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The Julia La Roche Show
#228 Steve Hanke: 'It's Going To Be A Year Of Investing Dangerously' — Bubble Detector At Highest Levels
Jan 23, 2025
Steve Hanke, a Professor of Applied Economics at Johns Hopkins University, shares his insights on the U.S. economy and financial markets. He warns that 2025 may be a year of risky investing due to overvalued markets, indicated by his bubble detector. Hanke discusses the impact of past monetary policies on inflation and asset prices, as well as the dangers of rising government debt. He advocates for a reduced government role in the economy and shares thoughts from his latest research and books, focusing on financial simplification.
36:20
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Quick takeaways
- Professor Hanke warns that 2025 might experience economic downturn due to the delayed effects of past monetary policies and inflated asset valuations.
- He highlights the alarming market conditions indicated by his bubble detector, suggesting that investors should be cautious of unprecedented market complacency.
Deep dives
Economic Forecasting and the Quantity Theory of Money
Professor Hanke discusses a potential economic slowdown in 2025, emphasizing the implications of the quantity theory of money. He explains that excessive money supply can lead to inflated asset prices, followed by rises in real economic activity and eventually inflation. The substantial increase in the money supply since February 2020 has notably escalated asset prices, contributing to growing income inequality, as wealthier individuals benefit from owning such assets. This results in a disconnect where those struggling financially become more vocal about their resentment towards the economic policies, reflected in recent electoral outcomes.
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