According to Steve Hanke, a professor of applied economics at Johns Hopkins University, the impact of the contraction in the US money supply has not yet manifested itself fully, and it is too early to say that the threat of a recession has passed, writes Business Insider.
He warned of overcomplacency among investors who could be hit by a recession early next year.
“We are like lunatics approaching market turbulence.”
The investor warned against a rash buy with "soft landing" in mind, which assumes the Fed can handle inflation without derailing the economy or causing a sharp rise in unemployment.
The fact is that so far the reduction in the available money supply has not hit the real economy, and given the usual delays for this, we can expect this in early 2024.
The money supply in the US added 26% in a year at the peak of the pandemic, but it has begun to decline in recent months, although in practice it should take 6 to 18 months before the real economy feels the full impact of such a reduction.
“Money is the fuel that runs the economy, and we had a huge accumulation of that excess fuel.”