In a recent interview on Sachs Realty’s YouTube show, Steve Hankey, a former senior economist at President Reagan’s Council of Economic Advisers, shared his thoughts on the current state of the U.S. economy and the investments he recommends in light of the potential challenges ahead.
Hankey, who has taught economics at Johns Hopkins University and served as a senior adviser to the US Congress’s Joint Economic Committee, believes the Federal Reserve’s actions have played a major role in the recent rise in inflation. “The Fed is pushing the quantity theory of money right now,” Hankey said, adding that “they don’t even look at the money supply. That is not in the models they use.”
According to Hankey, this oversight led to the Federal Reserve “flying blind” and failing to predict the peak of inflation. He and his colleague John Greenwood accurately predicted that inflation would reach 9%, which it did in June 2022.
Hankey also expressed concern about the growing role of government in decision-making, especially in the area of industrial policy. He warns that if the US continues on this path, the economy could slowly fall apart. “If we stay on this industrial policy trajectory, the idea that the state will run more and more things and make more and more decisions could slowly unravel,” Hankey warned.
Looking ahead, Hankey predicts that the US economy could face a recession later this year due to the contraction in the money supply. “Since March 2022, we have had our fifth-ever contraction in the United States, which is why I think we are in for a slowdown in the economy and a recession later this year,” he explained.
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Given the potential economic challenges, Hankey recommends three investments for consideration:
1. Gold as a long-term investment
Hankey notes that gold has always been part of the international monetary system and is attractive because it is not the responsibility of any sovereign nation.
The price of gold has soared recently, up 13.1% YTD, despite a pullback after hitting a new all-time high last week. This is mainly attributed to the fact that central banks, led by China, have been purchasing gold at unprecedented levels since 2022.
2. Iowa farmland as a stable long-term investment
As a farm boy from Iowa, Hankey points out that farmland is a limited resource that has shown a consistent upward trend in value over time. According to data from AcreTrader, Iowa farmland has increased in value at an annual rate of 8.8% over the past five years.
Also see: Gold has long been considered the ultimate safe haven, but a growing number of investors are now turning to farmland for better returns and better protection against inflation. Discover how it is becoming easier to invest in agricultural land.
3. Ten-year government bonds as a potential trading opportunity
With yields approaching 5%, Hankey believes that if inflation continues to decline toward the Federal Reserve’s 2% target, the price of 10-year Treasury bonds will rise, providing investors with both a stable coupon and potential capital gains.
While Hankey acknowledges that no investment is completely risk-free, he believes these three options offer potential benefits in the current economic climate. As investors try to make sense of the current economic climate, Steve Hankey’s insights and recommendations provide valuable food for thought and his perspective as a former Reagan advisor and veteran economist provides a unique lens through which to understand the challenges and opportunities that lie ahead. can view.
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Image source: Screenshot of Sachs Realty interview with Steve Hankey on YouTube.
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This article Former Reagan Advisor Thinks the US Economy Is on a Dangerous Path, But Still Likes These 3 Investments originally appeared on Benzinga.com
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