"At the moment I would say you might be a bit late, but if they offer you a good mortgage and you find an attractive apartment in Sofia - I would buy it."
This is what the world-famous professor of applied economics from Johns Hopkins University in the US Steve Hanke, also called the father of the currency board, told bTV.
"Money drives the economy and if you increase the availability of money, which has happened since COVID-19 started, about 1 to 9 months later asset prices jump. What are asset prices? They include real estate.
We have a huge increase in property prices in the US because of the increased money supply about 9 months after the start in February 2020. The same is happening in Europe. I think property is a good protection against inflation.
If you look at the building permits issued in Bulgaria, they have almost doubled since 2016. Actually, the sequence is this - money supply jumps, asset prices rise between 1 and 9 months later, then the real economy picks up 6-12 months later, and inflation catches up after only 12-24 months.
It is lagging quite a bit compared to the initial increased money supply. At the moment I would say you may have delayed a bit, but if you are offered a good mortgage and find an attractive apartment in Sofia - I would buy it," explained Prof. Hanke.
He pointed out what, in his opinion, is Bulgaria's biggest problem. At the moment it may be inflation, but in the long term there is a greater danger for our country, Prof. Hanke:
"The short-term and immediate problem, I agree with the Bulgarians, is inflation. And, as I said, it will fall. It is a problem because the ECB has printed too much money, but it will calm down. That will soon pass. The big and long-term problem is demography," Hanke believes.
The population in Bulgaria is increasingly ageing. This is a real problem and the only way to deal with it is first - to keep the currency board and do what they do in Hong Kong and Singapore. You are doomed if you decide to stick to the European plans, trying to copy what they are doing in the EU.
You have to be inventive, do as they do in Singapore - free markets, deregulation. Let the market take over, let the government step back. The new government worries me a lot because they are talking about spending more money in Bulgaria. You need the opposite, it only fuels corruption, government spending is the engine of corruption.
You need to change direction, given this demographic problem, and that would create an innovative and dynamic economy that would attract people to Bulgaria. It is a great place - perfect location, perfect climate, amazing cuisine, wonderful people. Everything is great - except the economic policies," said the father of the currency board.
In his view, the European idea of energy is suicidal. "Look at Germany - they are taking coal out, stopping nuclear, they have wind blades and solar panels. But the problem is the wind doesn't blow all the time, and the sun doesn't shine all the time. The only way to make the system work is to have huge batteries, which Germany doesn't have. It is in a terrible situation. The only country in Europe with sensible thinking about energy is France," Hanke said.
"Macron recently to make a U-turn - announced that 28 new nuclear power plants will be built starting in 2028. So France is on the right track - you must have nuclear power. That's the only solution if you want clean and safe energy - nuclear power plants. Small plants that are being designed and commissioned are the right way to go - not the huge old nuclear power plants, but small plants, fully automated, very safe.
I think the energy problem will exist in Europe for a long time because Europe has made a lot of disastrous mistakes and stupid things when it comes to the transition from traditional energy to greener things. I don't see a short-term solution, things will only get worse", Prof. Hanke.
