One of the World’s Richest Men Warns US Recession Is Inevitable

Ken Griffin, Founder and CEO, Citadel, speaks during the Milken Institute Global Conference in Beverly Hills, Calif., on May 2, 2022. Patrick T. Fallon/AFP via Getty Images

One of the richest men in the United States warned that a U.S. recession is inevitable and called on the Federal Reserve to keep raising interest rates to combat rising inflation.

In a recent conference, Citadel founder and investor Ken Griffin said a recession or downturn seems inevitable in what appears to be a “hard landing” scenario. That’s when Fed’s efforts to reduce soaring prices could lead to higher unemployment rates along with a slowdown in U.S. economic growth.

“Everybody likes to forecast recessions, and there will be one,” he said during the “Delivering Alpha” conference. “It’s just a question of when, and frankly, how hard.”

“Is it possible [that at the end] of ‘23 we have a hard landing? Absolutely,” added Griffin, who is estimated to be worth around $29 billion. Bloomberg pins him as the 35th richest person in the world.

Noting that psychology factors into inflation, Griffin said that people in the United States should not think that inflation above 5 percent year-over-year is normal.

“Once you expect it broadly enough, it becomes reality, becomes the table stakes in wage negotiations, for example,” he said. “So it’s important that we don’t let inflation expectations become unanchored.”

In August, the consumer price index—a key metric to measure inflation—increased 8.3 percent year-over-year, which is near highs not seen since the early 1980s. The Fed, meanwhile, has moved to raise interest rates, again raising rates by 0.75 percent during a Federal Open Market Committee last week.

The risk of a recession—generally defined as two consecutive quarters of negative GDP—has put a damper on stocks in 2022. The S&P 500 index has plunged about 22 percent this year. Griffin said that he expects stocks to slide even further if a Fed-induced recession causes a spike in unemployment.

Loss of the ‘American Dream?’

Griffin said that the Federal Reserve has faced additional difficulties due to the huge amount of government spending in recent years along with unusual trends in the U.S. labor market.

“So the Fed’s had a really difficult job to try to use a very blunt tool—interest rates—to address an overheating economy where Washington keeps making moves on the chess board that turned the oven hotter. So it’s a tough job,” he said.

But the Citadel founder urged the central bank to “continue on the path that we’re on to ensure that we re-anchor inflation expectations.”

During the conference, Griffin issued a stark warning about how a recession could impact the United States in the long-term, coming after significant job losses during the COVID-19 pandemic amid government-mandated shutdowns.

“To be unemployed twice in such a short period of time, the diminution of job skills, career experience, derailment to future aspirations, a belief that the American dream is not achievable—those cultural and tangible impacts are really devastating,” he said.