Professor of Applied Economics at John Hopkins University Steve Hanke believes that the United States soaring inflation is an indication the economy is going into recession soon.
Speaking during an interview with Kitco News, Hanke stated that chances of a recession stand at around 65% although he did not highlight any specific timelines noting that it all depends on the Federal Reserve.
This comes after the inflation rate hit a record high of 8.6%, with pressure mounting on the Fed to intervene.
The Fed faulted for mistakes
According to the economist, the Fed is fully responsible for the inflation situation, stating that while enacting previous measures, especially on printing money, the institution had no idea how it might turn out.
“I’m pretty comfortable with 65%, which is a high number<…>We’re talking about a Fed that got us into this mess in the first place and they were never able to anticipate or predict it even, they didn’t know what they were doing<…>They ended up making a lot of mistakes, creating a lot of excess money and giving us this terrible inflation,” said Hanke.
Hanke noted that chances of reversing inflation back to 2% might not be possible due to the excess money already in the system, and based on the current conditions, there might be both a recession and inflation.
He noted that the current inflation rates would likely stick around for a few years since the money supply is bound to keep increasing.
“No matter what you do today, even if you overdid a tightening and had a recession, you’re still going to have that inflation to deal with,” he added.
In the wake of rising inflation, equities and crypto markets tumbled, wiping out any possibility of a near-term resurgence.
Bitcoin fails to break past $30,000
In this case, Bitcoin which is considered a possible hedge against inflation extended its losses below the crucial $30,000 level. By press time, the asset was trading at $28,700, dropping over 2% in the last 24 hours.