I’ve excerpted some quotes from economist John Williams’ most recent economic commentary No. 983-B (ShadowStats.com) which is of interest to every American. It predicts financial authorities will make a formal admission that the economy is in a state of collapse and in recession on or around September 2019. Williams made this prediction in 2004! The announcement would be an admission of a financial collapse that has been ongoing since 2008 and has been hidden from public view.
Many quarterly reports are assumptions that are later corrected when the real numbers come in (September 2019). These numbers typically don’t grab the news headlines as they should, says Williams.
Williams notes the Federal Reserve, a cabal of 12 private banks, “has centered on the needs and health of the banking system, very much at the cost of domestic business activity and the economic health and prosperity of Main Street, U.S.A.”
Williams reveals the primary numbers on the health of the American economy, unemployment and gross domestic product, are fabricated. The U.S. government reports day-to-day financial data that doesn’t include future obligations (Medicare & Social Security). It’s as if the government doesn’t actually have to meet those obligations. But, of course, it does. And to imagine, various politicians are calling for “Medicare for all.”
Williams goes on to say: a banking holiday (in 2008) might have left the U.S. economy in a better long-term circumstance than it is today.
Given that The Federal Reserve has now failed at achieving its dual mandate, that of promoting the goals of maximum employment, stable prices, and moderate long-term interest rates,” Williams suggests a radical change:
“Maybe it is time for the Congress to realign control of the U.S. currency, monetary policy and ―targeting‖ economic activity back to the elected officials who control the U.S. Treasury, with oversight in Congress, as opposed to the Federal Reserve, which is owned by the banks it oversees.”
Go to ShadowStats.com to learn more. – Bill Sardi
SPECIAL COMMENTARY NUMBER 983-B
Economic and Financial-Market Review—April 22, 2019
John Williams. SHADOWSTATS.com
The Federal Reserve Is Not Doing So Well with Its ―Dual Mandate, Despite Happy, Formal Proclamations to the Contrary.
Since 1977, the Federal Reserve has operated under a mandate from Congress to̳ promote effectively the goals of maximum employment, stable prices, and moderate long term interest rates, what is now commonly referred to as the Fed‘s dual mandate.
The Federal Open Market Committee (FOMC) policies of 2008 and 2018/2019, and the years intervening, have centered on the needs and health of the banking system, very much at the cost of domestic business activity and the economic health and prosperity of Main Street, U.S.A.
From a practical standpoint, the ―dual mandate has not been met within the intent of the U.S. Congress, and that should be reviewed in the Congressional Oversight of the Federal Reserve System.
Fed‘s current statutory mandate of attaining ―maximum employment and price stability,‖ has been made a great deal easier to attain in recent decades, from a headline standpoint, thanks to the federal government redefining how it measures headline inflation and unemployment (always with Fed input and encouragement). Discussed in Public Commentary on Inflation Measurement and Public Commentary on Unemployment Measurement, the redefined series have had the policy and politically friendly effects of reducing both headline inflation and headline broad unemployment.
As the FOMC moved recently to constrain consumer liquidity, weakening the 74% of the U.S. Gross Domestic Product (GDP) directly driven by the consumer.
Defending the rate hikes, the Fed argued that the broad economy was booming, overheating in fact, which raised the risk of rising inflation; that was nonsense!
Even so, despite a booming headline GDP, major sectors of the U.S. economy never expanded post-Banking Crisis, never saw a full business recovery from the 2007 recession and economic collapse into 2009.
Economic ―expansion‖ generally is recognized and measured from when depressed levels of business activity recover to, and then expand beyond, the pre-recession peak in activity.
Now the Fed is triggering a renewed and intensified economic downturn, as it tries to extricate itself from its policies of ten years ago.
