World

There is an 80% chance of the U.S. going into a recession: Steve Hanke


Steve Hanke says the Fed has been looking for the cause of inflation 'in all the wrong places'

According to Steve Hanke, a professor of applied economics at Johns Hopkins University, there is an 80% chance the US will fall into a recession – much higher than previously thought.

Based on CNBC’s September Fed Survey Economists, fund managers and strategists surveyed said there was a 52% chance the US could slip into a recession in the next 12 months.

“The probability of a recession, I think is much higher than 50% – I think around 80%. Maybe even higher than 80%,” Hanke told CNBC.Asian street signs” on Friday.

“If they continue to tighten quantitatively and move the growth rate and M2 money supply (money supply) into the negative territory, that will be very severe.”

They were really looking for inflation and its causes in all the wrong places. They are looking at everything under the sun, but the money supply.

Steve Hanke

Professor of Applied Economics, Johns Hopkins University.

Hanke criticized, and was in the pastabout the Federal Reserve’s failure to manage inflation by tracking the dwindling supply of large money in the U.S. economy.

“They’ve really been looking for inflation and its causes in all the wrong places. They’re looking at everything under the sun, but the money supply,” Hanke said.

“And in fact, they’ve doubled and tripled their argument that money has no relationship to economic activity or no reliable relationship to economic activity and inflation.”

A customer shops at a supermarket in Oregon. According to Steve Hanke, a professor of applied economics at Johns Hopkins University, there is an 80% chance the US will fall into a recession – much higher than previously thought.

Wang Ying | Xinhua News Agency | beautiful pictures

He blamed the US central bank for rising inflation.

“The reason for that is because the Fed has exploded the money supply, starting in early 2020 at an unprecedented rate, and they don’t want this length to show up between money supply and inflation.”

“Because if that’s the case, then the noose is around their neck, and that’s the real problem.”

An increase in the money supply will increase the price because consumers are willing to pay more for the good.

Classical economics, as Milton Friedman and others have shown, The money supply, Hanke added, is the culprit behind out-of-control inflation.

The Fed should have done more sooner, but now they should slow down, says Jeffrey Gundlach of DoubleLine

The professor said the Fed has flooded the US economy with massive amounts of stimulus and liquidity to keep it alive during the pandemic, but has not focused on cautiously reducing the money supply over time. said the professor.

The M2 money supply, a measure of the money supply that includes cash and deposits, has grown by double digits over the past three years.

Currently, the growth rate of the M2 money supply is slowing down too quickly and that could send the economy into recession, Hanke warned.

“They don’t address it correctly,” he said. “For five months, we’ve seen large amounts of money in the US go sideways. It’s not up at all.

Select stocks and investment trends from CNBC Pro:

“And now they’re going to do quantitative tightening and what will do is bring the money supply down, that’s going to push it down into the negative territory if they keep doing that.”

Hanke said the right economic move would be to keep the money supply growing at a “golden growth rate” of between 5% and 6% to bring inflation up to around 2%.

“It’s zero now, and it’s probably going to be negative,” the professor said. “And that’s why we’ll see a recession in 2023.”



Source link

news7d

News 7D: Update the world's latest breaking news online of the day, breaking news, politics, society today, international mainstream news .Updated news 24/7: Entertainment, Sports...at the World everyday world. Hot news, images, video clips that are updated quickly and reliably

Related Articles

Back to top button