Steve Hanke, professor of applied economics at John Hopkins University, says the Fed is looking at lagging indicators, adding that he does not believe that the U.S economy is on track for a “soft landing.”…(read more)
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Renowned economist Steve Hanke has recently expressed his concerns about a potential recession in the United States next year. Hanke, a professor of Applied Economics at Johns Hopkins University, believes that the contraction of the money supply is a key factor that will contribute to this economic downturn.
Monetary supply plays a crucial role in an economy as it affects the availability of credit, interest rates, and overall economic activity. When the money supply contracts, it means that there is a reduction in the amount of money circulating in the economy, which can lead to a decline in spending and investment.
Hanke points out that the U.S. Federal Reserve’s decision to reduce the amount of money in circulation by tightening monetary policy is a worrisome development. The central bank has increased interest rates and reduced its balance sheet over the past few years, effectively reducing the money supply. Hanke argues that this tight monetary policy is stifling economic growth and warns of the potential consequences.
One of the major concerns for Hanke is the impact this contraction of money supply will have on credit availability. When there is less money in circulation, financial institutions become more cautious in lending. This can lead to higher borrowing costs and a decrease in borrowing overall. As access to credit becomes limited, businesses may struggle to invest, expand, or even survive, ultimately hampering economic growth.
Another harmful consequence of a shrinking money supply is the potential deflationary pressure it can exert on prices. When there is less money in circulation, consumers have less purchasing power, which can lead to reduced demand for goods and services. This decline in demand can push prices down, leading to a prolonged period of falling prices or deflation. Deflation, in turn, discourages spending as consumers delay their purchases in anticipation of even lower prices. This can lead to a vicious cycle that further weakens the economy.
Hanke’s concerns over the declining money supply and the potential repercussions on the U.S. economy are not unfounded. Historically, tight monetary policy has often preceded recessions, as seen during the Great Depression and the 2008 financial crisis. However, it is important to note that predicting economic downturns with precision is a challenging task, as various factors influence the overall economic landscape.
It remains to be seen whether Hanke’s prediction will come to fruition, as the economy is influenced by a multitude of domestic and global factors. The U.S. Federal Reserve, for its part, has already signaled a more accommodative approach recently by lowering interest rates. This change in stance could potentially mitigate the impact of the contraction in the money supply.
As the year progresses, economists and policymakers will closely monitor the health of the U.S. economy and the effects of the money supply contraction. Whether Hanke’s warning will be heeded or dismissed as misplaced remains to be seen, but what is clear is that careful considerations and proactive measures will be required to ensure the stability and growth of the U.S. economy in the years to come.
Given the current economic difficulties that the country is experiencing in 2023, how can we enhance our earnings during this period of adjustment? I cannot let my $680k savings vanish after putting in so much effort to accumulate them.
I say we are already in recession.
How is every comment in here a scam?
On the ball – there are lead & lag indicators…wakie, wakie…
Recession is most likely the result of an external factor. For the first time in decades, the United States is losing its clout as a federal reserve currency. They don't have any more economies to use to control inflation, and less money is being spent on stock and oil trading than in the past. They all lend support to the idea that a new multilateral world order is in the works.
To reach your potential, you need to start working towards it Investing remains the smartest way to prepare for the unexpected. Been in the space for 6yrs and extremely pleased with the decision I made. The good news is – it's not too late.
Volatile egg? Food, he meant?
Thought they did not interview truth-tellers on CNBC!
Biden says the economy is fine
There is no need for usa to go into a prolonged recession if a good tradd deal is done with india,rather than getting mexicans and africans for low paying jobs,usa should banish them all and get these on a work visa from india,usa has huge potential to produce ethanol from agriculture,also white coal can be produced in barren land,For all this they can get indian labour and sell the ethanol in both their domestic market and that of india,this can revolutionise the jobs market and create a number of paying jobs if they replace oil with bio diesel and ethanol.
Bullshity
Lol
Ya ya ya
Right now, things seem odd. The US dollar is losing value due to inflation, but it is strengthening in comparison to other currencies and commodities like gold and real estate. Because they believe it to be safer, people are going to the dollar. I'm concerned that the rising inflation may lead my $420K in retirement funds to lose value. Where else could we put our cash?
keeping the population afraid and ignorant, that’s their secret. !!
Well since it wasn't this year obviously this clown has to move it to next year. And once it doesn't hit next year, he will say 2025…..
I used to think every investor lose out during recession, meanwhile some make millions. I'm nonetheless considering whether to put $400k in my stock portfolio. What is the greatest approach to profit from the market?
Interesting , a number of the most eminent market experts have been expressing their views on the severity of the impending economic downturn and the extent to which equities might plummet. This is because the economy is heading towards a recession and inflation is persistently above the Federal Reserve's 2% target. As I'm aiming to create a portfolio worth no less than $850,000 before I turn 60, I would appreciate any advice on potential investments.
Economy needs to burst to pop all bubbles.
Is the stock market going to tank? Geez I am waiting in cash.
"Bidenomics" at work.
I suppose if you keep saying there will be a recession in the next 6 months or next year for long enough eventually you'll be correct.
"Unprecedented." Then says, "We haven't seen this since the 1930s." So, not unprecedented. Speaking only about money supply ignores the need for the interest rate to set a high enough internal rate of return to shake out the companies that need to go extinct, weed out the bad ideas, and enable survival of the fittest which will make our economy stronger. Economists – all numbers and theory, but lacking the concrete business perspective. No discussion of the fiscal side. So incomplete it can only be called noise.
Recession – two consecutive quarters of negative GDP. That already occurred in the first half of 2023 folks!!
Maybe
Everyone has a plan until they get punched in the mouth.
Thanks Obama
Unless u r retiring soon and things are tight, a minor hiccup vs. missing the next leg up…for the avg person under 60 yrs old these predictions have no bearing on asset allocation.
He's either woefully under-informed or he's trying to trick people. The crash is imminent and it's gonna be cataclysmic.
Ive been Following Professor Hanke for a few years, he's very accurate with his forecasts… .. .He should be someone the current Central Bank consults with because they still claim that the money supply doesn't affect inflation….that's their narrative.
Because of the amount of total debts expanded catastrophically, and globally as well.