In a recent interview on the Sachs Realty YouTube show, Steve Hankey, a seasoned economist with a background that includes serving as a senior economist on President Reagan’s Council of Economic Advisers, provided valuable insights into the current state of the U.S. economy. Drawing on his extensive experience teaching economics at Johns Hopkins University and advising the Joint Economic Committee of the U.S. Congress, Hankey shed light on various aspects affecting the economy and offered recommendations for investors in light of potential challenges ahead.
Hankey expressed concern about the Federal Reserve’s approach to monetary policy, particularly its disregard for the quantity theory of money and its omission of the money supply from its models. He argued that this oversight led the Fed to be ill-prepared for the recent surge in inflation, which he and his colleague accurately predicted. Hankey’s observation underscores the importance of considering broader economic factors, such as money supply dynamics, in shaping monetary policy decisions.
Moreover, Hankey raised alarm bells about the expanding role of the government in decision-making processes, especially concerning industrial policy. He cautioned against further government intervention, warning that it could lead to economic unraveling if left unchecked. Hankey’s perspective highlights the delicate balance between state intervention and free-market principles in driving economic growth and stability.
Looking ahead, Hankey forecasted a potential recession later in the year, attributing it to the contraction of the money supply since March 2022. This prediction underscores the importance of monitoring monetary trends and their potential impact on broader economic performance. Hankey’s insight serves as a reminder of the interconnectedness of monetary policy and economic outcomes.
In response to these economic challenges, Hankey recommended three investment options for consideration:
- Gold as a long-term investment: Hankey emphasized the historical significance of gold in the international monetary system and its appeal as a non-sovereign asset. Despite recent price fluctuations, gold remains a popular choice among investors seeking stability amid economic uncertainty.
- Iowa farmland as a stable long-term investment: Leveraging his upbringing in Iowa, Hankey highlighted the enduring value of farmland as a limited and tangible asset. Data showing consistent appreciation in Iowa farmland values underscored its attractiveness as a long-term investment option.
- 10-year Treasury bonds as a potential trade opportunity: With yields nearing 5%, Hankey suggested that if inflation continues to decline, Treasury bond prices could rise, offering investors both steady income and potential capital gains. This recommendation reflects Hankey’s assessment of evolving market conditions and potential investment opportunities.
While acknowledging the inherent risks associated with any investment, Hankey’s recommendations offer strategic insights for investors navigating the complexities of the current economic landscape. By considering both macroeconomic trends and specific investment opportunities, investors can make informed decisions to manage risk and pursue long-term financial goals.