'We're going to have a swearword of a recession in 2023': State of US economy remains uncertain

Talk of a looming recession has been buzzing this summer, and some experts say it's near, and not necessarily the product of higher interest rates.

According to Steve Hanke, a professor of applied economics at Johns Hopkins University, the United States is heading for a recession in 2023 because "we've had five months of zero money supply growth, and the Fed isn't isn't even looking at it," Hanke said, according to CNBC.

Hanke also added that the period of sustained growth is due to "unprecedented growth" in the money supply that began with Covid in 2020 and has continued, meaning inflation could remain elevated until in 2023 and "probably 2024".

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As for the role of the Fed, Hanke remains skeptical of the actions taken so far.

“The problem we have is that [Fed Chairman Jerome Powell] doesn't understand, even at this point, what are and were the causes of inflation,” Hanke told CNBC. "He failed to tell us that inflation is always caused by excessive growth in the money supply, which keeps the printing presses spinning."

Hanke isn't the only one putting pressure on the Fed. Stephen Roach, a senior fellow at Yale University and a former Federal Reserve economist, told CNBC that Powell may have no choice but to raise interest rates aggressively using a Paul Volcker approach.

"Let's go back to the kind of pain that Paul Volcker had to impose on the United States to wring inflation out. He had to bring the unemployment rate above 10%," Roach told the outlet. “The only way not to get there is for the Fed under Jerome Powell to keep its word, stay focused on discipline, and get that real fed funds rate into the restrictive zone. And the restrictive zone is a long way from where we are at. this moment."

Although Roach said the US needs a "miracle" at this point to avoid a recession, the fact remains that unemployment rates are still low at 3.5% in July. However, that could change when the Bureau of Labor Statistics releases its August report on Friday.

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