560: American Economist and Professor, Steve Hanke, on Rewriting the Rules of Our Financial System

560: American Economist and Professor, Steve Hanke, on Rewriting the Rules of Our Financial System

Central banks in major economies have repeatedly misread inflation trends by relying on models that omit a fundamental economic lever: the money supply. In this episode, economist Steve Hanke offers a detailed critique of prevailing post-Keynesian frameworks and the policy missteps that have followed. Drawing on historical and current data, Hanke underscores the predictive power of the quantity theory of money, a model largely excluded from central bank thinking, and explains how ignoring this leads to erroneous inflation forecasts and misguided interventions.

The discussion outlines how inflation, often attributed to exogenous shocks such as supply chain disruptions or geopolitical events, is more reliably explained by changes in the money supply. Hanke presents evidence that inflation today is the result of decisions made one to two years prior, making it critical to focus on monetary trends rather than short-term data fluctuations. He further contrasts U.S. and Chinese monetary responses, highlighting how both under- and over-corrections in money supply growth have resulted in either recessionary pressures or deflation.

Key insights from the episode include:

- The quantity theory of money remains one of the most reliable frameworks for anticipating inflation, yet is absent from mainstream economic models used by central banks.

- Inflation is always a monetary phenomenon, rising or falling primarily in response to shifts in the money supply, not due to external shocks, which only affect relative prices.

- U.S. monetary policy is currently on a path toward recession, not inflation, due to anemic money supply growth since 2022, a trend Hanke predicts will continue unless reversed.

- Regime uncertainty, policy volatility that undermines business investment, amplifies economic stagnation. Drawing parallels to the New Deal era, Hanke warns that unclear or shifting fiscal and regulatory rules will delay recovery even further.

- Most of the money in circulation is created by commercial banks, not central banks. Post-2008 regulations have constrained these institutions, diminishing their role in supporting economic growth.

Taken together, these points call for a recalibration of macroeconomic policy, placing money supply at the center of analysis and re-empowering commercial banks to function as essential components of the financial system. For senior leaders navigating strategic decisions, the episode provides a timely and data-grounded lens on the structural drivers shaping inflation, recession risks, and economic stability.

Get Steve’s book here: https://shorturl.at/t5uDw

Making Money Work: How to Rewrite the Rules of Our Financial System

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97: The most important output in a consulting study | Management consulting project  | Benefits case

97: The most important output in a consulting study | Management consulting project  | Benefits case

An episode 96 of Strategy Skills iTunes podcast is here (Strategy Skills podcast is ranked among 5-10 top for careers in many countries worldwide).  One thing you always need to present in all of your management consulting projects is a business case. If you are not presenting a business case to a client, or a benefits case, I prefer the word benefits because it makes it clear you are looking for a benefit for a client, if you are not presenting a benefits case to a client you are making it very difficult for the client to make the decision to implement what you are saying in your recommendation as part of your management consulting project. www.FIRMSconsulting.com - optin for email updates to receive access to some episodes from our advanced #strategy programs.

21 Jan 202010min

96: "Are you undervaluing your customers?" with Bain & Company's Rob Markey

96: "Are you undervaluing your customers?" with Bain & Company's Rob Markey

Listen to this thought-provoking discussion between Michael and Rob Markey, Bain and Company's partner.  Rob Markey, a partner and director at Bain & Company and the founder of the firm’s Global Customer Strategy and Marketing practice. He is a co-author of The Ultimate Question 2.0 and is the host of the Net Promoter System podcast. He is based in New York. https://www.firmsconsulting.com/

14 Jan 20201h 9min

95: Value chain mapping | When value chain analysis are useful | Strategic management

95: Value chain mapping | When value chain analysis are useful | Strategic management

We have seen many value chain mapping examples. We have seen good value chain mapping, bad value chain mapping, incomplete value chain mapping. Ultimately, given the nature how value chain mapping will work, it can only do few things and it cannot do a few things. So if value chain mapping is presented to do things it cannot do it is flawed. When you do value chain analysis it is far more useful to see where profits are going to shift over time, that is one thing you have to do. Two, assign some probabilities of what are the odds of this happening. And 3, what influences those probabilities. You are analyzing the entire sector, the entire industry. A lot of things influencing a sector. Consumer spending can change with the recession. Recession can change things. Different legislation could cause profits move from point x to point y. Competitor making a misstep could cause it, new competitor entering, competitor going bankrupt. So whenever someone says I am so certain this will happen you should question their business judgement because you cannot predict the future. #valuechainmapping #valuechainanalysis #valuechainanalysisexplained https://www.firmsconsulting.com/

7 Jan 20209min

94: Design the value chain you need | Value chain analysis | Management consulting

94: Design the value chain you need | Value chain analysis | Management consulting

An episode 94 of Strategy Skills iTunes podcast is here (Strategy Skills podcast is ranked among 5-10 top for careers in many countries worldwide).  www.FIRMSconsulting.com - optin for email updates to receive access to some episodes from our advanced #strategy programs.

31 Dec 201917min

93: How to Manage Like Amazon (with CEO Advisor Ram Charan)

93: How to Manage Like Amazon (with CEO Advisor Ram Charan)

Every business wants to succeed like Amazon so we invited New York Times bestselling author & CEO Advisor Ram Charan to talk about How to Manage Like Amazon. From their high-velocity decision-making to their top talent hiring practices to their “Forever Day-1 Culture”, the insider secrets behind Amazon’s success are now within anyone’s grasp. Find out how Amazon does it and how you can too by listening to this fascinating conversation between Michael and Ram, whom Fortune calls “The most influential consultant alive” and whose book  Execution spent 150 weeks on the New York Times bestseller list. Ram's new book The Amazon Management System can be purchased here https://amzn.to/2RGGLy6 https://www.firmsconsulting.com

11 Dec 201951min

92: Senior partner at McKinsey & a global leader of their Organization Practice

92: Senior partner at McKinsey & a global leader of their Organization Practice

Meet Bill Schaninger, Senior Partner at McKinsey and a global leader of their Organization Practice (based in Philadelphia). Bill focuses on driving large-scale organizational and cultural change for clients across North America, Europe, and the Middle East. An expert on the role of culture, values, talent and leadership in improving business outcomes, he helps executives enhance management effectiveness. Bill has published extensively in practitioner and academic journals, on organizational topics. FIRMSconsulting.com - optin for email updates to receive access to selected episodes from our advanced training programs.

25 Okt 20191h 10min

91: How do I know what is corporate strategy

91: How do I know what is corporate strategy

An episode 91 of Strategy Skills iTunes podcast is here (Strategy Skills podcast is ranked among 5-10 top for careers in many countries worldwide).  www.FIRMSconsulting.com - optin for email updates to receive access to some episodes from our advanced #strategicmanagement programs.

24 Sep 20195min

90: What makes corporate strategy different

90: What makes corporate strategy different

You can find more training resources here: Get free access to selected episodes when you sign up for email updates: https://www.firmsconsulting.com Get Access to Firmsconsulting Training by Becoming a Member Here: https://www.firmsconsulting.com/subscription-options/ Instagram: https://www.instagram.com/firmsconsulting/ Facebook: https://www.facebook.com/Firmsconsulting/ Twitter: https://twitter.com/firmsconsulting Linkedin: https://www.linkedin.com/company/firmsconsulting

21 Sep 20195min

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