The David Lin Report Economy On Verge Of Crisis, Warning Signs Flash Red | Steve Hanke
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Aug 11, 2025 Steve Hanke, a prominent Professor of Applied Economics at Johns Hopkins University, sheds light on the complexities of money creation and banking. He warns of an impending asset bubble driven by irrational exuberance and questions the accuracy of government employment data. Hanke debunks traditional views on fractional reserve banking and discusses the risks of hyperinflation in a fiat system. He also critiques the reliability of economic indicators while pondering the Federal Reserve's decisions amid a slowing economy.
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Banks Create Deposit Money Directly
- Steve Hanke explains banks create deposit money when they make loans rather than intermediating existing savings.
- That loan-created deposit expands the money supply (M2) until borrowers repay principal.
Ignore The Money-Multiplier Narrative
- Avoid relying on the textbook money-multiplier model; Steve Hanke calls it misleading for modern banking.
- He shows zero reserve requirements did not make the money supply explode, disproving the simple multiplier story.
Commercial Banks Built Most Of M2
- Steve Hanke states commercial banks have created roughly 80% of U.S. M2 through loan deposits.
- That bank-created money circulates as part of broad money until loan principal is repaid.
