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Join us in an enlightening conversation with Professor Steve Hanke, renowned economist from Johns Hopkins University. In this episode, James Connor delves deep into the nuances of monetary policy, inflation, and potential recessions with expert insights from Hanke. Discover how changes in the money supply could signal significant shifts in the economy and what it means for your investments. Stay tuned as we decode complex economic indicators and prepare for potential market shifts. Watch to learn how you can shield your wealth in uncertain times!


Steve Hanke 0:00
It is a perfect cocktail that’s being stirred up. We’ve got the incompetent fed, that’s the monetary side. And the general policy side, there’s a lot of protectionist talk and action in the in the in the wind. You can’t pick up the paper without saying something about attacking China, for example. Secretary Yellen was just in China. And she said that well, we’re suffering from overcapacity. Now what in the world over capacity

James Connor 0:35
Hi, and welcome to Wealthion. My name is James Connor. And today my guest is Professor Steve Hanke. And Steve is a Professor of Applied Economics at Johns Hopkins University. Steve has done much research on the money supply and its impact on inflation and also economic growth. And so we’re gonna get Steve’s views on where he thinks we are in the economy, and if and when we’re going to go into recession.

Hi Steve, thank you very much for joining us today. How are things in Baltimore?

Steve Hanke 1:06
Things are great down here. James, good to be with you.

James Connor 1:10
And are you still teaching or things still very active that the university?

Steve Hanke 1:15
Yeah, things are active. But with with me, they’re always active. I mean, it’s more or less 24 712 months out of the year. So the the year changes very little for me, except during the summer months, obviously, there aren’t as many people around, but that’s about the only difference.

James Connor 1:34
And you’re leading a big research team to how many students on your research team.

Steve Hanke 1:39
I’ve got 31.

James Connor 1:41
So that keeps you busy.

Steve Hanke 1:43
I’ve got a lot of good assistants. So some of them are load greener than others, you got to watch them carefully.

James Connor 1:51
So I want to get your views on the economy. And I want to first start with the money supply. And you and your partner, John Greenwood have done much research on the money supply and also the quantity theory of money. And I want to start right here. And it’s been a while since I took an economics class. So let’s just start with the basics. What exactly is the money supply? And how do we measure it?

