(FiveNation.com)- This week, Mike Novogratz, CEO of Galaxy Investment Partners, issued a dire warning about the state of the American economy.
On the same day the Federal Reserve issued its second interest rate change in roughly six weeks, Novogratz made the remarks. Following a two-day meeting, the Federal Reserve declared that interest rates would rise by 0.75 percent this month as part of a broader initiative to reduce demand and rein in inflation.
However, Novogratz warned that the economy “is going to collapse,” and he does not believe the Federal Reserve’s efforts will succeed.
Just before the Federal Reserve issued its most recent rate hike, the investor said that we would fall into a rapid recession, and you can see it happening in many ways.
He said housing is starting to roll over, multiple industries are experiencing cutbacks, and the Fed is in a bind.
Although Novogratz did not provide a time frame for when he believes the U.S. economy would enter a recession, he did add that he doesn’t think the Federal Reserve will be able to stop it.
He said the Fed is stuck, and the only thing the Fed can do is raise rates until inflation rolls over.
The economy might experience a period of recession for months or years until inflation is brought under control, resulting in higher borrowing costs, less demand for products and services, and higher interest rates for borrowers.
Economists expressed skepticism about the Federal Reserve’s judgment only a day after Chairman Jerome Powell reiterated that the bank is not intentionally attempting to precipitate a recession and that the U.S. economy is well-positioned to recover.
Tom Porcelli, an economist with RBC, stated on Thursday that Powell’s views did not correspond to the actual data.
Even before the Fed began applying the breaks, growth was at a minimum, declining, according to Porcelli. He said the evidence for it appears to be increasing fairly steadily at this point. Despite Powell’s best efforts, the evidence on the ground just doesn’t support his statement.
Global stock markets tumbled once further on Wednesday following the Federal Reserve’s announcement of its most significant rate increase since 1994, further demonstrating a lack of confidence in the overall state of the economy.
A day after the United States, the United Kingdom, and Switzerland followed suit and raised their interest rates on Thursday, sending the world’s stock markets into a tailspin. The S&P 500 in the United States sank by 3.2 percent, Australia’s main stock market index dropped by more than 2 percent, and the Nikkei in Japan fell by 1.6 percent. Over 2.4 percent was lost by the Dow Jones Industrial Average as well.