Professor Steve H. Hanke, professor of applied economics at Johns Hopkins University and the founder and co-director of the Institute for Applied Economics, Global Health, and the Study of Business Enterprise, joins Julia La Roche on episode 265 to discuss the economy and his new book "Making Money Work: How to Rewrite the Rules of Our Financial System."
Sponsors:
Monetary Metals. https://monetary-metals.com/julia
Kalshi: https://kalshi.com/julia
In this episode, Hanke warns of an 80% recession probability by year-end, driven by regime uncertainty from Trump's policy changes and money supply contraction since April 2022. He critiques the Federal Reserve's narrow focus on interest rates while ignoring quantitative tightening and argues for putting money supply and commercial banks back at the center of monetary policy. Hanke explains how Fed policies create wealth inequality by inflating asset prices that benefit the rich, advocating for "neutrality" as the goal of monetary policy. He dismisses Trump's "big beautiful bill" as fiscally irresponsible and calls for a constitutional convention to implement a Swiss-style debt brake. The conversation covers his new book's thesis that monetary policy should focus on money supply growth rather than interest rates, with commercial banks producing 80% of the money supply through lending.
Links:
Twitter/X: https://x.com/steve_hanke
Making Money Work book: https://www.amazon.com/Making-Money-Work-Rewrite-Financial/dp/1394257260
00:00 - Introduction of Professor Steve Hanke
01:28 - Regime uncertainty concept and Trump's policy changes
03:52 - Tariffs as taxes on international transactions
06:20 - 80% recession probability by end of year
08:31 - Money supply contraction since April 2022
10:51 - Bubble indicator and market complacency discussion
12:52 - Family call interruption from Dominican Republic
13:24 - Market in bubble territory explanation
16:11 - Federal Reserve critique and FOMC meeting outlook
18:27 - Quantitative tightening vs interest rate focus
19:04 - Three pillars of the book's thesis
25:46 - Neutrality as monetary policy objective
29:30 - How Fed policy creates wealth inequality
32:15 - Catalyst for writing the book
37:09 - "Big beautiful bill" critique and fiscal concerns
42:34 - Swiss debt brake constitutional solution
46:25 - Key prices to watch: gold, 10-year yields, dollar-euro, stocks