Steve Hanke 2:12
Well, for the money supply, at least in the United States, the broadest measure of money is what they call m two. And m two is made up of the following components James, currency is one thing, notes and coins. That’s, in fact, that’s what most people think money is. But that only makes up about 11% of broad money. 76% is made up by liquid deposits and banks, like your checking account that your checking account is money, you write a check, and it’s good for a transaction. Assuming you’re a reliable client, have something in the bank. But But in general, those deposits of banks are included, and that’s about seven, that’s the bulk. That’s about 76% of the money supply. And about 5% are small time deposits of banks, and about 8% or money market accounts. So retail money market accounts. So the big elephant in the room are deposits liquid deposits in the banking system. And, and most people don’t realize that I call that bank money. And bank money is credit is issued by banks. And once once a bank makes a loan to you, your your checking account is topped up, and bingo, that’s money. So bank banks produce in fact most of the money commercial banks and always have been. So if you look at most countries, about 80 to 90% of the money supply broadly major it is made up of bank money the real the remaining part is made up of what I call state money and that’s that’s what comes from the central bank’s, that’s notes and coins. So, so there there you have it, that that that is that is the definition in the United States and other countries have slightly different configurations of these broad monies with other other components in it, but they’ll all have the bulk will be these commercial bank deposits. So in that sense most people don’t have a very good idea of what money actually is because they they just think it’s notes and coins. But but in fact notes and coins as he is I noted are fairly small potatoes and the picture so that that is the money supply. And when the money supply moves around, the economy moves around. And if you get substantial changes in the money supply, you get, first of all, with a with a, there’s a transmission mechanism, it takes time for these changes to go through the economy and have an effect. And as you increase the money supply, let’s just do the increase side of it, which we’ll talk about that starting really and when the pandemic COVID and early 2020. And when that started the US central bank and loosening the monetary range, shall we say, and the money supply started increasing. And with a lag of about one to nine months, then you get asset prices start increasing. And sure enough, we had a big boom in the stock market and real estate market all hard assets went up tremendously in value in the United States, the s&p 500 That’s the equity market for March of 2020. Until January of 2022, it increased by 114%. That’s, that’s equity assets. Now, if you look at farmland, for example, prime farmland in Iowa 2020 to start at 2022, little over 30% residential home prices in the US in that same period of time, up a little over 44%. So that’s the first phase this one that one to nine months surge, and then and then with a little longer, like six to 18 months, the economy starts revving up after you’ve had a big increase in the money supply. And in the United States. And the average for the 2021 22 period after the goosing of the money supply, the average real rate of growth in the economy is 4.1%. Now, that’s higher than the potential sustainable growth rate in the United States about 2.2%. So it was double actually. And then ultimately, of course, we had a lot of inflation, with a lag after the increase in the money supply, or the fuel and the economy about 12 to 24 month lag. And you mentioned John Greenwood and my self and our work with a quantity theory of money and that the quantity theory of money in simple terms is this. It’s a money supply stupid, the changes in the money supply are going to change asset prices, economic activity, inflation, these things follow changes in the money supply. And we anticipated the inflation in the United States. And we said that we thought it could go up to as high as 9%. And in June of 2022, it actually peaked out at 9.1%. So we hit the bullseye with the inflation forecast on the upside and then, and then we’ve started to downside money supply has been coming down and contracting in the United States. And now it’s contracting on a year over year basis. It’s about 2% year over year contraction. And since March of 2022, we have had actually a decline of about 3.2%. So it’s been contracting. So when we went up by the way, just to give you an idea of how fast it went up by from my February of 2021, that’s when it peaked out this m two major, and it peaked out at 27% per year. And, and that’s way higher than what I call hankies golden growth rate. And that’s, that’s a 6% rate. That would be consistent, given the quantity theory of money of hitting an inflation target of 2%. If you want to hit 2%, the money supply should be growing at a constant 6.6% growth rate year over year. Well, it went up to 27%. That’s the highest it’s ever been recorded in the United States. So it was an extraordinary event. And now this contraction thing that I’m talking about that That’s almost unprecedented, we’ve only had four times where the money supply is actually contracted. And the United States since the Fed, the central bank was established in 1913. One of those was 1920 21. Another one was 2933. And other one was 3738. And another one was 4849. And what what happened after each one of those contractions, we had a recession. And that’s why I think we will be seeing, eventually a recession in the United States late late this year, early next year. And that’s why also I think, the inflation rate, it’s it has come down, but it’s kind of plateaued out the last three months, it’s not running 3.5%, but I think it will, it will continue to come down with this monetary contraction. So So that’s more or less the picture, big change in the money supply, and you’ve got this transmission mechanism of these legs, asset prices moving, then the economy moving, and then inflation moving. That’s that’s the way it works.

James Connor 11:16
So just to summarize, money, and the components of the money supply are the fuel to drive the economy, the more money in the system, the stronger the economy. And conversely, the less money in the system, the weaker the economy is.

Steve Hanke 11:31
You got it. And in fact, there’s there’s never been an in the world. By the way, there’s there’s never been a case in which you’ve had sustained inflation over 4%. Or you haven’t had a big increase in the money supply prior to the inflation running over 4%. And, and I’ve looked, by the way, I did a study that was published last September and World Economics, in which I looked at 147 countries now I just looked at these countries from 99 to 2021. And and I looked at the change in the money supply and the change in inflation. And you really had kind of a proportionality there you have a correlation. It was it was almost one to one, it was point nine, four, between changes in the money supply and changes. And inflation, you moralize that a one to one relationship. Change, change the money supply by 10%, you’re gonna get a 10 percentage 10% increase in inflation and, and vice versa. If you slow things, then you’ll slow inflation down.

James Connor 12:51
And you made mention of the fact that there’s only been four other times in history when we’ve had a contraction in the money supply. And each of these times the economy went into a recession. Do I have that? Right?

Steve Hanke 13:05
Yep, you got it.

James Connor 13:06
But I’m surprised to hear that the last time it happened was in 1948. In 1949.

