Posted on 08/31/2022 6:44:18 AM PDT by lasereye
Americans are worried a recession is looming—and according to a top economist, they ought to be.
Steve Hanke, a professor of applied economics at Johns Hopkins University, said this week that he believes the U.S. is heading for a “whopper” of a recession next year.
In an interview with CNBC’s “Street Signs Asia” on Monday, Hanke argued that a major economic downturn had been made inevitable due to U.S. money supply soaring and stagnating.
“We will have a recession because we’ve had five months of zero M2 growth, money supply growth, and the Fed isn’t even looking at it,” he said. “We’re going to have one whopper of a recession in 2023.”
M2 is a measure of U.S. money supply, which includes cash, checking and savings deposits, and shares in retail money market mutual funds. Since the beginning of the year, the M2 reading has plateaued, but the supply of money in the U.S. surged throughout the pandemic, according to official data.
Hanke said on Monday that throughout world history, there had never been sustained inflation—inflation above 4% for more than two years—that had not been caused by excessive growth in the supply of money.
“We had [that M2 growth] starting with COVID in February of 2020,” he told CNBC. “We had an unprecedented growth in the money supply in the United States, and that is why we are having inflation now—and that’s why, by the way, we will continue to have inflation through 2023 going into probably 2024.”
Last year, Hanke’s research predicted that U.S. inflation would be somewhere between 6% and 9% in 2022.
U.S. inflation cooled in July, but still remained elevated with the Consumer Price Index increasing 8.5% from a year earlier.
“We hit the bull's-eye with that model,” Hanke said Monday, referring to his inflation simulations. “Now the model is running at between 6% and 8% for the end of this year on a year-over-year basis, and 5% at the end of 2023 going into 2024.”
The Federal Reserve aims to keep inflation at around 2%, and has been trying to reduce inflation this year without triggering a recession.
However, Powell himself warned last week that American households and businesses should brace for “some pain” as the central bank’s efforts to bring inflation under control were “likely to require a sustained period of below-trend growth.”
There is a broad consensus among many of the world’s top economists and market watchers that a recession is on the horizon, with many believing inflation will be difficult to tame and force the Fed to take drastic action.
According to a recent Bank of America survey of asset managers, recession expectations among investors have reached an all-time high.
Consumers are also nervous, with polling showing that 70% of Americans are worried about an imminent recession.
Earlier this month, top economist Mohamed El-Erian warned that inflation “will be sticky” and despite recent signs that price growth may be slowing, high inflation could become “entrenched.”
The veteran economist argued in recent weeks that while the U.S. is “simply not in a recession” right now, the risk of a recession was high—and “getting higher and higher.”
Michael Spence, Nobel laureate and dean emeritus at the Stanford Graduate School of Business, told Bloomberg this month that while recession fears were receding, he did not believe they were over.
“There are still people who are worried that inflation will be persistent enough to force the Fed to really clamp down,” he said in an interview. “There’s still a non-trivial possibility that we’ll have a recession or a dramatic slowdown.”
Meanwhile, renowned economist Stephen Roach told CNBC this week that the U.S. needed a “miracle” to evade a recession, and JPMorgan Chase CEO Jamie Dimon said recently that he saw only a 10% chance of an economic slowdown that did not lead to a recession.
However, others are less gloomy about the outlook for the U.S. economy.
“Little of the data I see tells me the U.S. is on the cusp of a recession,” Citigroup CEO Jane Fraser said in the company’s earnings call last month.
Diana Furchtgott-Roth, George Washington University adjunct economics professor and former chief economist at the Department of Labor, told PBS on Monday that she had a positive long-term outlook.
“I am optimistic that the economy is going to get better in the future and that we are going to have a mild recession, which is going to get inflation out of the economy, and then the economy is going to continue to increase,” she said.
Don’t worry. Jo Jo the Pedo Clown and his band of Snowflakes have everything figured out. LOL! He’ll fight the recession using the same tactics he used with Corn Pops. Go get ‘em Jo Jo!
Yes, he sounds reminiscent of Milton Friedman to me.
On America’s Voice, a guest said we are in a recession, and it will become a depression soon.
“Johns Hopkins economist predicts ‘whopper’ of a recession in 2023 — and points to one key economic reading the Fed is missing”
If the Demoncrats ... I mean Democrats get their way and end up with a veto proof House and Senate it will probably be a full blown depression, not a recession.
he may be one of the few economists left who is A-Political when it comes to his economic forecasts and doesn’t base his predictions on politics.
Could just blame the election of a Republican Congress.
Um, we’re in a recession NOW.
They spew this crap in a desperate attempt to affect the Fall elections — those Democrats are doing a great job with the economy!!
It won’t work.
Voters will support Republicans. At that point, these same economists will suddenly notice the Recession and blame the people who just got elected for screwing up Biden’s Booming Economy.
I hope that I am wrong, but I fear it will be worse than a “recession”.
We have NEVER had this much consumer debt. As consumer spending dries up the small businesses that survived Covid will not be able to make it and unemployment will rise drastically further fueling the downward spiral.
Our government and the “Fed” have shot their wad with stimulus or quantitative easing. They can still do it, but it has no effectiveness beyond propping up their chosen causes because it further erodes the dollar.
I would love to be wrong, but I think we are in deep trouble. My unease with our current situation is made worse by the bleatings of a journalism class that has been wrong about every major issue recently to include economics.
We did not get here overnight and we will not get out of it overnight either......
It’s Official: The US Has Been In a Recession For 6 Month
https://americasvoice.news/its-official-the-us-has-been-in-a-recession-for-6-months/
After Rat Party Governors (and Trump hating RINO Governors) shut down this country and,thus,brought its economy to its knees how could we possibly *avoid* a depression?
—
Having destroyed supply thru shutdowns, and ramped demand thru stimie checks, how can anyone be surprised inflation is now in runaway mode. Of course this admin despises the concept of supply-side economics. They think they can solve all problems with Keynesian economics; dumping money will magically fix everything.
—— 70% of Americans are worried about an imminent recession.——
Balderdash
70% of Americans don’t know what a recession is beyond the fact it is bad
From my perspective, the key economic numbers are cooked. GDP, unemployment, and inflation. One can read about all the changes to the metrics over the last 40 years. The chances obscure bad numbers. To compare metrics over time, the algorithms and process must be constant.
The US key metrics have had their processes and algorithms constantly adjusted with no restatement of history making any comparison of current numbers with past number impossible. I prefer to look at government shadow statistics which states they use the history algorithms and processes so they can be compared. GDP, unemployment, inflation are much, much worse than the published numbers and intuitively make more sense with what I personally observse.
We are in a recession. We have been since the country was shutdown. True unemployment is very high and true inflation well above 12%.
The country was practically shut down for almost a year. And the government was after President Trump. And they stole the election and put a senile old man who gave no one any confidence.. And the grocery shelves were half empty. And the prices went up and up. Gas became expensive.
Housing prices that were high, are down. Eating out costs more. Everything costs more and more... job losses and the open border adds to all of the problems.
If we think it is not a recession... it is. Everything is out of kelter.. And anger and hate is worse... uncertainty brings on irritation.. and more.
Prep for the coming food riots.
We are ALREADY in a recession, let’s not forget that. Otherwise, they will claim it started after and is a result of the November election. Mark my words.
Isn’t a “non-trivial possibility” a serious possibility?
Now why would they put it like that? /S
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