Top Economist Predicts 80% Chance Of A Recession

( )- The writing has been on the wall for some time now, but some economic experts have said this week that Americans should prepare for a cold economic winter ahead.

Wall Street suffered massive losses last week, with The Dow Jones Industrial average decreasing by 486.27 points. It closed last Friday at 29,590.41, the first time it ended below the 30,000 mark since June of this year.

The Washington Post reported that this new low means that the Dow erased all of the gains it had experienced since November of 2020.

CNBC conducted a survey of many financial experts earlier this month called the Fed survey. Because inflation still isn’t in check, the experts polled said there was a 52% chance that the economy would go into a recession within the next year.

As if that outlook wasn’t bad enough, there’s one economist who has an even more dire viewpoint on where the economy is going. Recently, Steve Hanke, a Johns Hopkins University professor of applied economics, commented:

“The probability of recession, I think it’s much higher than 50%. I think it’s about 80%. Maybe even higher than 80%. If they continue the quantitative tightening and move that growth rate and M2 (money supply) into negative territory, it’ll be severe.”

The M2 that Hanke refers to is the amount of money that’s estimated to be circulating within the economy. When consumers have an excess of money on hand, then prices end up rising. That’s because, according to the CNBC report, the consumers are willing to spend whatever they have to so they can get the goods they desire — since they can afford it.

As of March of 2020, the M2 was estimated to be $15,988.60. As of July of 2022, that increased 35.78%, to $21,709.20.

To put that in perspective, a 34.64% increase in the money supply was also experienced from September of 2014 through February of 2020. So, what took five years to accomplish starting in 2014 took only two more years to replicate.

The problem, as Hanke says, is that the Federal Reserve Bank is acting in the wrong way. As he explained:

“They have really been searching for inflation and the causes of inflation in all the wrong places. They’re looking at everything under the sun, but the money supply. And in fact, they’ve doubled and tripled down on the argument that money has no relationship to economic activity, or not a reliable relationship to economic activity and inflation.

“The Fed exploded the money supply, starting early 2020, at an unprecedented rate, and they don’t want this length to be visible between the money supply and inflation. Because if it is, the noose is around their neck, and that’s the real problem.”

Another financial expert who agrees with Hanke’s predictions is Jeffrey Gundlach, the CEO of DoubleLine Capital. He said recently that he would put the chances of a recession happening in 2023 at around 75%.