Steve Hanke 13:14
Oh, yeah. Very, very unusual. I mean, shall we say, in the post world war two era, it’s never happened

James Connor 13:22
And why is that because we’ve had many recessions since that time?

Steve Hanke 13:26
Well, we’ve had many, many, many recessions. But the we’ve also had many times where the money supply went up and then came came down, if it comes down. It, it might not go negative on you, as it as it is now, a real outright contraction. But it can slow way down if it if it’s if it slows down rapidly. And it’s and it stays below that golden growth rate of 6% per year, you’ve got a pretty good chance of having a recession on your hands. That’s what’s going on.

James Connor 14:03
And so let’s talk about that recession. The last time we spoke, I believe it was late 2023. You are expecting a recession in 2023. We didn’t get it. Now you’re seeing is 2024. And I I understand there’s a lag associated with these things.

Steve Hanke 14:19
The original forecast, just to be clear on this Greenwood, and I thought that it would come earlier than it did we originally thought it would come in late 2023. Well, well, we were wrong. And we changed our forecast. Now why Why were we wrong? And why did we change our forecast because what had happened is that that the build up in excess cash balances excess money in the system, Pete people had accumulated a tremendous amount of money during the pandemic, much more than they would have desired to beholding in terms of cash that was that would be in the way to get that is to take him to the money supply and is divided by GDP. And that’s a cash balance. Well, that’s it goes up on a trend as the economy grows and so forth, people demand more cash. So there’s a trend, increasing the demand for money, as m two is about 1.7% per year goes up, up, up well, with this huge blip, increasing the thing at 27% per year, there was just a massive amount of excess money in the system. And and that slowly started draining out. But it didn’t drain out as fast as Greenwood and I thought it would and, and as a result of that the economy is kept going. And, and it’s been pretty strong. Now all that excess actually has been drained out. And and we should be seeing a convergence towards this more normal trend rate of around 1.7 1.8% growth and the demand for money. And as that occurs, then then then then we will see the slowdown really start biting. So so that’s why we were off, it was this unusual bulge that we had, and the excess cash balances that had been build up, we thought they would drain off faster than they actually did. And come in, when I say drain off that people would would spend the money we we thought they would spend the money faster than they actually did. And and as a result of that we were way ahead of the game on predicting a recession. We just didn’t get it right. And once, once we saw what was going on, we changed our forecast to move it instead of late 23 to like 24. Now the interesting part is we’ve always said the recession is baked in the cake, because the money supply is has contracted. So that’s why that’s why the baked in the cake expression comes into the picture, these things you things have happened in the economy or been baked in the cake a long time before they actually happen because of all these lags going on. And remember, these legs are long and variable, they don’t happen. They don’t come inflation doesn’t all of a sudden, rear its ugly head 24 months after the big change. And that money supply, maybe it can be 12 months. Maybe it can be 36. By the way, maybe maybe it could be early drug up there. Usually the lag is between 12 and 24 months between big changes in the money supply and inflation but but it varies all over the place. So you’ve got to keep your eye on the ball. And what happened once we saw that the the contemporary data were changing and the draining. The excess was slower than we had anticipated. We change our forecast and you know the quote John Maynard Keynes, John Maynard Keynes, you know, somebody asked him why he changed his forecast. And he said when the facts are changed. I changed my mind what you do, sir?

James Connor 18:50
I like that, quote, I might have to use that one. So And let’s talk a little bit about the this pending recession. Okay, and given that the growth in the money supply was so. So excessive 27% I believe you said year over year, and then we’ve had this sharp contraction once again, in a very short period of time. Do you think this recession is going to be a severe one?

