# How Money Supply & Dollar Flight Are Fueling a Bull Market w/ Steve Hanke Source: https://www.youtube.com/watch?v=T_sEzWYqmr4 Recap page: https://rapidrecap.app/video/T_sEzWYqmr4 Generated: 2025-10-15T00:07:11.004+00:00 --- ## Quick Overview Professor Steve Hanke argues that the current US gold bull run will likely peak around $6,000 per ounce because the Federal Reserve's monetary policy, focused on interest rates rather than money supply (M2), is failing to control inflation, which he calculates to be around 700% annually in Argentina, compared to the US's implied 2% target. Hanke advocates for immediate dollarization and ending quantitative tightening to stabilize economies and halt capital flight from countries like Argentina and Zimbabwe, suggesting that fiat currencies have proven historically inferior to dollarized or gold-backed systems in preventing hyperinflation. **Key Points:** - Professor Hanke predicts the current gold bull run will likely peak around $6,000 per ounce. - He criticizes the Federal Reserve for focusing on interest rates instead of money supply (M2) to control inflation. - Hanke calculates Argentina's true annual inflation rate to be approximately 700% per month, far exceeding the Fed's 2% target. - He advocates for dollarization or currency boards, pointing to historical successes in countries like Ecuador, Zimbabwe, and Argentina (post-1991) that adopted the US dollar or a currency board. - Hanke states that the US itself has a persistent trade deficit, meaning it consumes more than it produces, which is financed by dollar-denominated debt. - He notes that the central bank assets held by Russia and China are shifting towards gold, signaling a lack of trust in fiat currencies. - The key to controlling inflation, according to Hanke, is managing the money supply growth rate (M2) relative to real GDP growth, not just interest rates. ![Screenshot at 00:00: Professor Steve Hanke, an expert on hyperinflation, appears on the Milk Road Macro podcast with host John Gillen to discuss monetary policy and the gold market.](https://ss.rapidrecap.app/screens/T_sEzWYqmr4/00-00-00.png) **Context:** This is an interview on the Milk Road Macro podcast between host John Gillen and Professor Steve Hanke, an economist known for his expertise in international economics, currency stability, and hyperinflation measurement. The discussion centers on current monetary policy, particularly the Federal Reserve's actions, the ongoing gold bull market, and the effectiveness of different currency regimes in controlling inflation, drawing heavily on historical examples of hyperinflationary crises. ## Detailed Analysis Professor Steve Hanke, a leading authority on hyperinflation, projects that the current gold bull run will likely peak around $6,000 per ounce. He argues that the Federal Reserve's current monetary policy, which centers on adjusting interest rates rather than controlling the money supply (M2), is fundamentally flawed and explains why inflation remains high. Hanke contrasts the Fed's implied 2% inflation target with what he calculates as Argentina's true monthly inflation rate of around 700%. He emphasizes that monetary policy should focus on stabilizing the money supply growth rate relative to real GDP growth, using the Quantity Theory of Money (MV=PY). Hanke points out that countries experiencing severe inflation, such as Argentina, Zimbabwe, and Venezuela, often resort to dollarization or currency boards to regain stability because their local currencies lack credibility. He notes that the US itself runs a persistent trade deficit, essentially financing it by issuing dollar-denominated debt, which erodes confidence in the dollar as a global anchor. He also observes that major economies like Russia and China are increasingly holding gold as reserves, indicating a global shift away from fiat currency trust. Hanke strongly advocates that countries struggling with hyperinflation should immediately adopt the US dollar or a currency board pegged to a stable anchor currency like the USD to restore price stability and halt capital flight. ### Gold Price Prediction - The current gold bull run will likely peak around $6,000 per ounce. - This is based on the historical relationship between money supply, velocity, and inflation. - Hanke suggests the market is currently underestimating the severity of the inflation problem. ### Critique of Federal Reserve Policy - The Fed's focus on interest rates is misplaced; policy should target money supply (M2) growth relative to real GDP growth. - The Fed's current policy is on a 'roller coaster' of inflation outcomes (up, down, up). - Hanke advocates for ending quantitative tightening immediately. ### Hyperinflation Measurement and Examples - Hanke calculates Argentina's true annual inflation rate at nearly 700% per month, far exceeding official figures. - He cites historical examples like Zimbabwe (1990s) and Argentina (post-1991) where dollarization successfully stabilized prices. - Countries with inherently unstable local currencies seek the USD as an anchor. ### Dollarization and Capital Flight - Dollarization is a powerful tool to restore price stability and halt capital flight from unstable economies. - He notes that the US trade deficit is financed by issuing dollar-denominated debt, which is a form of inflation. ### Global Central Bank Behavior - Russia and China are increasing their gold holdings, signaling a loss of faith in fiat currencies. ![Screenshot at 00:00: Introduction screen showing host John Gillen and guest Professor Steve Hanke before the interview begins.](https://ss.rapidrecap.app/screens/T_sEzWYqmr4/00-00-00.png) ![Screenshot at 00:13: John Gillen introduces the podcast and sets the stage by mentioning current economic concerns like rising inflation and a weakening labor market.](https://ss.rapidrecap.app/screens/T_sEzWYqmr4/00-00-13.png) ![Screenshot at 00:41: Professor Steve Hanke is introduced as a highly influential economist specializing in international economics, currency stability, and hyperinflation measurement.](https://ss.rapidrecap.app/screens/T_sEzWYqmr4/00-00-41.png) ![Screenshot at 01:00: John Gillen asks Professor Hanke to explain Quantitative Tightening \(QT\) and why it should end.](https://ss.rapidrecap.app/screens/T_sEzWYqmr4/00-01-00.png) ![Screenshot at 01:37: Professor Hanke greets John Gillen, setting a cordial tone for the discussion.](https://ss.rapidrecap.app/screens/T_sEzWYqmr4/00-01-37.png) ![Screenshot at 02:15: Professor Hanke begins to explain that monetary policy is about money supply changes, not just interest rates.](https://ss.rapidrecap.app/screens/T_sEzWYqmr4/00-02-15.png) ![Screenshot at 03:54: Professor Hanke references his work on hyperinflation in Zimbabwe and Argentina.](https://ss.rapidrecap.app/screens/T_sEzWYqmr4/00-03-54.png) ![Screenshot at 05:25: Professor Hanke explicitly defines the Quantity Theory of Money \(MV=PY\) as the framework for his analysis.](https://ss.rapidrecap.app/screens/T_sEzWYqmr4/00-05-25.png) ![Screenshot at 13:47: A graphic overlay appears with text "but KGEN flipped the script" and a URL, indicating a transition or sponsorship segment.](https://ss.rapidrecap.app/screens/T_sEzWYqmr4/00-13-47.png) ![Screenshot at 38:24: Professor Hanke smiles, reacting to John Gillen's summary of his predictions regarding the gold price peak.](https://ss.rapidrecap.app/screens/T_sEzWYqmr4/00-38-24.png)