• Bill Ackman and Elon Musk have urged the Federal Reserve to stop increasing interest rates in order to stabilize the banking system and prevent contagion.
• Ackman believes that the current banking turbulence remains unsolved and additional rate hikes could cause further losses for investors.
• Musk has suggested that the FOMC meeting should result in a decrease of rates by at least 0.5%.
Elon Musk and Bill Ackman Urge Fed to Cease Hiking Interest Rates
The American billionaire investor, Bill Ackman, Founder of Pershing Square Capital, took it to Twitter to explain why he thinks the US Federal Reserve should temporarily halt its policy of increasing interest rates. He pointed out recent bank collapses in the US which have affected equity and bondholders, such as Silvergate Capital, Silicon Valley Bank, Signature Bank, and First Republic Bank. Furthermore, Ackman believes that increasing interest rates for a ninth consecutive time could cause additional investor losses and a domino effect of crashing banks.
Tesla’s CEO Elon Musk has also weighed in on this matter by urging the central bank to drop the interest rates by at least 50 basis points at this week’s FOMC meeting.
Banking Turbulence Remains Unsolved
Ackman highlights that the recent banking turbulence remains unsolved while lifting of interest rates could bring additional pressure on the system as financial institutions struggle with liquidity issues exacerbated by COVID-19 pandemic. Therefore, it seems like halting rate hikes would be beneficial for both investors and banks alike.
Musk Suggests Rate Decrease
Meanwhile, Elon Musk argued that instead of an increase in rates, there should be a decrease of 0.5%. His reasoning behind this is due to how low-interest credit is being abused by banks who are making risky investments not backed up by sufficient capital reserves – hence leading them into trouble when faced with market shocks like those caused by COVID-19 pandemic.
Risks Of Increased Interest Rates
Apart from potential losses for investors caused by further rate hikes , other risks associated with them include weakening consumer spending power which can lead to more bankruptcies among small businesses due to decreased demand for their products or services . This can create a downward spiral where weak consumer spending leads to more business closures which then leads back into weak consumer spending etc., thus creating economic stagnation or even recession .
Conclusion
In conclusion , both Elon Musk and Bill Ackman believe that increased interest rates pose too many risks while providing little benefit given current market conditions . As such , they urge The Fed ‘s Federal Open Market Committee (FOMC) meeting this week to either halt or decrease existing ones so as not only help solve existing banking turbulence but also prevent similar situations from occurring again in future .