Steve Hanke 19:16
I don’t I don’t really know. And the only thing I know is the direction of things. We’ve had this big slowdown and if by the way, I said that the money supply is contracted about 3.2% since March of 2022. Let me give you the magnitudes on these other contractions that have occurred the 1920 22 from the peak to the trough, it was a 9% contraction, so we haven’t contracted that much. And and then the big Whopper was 1929 1933 when the contraction was almost 39% And that’s what that’s when we had the Great Depression. And then 37, 38, the contraction was 2.6%, we had, we had a pretty good recession actually lasted 13 months, and 37, 38. But the contraction was more or less in the same range as a current contraction, that 37, 38 one, and then the one in 48, 49 was a mild or when it was only about one and a half percent. And the recession was milder, too. So, so we can say something about the duration of the recession, maybe not the depth Exactly. But look at the big Great Depression, we had a contraction of, you know, almost 39% in the money supply. And, and the contraction, the recession of the Great Depression lasted 43 months. Whereas the most mild recession we’ve had associated with that monetary contraction. In 1948 49, the duration was only 11 months. And, and the one comparable to what we’re talking about now, we now have contracted 3.2%, we had a 2.6% contraction, peak to trough and 3738, the duration of that recession was 13 months. So getting these things, the idea that you can precisely say when something’s going to happen, and precisely the magnitude, it’s really a fool’s game, no one can do this. I can give you what what reliably, you can say something about is the pattern of things. And what’s coming is a slowdown. And the slowdown will probably be a recession, if it’s if it’s like every one of these other contractions we’ve had. It’s it’s going to be a recession territory. But if not, it’s it’s going to be a pretty big slowdown, at least.

James Connor 22:18
So let’s just summarize a few of the points you made in first of all, I want to look at the current economy. And as you mentioned, it appears to be very strong, growing at three to 4%, the jobless rate continues to be very low below 4%. Now for many quarters, stock market continues to make new highs or was up until the last couple of weeks now we’re seeing some weakness, the housing market, I can’t really speak for what’s happening in the US. But in Canada, it’s hanging in there pretty good in spite of the mortgage rates being a lot higher in the last couple of years. But overall, things look pretty good to me. And I know we’ve had this big contraction in the money supply, and there’s this big leg coming. But do you think when I look at all of these things, I’m being too complacent?

Steve Hanke 23:07
Yes, because that that the those aren’t current data. So if you look at the current data, those are kind of symptoms of, of what what happened before. And the big thing that happened before that’s causing these current the current data that you see in driving them, it’s the money supply, what happened to the money supply, and and you’ve got these long and very highly variable lags in the picture. So I’m just saying that, given what I know, actually happened in reality, this contraction in the money supply and huge slowdown in the money supply. And the fact that all excess cash balances have pretty much been drained out of the system. I know what’s coming down the track. It just isn’t here yet.

James Connor 24:02
And to reiterate something you said earlier, we get changes in the money supply first and then changes in asset prices. And the asset prices are starting to change. There’ll be slowly but it’s gonna come.

Steve Hanke 24:14
Yeah it’s starting to change and when you look at it, for example, stock market. If we look, remember, Nobel laureate, friend of mine, Robert Shiller at Yale, great, great professor. He wrote a he’s written a number of famous books, after all, that’s how you win a Nobel Prize. But one of them was irrational exuberance. And he wrote that in 2000. And he anticipated that the tech bubble that we had, right, remember we had that huge run up in the stock market and then a crash and 2000 2001 and And he anticipated that thing. And, and what he looked at he he has something called Shiller’s cyclically adjusted price to earnings ratios, CA P E ratio. And now that Cp at CIP E ratio is 34.4%. And it’s higher than 95% of the readings that we’ve ever had since 1881. Now, what’s that mean? It means stock prices are very high. Now, the price, price earnings ratio, the way Shiller majors that, which is a very carefully done, thing. And, you know, just yet another reason the guy won a Nobel Prize. It’s very high right now. And the only higher time actually what was in 2000, it was a it was about 45%. The ratio 45, the ratio was about 45 is 34. Now 34 is higher than 95% of the readings that have ever occurred in the stock market since 1881. And there’s only been one peak higher. And that was the so called interim internet bubble, whatever you want to call it that occurred in 2000. So the market looks pretty pricey to me and show are now thanks. There’s a 50% chance of a recession. I think it’s a little higher than that. He by the way, Shiller is not a monetarist. He’s Shiller Shiller is a Keynesian, Keynesian. And, and, and so that’s, that’s, that’s the stock market. That’s bass bass. Basically, in a nutshell, to summarize, I’m a little bit with Jamie Dimon and Warren Buffett. They’re they’re not they’re not. They haven’t been injected with irrational exuberance. Neither is Anki. So is this the calm before the storm? Yeah, this is well, this is the this is the exuberance before the storm. I mean, everybody’s in the party, you know, everybody’s celebrating and, and the wildly optimistic and, and especially if you listen to some of the Silicon Valley crowd, you know, they say, artificial intelligence is going to save man, you know, and change the world and everything? Well, it will, it will change a lot of things, by the way. But when you put it into context, they they say things like this. And this is this is how you can kind of take them to school a little bit. They say, Oh, artificial intelligence, you know, that’s going to change everything. Productivity will zoom in the United States. And, and instead of in, they say, we’ll have real economic growth of 6% per year, well, not 6% per year, that’s, that’s three times higher than the current potential growth rate in the United States. We haven’t seen that kind of jump ever in history. So you know, I mean, Black Swans are possible, but they’re not very likely.

