Economy in Trouble
Venture capitalist Chamath Palihapitiya believes the economy is headed for a downturn. He points to data showing that Americans have used up their savings, forcing them to seek jobs.
However, Palihapitiya says companies are hesitant to hire due to the Federal Reserve’s (Fed) policy of keeping interest rates high. This is leading to a rise in unemployment.
Fed’s Dilemma
Palihapitiya argues that the Fed will be pressured to cut interest rates multiple times. He says that the economic slowdown and rising unemployment will give Fed Chair Jerome Powell no choice but to ease monetary policy.
“I think we’re starting to see that we’ve run out of cash to spend,” Palihapitiya said. “As a result, I do think we are going to see an economic slowing… I think unemployment’s going back up. I think GDP is going to shrink.”
Political Pressure
Palihapitiya also believes that political pressure will force Powell to cut rates more aggressively than he would have otherwise. He says that the Fed will be under pressure to help the economy and reduce unemployment.
“I actually think yes [Powell will cut rates more aggressively],” Palihapitiya said. “My perspective is that I think we’ve run out of money… I tend to be in this camp that we’re going to see more than one rate cut.”
