In a chaotic economy plagued by central bank tinkering, supply chain problems, and red-hot inflation, Johns Hopkins University applied economics professor Steve Hanke believes that 2023 will be “pretty big recession,” and in an Oct. 28 interview, Hanke said he updated the probability of a U.S. recession to 90% because he believes the money supply has tightened at an “unprecedented” rate.
Economics professor Steve Hanke said the probability of a U.S. recession is now 90%
Professor Steve Hanke, critical of central banks around the world, said Friday that the probability of a recession is very high. Hanke spoke with Kitco News news anchor David Lynn and explained thathe had raised his estimate of the probability of a U.S. recession to 90%.” ‘Where we go depends on where the money supply goes,’ Hanke told Lynn on Friday.” The quantity theory of money is the method for determining national income.”
The Johns Hopkins applied economics professor added:
We were in early 2020 when COVID hit, and the money supply was growing, on average, about three times faster than it should have been to meet the 2% inflation target. This resulted in a lot of inflation.
Inflation in the U.S. has been a problem, with the Federal Reserve’s main inflation indicator, the personal consumption expenditures (PCE) price index, rising 0.5% in September. In addition, the Consumer Price Index (CPI) report for September showed that consumer prices jumped 8.2%. Hanke stressed in an interview that quantitative tightening has become a major issue because of the significant contraction in the money supply, the economics professor said.
“In the last seven months, the money supply has actually contracted 1.1%,” Hanke told the Kitco anchor. ‘That is almost unprecedented. So, of course, there is a big change in the money supply and then there is a transmission mechanism. There is a time lag between whether the money supply goes up or down and what happens in the real economy,” Professor Hanke added. The economics professor opined that he believes these factors will lead the U.S. into a major recession.
Hanke further toldnews anchorsthat
Some time in 2023, there’s a pretty big recession baked into the cake. So the GDP numbers, they’re great, you can celebrate it today, it’s not negative anymore, we had positive numbers – the big picture looks like the economy is kind of flat last year, but it’s going to hit south.
However, Hanke does not like cryptocurrencies like Bitcoin and criticizes the country of El Salvador for adopting Bitcoin as legal tender: in June 2021, months before Bitcoin (BTC) hit $69K per unit , Hanke explained that his country “with (Nayib) Bukele at the helm” was facing “financial ruin.” Bukele fired back at Hanke’s critique,when BTCreached $60K per unit in mid-October 2021 when BTC
Hanke is a fan of countries creating currency boards, the idea being to leverage the use of monetary authorities to maintain fixed exchange rates for currencies. Bitcoin, by design, is the antithesis of Hanke’s preferred currency board solution,BTCthe network is decentralized and the free market chooses the exchange rate of the cryptocurrency.
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