James Connor 28:27
So let’s talk about the inflation rate. And I know you said that with this contraction in the money supply, we’re going to get a big pullback in the inflation rate, you think it’s going to be approaching 2% or lower by the end of the year. But you we just recently had a very strong CPI number, we had very strong retail numbers. And we had your good friend, Powell speak recently. He also said it, it said it almost sounded like rates are going to be higher for longer. And I think the dot plot in March, they said they were expecting three rate cuts with the first one coming in June. It sounds like it’s going to be beyond that. Now. What do you think about what’s happening right now in the economy? And then of course, I got to touch on what’s happening in the Middle East with oil prices and with the potential for oil prices, prices to go significantly higher. How does this all fit into your scenario?

Steve Hanke 29:19
Well, first of all, the inflation rate was was coming down fast from that peak of 9.1. And then the first quarter the last three months, it’s kind of plateaued at more, more or less where we are now 3.5. So it was coming down coming down and then it’s and then applied to it’s going to start going down again. And John Greenwood night, again, were originally thought without this plateau in the picture, this little kink in the in the trend, we thought it would be down to 2% or below by the end of the year that that that will have occur, but I it might not occur quite by the end of the year, it might take a little bit longer. But it will come down to the to the target. Now about Paul and policy, they they don’t look at the money supply, they’ve canceled the money supply. And they’re they’re data dependent. They’re looking at current data. And that’s it. So he looks at the current three months of the CPI, he says, Oh, we better stay a little higher for longer tighter for longer. Now, I think that’s inappropriate. They’ve been way too tight. And for way too long. And if anything you asked about, well, how deep do I think the recession is going to be? I think if they stay tighter for a longer, that will simply mean the recession will be drugged out for a longer might might even be a little deeper than we are more or less anticipating so. So that’s that’s that side of the picture, the Fed is just got us on this. They’re just all wrong. They’re not looking at the money supply. They’re looking at current data. And as a result of that, they’re just whipsawing. us we’re we’re on a roller coaster, I said, unprecedented increase in the money supply. February 2021. It peaked at 27%. Year over year, highest it’s ever been in the history of the Fed. And now boom, we’re coming down and we’re in we’re contracting, we’ve only had four contractions in the history of the Fed. And as you say, you’ve got to go back to 1948 49 to even pick up the the last one we had before. So they’re on a roller coaster, they just are not with it. They don’t follow the hankies golden growth rate, about 6% per year, constant rate, and you’re going to come pretty close to hitting the inflation target. And that’s what they were doing, by the way, with Greenspan in the 1990s. That wasn’t that long ago. What, Why, why, why did we have a pretty constant inflation rate in the United States, and pretty good growth and sustainability along Long Boom, it was because of money supply was growing more or less at a constant rate of around 6% per annum. So that’s the that’s the money supply part of it the what’s what’s going on with the the wars in Ukraine and the Middle East. That’s another kettle of fish. Creating, by the way, create creating a lot of uncertainty. However, it’s interesting since the last last weekend, when the the Iranians following the bombing and assassination in the consulate in Syria by Israel, and then the, of course, the Iranians responded as they said they would and gave everybody a fair warning that they were going to respond. They did. And and the markets do really didn’t do much of anything. I mean, even the gold market was we I measure the sentiment in the gold market every on an hourly basis. And the sentiment in the gold market really, it hardly changed at all.

