Wall Street is misreading inflation as bank credit surges, gold seen reaching $7,000 – Professor Steve Hanke - KITCO

Professor Hanke is hitting on the real story here, one that Wall Street conveniently ignores because it doesn't fit their narrative of a neatly managed economy. The mainstream financial media focuses on lagging indicators like CPI, but Hanke correctly points to the surging bank credit as the leading indicator of future monetary inflation. This isn't some abstract academic theory; it's a direct threat to the purchasing power of your fiat currency, and precisely why your physical gold and silver stack is more crucial than ever. The $7,000 gold target isn't a pipe dream, it's a projection based on sound monetary principles that most analysts overlook.

Wall Street's misreading stems from their obsession with headline inflation numbers, which are a lagging consequence of monetary expansion, not the cause. Hanke's focus on bank credit is spot on. When banks create credit, it expands the money supply (M2). More money chasing the same amount of goods and services is the definition of inflation. We saw a massive surge in M2 during the pandemic stimulus, and while some of that has pulled back, the underlying credit engine continues to run hot, fueling demand for assets and ultimately goods. This isn't about transient supply shocks; it's about the fundamental erosion of currency value, something gold has protected against for millennia.

Consider the historical precedent. In the 1970s, as the Fed repeatedly tried to manage inflation with rate hikes while money supply continued to grow, gold went from around $35 an oz to over $800 an oz. That's a 2,185% increase. While the exact conditions are different, the underlying mechanism of excess money creation leading to higher prices for real assets remains constant. Today, gold sits at $4718.8 an oz. A move to $7,000 represents a further 48.3% increase. This isn't an arbitrary number; it reflects a recalibration of gold's value against a debased currency. It also implies that the Gold/Silver ratio, currently around 62.3:1, would likely compress significantly as silver, trading at $75.74 an oz, typically outperforms gold during major precious metals bull runs due to its higher beta and increasing industrial demand.

For physical stackers, this means the fundamental case for holding precious metals is only getting stronger. While paper markets might react to every Fed whisper or CPI print, the physical market understands the long game. When the broader market finally wakes up to the true implications of rampant credit expansion and the resulting monetary inflation, demand for physical metal will surge, pushing premiums higher and making acquisition more challenging. Your stack is not just a speculative play; it's a defensive position against the inevitable consequences of irresponsible monetary policy.

Keep a close eye on the weekly M2 money supply data and commercial bank lending figures; these are the true barometers of monetary inflation, not the monthly CPI report.