Steve Hanke: Shrinking Money Supply = Recession And Sub-2% Inflation By End Of Year
Mar 31, 2024
auto_awesome
Economics expert Steve Hanke predicts sub-2% inflation by year-end after accurately forecasting CPI changes. Discussions include recession risks, AI bubble comparisons, money supply impacts, GDP implications, and the importance of fiscal reforms for financial stability.
Money supply contraction may lead to recession and sub-2% inflation by year-end.
Global economic challenges include geopolitical tensions and market valuations risks.
Proposed Swiss-style debt break could address fiscal deficits and ensure long-term sustainability.
Deep dives
Warning Signs of an Impending Recession and Inflation Anticipation
The contraction in the money supply since March of 2022, combined with expectations of inflation to be around 2 percent or lower by the end of the year, signals a possible recession later this year. The significance of changes in the money supply as an economic fuel is emphasized, highlighting the historical correlation between money supply contractions and ensuing recessions.
Global Economy and Market Risks Amid Geopolitical Tensions
Challenges in the global economy, including ongoing wars, geopolitical tensions between the US and China, and market valuations potentially ahead of their fundamentals, pose significant risks. Uncertainty prevails amidst narratives of potential commercial breakthroughs and market enthusiasm, cautioning against overestimating productivity growth spurred by technologies like AI.
Fiscal Challenges, Monetary Policy, and a Proposed Debt Break
Concerns over mounting fiscal deficits and debt levels prompt discussions on fiscal dominance, monetary policy implications, and structural reforms. A proposed Swiss-style debt break, involving a constitutional amendment to cap government spending relative to real GDP growth, emerges as a potential solution to address long-term fiscal sustainability and constrain economic growth to prevent solvency issues.
Market Analysis and Predictions by Steve Hanky
Steve Hanky, as one of the foremost economists, highlighted key insights concerning the potential risks in the financial markets. Hanky indicated a cautionary stance towards the market, citing concerns over high market valuations and the money supply trend. He emphasized the importance of closely monitoring inflation and its correlation with the money supply, predicting a possible recession in the near future. Despite the optimistic market sentiments due to recent gains, Hanky's analysis serves as a warning for investors to be vigilant and prepared for potential market downturns.
Investment Strategies and Risk Management by New Harbor Financial
New Harbor Financial shared insights into their investment strategies amid the current market conditions. The team highlighted the challenges of navigating a market where various assets are reaching all-time highs, emphasizing the importance of risk management. By dynamically adjusting their positions and employing tight hedges, New Harbor seeks to balance short-term opportunities with long-term risk mitigation. Their approach involves strategic investment decisions, such as adding exposure to specific equities while maintaining cautious risk controls to protect against sudden market shifts.
When I interviewed today's guest expert back in August of 2021, when inflation was 5%, he made the bold prediction that the CPI would eventually hit 9%, a prediction that seemed unthinkable at the time -- but it indeed proved true less than a year later.
He then called for inflation to moderate substantially, which it also then did.
Where does he see inflation headed from here?
To find out, as well as hear his latest outlook on the economy, recession risk, social stability and the markets, we welcome back Steve Hanke professor, of applied economics at the Johns Hopkins University in Baltimore, Maryland
WORRIED ABOUT THE MARKET? SCHEDULE YOUR FREE PORTFOLIO REVIEW with Thoughtful Money's endorsed financial advisors at https://www.thoughtfulmoney.com
#recession #inflation #moneysupply
Remember Everything You Learn from Podcasts
Save insights instantly, chat with episodes, and build lasting knowledge - all powered by AI.