James Connor 33:42
No, that’s a fair point. And the price of oil didn’t really respond either.

Steve Hanke 33:46
The price of oil didn’t really respond either initially, although today, as we speak, it’s the 17th of April, and the oil price did take a little bit of a tumble that day. Let me just see what we’re doing now. Yeah, it’s done about 250 a barrel, it’s threatening and run. West Texas is running around at $83 a barrel. And I’m just looking the last well the last in the last month it’s been between about 86 and 80 a something like that, more or less chopping around up at the top and that not now it’s taken a little dive down. It’s it’s now we’re down at 80 to 85. So let’s say we were about 85 More or less for the last couple of weeks and now all of a sudden it’s it’s peeled off some and we’re down around 83.

James Connor 35:00
Steve, the Fed lost a lot of credibility in 2021, when they said inflation was transitory, and then they kind of woke up to reality in March of 2022. And they started lifting interest rates, and they did so at a very accelerated pace. But as we stand ready now, do you think the Fed is making another policy error here? error by keeping rates too high for too long?

Steve Hanke 35:25
Oh, yeah, there’s no question about it, they’re not paying a monetary policy is not about interest rates, it’s about changes in the money supply point number one, and all they’re doing is fooling around, keeping their eye on interest rates, keeping their eye on current data that are coming out about the economy and so forth, and not even paying attention to the money supply. I mean, they’ve explicitly said, Powell, has testified to this over and over again, that there’s really all these linkages, I’m giving it between the money supply, and saying the money supply as a fuel in the economy. And the thing that drives everything, which which any, any youngster would tell you laugh, you know, I mean, if they gave, if they gave your children a lot more money, what would the child say? Well, I’d say, you know, I’m in heaven, I’m gonna be buying a lot more candy and other things, you know, and, and then, and then if you ask him, well, is that going to make the shop owner happy? Make things good? He might even hire more people. It’s like, oh, maybe he would. So so everyone gets a connection. And anyone with any sense, has any connection, but the Fed clearly has no sense. And they have this ill conceived idea about these financial conditions, indices, and, you know, you name it, credit spreads, interest rates, employment levels, joy, drill reports, all these things coming in every day, they’re looking at all of this stuff, and trying to make sense out of it, not stupidly, not realizing that what causes these things to move around? Is what happened to the money supply a year and a half ago, or maybe two years ago, maybe even three years ago.

James Connor 37:28
Well, how do you explain that? Like they must have many economists working within the Fed? They have some very smart people. They’re examining all of this data.

Steve Hanke 37:37
They have, they have a lot of economist and the Fed system, they have about 785 Professional economists. And none of them were able to forecast the inflation that we had. None. They got none of them got it. Well, Greenwood and I did get it we were using the quantity theory of money. And they weren’t using the quantity theory of money. Now, why weren’t they using it? Because they most of them have been trained in contemporary university setting where post Keynesian models are the order of the day for the last 30 years. And post Keynesian models don’t don’t include a variable for a monetary aggregate money is not in the model. So, so the theoretical tools they have an apparatus or are are are rubbish basically. That’s that’s point number one. And point number two, there is a political aspect of the thing because out of the 785 economist who work at the Fed 48.5 of those are in the democratic, the ratio, the ratio of 48.5 to 140 8.5. To one almost 50 economist versus one are in the Democratic Party. He got you got 50 Democrats for every one Republican. Now you say, Well, what’s that have to do with anything and it has a lot to do with something because who is the dean of monetarism and the quantity theory of money in the 20th century Nobel laureate Milton Friedman, and Friedman was was a heavy adviser to all Republicans. He clearly was in the Republican Party. So and in particular, influenced a great deal. Ronald Reagan, and the bringing down of the inflation that we had in the late 1970s Was Paul Volcker and Volker embrace the quantity theory of money. In other words, Volcker said well to get Reagan Reagan says, I want to get inflation down. And I think that means we got to get the quantity of money slowing down and Volcker says, Yeah, I agree with you. And that’s what I’m gonna do. And that’s what he did. So, so that so the kind of target plus treatment and a lot of other, shall we say, policy prescriptions besides this the monetarism that rubbed the Democrats the wrong way. In other words, Friedman was not a state interventionist he, like most Democrats are, most Democrats want to go to the government to get something fixed. If they see a problem, you got to go to the government tried to get it fixed? Well, Friedman was just the opposite. If you see a problem, you want to go to the private sector to get it fixed, not the government. So So I think that that is another factor. In this picture, I think there is a technical bias of particularly young economists that are not trained properly, in macroeconomics, and that’s why they never can get anything, right. They’re always always wrong, by the way. So that’s one thing. And the second thing is I think there also is really a political bias. Friedman was a quantity theory of money, man. And that’s just another reason why we we, we, at the Fed don’t want to be using that model. We want to be using the models, we were trained with the post Keynesian models that that don’t have money, they don’t have Milton Friedman in there. Friedman is passe.

