Billionaire venture capitalist Chamath Palihapitiya is warning that the global economy appears on track to witness two phases of recession.
In a recent interview on the All-In Podcast, Palihapitiya says the world is currently experiencing supply-side recession, which he notes is the first part of the process.
“We have been in a supply-side recession. That is what has caused inflation.
We have to go through a process of taking all the excess money, that’s been put in, out. And when you do that, we will destroy demand and then that’ll trigger a demand-side recession… and we will destroy asset values…
I think we’re still firmly in that first phase, and I hate to be the bearer of bad news, but the reason why I still think we’re in the first part of this process is because people, broadly speaking, still have a lot of savings because of all the stimulus checks. There is still a lot of money.”
Palihapitiya says there are few indicators suggesting when those savings have been depleted and the global economy is about to enter the second phase of the recession.
“When people are more motivated to re-enter the workforce. I think that’s a signal. When credit delinquencies really start to spike, [that’s another signal], because people then tapped out their savings, then they tap their credit cards and then all of a sudden, they become delinquent.
When all of those things happen, you’re probably now at a point where that first phase of the supply side issues [is] largely done and now you get to the demand destruction. But all of those roads, unfortunately, lead to the same conclusion, which is equities get really under pressure.”