“Kamala Harris’s Plan To Give First-Time Homebuyers $25,000 Is Basically Theft,” Says Renowned Economist Professor Steve Hankle

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As a seasoned crypto investor with a keen interest in economics and finance, I find Steve Hanke’s insights truly enlightening. His extensive experience advising various heads of state across the globe, coupled with his academic prowess, makes him an authority in economic policy.

During a recent conversation with David Lin, esteemed economist Professor Steve Hanke shared his perspectives on diverse economic and political matters, such as the Fed’s monetary strategy, price increases, and the probable consequences of Vice President Kamala Harris’s housing proposal.

Steve H. Hanke is a well-known professor specializing in applied economics at Johns Hopkins University, where he also jointly oversees the Institute for Applied Economics, Global Health, and Business Enterprise Studies. He is highly respected for his knowledge on currency reform, especially within developing nations, and has substantially impacted global economic policy.

Hanke occupies various influential roles, such as being a senior fellow and the director of the Troubled Currencies Project at the Cato Institute. Furthermore, he has offered guidance to numerous heads of state from regions like Asia, South America, Europe, and the Middle East concerning economic matters, with a focus on creating currency boards and executing dollarization plans.

Throughout his academic journey, Hanke has enriched his knowledge with real-world economics experience. He spent a year as a senior economist on President Ronald Reagan’s Economic Advisory Council from 1981 to 1982. Over time, he has taken on advisory positions for multiple governments and organizations. Notably, he played significant roles in economic recovery plans for nations like Argentina, Bulgaria, and Ecuador.

Furthermore, Hanke holds positions in multiple educational and financial organizations. These include being a senior fellow at the Independent Institute and a senior advisor at Renmin University of China’s International Monetary Research Institute. His expertise extends to currency and commodity trading, where he currently presides over the supervisory board of Advanced Metallurgical Group N.V., based in Amsterdam.

Initially, Hanke discussed his thoughts on the statements made by Federal Reserve Chairman Jerome Powell during the Jackson Hole meeting. In Hanke’s view, Powell hinted at a potential interest rate reduction in September, a prediction that has been partially factored into the market already. However, according to Hanke, such a cut could still lead to a decrease in the value of the U.S. dollar. Hanke pointed out that the U.S. dollar has shown slight weakness against the Euro over the past few weeks, but he underlined that this is not a major trend since the market had already expected these fluctuations.

Discussing the Federal Reserve, Hanke noted that the American money supply (as represented by M2) has been decreasing since July 2022. He highlighted this decrease as unusual and mentioned that such a contraction has occurred just four times since the creation of the Federal Reserve in 1913. In each of these instances, Hanke stated, the economy either entered a recession or, like during 1929-1933, experienced a Great Depression. Hanke and his fellow analyst John Greenwood have persistently forecasted that this monetary contraction will cause a recession around late 2024 or early 2025. Hanke didn’t seem surprised by the recent adjustment in U.S. employment data, as it aligns with his anticipation of an economic slowdown stemming from the diminishing money supply.

Regarding the topic of inflation, Hanke took issue with Powell’s explanation for the recent price increases, suggesting that they stemmed from pandemic-induced supply chain disruptions. Hanke instead contended that the primary culprit was a rapid increase in the money supply during early 2021, when M2 growth soared to an extraordinary annual rate of 27%. He maintained that such a significant expansion of the money supply inevitably triggers inflation, as was evident with inflation reaching a high of 9.1%. Hanke and Greenwood had anticipated this inflation surge, and Hanke expressed confidence that their prediction for inflation to drop to between 2.5% and 3% by the end of 2024 remains valid, given that current inflation stands at 2.9%.

Later on, Hanke focused his discussion on Kamala Harris’s proposed strategy to curb inflation by constructing 3 million homes and offering $25,000 aid to first-time home buyers. Hanke voiced criticism towards this plan, labeling the $25,000 assistance as a disguised form of “taking” from taxpayers, who would ultimately shoulder the expense of this subsidy. He expressed doubts about the reasoning behind bestowing such substantial amounts to homebuyers, arguing that it would only intensify demand for real estate and thus boost housing prices. Hanke highlighted that this action would work against the primary objective of making housing more economical.

Additionally, Hanke expressed disagreement with the concept of rent regulations. He reminisced about his past opposition to this idea, as expressed in an opinion piece for the Baltimore Sun during the early 1980s. He contended that rent controls skew the housing market and frequently result in housing scarcity, as property owners and developers curtail their investments in real estate development. Hanke cautioned that Harris’s proposal to enforce rent controls might have unintended consequences, exacerbating existing issues within the housing market instead of resolving them.

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2024-09-01 22:56