Fed Will Be Forced to Print & Kill Dollar-John Williams
By Greg Hunter
USAWatchdog.com
January 29, 2017
Economist John Williams warned last year the U.S. economy never really recovered, and it was going to turn down again. That downturn happened Friday when the latest GDP figures came in below 2% growth in the fourth quarter of 2016. Williams says the economy “contracted,” and he contends it’s going to get a lot worse before it gets better. Williams explains, “I think there is reason for optimism in terms of the economy down the road. The problem is irrespective of who is president. When you introduce new policies, it takes about nine months to a year before we see the impact. So, the impact of all the happy things that are happening now won’t start to surface until 2018 barring other complications. I expect you to see a pickup in the economy then. Unfortunately, we are still in an economy that is turning down. You are going to see that in the reporting in the next several months. We never really recovered from the economic collapse going into 2009. There was a little bit of a rebound, and we started to see the economy turn down again in 2014. If you look at the underlying series such as industrial production, freight indices and petroleum consumption, there has been no recovery. We are turning down again. This is the longest and deepest economic contraction since the Great Depression.”
On rising interest rates, Williams predicts, “I think the Fed is going to suppress rates. Unfortunately, the bad economy we have now will be at least the better part of 2017. As the economy weakens, that puts renewed stress on the banking system. The Fed is going to be forced back to accommodating the solvency of the banking system. The Fed will be moving back towards the quantitative easing (money printing) that it had before. They have to save that banking system as they did back in 2008 . . . As they do that, it will kill the dollar. . . . There is hope for the economy, but we have a very difficult year ahead.”
Williams goes on to say, “There are two big problems. The Fed still doesn’t have control of the system, and I think they are going to be having trouble with the banks. They are going to move back to quantitative easing (money printing) that will hit the dollar hard. That, by itself, would tend to put upside pressure on rates. The Fed can intervene for the banking system, but it’s not going to be good for the financial markets. The second element, which is also very bad for the dollar, is that in the initial phases of the Trump stimulus, you are also going to see some increase in the near term budget deficit. Once you are down the road, and you have a stronger economy and you have greater revenues coming in with taxes and greater profits, that will help lessen the deficit. The global currency markets will, once again, look at the long term solvency of the United States, and in that area, you are going to have serious issues as you did in August of 2011. As the markets focus on the long term solvency of the U.S. government, that is a very bad circumstance for the dollar.”
If they don’t do that, Williams says, “We are facing a terrible crisis. . . . In terms of the Fed (getting control) and the long term solvency issues, these are death knells for the dollar. Unless those are addressed, you are going to see massive selling of the dollar, a debasement of the dollar and high inflation that will lead you into hyperinflation. That’s what comes into play. Prior to this administration, I would have given the chances of avoiding that as nil, but with this administration, I have some hope here.”
Join Greg Hunter as he goes One-on-One with economist John Williams, founder of ShadowStats.com.
(There is much more in the video interview.)
