A CNBC poll of economists, fund managers and strategists showed that there is a 52% chance that the United States will enter a recession in the next 12 months.
This comes at a time when the US Federal Reserve has become a target of criticism from investors and markets, considering that it was too late in launching its battle once morest inflation following it escalated.
But the well-known American economist, Steve Hanke, said that the chance of a recession in the United States recently jumped to 80%, according to what was quoted by “CNBC” in a report.
The Johns Hopkins University professor of applied economics added: “The probability of a recession I think is much higher than 50%, I think it’s regarding 80% now and maybe even higher.”
Hanke blamed the US Federal Reserve for high inflation, saying, “The reason for this is that the Fed blew up the money supply starting in early 2020 at an unprecedented rate, and they don’t want this to be visible between the money supply and inflation.”
He continued, “If they continue with quantitative tightening and move the growth rate and the rate of money supply into negative territory, this will have a severe impact on the economy.”
Hanke was critical in saying that “the Federal Reserve has failed to manage inflation by monitoring the large supply of money flowing into the US economy”.
He added, “They were already looking for inflation and the causes of inflation in all the wrong places… They are looking at everything in the sun without the money supply.”
He said, “In fact, the money supply has tripled because of the argument that money has nothing to do with economic activity or has no reliable relationship to economic activity and inflation.”
An increase in the money supply causes prices to rise, as consumers become more willing to pay more money for goods.
Hanke pointed out that classical economics, as suggested by Milton Friedman and others, had pointed to the money supply as the main cause of uncontrolled inflation.
The professor said that the Fed flooded the US economy with large amounts of stimulus and liquidity to keep it afloat during the Corona epidemic, but it did not focus carefully on reducing the money supply over time.
He added that the growth of the money supply is now slowing down very quickly and this may lead to the economy entering into a state recession.
He also added that the correct economic step would be to maintain the growth of the money supply at a “golden growth rate” from 5% to 6% to bring inflation to regarding 2%, but now it is zero, and for this reason, “we will witness a recession in the year 2023.”
