Rates To Jump 50 Basis Points: ‘Red Zone’ Next Warns Economist Steve Hanke

Escalating geopolitical tensions in Iran and the resulting surge in oil prices are secondary to the primary driver of current economic instability: excessive money supply growth. Steve Hanke, Professor of Applied Economics at Johns Hopkins University, asserts that inflation is strictly a monetary phenomenon, noting that the 7.9% growth in the Divisia M4 money supply necessitates higher Treasury yields. While the market reacts to cost-push factors like oil and tariffs, these represent relative price changes rather than the root cause of sustained inflation. Hanke characterizes the recent US-Venezuela oil deal as an illegitimate, coerced agreement and advocates for the full dollarization of the Venezuelan economy to eliminate its 380% inflation rate. Ultimately, the Federal Reserve must pivot toward monitoring monetary aggregates to regain control over inflation expectations and stabilize the long end of the Treasury curve.