Submitted by QTR's Fringe Finance

If you read my recent piece on wealth inequality and the honest economic pain so many Americans are feeling, you know exactly where I stand: our monetary system is fundamentally broken, and it’s rigged to benefit the asset-rich elite at the direct expense of the working and middle class.

When I wrote that rising costs, stagnant wages, and sky-high asset prices were eroding faith in capitalism, I wasn’t speculating—I was describing exactly what happens when central banks replace market discipline with financial engineering.

Steve Hanke just provided one of the clearest, most devastating explanations of how and why that’s happening.

The below interview with Hanke doesn’t just support the argument I’ve been making—it throws jet fuel on it. He lays bare how the Fed’s monetary distortions are turbocharging inequality, enriching the billionaire class, and crushing everyone else under the weight of inflated prices and policy failure.

So if you want to understand the madness of U.S. economic policy right now — from inflation to interest rates to the Fed's total dysfunction, watch the below interview with Steve Hanke.

I can’t recall a more direct, unsparing, or necessary takedown of everything that’s gone wrong in American monetary thinking. I believe this conversation should be required viewing for anyone with even a passing interest in economics, investing, or the future of the U.S. dollar.

Hanke opens by lighting both Trump and Jerome Powell on fire.

“Both Trump and the chairman — I would give a letter grade F to. If they were in my class, they’d both get Fs,” he says. It’s not personal, it’s policy.

Powell, according to Hanke, has “had us on a roller coaster. Money supply goes up, inflation goes up. Then money supply contracts, and inflation starts going down.” The problem, he explains, is that Powell — like Trump — “thinks looking at the interest rate is an indicator of monetary policy. No. Interest rates are not an indicator of monetary policy. Changes in the money supply indicate what’s going on with monetary policy.”

That single idea — that inflation is driven not by rates but by money creation — is the core theme Hanke hammers again and again. It’s what underlies the entire critique he levels at both the Fed and the press. “Inflation is always and everywhere a monetary phenomenon.” The media blames the recent CPI uptick on tariffs. But Hanke isn’t buying it. “95% of what you read in the press is either wrong or irrelevant.” Yes, tariffs may cause short-term price “blips,” but they don’t drive the broader trend. That’s set by what happened to the money supply two years ago — and in Hanke’s analysis, it’s still contracting. That means inflation is likely still on a downward path.

But that message doesn’t play well in headlines, and Hanke knows it.

“Everyone will start thinking that inflation is going up because they don’t pay any attention to the money supply,” he says. “They’ll see the ratchet up and claim that inflation is back. But no — we had a one-time jump, and then inflation starts on the old trajectory again.”

The interview hits new heights when Trump re-enters the scene. After the latest inflation report, Trump demanded a 300 basis point cut to the Fed funds rate. Hanke doesn’t flinch. “Like many things coming from the White House, it’s just rubbish. It’s irrelevant.” The logic behind Trump’s demand? Completely flawed. “The government does not borrow at the federal funds rate.” And if Powell is replaced by a Trump loyalist? “You’d basically have Trump running monetary policy — which is a disaster. You need that like a hole in the head.”

But perhaps the most damning part of the interview is Hanke’s indictment of how monetary policy has fueled inequality. During COVID, the Fed pumped trillions into the system and blew a hole through any illusion of neutrality.

“Billionaires made out like bandits,” he says. “In January 2020, billionaire wealth was 14.1% of GDP. Today it’s 21.7%. That’s the Fed. That’s monetary policy.”

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And here’s the kicker: the Fed didn’t even know it was doing that. “You don’t want monetary policy doing that. You want it to be neutral.” But neutrality, Hanke argues, isn’t even on their radar — because “money has disappeared from economic thinking.” He’s not exaggerating. As he explains, most of today’s macroeconomic models — especially at the Fed — literally do not include the money supply as a variable. “There’s no M1, no M2, no M3. It’s just not in the model.”

Why? Because if you remove money from the equation, you also remove blame. “If you don’t include money as a cause of inflation, that means the thing central banks control is out of the picture.” Convenient.

All of this is at the heart of his new book Making Money Work, which calls for a return to the quantity theory of money and a complete overhaul of how we think about monetary policy. Hanke outlines four pillars: (1) money supply matters, (2) commercial banks create most money and must be central to the model, (3) fiscal policy has monetary implications, and (4) neutrality must be a core goal. “We want the money supply and neutrality both put back in the picture.”

He also points out how this disappearance of money from economics creates distortions we barely understand. “When the Fed goosed the money supply, asset prices went up. But who owns assets? The rich. So we had a non-neutral impact on the distribution of income.” Again, the outcome wasn’t accidental — it was baked in.

If you’ve ever wondered why everything feels broken — from unaffordable housing to asset bubbles to financial inequality — this interview is a blueprint for understanding it all. Hanke doesn’t just diagnose the disease. He names names, provides data, calls out the myths, and offers real solutions grounded in classical economics.

QTR’s Disclaimer: Please read my full legal disclaimer on my About page here. This post represents my opinions only. In addition, please understand I am an idiot and often get things wrong and lose money. I may own or transact in any names mentioned in this piece at any time without warning. Contributor posts and aggregated posts have been hand selected by me, have not been fact checked and are the opinions of their authors. They are either submitted to QTR by their author, reprinted under a Creative Commons license with my best effort to uphold what the license asks, or with the permission of the author.

This is not a recommendation to buy or sell any stocks or securities, just my opinions. I often lose money on positions I trade/invest in. I may add any name mentioned in this article and sell any name mentioned in this piece at any time, without further warning. None of this is a solicitation to buy or sell securities. I may or may not own names I write about and are watching. Sometimes I’m bullish without owning things, sometimes I’m bearish and do own things. Just assume my positions could be exactly the opposite of what you think they are just in case. If I’m long I could quickly be short and vice versa. I won’t update my positions. All positions can change immediately as soon as I publish this, with or without notice and at any point I can be long, short or neutral on any position. You are on your own. Do not make decisions based on my blog. I exist on the fringe. If you see numbers and calculations of any sort, assume they are wrong and double check them. I failed Algebra in 8th grade and topped off my high school math accolades by getting a D- in remedial Calculus my senior year, before becoming an English major in college so I could bullshit my way through things easier.

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