Inflation Headed DOWN From Here, Despite Tariffs | Steve Hanke

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**Steve Hanke** (0:41)
So right now, the rate of growth is four and a half. The rate consistent with hitting a 2 percent inflation target is about six. That suggests to me, what? That the trend of inflation, the course of inflation is down.

**Adam Taggart** (1:02)
So disinflation is-

**Steve Hanke** (1:04)
Disinflation, right.

**Adam Taggart** (1:05)
What I think I'm hearing you say then, Steve, is despite maybe conventional wisdom, tariffs should not be inflationary, but they should be an economic drag.

**Steve Hanke** (1:20)
Yes. I think the economy is steadily weakening and will eventually end up in a recession.

**Adam Taggart** (1:34)
Welcome to Thoughtful Money. I'm its founder and your host, Adam Taggart. As the world awaits Federal Reserve Chairman Jerome Powell's speech at Jackson Hole today, the question on everyone's mind is, where's inflation headed from here? Is it set to surge as the Trump tariffs start being felt in full force? Or is it set to trend downwards to the Fed's 2% target rate due to a slowing economy? To discuss the latest possibilities and probabilities, we've got the good fortune to sit down today with Steve Hanke, Professor of Applied Economics at the Johns Hopkins University in Baltimore, Maryland. Steve, thanks so much for joining us today.

**Steve Hanke** (2:13)
Great to be with you, Adam.

**Adam Taggart** (2:15)
Thanks, Steve. Well, look, lots to talk about today. As I just said there, the day that this video is coming out should be the day that Jerome Powell is going to have his big speech at Jackson Hole. We're recording this the day before. He'll be there at Jackson Hole with all the other great economic oombas. So there's sure to be lots of grand thinking released after this weekend. I want to talk about what you think is going to come out of that really quickly before we do, though, Steve, just because it's been a little while since you've been on the program. Let me ask this intentionally general question just to help viewers kind of get a sense for where your thinking is right now. What's your current assessment of the economy and the financial markets?

**Steve Hanke** (2:56)
I think the economy is steadily weakening and will eventually end up in a recession.
As far as the markets are concerned, I think they're overhyped, overpriced and in bubble territory. The problem with that, Adam, is it's fine to be able to detect a bubble. A lot of people are starting to worry about a bubble, but it's very difficult to predict whether the bubble will actually pop and when that would occur, or whether the air will just slowly go out of the bubble and we'll have valuations reach, shall we say, reasonable levels. And we don't know when that would start and how long it would take. So there you have it. You asked the question and your intro set the table pretty well for a variety of things we can talk about.

**Adam Taggart** (3:56)
Great. Well, looking forward to rolling up our sleeves and diving in. I just want to say your very concise answer there, and I appreciate how direct you were, reminds me of two quotes. One is from John Hussman, who says that bubble markets, fortunate to make a choice, look like a genius now or look like a genius later. There's a lot of people who are thinking they're geniuses now. The question is, will they feel that later if indeed it is a bubble and it does pop? Anyways, you say, economy on its way to recession, markets on its way to some reckoning because it's a bubble. Of course, the second quote that pops into my head is, well, okay, beyond that, Mrs. Lincoln, how do you enjoy the play?

**Steve Hanke** (4:39)
I love the quotes. Let me follow up with a little thought with regard to the market and bubbles and that is there are actually two decisions that people have to make with regard to bubbles. Maybe three, but the two I was thinking about. If you decide to go out, that's one decision. But if you decide to go out, you're eventually going to have to decide when to get back in.