Prof Steve Henke: Please Listen, Banks Will Seize Your Money, Do This Now To Get Rich During Crisis

when I look at the picture in the macro point of view the the fuel for the economy is what it's a money supply and the stock of money in the United States is lower now than it was in July of 2022 and that's only happened four times in the history of the of the FED since 1913 and every one of those was followed by recession or or in the case of the 1929 19 19 33 contraction in the money supply we had of course a Great Depression so you either had a great depression or a recession following those contractions and that's why John Greenwood and I think we will enter a recession either late this year or early next year in the United States imagine you're driving a car on a long Ving Road the gas tank is nearly empty the warning light is blinking and you're miles away from the nearest gas station this is the picture that Professor Steve hanky paints when describing the current state of the US economy according to Hanky the economy is running on fumes and the situation is more precarious than most realize but there's a silver lining if you play your cards right this recession could be your golden opportunity to achieve millionaire status in just a few months so how do you prepare let's dive into hanky's insights and advice The Story begins with a seemingly innocuous but telling indicator unemployment after hitting a low of 3.5% in 2023 the unemployment rate has been creeping upwards in July 2024 it reached 4.3% up from 4.1% the previous month this optic has sparked concerns among economists and analysts alike while some view this as a natural fluctuation hany warns that it is a sign of deeper issues within the economy unemployment isn't just a number it's a signal of economic health when people lose their jobs they lose their income and when they lose their income they're spending power diminishes this creates a ripple effect across the economy less spending means less demand which in turn means slower growth to understand the bigger picture hanky shifts our Focus to the macro level the lifeblood of any economy is its money supply without sufficient liquidity the economy cannot function properly hanky explains that the US money supply is now lower than what it was in July 2022 this decline is significant it's only the fourth time that this has happened since the Federal Reserve was established in 1913 each of the previous three times was followed by a recession or in case of 1929 to 1933 a Great Depression so what does this mean for today according to Hanky the contraction in the money supply is a strong indicator that the US is is on a brink of a recession likely to hit late this year or early next year the logic is simple less money in circulation means less spending which in turn means less economic activity and when the engine of the economy sputters a recession is almost inevitable to add to this hanky and his colleague John Greenwood have been closely monitoring inflation another critical piece of the puzzle they predicted that inflation would rise sharply when the money suppli surged during the covid-19 pandemic and they were right so sure enough money supply zooms up we get inflation Greenwood and I said we thought it would Peak at 9 9% it peaked at 99.1% so we we we we hit the nail on the head going up we hit it going down why because we focus on changes in the money supply and and that gets transmitted Jimmy through the economy it changes asset prices economic activity and and eventually inflation but all of this with lags so so people don't don't pay any attention to it what what's happening in the economy now is driven by what was happening in the money supply a year and a half or two years ago inflation peaked at 99.1% in June 2022 the highest in over four decades but as the money supply began began to contract so did inflation today inflation has dropped to 2.9% and Hanky forecast that it will fall further to between 2.5 and 3% by the end of the year this prediction is based on the quantity theory of money which posits that change in the money supply directly influences price levels elbit with a time lag what we are experiencing now hanky explains is the delayed effect of early money supply contraction the economy is slowing inflation is falling and the recession looms closer while the unemployment rate and the money supply offer a glimpse into the economy's overall health the stock market provides another crucial perspective if you look at the stock market right now it's it's the valuations are very elevated if you look at at Bob Schiller y has has the the cape model cyclically adjusted PE ratios and and that by that measure by the Schiller uh Cape measure right now it's 35 times higher than the average over the past decade so it's very high there're it's it's there are only three more expensive periods in time since the since the 19th century given shiller's measure so very expensive right now the market is at an elevated level with valuations looking dangerously High hanky sites Robert Schiller's cyclically adjusted price to earnings ratio which currently sits at 35 one of the highest levels in history only three periods have seen higher valuation before the 1929 crash during the dotom bubble and just before the 2008 financial crisis for those who prefer a more traditional measure forward price to earning ratios also indicate that the market is pricey though not as Extreme as in 2000 or late 