Palisades Gold Radio

Palisades Gold Radio

Prof. Steve Hanke: Central Bank Buying & Looming Recession Both Great for Gold

March 29, 2023

Tom welcomes back Steve Hanke Professor of Applied Economics – Johns Hopkins University.

Steve discusses Austrian economist Felix Somary and explains how he was one of the few who understood exchange rates and had a full view of economic reality. This understanding is lacking today by most in power positions. Modern economic theory is very narrowly defined, and most lack that broad level of knowledge.

The Fed has some 700+ economists working for them, but they all have similar understanding. We see these failings appear with the recent bank failures. It’s obvious the banking system has large-scale problems. We’re bordering on incompetence by those who are supposed to oversee these banks.

They’ve doubled down on ignoring the money supply, arguing it has nothing to do with economic activity. Most of what you read in the financial press is either irrelevant or plain wrong. They are just restating Fed opinion.

The Fed let the money supply increase at an unprecedented rate, and then we’re surprised by the inflation. Now they are talking about tightening while increasing Federal fund rates. The money supply has shrunk by 2.3% which is causing pressure on banks. They have shrunk it by too much. We’re still in quantitative tightening and the bank bailouts does not impact it.

He explains his gold sentiment score service and how it can be useful for trades. A computer is examining articles hourly related to gold and the markets to determine current sentiment. It’s a form of text analysis that can be used as a buy/sell signal.

Time Stamp References:
0:00 – Introduction
0:44 – Economic Ignorance
4:36 – Federal Reserve System
9:43 – Recession & Whiplash
14:10 – Bank Crisis & Easing?
18:19 – Money Supply & GDP Growth
21:19 – Hyperinflation & Countries
22:55 – Game-Changing Moments?
29:10 – Gold Sentiment Score
35:40 – Primary Data Sources
40:18 – Wrap Up

Talking Points From This Episode

  • Economic theory and the problems with the narrow focus of modern economists.
  • Why most of the financial press is either wrong or irrelevant.
  • The impact of money supply changes on the economy.

Guest Links:

Steve H. Hanke is a Professor of Applied Economics and Founder & Co-Director of the Institute for Applied Economics, Global Health, and the Study of Business Enterprise at The Johns Hopkins University in Baltimore.

He is a Senior Fellow and Director of the Troubled Currencies Project at the Cato Institute in Washington, D.C., a Senior Advisor at the Renmin University of China’s International Monetary Research Institute in Beijing, a Special Counselor to the Center for Financial Stability in New York, a contributing editor at Central Banking in London, and a regular contributor to the Wall Street Journal’s Opinion pages. Prof. Hanke is also a member of the Charter Council of the Society of Economic Measurement and of Euromoney Country Risk’s Experts Panel.

In the past, Prof. Hanke taught economics at the Colorado School of Mines and at the University of California, Berkeley. He served as a Member of the Governor’s Council of Economic Advisors in Maryland in 1976-77, as a Senior Economist on President Reagan’s Council of Economic Advisors in 1981-82, and as a Senior Advisor to the Joint Economic Committee of the U.S. Congress in 1984-88. Prof. Hanke served as a State Counselor to both the Republic of Lithuania in 1994-96 and the Republic of Montenegro in 1999-2003. He was also an Advisor to the Presidents of Bulgaria in 1997- 2002, Venezuela in 1995-96, and Indonesia in 1998.

He played an important role in establishing new currency regimes in Argentina, Estonia, Bulgaria, Bosnia-Herzegovina, Ecuador, Lithuania, and Montenegro.

Prof. Hanke has also held senior appointments in the governments of many other countries, including Albania, Kazakhstan, the United Arab Emirates, and Yugoslavia.

Prof. Hanke has been awarded honorary doctorate degrees by the Bulgarian Academy of Sciences, the Universität Liechtenstein, the Universidad San Francisco de Quito, the Free University of Tbilisi, Istanbul Kültür University, Varna Free University, and the D.A. Tsenov Academy of Economics in recognition of his scholarship on exchange-rate regimes.

Prof. Hanke and his wife, Liliane, reside in Baltimore and Paris.