Economy ‘Going Off The Cliff’, Recession Risk Spikes | Steve Hanke

Summary

Steve Hanke joins David Lin to react to President Trump's State of the Union address, tariffs, and the trade war. Hanke argues trade deficits are driven by US savings and fiscal deficits, not foreign unfairness, and that tariffs will not fix them. He warns the contraction in money supply makes a slowdown or recession likely, and he prefers long 10-year US Treasuries as inflation and yields decline. The discussion also covers budget-balancing prospects and the Ukraine-Russia war.

• Hanke dismisses Trump's reciprocal-tariff rationale, saying the US trade deficit is domestically generated by a savings and fiscal deficit.
• He expects a US slowdown or recession because money supply contracted and manufacturing and labor details are weak, with the Atlanta Fed GDPNow nowcast negative.
• Hanke's preferred trade is long 10-year US Treasuries, based on falling inflation pulling yields lower and producing capital gains.
• He doubts the federal budget will be balanced because recent House budget plans increase spending.
• Hanke says the Ukraine minerals agreement is complicated by Russian-occupied territories and Russian peace conditions.
• He argues Europe cannot sustain war with Russia without US support, so US aid cuts would likely wind the war down.