Monetary Matters with Jack Farley Regime of Uncertainty | Steve Hanke on Money Supply Shock, Tariff and Current Account, and Why Recession Remains Base Case For 2025
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May 28, 2025 
Steve Hanke, a Professor of Applied Economics at Johns Hopkins University and author of "Making Money Work," discusses critical economic issues. He analyzes the stagnation of the money supply and its impact on inflation stability. Hanke foresees a potential recession in 2025, driven by sluggish investments and unpredictable tariffs. He challenges traditional views on trade deficits, suggesting they can stimulate economic growth. The conversation also touches on fiscal deficits and their implications for the U.S. dollar and global markets.
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Regime Uncertainty Dampens Investment
- Regime uncertainty from constant policy shifts, like those under Trump, suppresses investment and slows economic recovery.
- This uncertainty can sustain recessions by causing companies to withhold forward guidance and freeze spending.
Tariffs and Uncertainty Harm Trade
- Tariffs reduce trade by taxing gains from trade and creating uncertainty about policy levels.
- Both higher tariffs and tariff uncertainty harm economic activity by reducing trade volume and business confidence.
Trade Deficits Reflect American Spending
- The U.S. trade deficit is caused by Americans spending more than they produce, not by foreigners.
- Running a trade deficit enables Americans to consume beyond production by exporting U.S. dollar assets, which remains sustainable thanks to strong demand for the dollar.
