Steve Hanke’s Warning about 2024 Recession
Steve Hanke, a Professor of Applied Economics at Johns Hopkins University, warns that the Federal Reserve is “flying blind” into an “ugly recession” in the first quarter of 2024. Hanke, who served on Ronald Reagan’s Council of Economic Advisors, is a monetarist and claims that changes in the M2 money supply directly cause changes in inflation and GDP. He strongly argues that the Fed is ignoring the evidence and should instead pay attention to the money supply.
Federal Reserve’s Stance on Money Supply
The Federal Reserve is currently not paying any attention to the money supply, claiming that it’s not a reliable indicator. Hanke believes this is a grave mistake, as the Fed’s post-Keynesian macroeconomic models do not include money. He highlights that since April last year, the money supply has shrunk by 4.6 percent, leading to rapidly falling inflation and eventually, a contracting economy.
Banking Turmoil and Credit Crunch
In his FOMC Press Conference, Fed Chair Jerome Powell admitted to keeping an eye on the “full extent” of the unfolding banking turmoil, which has seen four banks collapse this year. Hanke warns that a “credit crunch on Wall Street” would force the Fed to pivot on rate hikes and reverse its quantitative tightening program. He believes that the only thing that could make the Federal Reserve pivot is a credit or liquidity crash.
Gold Market Outlook and Hanke’s Predictions
Steve Hanke and his colleague, Abe Cofnas, have developed The Gold Sentiment Score, which uses artificial intelligence to develop a sentiment score from -10 to 10 based on mining the internet for articles about gold. Hanke reveals that he’s bullish on gold, as it tends to perform well entering a recession. The Gold Sentiment Score is being used by Hanke to earn returns of 30 to 50 percent per annum.