2020 moreover the FED model which Compares bond yields to stock yields suggests that stocks are overvalued relative to Bonds in other words by all measures the stock market is in a bubble and when bubbles burst the consequences can be severe I think what what we're going to see if that's the case and and if there monetary quantity theory of money is right and and we start slowing down Topline revenues will slow down the cost will continue to under undermine margin so the revenue is going down I and I think the margins will be going down and we'll we'll end up seeing a lot of these pees coming way off I mean they they're they're set up to get hit but hanky is also highly critical of Federal Reserve approach to monetary policy he argues that the FED is consistently behind the curve when it comes to managing the economy largely because they focus on the wrong indicators oh the the FED is always behind the curve because they're they're they're they're data dependent what they call data dependent they look at the daily data that that comes out and then make make some kind of judgment about what they should be doing according to Hanky the FED pays too much attention to daily data points instead of the more crucial metric the money supply hanky emphasizes that changes in the money supply are the real drivers of economic Trends but the effects of these changes come with significant and variable time lags because of this lag the daily economic data the FED relies on today is actually the result of money supply changes that occurred a year or even 2 years ago By ignoring the money supply and relying on short-term data the FED ends up making policy decisions that are reactive rather than proactive this misalignment in hanky's view is why the FED failed to predict the surge in inflation and is now similarly ill equipped to forecast the recent sharp decline they they they do not look at the money supply and they don't pay attention to the quantity theory of money so so they kind of throw that aside they focus on the interest rate and which is a big mistake and and by the way that's the reason why they were never able to forecast The Surge we had in inflation and they've not not been able to forecast the the sharp fall down in inflation that we've seen the the reason for that they they don't have the right model hky contends that the fed's focus on interest rates as a primary tool for monetary policy is misguided instead they should be paying ATT attention to the money supply as it's the most reliable indicator of where the economy is headed in a sense hanky believes that the fed's current approach is not only flawed but also detrimental to the economy's stability leading to a situation where their actions are always too little too late so with all this Doom and Gloom what should the investors do hanky offers some clear advice for those looking to protect their wealth and even come out ahead during the impend recession pretty safe investment and and that's the 10-year US Government Bond and and and when I started recommending that and bought it it it was the yield was you know almost 5% and now it's it's below 4% hanky strongly recommends the 10-year US Government Bond as a safe and profitable investment when he first suggested buying it the yield was nearly 5% today it's below 4% meaning investors have not only enjoyed a solid yield but also seen significant capital gains as the bonds price has risen hanky believes that there's still more juice in the lemon because as inflation continues to decline so will the yield on the 10-year bond driving its price up further this makes it a secure option for those seeking both income and capital appreciation regarding stocks hanky is more cautious he doesn't see much value in the current market and suggests not adding to the stock positions with a potential recession on the horizon it's crucial to be vigilant and consider lightening your investment looat Warren Buffett serves as a model here having been strategically reducing his stockh Holdings and accumulating cash I would suggest that people look at look at Berkshire hathway and what Buffett's done in the in the last 6 months he's he's been in a lightening up accumulating cash mode so I would be in a lightening up accumulating cash mode I I think I think Buffett thinks the Market's very pricey and I think he's anticipating uh that he he he kind of you know he's he's out there in Omaha Nebraska that's where I grew up I grew up about in Iowa southwest Iowa about 45 miles from Omaha and and and and one thing you learn how to do out there you you can see a storm rolling in on the horizon and I think Buffett sees a storm rolling in notably Burkshire hathway now holds more treasury bills than the US Federal Reserve signaling Buffett's preparation for the market turbulence lastly hanky has been appr opponent of gold and he continues to recommend it as a hedge against economic uncertainity with the FED likely to cut interest rates aggressively by 2025 hanky expects the dollar to vacon which would boost gold prices adding gold to your portfolio provides a safe haven during turbulent times and could be a smart move as the recession unfolds hanky advises a cautious yet strategic approach maintain your strong Investments consider shifting into 10e bonds or cash and adding some gold to your portfolio like Buffett be prepared for a potential storm but don't panic instead carefully adjust your Investments to feather the possible downturn