When someone on Twitter asked Elon Musk if he thought there would be a recession, Musk replied, “Yes, but this is actually a good thing. It has been raining money on fools for too long.”

When asked how long it would last, he replied, “Based on past experience, about 12 to 18 months.” He went on to say, “some bankruptcies need to happen,” and, “Companies that are inherently negative cash flow (ie value destroyers) need to die, so that they stop consuming resources.”

He then added, “Also, all the Covid stay-at-home stuff has tricked people into thinking that you don’t actually need to work hard. Rude awakening inbound!”

On Thursday the government released data showing the GDP, the measure of production, fell by 1.5% in the first quarter of 2022. This was a steep drop from the 6.9% growth in the GDP registered in the last quarter of 2021.

Analysts attributed the drop to a shift by consumers toward cheaper imports, possibly due to increasing prices produced by rising inflation. Without the shift toward imports, the GDP would have been 3.2% higher according the analyst estimates.

Also affecting the decline was difficulty in getting products in front of consumers due to supply chain disruptions and inventory restocking issues at retailers, as the consumer market rebalanced itself following the pandemic and shipping issues.

Inflation continues to afflict the economy, with the Consumer Price Index rising 8.3% in April. The Fed has moved in, raising rates a half point and all but promising half point rises in the interest rate for the next two meetings. However tightening of monetary policy carries its own risks relative to initiating a recession.

Photo of Elon Musk courtesy of Wikipedia.

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