John Williams: Get Ready for New Recession (Video)

John Williams of ShadowStats.com shares Peter Schiff’s expectation of a new round of quantitative easing from the Federal Reserve. Williams believes the United States economy is slowing down and headed into another recession. He sees inflation rising in the coming years as the markets realize that the Federal Reserve is incapable of actually helping the fundamental economy. In this interview with Greg Hunter of USAWatchdog, Williams explains and defends his reasoning.

Highlights from the interview:

“The GDP number comes out in 3 estimates. The first one, which is the advanced estimate, the one that came in at 2/10ths of a percent, the Bureau of Economic Analysis is guessing at. They tend usually to try to target whatever the consensus is looking at. Well, the consensus forecast was looking at 1% growth. Keep in mind that the general consensus forecast, the people who make those forecasts are employed by Wall Street. Their firms need positive news… So they’re very slow to catch downturns in the economy. It’s unusual that the GDP growth estimate would be so much weaker than the consensus. That was a signal from the Bureau of Economic Analysis to the consensus: ‘Hey guys, the economy in the first quarter was a lot weaker than you thought it was.’ …

“What we’re seeing now is that the outlook for the second quarter is not only weak, but it’s also going to turn negative. Two consecutive quarters of retracting GDP gives you a recession. What I’m looking at here is come sometime between now and July 30th, when they first estimate the second quarter GDP that the markets are going to be looking at a new recession. You’re going to see a lot of numbers in the weeks ahead — retail sales, industrial production, housing. We have a full quarter’s worth of reports ahead. The monthly numbers will tend to be weaker than people are looking at, and it will move the forecast for the second quarter down…

“This is an economy that I’ll contend never recovered. Now we’re in a new recession. I contend that it’s just a continuation of the old one… Not what the Fed wants, not what the market wants. All that speculation about the Fed raising interest rates, returning its policies to more normal functioning… That’s gone. It will be very difficult for the Fed to raise interest rates with the economy turning down again…

“The Fed’s quantitative easing was never designed to support the economy. That was the popular story. ‘The economy is weak, therefore we’re pumping a lot of money in. We’re keeping interest rates low.’ Low interest rates are not necessarily good for the economy. In fact, if interest rates are higher, that has some pluses. Banks can generally get higher profit margins on their loans, which means they can take on higher risk loans and that puts more credit into the system. That generally helps expand economic activity…

“I’m sure [Janet Yellen] knew what she was saying. Usually Fed Chairman don’t talk about things like that… for the reason that they can be very disruptive to the markets. On the other hand, the Fed has been doing everything it can to prop up the stock market: quantitative easing, the stories, the rumors have been played very carefully against the market. The wording in the FOMC communiques has tried to be as non-disruptive to the markets as possible… Having a strong stock market has been something the Fed has viewed as one way they can help the economy, because in theory you’ll have people become wealthier… If people are worth more, they tend to spend more, which helps the economy. It’s not working. You’re not going to save the economy by having the stock market high… I think you’re going to have a crash here somewhere along the line that’s going to be of a magnitude that will be remembered for decades…

“The fundamentals [for a crash] are there… Where the markets are, where the expectations of where the economy is… are so far removed from reality that something’s got to give…

“The [Fed has been out of bullets for a long time]. We had a panic in 2008. People forget this. The system was on the brink of collapse. 2008 – that wasn’t that long ago, but people forget. The system as we know it almost came to an end… They did everything in their power to prevent the system from collapsing… We should have not been in that circumstance. It was due to decades of abusive policy by the federal government from a fiscal standpoint, letting the budget deficits and future budget deficits, obligations run wild. And by the Fed, particularly under Greenspan, encouraging debt expansion…”

Get Peter Schiff’s latest gold market analysis – click here – for a free subscription to his exclusive weekly email updates.
Interested in learning more about physical gold and silver?
Call 1-888-GOLD-160 and speak with a Precious Metals Specialist today!