Weekend Edition: Does money supply determine economic health?
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Friday 11th April 2025
Please note this communication is not a research report and has not been prepared by NAB Research analysts. Read the full disclaimer here.
Economists these days tend not to treat the supply of money as a major determinant of economic growth. That’s because a downturn in the supply of money can be counteracted by the speed at which money changes hands. This week Steve Hanke, a Professor of Applied Economics at Johns Hopkins University in Baltimore, argues against that belief. The velocity of money is relatively constant, he says, but the supply of money is the major determinant of economic output, driven primarily by loans from commercial banks. Listen to his reasoning on this week’s podcast and why he thinks the RBA is doing a good job for Australia, but the US could be heading for a recession, even before Trump’s tariff adventure.
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