Steve Hanke, professor of applied economics at John Hopkins University, says the Fed is looking at lagging indicators, adding that he does not believe that the U.S economy is on track for a "soft landing."...(read more)
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Renowned economist Steve Hanke has recently expressed his concerns about a potential recession in the United States next year. Hanke, a professor of Applied Economics at Johns Hopkins University, believes that the contraction of the money supply is a key factor that will contribute to this economic downturn. Monetary supply plays a crucial role in an economy as it affects the availability of credit, interest rates, and overall economic activity. When the money supply contracts, it means that there is a reduction in the amount of money circulating in the economy, which can lead to a decline in spending and investment. Hanke points out that the U.S. Federal Reserve's decision to reduce the amount of money in circulation by tightening monetary policy is a worrisome development. The central bank has increased interest rates and reduced its balance sheet over the past few years, effectively reducing the money supply. Hanke argues that this tight monetary policy is stifling economic growth and warns of the potential consequences. One of the major concerns for Hanke is the impact this contraction of money supply will have on credit availability. When there is less money in circulation, financial institutions become more cautious in lending. This can lead to higher borrowing costs and a decrease in borrowing overall. As access to credit becomes limited, businesses may struggle to invest, expand, or even survive, ultimately hampering economic growth. Another harmful consequence of a shrinking money supply is the potential deflationary pressure it can exert on prices. When there is less money in circulation, consumers have less purchasing power, which can lead to reduced demand for goods and services. This decline in demand can push prices down, leading to a prolonged period of falling prices or deflation. Deflation, in turn, discourages spending as consumers delay their purchases in anticipation of even lower prices. This can lead to a vicious cycle that further weakens the economy. Hanke's concerns over the declining money supply and the potential repercussions on the U.S. economy are not unfounded. Historically, tight monetary policy has often preceded recessions, as seen during the Great Depression and the 2008 financial crisis. However, it is important to note that predicting economic downturns with precision is a challenging task, as various factors influence the overall economic landscape. It remains to be seen whether Hanke's prediction will come to fruition, as the economy is influenced by a multitude of domestic and global factors. The U.S. Federal Reserve, for its part, has already signaled a more accommodative approach recently by lowering interest rates. This change in stance could potentially mitigate the impact of the contraction in the money supply. As the year progresses, economists and policymakers will closely monitor the health of the U.S. economy and the effects of the money supply contraction. Whether Hanke's warning will be heeded or dismissed as misplaced remains to be seen, but what is clear is that careful considerations and proactive measures will be required to ensure the stability and growth of the U.S. economy in the years to come. https://inflationprotection.org/money-supply-contraction-predicted-by-steve-hanke-to-lead-to-u-s-recession-in-the-coming-year/?feed_id=138293&_unique_id=650c381aec372 #Inflation #Retirement #GoldIRA #Wealth #Investing #AsiaSquawkBox #RecessionNews #AsiaSquawkBox
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