Renowned economist warns: Don't believe in the illusion of a soft landing, the US will fall into recession early next year. Steve Hanke, a well-known American economist and professor of applied economics at Johns Hopkins University, known as the "Currency Doctor," warns that US stock investors, who are too complacent, may be caught off guard by an economic recession early next year.
In a recent interview, Hanke said, "We are sleepwalking into market turmoil. We are essentially sleepwalking into recession." Hanke cautions investors not to believe in the notion of a "soft landing," which implies that the Federal Reserve can control inflation without dragging down the economy or causing a surge in unemployment. He said, "The soft landing camp says, 'Oh, look, the labor market is still strong, the stock market is still strong, the economy seems to be running well, and inflation is declining, so we will achieve a soft landing.'" "But what I want to say is, 'No, we haven't seen the impact of the decline in money supply on the real economy yet, and this will be in early 2024 due to the usual lag.'"
Hanke, who has provided economic policy advice to heads of state and finance ministers for decades, earned the nickname "Currency Doctor". In the 1980s, he served on President Reagan's Economic Policy Advisory Board and helped Indonesian President Suharto deal with the impact of the Asian financial crisis in the 1990s. He pointed out that during the peak of the pandemic, the US money supply grew by 26% in one year, but has been shrinking in recent months. He said that the real economy usually takes 6 to 18 months to feel the full impact of an economic contraction. "Hanke said, "Money is the fuel for the economy, and we have a surplus of fuel. Now the excess fuel in the tank has been drained, and now we can only rely on fumes.
" According to Hanke, the decrease in money supply, along with the Federal Reserve's reduction of its balance sheet and possible further interest rate hikes, indicates a bleak economic outlook. "The fumes will dissipate, and when that happens, an economic recession will occur," he said. This senior economist also sounded the alarm on US government debt, warning that the US government is preparing to allocate more and more of its budget to paying interest.