Economist Steve Hanke: This Will Bankrupt U.S.; Massive Inflation Next

3/28/2026 1:03:12 AM	medium term sharp up	21 days later	-12.90%	-19.35%
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Introduces topics: consumer sentiment at all-time low, rising inflation, US naval blockade of Strait of Hormuz, WTI around $100/barrel, and Treasury insolvency.

David Lin

Steve Hanke

The Treasury did declare insolvency via its financial statements: assets $6.1 trillion vs liabilities $136.2 trillion, making the US insolvent by definition.

Criticizes fact-checkers as ignorant, unable to read financial statements. Notes this has been true for decades.

Questions what happens when the government is insolvent, noting it's different from a business bankruptcy.

David Lin

Steve Hanke

The US can print money to avoid default, but deficits are deferred taxes that future generations will pay via higher taxes or inflation.

Criticizes fiscal folly under Trump, Biden, and Trump administrations. Advocates for a constitutional debt brake.

White House budget director cannot estimate Iran war cost; Harvard projects $1 trillion. Asks what this means for taxpayers.

David Lin

Steve Hanke

The OMB director's inability to estimate costs shows government irresponsibility. The war will make the US more insolvent, and total costs will far exceed $1 trillion.

Compares to Iraq, Vietnam, Libya wars as disasters with negative benefits and trillions in costs.

Asks if the US can afford a prolonged war with Iran.

David Lin

Steve Hanke

The US should not have entered the war; it's immoral to burden future generations with debt for an unjustified conflict.

Dismisses nuclear threat narrative as Israeli propaganda, citing Mearsheimer and Walt.

Notes Hanke correctly predicted inflation decline in 2022 and rise since fall 2024. Current headline inflation is 3.3%. Asks where it's going.

David Lin

Steve Hanke

Inflation will persist because M2 money supply is accelerating. The Fed cannot get the 'genie back in the bottle' to 2% target.

Uses Japan 1979 natural experiment: oil prices spiked but inflation fell because money supply was controlled. Oil price changes are relative, not the cause of general inflation.

Points to Fed balance sheet still contracting, questioning the inflation thesis.

David Lin

Steve Hanke

The Fed contributes only ~20% to M2; commercial bank credit is growing at 6.7% (above his 'golden growth rate' of 6%), which is the key driver. Bank earnings and deregulation will accelerate lending further.

Explains that bank loans create checking deposits, which are part of M2.

Shows University of Michigan consumer sentiment at all-time low, with high price concerns diverging from falling inflation expectations. Asks about demand destruction.

David Lin

Steve Hanke

Inflation genie is not going back in the bottle. Fertilizer prices up 50% due to blockade, leading to food price spikes. Trump administration is 'flying blind' on economic consequences.

Notes 80 refineries damaged, requiring 2 years to repair. Iran's oil revenue will continue until end of July via floating storage.

Introduces Hanke's Misery Index: US ranks 119th, Taiwan is least miserable. Asks about construction and US trajectory.

David Lin

Steve Hanke

Index = inflation + (unemployment x 2) + bank lending rate - GDP per capita growth. US will continue to deteriorate.

Notes Canada (98th) is more miserable than US. Southeast Asian tigers perform well.

Asks about two companies (Allbirds, Myzeo) pivoting to AI with triple-digit stock gains.

David Lin

Steve Hanke

This is hype. Stock prices reflect present value of future cash flows; AI adoption cannot justify such massive increases. These are prime short candidates.

Notes US productivity fell from 3% (2024) to 2.1% (2025), contradicting AI hype. Uses AI himself but skeptically.

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