“Kamala Harris's plan to provide $25,000 to first-time homebuyers is essentially theft,” says renowned economist Professor Steve Hanke.

A recent interview with David Lin revealed the views of the renowned economist Professor Steve Hanke on several pressing economic and political issues. Among the topics discussed were the monetary policy of the Federal Reserve, inflation, and the potential consequences of the housing plan proposed by Kamala Harris. Professor Steve Hanke is a recognized expert in applied economics at Johns Hopkins University, where he also co-directs the Institute for Applied Economics, Global Health, and Business Study. Hanke is widely known for his expertise in currency reform, particularly in developing countries, as well as his significant contributions to global economic policy.

The professor holds numerous influential positions, including Senior Fellow and Director of the Project on Currency Problems at the Cato Institute. He has advised heads of state in Asia, South America, Europe, and the Middle East on economic issues, particularly on the establishment of currency boards and the implementation of dollarization strategies. His academic career is integrated with practical experience in economics, as he served as a senior economist at the Council of Economic Advisers under President Ronald Reagan from 1981 to 1982. Throughout his career, Hanke has held advisory positions in various governments and organizations, assisting in economic stabilization in countries such as Argentina, Bulgaria, and Ecuador.

In addition, Hanke is actively involved in the work of several academic and financial institutions, including the Institute for Independence, where he is a senior research fellow, as well as the International Institute of Currency Studies at Renmin University in China, where he serves as a senior advisor. He has also gained experience in trading currencies and commodities and is currently the chairman of the supervisory board of Advanced Metallurgical Group N.V. in Amsterdam.

Opinion on the Federal Reserve

At the beginning of the interview, Hanke shared his opinion on the recent statements made by Federal Reserve Chairman Jerome Powell at the meeting in Jackson Hole. According to him, Powell confirmed a high likelihood of a rate cut by the Fed in September, although this scenario had already been partially factored into market expectations. Hanke noted that the dollar has already weakened slightly against the euro in recent weeks, but emphasized that this is not a significant event, as the market had anticipated these changes.

Reduction of the money supply

Speaking about the Federal Reserve System, Hanke pointed out that the money supply in the U.S., measured by the M2 indicator, has been decreasing since July 2022. He noted that such a reduction is anomalous and has occurred only four times since the Federal Reserve was established in 1913, with each instance followed by either a recession or, as in the period from 1929 to 1933, the Great Depression.

Critique of inflation

Moving on to the topic of inflation, Hanke criticized Powell's explanation regarding the recent inflationary pressures, which he attributed to supply chain disruptions caused by the pandemic. The professor described this as“absolute absurdity”insisting that the true cause of inflation lies in the rapid increase of the money supply at the beginning of 2021, when M2 grew at an unprecedented rate of 27% year-on-year. Hanke argues that such a sharp increase in the money supply inevitably leads to inflation, which indeed happened, peaking at an inflation rate of 9.1%. Hanke and Greenwood predicted this surge in inflation, and the professor noted that they still believe inflation will decrease to2.5-3%by the end of 2024, as the current inflation is already2.9%.

Kamala Harris's plan

Then Hanke turned his thoughts to Kamala Harris's proposed plan to combat inflation, which includes the construction of 3 million homes and providing25,000 dollars in aidfirst-time homebuyers. Hanke criticized the plan, describing the $25,000 assistance as a form of“theft”Taxpayers, who will ultimately bear the costs of this gift, are the ones affected. He questioned the logic of allocating such large sums for homebuyers, suggesting that it would only increase demand for real estate, which in turn would lead to rising housing prices. The professor emphasized that this contradicts the original goal of making housing more affordable.

The idea of controlling rent prices

Hanke also questioned the idea of rent control, recalling how he strongly opposed it in his article for the Baltimore Sun in the early 1980s. He argues that such restrictions distort the housing market and often lead to a housing shortage, as landlords and developers cut back on their investments in this segment. He warned that Harris's initiative to introduce rent control could lead toreverse consequences...creating new problems in the housing market instead of solving them.