Just a few weeks ago, a Twitter user said he was convinced that all economic data, whether job numbers or GDP growth, are all fake. Tesla CEO Elon Musk agreed, saying “the numbers don’t make sense.” With the economy’s prolonged downturn, economic indicators are all we have to look for positive or ominous signs—except for Musk, who apparently doesn’t believe them.
In April, he had proclaimed that a “mild recession is already here,” even though government data didn’t reflect that—and in fact, economic growth was subsequently revised upward to a healthy 2% for the first quarter. Nobel Prize–winning economist Paul Krugman, a professor emeritus at Princeton and New York Times columnist, has been optimistic about the economy for years, and now he’s taking a victory lap with inflation coming down. He’s also telling his audience not to listen to “recession truthers” like Musk or the others who loudly predicted a recession and are annoyed that it hasn’t happened yet.
“You might have expected technology billionaires to be well-informed about the world—someone like Musk could, if he chose, easily maintain a large research department for his personal edification,” Krugman wrote in a Wednesday column for the Times. “Yet they are often, in practice, easy marks for grifters and con men.”
The veteran economist thinks that part of the reason why tech moguls, some of whom have made wild predictions about the economy, give in to such “conspiracy theories” is their ego.
“The answer, I believe, is that technology billionaires are especially susceptible to the belief that they’re uniquely brilliant, able to instantly master any subject, from COVID to the war in Ukraine,” Krugman wrote. He said he thinks they just don’t want to be told things they didn’t want to hear in the first place. “So what happens instead, all too often, is that they go down the rabbit hole: Their belief in their own genius makes them highly gullible, easy marks for grifters claiming that the experts are all wrong.”
Why billionaires are easy prey for policy con men and grifters https://t.co/SfZMDYUSdv
— Paul Krugman (@paulkrugman) July 4, 2023
To be sure, Krugman isn’t rejecting the idea of a recession, even though he sees inflation cooling without much pain or causing a deep recession along the way, a scenario referred to as a “soft landing.” But he disagrees with claims that a recession is already here.
“A recession might eventually happen, but it isn’t happening now,” Krugman wrote.
A widely predicted downturn
The U.S. has had recessions before, but this time around, Musk was just one of the prominent businessmen who created a chorus predicting the most widely anticipated downturn in history. Predictions about the timing and nature of a recession have occupied center stage in the economic debate—with banks forecasting a “growth recession” in which economic growth is low but positive, and experts suggesting a “policy-led recession” may be brewing, thanks to the Federal Reserve. In recent times, some key recession indicators, like the yield curve, have been pointing to an impending recession later in the year. David Rosenberg, former Wall Street economist and founder of Rosenberg Research, noted in late May that gross domestic income, a measure of economic activity, had contracted for two consecutive quarters, which meant that a recession was here but “nobody’s noticed.”
This isn’t the first of Musk’s economic predictions, coupled with a Fed critique. The Tesla CEO agreed with Wharton professor Jeremy Siegel, who criticized the Fed last year, saying the bank was making a mistake in clamping down on inflation too aggressively in raising rates. Then in October, the world’s richest man said that a recession may last well into 2024, and in November said the Fed was “massively amplifying the probability of a severe recession.”
Just guessing, but probably until spring of ‘24
— Elon Musk (@elonmusk) October 21, 2022
Musk has also doubted Fed numbers in the past, warning that more interest rate hikes could put the economy in real trouble.
“Fed data has too much latency,” Musk tweeted in April, adding that additional rate hikes could set off a big recession. “Between Tesla, Starlink, and Twitter, I may have more real-time global economic data in one head than anyone ever.”
The Fed eventually did hike rates in May by 25 basis points, but we still aren’t in a recession yet.
Fed data has too much latency. Mild recession is already here.
— Elon Musk (@elonmusk) April 30, 2023
It’s not like just the canary in the coal mine (SVB) died, one of the staunchest miners (Credit Suisse) died too & the cemetery is filling up fast!
Further rate hikes will trigger severe recession. Mark my words.
Other tech CEOs have cautioned about economic turmoil ahead with a slowdown and sky-high prices. Salesforce’s Marc Benioff said in March that he was preparing for a difficult 2023 as the economy heads toward a recession, and Microsoft CEO Satya Nadella said he was bracing himself for a rocky two years in the tech industry. Big companies laid off scores of employees to ramp up cost-cutting measures in response to the inflationary environment. But for the world’s richest man to openly question economic data that disagrees with his own projection? Krugman calls foul.
Where are we with recession now?
Despite over a year of talk surrounding whether or not the “R” monster will hit the economy, there have been few signs of it. Robust consumer spending and employment data suggest that the economy, although still faced with high inflation and subsequent interest rates to curb it, is in good health.
But what of all the economists who predicted otherwise? Suspicions swirling around the enigma that is the U.S. economy have led to theories like “richcession,” in which job cuts are limited to high-paying industries, and “rolling recession,” where only a few industries shrink while the economy on the whole flourishes.
“The U.S. economy is genuinely displaying signs of resilience,” Gregory Daco, chief economist at EY, a tax and consulting firm, told the Associated Press. “This is leading many to rightly question whether the long forecast recession is really inevitable or whether a soft landing of the economy” is possible.
The Fed is set to meet later in July to contemplate its policy approach in the months ahead.
