© Provided by Business AM
In an interview with American television, investor Carl Icahn shared some pessimistic predictions. According to him, we are no longer sheltered from a recession.
Carl Icahn, whose fortune is estimated at 20 billion dollars by Forbes, believes that a slowdown in our economy could well be on the horizon: “I think there could very well be a recession or even worse”, said the famous investor in the show Closing Bell Overtime from CNBC.
“I’ve kept everything covered for the past few years. We have a strong long hedge and we’re trying to be proactive to get that advantage… I’m negative, as you can hear. In the short term, I don’t even make a forecast,” he added.
According to him, galloping inflation is a major threat to the economy. And the war in Ukraine has only added more uncertainty to these prospects.
“There will be a hard landing”
Last week, the Federal Reserve raised interest rates for the first time in more than three years, now putting them in a range of 0.25% to 0.50%. A measure taken to fight against inflation, which has reached its highest level in 40 years and which threatens to worsen in view of the situation in Ukraine.
“I really don’t know if they can stage a soft landing,” Icahn said. “I think there will be a hard landing… Inflation is a terrible thing when it kicks in,” Carl Icahn said.
The investor fears that poor management of the situation by companies could lead to disasters. “There is no accountability in corporate America. You have very good companies, very good CEOs, but far too many are not up to the task,” he lamented.
Parallel with 1991
According to a study by the Federal Reserve Bank of Dallas published on Tuesday, the risks of recession mentioned by Carl Icahn are very real.
“If the bulk of Russian energy exports are taken off the market for the remainder of 2022, a global economic slowdown seems inevitable,” wrote economists Lutz Kilian and Michael Plante, quoted by Bloomberg. “This slowdown could be more prolonged than that of 1991”.
According to them, there is a parallel to be drawn with the global recession of 1991, triggered by the invasion of Kuwait by Iraq the previous year, which had caused an oil supply shock. At the time, Saudi Arabia partly mitigated the impact by pledging to increase production, contributing to what researchers call “a brief American recession,” which lasted less than a year.
Fed Dallas economists fear that oil supply will not follow at all this time around. This will cause an inflationary shock that will compress spending.
“Unless Russia’s oil supply shortfall can be contained, it seems necessary for the price of oil to increase significantly and stay high for a long time to eliminate excess demand for oil,” they noted. . “This destruction of demand will probably be favored by the recessionary effect of the rise in the prices of natural gas and other commodities, particularly in Europe. »
The IMF tempers
On Tuesday, the Managing Director of the International Monetary Fund (IMF) wanted to calm fears. For Kristalina Georgieva, quoted by Les Echos, global economic activity “should remain in positive territory”.
However, she indicated that the international institution would revise its forecasts downwards next month. Where growth should have picked up and inflation ebbed, “we have moved due to the war in Ukraine to an opposite environment,” she noted. She also recalled that the pandemic and global warming were two other crises that added to the Ukrainian one.
At the end of January, the IMF had lowered its global growth forecast for this year by half a point, bringing it to 4.4%. A forecast that will therefore fall again, but according to Kristalina Georgieva, growth should remain above 3.5%.
However, the managing director of the IMF does not rule out serious consequences – “a possible risk of recession” – in emerging countries. And particularly those “low-income who are in a situation of distress in terms of their debt”. Rising energy and food prices could lead to famines, she warned.