James Connor 41:38
So if you are going to give the fed a grade, what grade would you give them?

Steve Hanke 41:43

James Connor 41:45

Steve Hanke 41:47
oh, this is what this is one of the world’s perform.

James Connor 41:49
You’re a tough marker.

Steve Hanke 41:50
Well, I would say I’m a fair marker, I’m not. I’m a little bit old school, I’m not into the grade inflation thing and never really grabbed me very much. I, I think you should have standards, and you should evaluate policies and people’s performance based on, you know, old school standards. I don’t like to shrink the hurdle, the hurdle is up here. And if you go over it, you got a pat on the back and a good grade. If you don’t, if you crash through the thing, you’re gonna get an F. And by the way, when when when I say this, the only time really the Fed is is screwed this thing up worse than the current time is 1929 1933. I mean, if you go back to those periods that I gave you, that that’s the only real one that stands out as being, you know, completely catastrophic. And that Great Depression was at the hands of the Fed. And complementing that, of course, we had the politicians in Washington doing Congress was doing its thing with the Smoot Hawley tariffs. And that’s the direction we’re going in now, a lot of protectionism. So, so this this do is it is a perfect cocktail that’s being stirred up. We’ve got the incompetent fed, that’s the monetary side. And the general policy side, there’s a lot of protectionist. Talk and action in the in the in the when you can’t pick up the paper without saying something about attacking China, for example. Secretary Yellen was just in China. And she said that, well, they’re suffering from overcapacity. Now, what in the world over capacity? She said, don’t send us this excess that you’re producing. So is does that mean? That’s strictly a protectionist ruse that she’s, she’s put forward? She’s she’s basically saying that. Let’s stop international trade. If you have capacity to produce more than you can consume at home, you’re a bad guy. And you should stop that. And we should try to stop it with with protection as majors, either you voluntarily don’t stop exporting, or we’ll put a quota on you or we’ll put tariffs on Yeah, but to slow you down. It was an incredible and stupid statement and in my view, but very dangerous like like the Smith Hawley tariff Smoot, the Smoot Hawley tariff. But that was another reason we plunged into the Great Depression. Money was the big thing that dominated but the tariff was was bad.

James Connor 44:57
Well, that was a fascinating discussion, Steve and if someone would like to learn more about you and hear more of your thoughts, where can they go?

Steve Hanke 45:04
I think the easiest thing is to go to my Twitter. It’s just @Steve_Hanke. Right now I have 727,000 followers. That’s our third highest of any economist in the world and I putting out things, you know, on a regular basis every day. If you want to join my distribution list, and let me send you articles that I write things like that, you just just send me an email at That’s my university email.

James Connor 45:44
And once again, that was a great discussion. Thank you very much for making the time.

Steve Hanke 45:48
You’re welcome. James. Great to be with you.

James Connor 45:51
Well, I hope you enjoyed that discussion with Steve Hanke. One of the reasons we do these interviews with people like Steve is to give you some sort of insight as to what’s happening within the global economy and also how to prepare for it. And if you’re trying to prepare for your financial future, consider having a discussion with a Wealthion endorsed financial advisor on There’s no obligation to work with any of these advisors, the free service that wealthy on offers to all of its viewers. Don’t forget to subscribe to our channel, and also hit that notification button to be kept up to date on upcoming events. Once again, thank you for spending time with us today and I look forward to seeing you again soon.

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