Elon Musk: No ‘magical cure for inflation’
Musk said that increasing economic productivity is the solution to resolving persistent inflation
Twitter CEO Elon Musk shared his business perspective on inflation and the emerging banking crisis on Tucker Carlson Tonight.
Billionaire Elon Musk warned Tuesday that the inflationary pressures which have wreaked havoc on the U.S. economy over the last year will persist until economic productivity increases.
Musk said in an appearance on Fox News’ "Tucker Carlson Tonight" that the turmoil caused by the banking crisis and difficulties in the commercial and residential real estate markets is a symptom of the Federal Reserve’s efforts to tamp down inflation through higher interest rates. He noted that "inflation is going to happen no matter what. If you increase the money supply, you get inflation."
"There’s not some magical cure for getting rid of inflation except to increase the productivity, the output of goods and services," Musk said. "So, what is money? You’ve got these sort of – it’s basically numbers in a database that comes up with some total. Then you’ve got the output of goods and services of the economy, and as long as the ratio of money to ratio of goods and services stays – if that stays constant, you have no inflation. If you add more to the system faster than you increase goods and services, then you have inflation."
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Elon Musk attends the 2022 Met Gala at The Metropolitan Museum of Art on May 2, 2022 in New York City. (Photo by Dimitrios Kambouris/Getty Images for The Met Museum/Vogue) (Dimitrios Kambouris/Getty Images for The Met Museum/Vogue / Getty Images)
Inflation reached 40-year highs in 2022, which prompted the Federal Reserve to hike interest rates. Prices surged in the wake of federal spending and deficits reaching record levels following the enactment of a series of pandemic relief measures.
Inflation remains elevated and prices were up 5% year-over-year in March – more than double the Fed’s target rate of 2%.
"So, all of these COVID sort of stimulus bills were not paid for. They just generated more currency," Musk continued. "More, you know, more money was created because the federal government, the checks always pass, you know, unless you hit a debt limit, which there’s probably going to be some debt limit crisis later this year."
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"But provided you haven’t hit the debt limit, the federal government, unlike state governments or city governments or individuals, can simply issue more money. And that’s what they did. As the old saying goes, there’s no free lunch," Musk added.
The billionaire then asked, "So if you could just issue massive amounts of money without negative consequences, why don’t we just take that to the limit, make everyone a trillionaire? Well, I mean they tried that in Venezuela, how’d that work out?"
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Carlson responded, "Well, they had to eat zoo animals."
"Right. It’s not good, you know. There’s no free lunch. There’s not some ability to issue money and not have inflation," Musk said.