Citadel’s Ken Griffin on Inflation, Recession, Jobs, Fed, FTX, Crypto

  • Ken Griffin said US inflation has likely peaked but the Fed needs to quell the threat completely.
  • The billionaire CEO of Citadel expects around 4.5% unemployment and a recession next year.
  • Griffin warned that the collapse of Sam Bankman-Frieds FTX had shaken investor confidence in the markets.

US inflation may have peaked but Federal Reserve should keep raising interest rates to avoid further economic woes in the future, Ken Griffin said at the 2022 Bloomberg New Economy Forum this week.

The billionaire investor and Citadel CEO also forecast a rise in unemployment and a recession over the next year. warned the Implosion of Sam Bankman-Fried’s FTX exchange could trigger a crisis of confidence in the financial markets, and warned the cut off China’s access to US microchips could end in disaster.

Here are Griffin’s top 10 quotes, slightly edited for length and clarity:

1. “We think we’ve seen the highest inflation. We believe our central view of inflation will be back to around the low to mid 2% range by the end of 2023.” (Griffin suggested that metropolitan rents and energy prices have already peaked, saying, that a shift in consumer demand from goods to services, coupled with retailers reducing inventories to shed excess inventory, would likely alleviate inflation.)

2. “I can’t imagine how many flat screen TVs have been sold to Americans during the pandemic that, frankly, aren’t being used nearly as much today as they were a year ago. This shift from a goods-based economy to a services-based economy will cause commodity prices to depreciate, which will help lower inflation.”

3. “In order for the Fed to really beat inflation here, we’re going to put unemployment somewhere in the mid-4% range. I find it hard to believe that we won’t have a recession by this point, sometime in the mid to late 2023.” (US unemployment was 3.7% in October.)

4. “It is not yet time for us to change the course of our monetary policy. We want to see that we put the inflation genie back in the bottle. We’ve endured a lot of pain to get to this point. The real estate market is definitely down. Durable goods sales are under pressure. We haven’t finished the job yet. Taking your foot off the brake now and not getting the job done is the absolute worst mistake the Fed could possibly make.

5. “It’s like saying you go to your doctor, you have a bacterial infection and he gives you ten pills to take and you stop taking them after pill number seven and a couple of days later you get a relapse. If the course of antibiotics is not ended and inflation begins to rise again, the Fed will have lost credibility in paying a much bigger bill. We shouldn’t put ourselves in a position to pay that bill. We should get the job done now. (Griffin explained why the Fed can’t back down in its inflation struggle.)

6. “FTX is one of those absolute travesties in the history of financial markets. People will lose billions of dollars. This undermines confidence in all financial markets.”

7. “A generation’s confidence in the financial markets has been shaken. This is really terrible because the 20-40 year olds who are so into crypto need to save for their retirement. If they don’t believe or trust the financial markets, that’s a huge problem. They must own stocks, they must own corporate debt, they must participate in our global capital markets.”

8th. “The turf wars of the American regulators must end. It’s just absurd that the agencies are all dancing about who owns what. The bottom line is that American investors have really taken a beating here, amounting to hundreds of billions of dollars in crypto market declines over the past two years. That really gets to the heart of what investor protection is about.”

9. “The duration of the war in Ukraine is an existential question for Europe, especially for Germany.” (Griffin noted that if the conflict between Russia and Ukraine stretches into the summer, Europe could face severe gas shortages next winter and European support for Ukraine could wane.)

10 “The United States is unable to produce anywhere near the number of semiconductors it needs to fuel its economy. We are totally and completely dependent on the Taiwanese for modern semiconductors in America. You can argue that by depriving the Chinese of access to semiconductors, we increase the risk that they will conquer Taiwan. We’re playing with fire here. If we lose access to Taiwanese semiconductors, the US GDP collapse is likely to be in the range of 5% to 10%. It is an imminent global economic crisis. “

Continue reading: Bank of America shares an area of ​​the bond market that will deliver 13% returns in 2023 — and lays out the drivers of its “great reversal.”

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