Billionaire venture capitalist Chamath Palihapitiya says the state of the economy will force Federal Reserve Chairman Jerome Powell to cut interest rates multiple times.
Speaking on a new episode of the All In podcast, Palihapitiya said he expects the economy to shrink, based on data that shows Americans have used up all their savings.
According to the Social Capital CEO, people who are relying on savings are now being pressured to look for work, but most will have a hard time finding work because the Fed’s high-for-long interest rate policy discourages businesses from expanding.
“If you simplify the U.S. economy, 70 percent of GDP is consumer spending. People have two things they can spend: savings or credit.
What’s interesting is that finally all the money that was in people’s bank accounts has been drained. So what does that force people to do? It actually forces people to go back into the workforce and start making money. But the problem is that businesses are shrinking and they’re on the defensive. And as a result, unemployment is starting to rise, because as these people go back into the workforce, there are no jobs for them to take.”
Palihapitiya further explained that rising unemployment would lead to a slowdown in the economy, forcing Powell to cut rates multiple times.
“I think we’re starting to see that large parts of the economy are running out of cash to spend. I think we’re going to start to see an economic slowdown as a result. And not only will that provide a big case for Jerome Powell, but it’s going to be exacerbated by political pressure to make cuts.”
Will this lead him to cut rates more aggressively than normal? At the margin, I actually think so, but my view is that people are running out of money. So I think unemployment will rise again. I think GDP will contract and we’ll see more than one rate cut.”
Don’t miss out on the latest news – subscribe to receive email alerts directly to your inbox
Check price trends
follow me X, Facebook and telegram
Browse the daily Hodl mix
 
Disclaimer: Opinions expressed on The Daily Hodl are not investment advice. Investors should do their due diligence before making high-risk investments in Bitcoin, cryptocurrencies and digital assets. Transfers and transactions are at your own risk and you are responsible for any losses incurred. The Daily Hodl does not recommend buying or selling cryptocurrencies or digital assets and is not an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
Generated image: DALLE3