In a recent interview, economist Professor Steve Hanke provided critical insights into the Federal Reserve’s monetary policy, inflation, and the potential impacts of Kamala Harris’s housing plan.
Hanke, known for his expertise in currency reform and economic policy, began by addressing Federal Reserve Chairman Jerome Powell's remarks at the Jackson Hole meeting.
He noted that while a September rate cut is likely, it has already been anticipated by the market, resulting in a slight weakening of the U.S. dollar against the Euro.
Hanke highlighted that the U.S. money supply, as measured by M2, has been contracting since July 2022. This contraction, according to Hanke, is significant as it has only happened four times since the Federal Reserve's inception.
Each instance was followed by a recession, or in the case of 1929-1933, the Great Depression. Hanke and his colleague John Greenwood predict that this contraction will likely lead to a recession by late 2024 or early 2025.
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Inflation and Monetary Policy
On the topic of inflation, Hanke criticised Powell's explanation that recent inflationary pressures were caused by pandemic-related supply chain disruptions.
Hanke dismissed this view, asserting that the real cause was the rapid expansion of the money supply in early 2021, which led to a peak inflation rate of 9.1%.
Hanke believes that inflation will continue to decline, potentially reaching 2.5-3% by the end of 2024.
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Harris’s Housing Plan Under Fire
Hanke also turned his attention to Kamala Harris’s proposed housing plan, which includes building 3 million homes and providing $25,000 to first-time homebuyers. He criticised the plan, labelling the assistance as a burden on taxpayers and warning that it could drive up real estate demand and prices, counteracting the goal of affordable housing.
Additionally, Hanke expressed concerns about rent controls, recalling his opposition to them in the 1980s.
He argued that rent controls distort the housing market, leading to reduced investments in housing and potentially worsening the shortage.
Alex
Clement
Coinlive 