A CNBC survey of economists, fund managers and strategists showed 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 come under criticism from investors and markets, considering it was too late to launch its battle against inflation after escalation.
But the well-known American economist, Steve Hanke, said that the possibility of a recession in the United States has recently jumped to 80%, according to a report by “CNBC”.
The Johns Hopkins University professor of applied economics added: “I think the probability of a recession is much higher than 50%, I think it’s about 80% now and maybe even higher.”
Hanke blamed the US Federal Reserve for high inflation, saying, “The reason for this is that the Fed has exploded the money supply since early 2020 at an unprecedented rate, and they don’t want to that this is visible between the money supply and inflation. “
He continued: “If they continue with a quantitative tightening and move the growth rate and the money supply rate into negative territory, it will have a serious impact on the economy.”
Hanke was critical 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 open without the money supply.”
He said: “In fact, the money supply has tripled due to 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 raises prices 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 the Fed flooded the US economy with large amounts of stimulus and liquidity to keep it afloat during the Corona epidemic, but did not focus carefully on reducing the money supply over time.
He added that the growth of the money supply is now slowing very rapidly and this could lead to the economy entering a state recession.
He also added that the correct economic step would be to keep money supply growth at a “golden growth rate” of 5% to 6% to bring inflation to around 2%, but it is now zero, and for this reason, “we will witness a recession in the year 2023”.
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