The Financial Crisis Of 2026: Economists Sound Alarm Bells | Hanke & Skousen

Financial Crisis of 2026: Inflation, Growth, and Market Outlook

Key Concepts:

• Gross Output (GO): A measure of total production in an economy, encompassing all transactions in the supply chain, significantly larger than GDP.
• Austrian School of Economics: An economic theory emphasizing the importance of individual action, subjective value, and the structure of production.
• Quantitative Tightening/Easing: Monetary policies involving reducing or increasing the money supply, respectively.
• M2 Money Supply: A broad measure of the money supply, including cash, checking deposits, and savings accounts.
• Dollarization: Adopting another country’s currency as legal tender.
• Government Shutdown: A temporary cessation of non-essential government functions due to lack of funding.
• K-Shaped Economy: A situation where economic recovery benefits the wealthy disproportionately, while the lower and middle classes struggle.

I. Economic Growth & GDP vs. Gross Output

The discussion began with a clip of Howard Lutnik (Davos) predicting over 5% GDP growth for the US in Q1 2024. Mark Scowzen challenged this optimistic outlook, emphasizing the importance of Gross Output (GO) as a more comprehensive measure of economic activity. While GDP focuses on final goods and services, GO accounts for all transactions within the supply chain, providing a more accurate picture of economic health. Scowzen noted that while GDP is showing growth, GO growth is slower, particularly in real terms, and the supply chain remains stagnant. He attributes current GDP growth primarily to consumer spending, a potentially unsustainable driver. He highlighted that new job creation is flat, and Trump’s trade wars continue to negatively impact the business sector. Despite these concerns, Scowzen remains 100% invested in the stock market and acknowledges that gold and silver have outperformed expectations.

II. Inflation & Monetary Policy

Steve Hanky expressed skepticism towards Lutnik’s growth projections, deeming them “delusional.” He believes the US potential growth rate is around 2.5%, and a 5-6% growth rate is unrealistic. Both experts agree that the Federal Reserve’s tight money policy has helped reduce inflation, but Hanky anticipates “slow growth and stubborn inflation” due to the loosening of monetary policy. He pointed to the Fed’s shift from quantitative tightening to quantitative easing, specifically the purchase of $40 billion in Treasury bills, as a sign of impending inflation. Hanky also emphasized the role of commercial banks, noting their increasing loan growth and potential to further accelerate the money supply, exceeding the Fed’s influence. He believes the “inflation genie will never really be put back in the bottle.” Scowzen noted that while M2 money supply growth is currently at 4.6%, it’s not growing at the historical rates seen previously.

III. Government Shutdown & Political Factors

The potential for a government shutdown this weekend was discussed, with Scowzen predicting the blame would fall on Republicans, negatively impacting Trump’s political standing. He also noted the potential for the Trump accounts (allowing investment in the S&P 500) to further inflate the stock market bubble. Hanky highlighted the importance of divided government for effective policy-making, citing the Clinton-Gingrich era as a positive example. He also expressed concern about Trump’s aggressive foreign policy and potential for increased military spending, characterizing the Department of Defense as a “home of waste, fraud, and abuse.”

IV. Global Economic Landscape & Geopolitical Risks

Hanky discussed a shift in global trade dynamics, with countries pivoting away from the US towards China and India. He believes this benefits India by forcing liberalization of its trade policies. Both experts acknowledged the potential risks associated with geopolitical tensions, particularly in the Middle East, and the possibility of a conflict with Iran. Scowzen highlighted the potential for increased oil prices and disruption to global trade. He also pointed to the potential for a crisis in Venezuela, despite Trump’s intervention attempts.

V. Commodity Markets: Gold, Silver, & Uranium

Scowzen and Hanky both expressed bullish sentiment towards precious metals. Hanky reaffirmed his price target of $6,000-$7,000 for gold, while Scowzen noted that his previous prediction of $5,000 has been surpassed. Scowzen believes a significant influx of silver supply will come from above-ground holdings (coins, silverware) as prices rise. He also highlighted the increasing industrial demand for silver, particularly in the AI and chip-making sectors. Interestingly, Scowzen suggested that uranium and nuclear stocks offer even greater upside potential due to rising uranium prices and the development of small modular reactors (SMRs). He specifically mentioned Mox as a promising company in the SMR space. Hanky agreed with the bullish outlook on gold and silver.

VI. Argentina & Dollarization

Hanky expressed skepticism about Argentina’s economic prospects, despite recent positive developments under President Malay. He believes the country’s fundamental currency problem requires dollarization to achieve lasting stability. Scowzen acknowledged the potential for a positive turnaround in Latin America, particularly if the Chilean model of economic liberalization is adopted.

VII. Gross Output & Austrian Economics

The discussion repeatedly returned to the importance of Gross Output (GO) as a leading indicator of economic health. Both Scowzen and Hanky, as proponents of the Austrian School of Economics, emphasized the value of understanding the structure of production and the transactions within the supply chain. Scowzen detailed his decades-long advocacy for the Bureau of Economic Analysis to include GO in its reporting, which has now been implemented.

Conclusion:

The panel discussion painted a complex picture of the global economic outlook. While current GDP growth appears strong, concerns remain about the sustainability of this growth, driven primarily by consumer spending. Inflation remains a significant threat, fueled by loose monetary policy and geopolitical instability. Both experts highlighted the importance of monitoring Gross Output as a more comprehensive measure of economic health. Commodities, particularly gold, silver, and uranium, are seen as potential safe havens and investment opportunities. The discussion underscored the interconnectedness of economic, political, and geopolitical factors, and the need for a nuanced understanding of these forces to navigate the potential financial crisis of 2026.