Milk Road Macro

How Money Supply & Dollar Flight Are Fueling a Bull Market w/ Steve Hanke

Oct 2, 2025
Guest
Steve Hanke
In this engaging discussion, Professor Steve Hanke, an applied economics expert at Johns Hopkins, dives deep into monetary policy. He argues that the real market drivers are changes in money supply rather than interest rates. Hanke warns that the Fed's focus on rate hikes is causing volatility and calls for a target of 6% money supply growth to stabilize inflation. He also explains the surge in gold demand and predicts a potential price peak of $6,000, linking it to capital flight and concerns over dollar stability.
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INSIGHT

Monetary Policy Is About Money Supply

  • Monetary policy is fundamentally about changes in the money supply, not interest rates.
  • Broad money growth determines nominal GDP and has long lags into inflation and output.
ADVICE

Stop QT And Stabilize Money Growth

  • End quantitative tightening to let money supply growth return toward a stable target near 6%.
  • Keep money supply growth steady rather than using interest-rate driven 'roller coaster' policy.
INSIGHT

Why 6% Is The Target Growth Rate

  • Hankey's golden growth rate (~6%) comes from MV = PY and targets 2% inflation plus ~2% real growth plus a 2% decline in velocity.
  • That money growth both fuels nominal GDP and accommodates rising demand for money.
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