Let me bring you in close on this. Steve Hanke—which you might recognize from the Reagan years—is sounding a serious alarm on the U.S. economy. He says the shrinking money supply is a clear warning sign, and it could mean a recession is just around the corner. It is worth paying attention, because when money starts drying up, the whole economy tends to sputter.
Is the money supply really shrinking?
Yes, and that is Hanke’s main concern. He points out that since March 2022, the total U.S. money supply has contracted—and that matters. Hanke reminds us that there have only been four such contractions since 1913, and every single one led to a recession. That is why he is not surprised the economy is slowing down.
What exactly did he say?
Here is what Hanke said, as quoted: “I think things will continue to show weakness and slow down in the United States and probably end up tipping into a recession later this year.” He also emphasized, “Monetary policy is not about interest rates, it’s about changes in the money supply. So they’re just looking at the wrong gauge.”
How likely is a recession, according to Hanke?
He puts the odds at a startling 80 to 90 percent in the near future. That is a strong statement—he is not sugarcoating it.
How do others see it?
You are probably wondering if other experts agree. Mark Zandi, a respected economist, says the economy is on the brink. He is watching three key warning signs:
- Payroll growth has flattened since May 2025.
- Over 53 percent of industries reported job losses in July, with only healthcare gaining.
- Unemployment is a lagging indicator right now, especially as the labor force shifts. So even though we are not officially in a recession yet, those trends are flashing yellow.
Are there opposing voices?
Definitely. Kevin Hassett, who advised President Trump, painted a much rosier picture. Back in April 2025, he flat-out said there’s “100 percent not” going to be a recession this year. He pointed to strong jobs numbers, upbeat CEOs, and high consumer demand—even amid tariff uncertainty.
Gary Cohn, another former Trump adviser, sounded more cautious. He said recession risk is higher than it has been in a long time—but if consumer spending and jobs stay strong, the economy could hold. He warned he’d shift his view quickly if businesses start cutting back.
What does this mean for you?
If you are watching your wallet—or planning ahead—you might want to heed these warnings, especially with Hanke’s strong emphasis on money supply contraction. At the very least, it is something you do not want to brush off. The risk appears real—and mounting.
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