In a recent interview on Sachs Realty’s YouTube show, Steve Hankey, a former senior economist on President Reagan’s Council of Economic Advisers, shared his thoughts on the current state of the U.S. economy and the investments he would make given the potential challenges ahead recommends.
Hankey, who taught economics at Johns Hopkins University and served as a senior adviser to the US Congress’ Joint Economic Committee, believes the Federal Reserve’s actions have played a major role in the recent rise in inflation. “The Fed is screwing up the quantity theory of money right now,” Hankey said, adding that “they don’t even look at the money supply. That’s not because of the models they use.”
According to Hankey, this oversight caused the Federal Reserve to “fly blind” and fail to predict the rise in 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 government’s growing role in decision-making, particularly regarding industrial policy. He warns that if the US continues on this path, the economy could begin to falter. “If we stay on this industrial policy course, this idea that the state will regulate more and more things and make more and more decisions, we could slowly unravel,” Hankey warned.
Looking ahead, Hankey predicts the U.S. economy could face a recession later this year due to a tightening money supply. “Since March 2022, we have experienced our fifth contraction ever in the United States, and that is why I think we are looking at an economic slowdown and a recession later this year,” he explained.
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Given the potential economic challenges, Hankey recommends three investments to consider:
1. Gold as a long-term investment
Hankey points out that gold has always been part of the international monetary system and is attractive because it does not represent a burden on a sovereign nation.
Gold prices have been surging lately, rising 13.1% year-to-date despite falling after hitting a new all-time high last week. This is largely attributed to central banks, led by China, buying gold on an unprecedented scale 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 steadily increases in value over time. According to data from AcreTrader, Iowa’s farmland has increased 8.8% annually over the past five years.
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3. 10-year Treasury bonds as a potential trading opportunity
With yields hovering around 5%, Hankey expects the price of 10-year Treasury bonds to rise as inflation continues to decline toward the Federal Reserve’s 2% target, 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 environment. As investors seek to understand the current economic climate, Steve Hankey’s insights and recommendations provide valuable food for thought, and his perspective as a former Reagan adviser and seasoned economist provides a unique perspective from which to consider the challenges and opportunities that lie ahead.
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Image source: Screenshot from Sachs Realty interview with Steve Hankey on YouTube.
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This article Former Reagan adviser believes US economy is on a dangerous path, but still likes these three investments originally appeared on Benzinga.com
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