From a peak of annualized inflation-adjusted real quarterly growth of 4.16% in second-quarter 2018, activity slowed to 3.36% in third-quarter activity, then to 2.17% in the ―final‖ fourth-quarter reading. Both first- and second-quarter 2019 GDP likely will show outright quarterly contractions in real, inflation-adjusted activity, reflecting the onset of what should become a formal, new recession.
Accordingly, the effects of FOMC‘s tightening of the last year or so are depressing current and future business activity as would be expected with the traditional lead time (which is 9 months, says Williams).
As a result, Fed actions to raise interest rates to what historically and normally would be higher levels, backfired, as the foreseeable, current negative economic impact now has forced the FOMC into a neutral tightening stance.
The present circumstance should be recognized, measured and timed as a ―new recession, off an economic peak level of activity in Fourth- Quarter 2018.
As of its March 2019 meeting, the Federal Reserve‘s Federal Open Market Committee indicated it had put planned interest-rate hikes for 2019 on hold, along with reducing/ceasing its balance sheet liquidations that were being used to unwind the QE programs.
The Bureau Of Economic Analysis (BEA) can bring in the headline GDP at any level it desires, and often targets the consensus outlook.
Beware July 26th, When a Formal Recession Likely Will Have Gained Popular Recognition! The annual benchmarking on July 26th, will revise recent GDP history, including Fourth-Quarter 2018, and First-Quarter 2019, both likely to the downside, with a headline first-quarter contraction in hand by then.
Yet, a Banking Holiday, with FOMC guarantees on all deposits (actually put in place with the 2008 crisis), and with a reorganization of the Banking System and Federal Reserve (or restructured U.S. Treasury) systemic oversight, might have left the U.S. economy in a better long-term circumstance than it is today.
Again, though, with systemic failure not viewed as an option, whatever money had to be created, spent or loaned, whatever liabilities had to be guaranteed, whatever bad assets had to be absorbed, whatever entities (inefficient, crooked or otherwise) had to be bailed out, whatever markets had to be manipulated, whatever had to be done as a stop-gap measure was done to preserve the system. What was not done was to address most of the underlying fundamental issues that led to the crisis, including the long-term sovereign-solvency issues of the United States government.
Those issues still need to be addressed, along with a long-overdue Congressional overhaul of the politically independent U.S. Central Bank and its Federal Reserve System, which otherwise is owned by the banks that it also regulates.
The Central Bank’s Primary Concern Remains the Banking System, Not the Economy and Not Main Street U.S.A.
The Fed still has not succeeded in fully reestablishing banking-system health and normal, commercial functionality.
Having taken little but stopgap measures in 2008, which pushed much of the banking-solvency crisis into the future, the Federal Reserve (and the U.S. Treasury), again, face continuing systemic insolvency or instability issues as that future closes in.
Maybe it is time for the Congress to realign control of the U.S. currency, monetary policy and ―targeting‖ economic activity back to the elected officials who control the U.S. Treasury, with oversight in Congress, as opposed to the Federal Reserve, which is owned by the banks it oversees.
No other major economic indicator or employment measure has shown anything close to the purported headline real GDP ―Expansion of 19.1%.
Almost all government reporting has to incorporate underlying assumptions, and the tendency usually is to make overly positive assumptions, allowing for later downside corrections in the benchmarking.
Understating economic activity is a ―political embarrassment,
while overstating activity has no such political stigma attached to it.
With ―Unsustainable‖ Fiscal Policies, the United States Government Faces Long-Range Insolvency or Hyperinflation. The U.S. Government must move now to bring its fiscal operations into balance, to restore long-term stability and solvency to the system. Otherwise, current conditions easily could evolve into a hyperinflationary great depression, much sooner than commonly expected, forcing significant overhauls to the domestic and global economic and financial-market systems. These crises no longer are―too far into the future to worry about, as some in the U.S. government and Fed have argued in recent decades, and the Fed is complicit in this circumstance along with the Congress and President.
Based on generally accepted accounting principles (GAAP), the headline net obligations of the Federal Government, including the unfunded liabilities valued in today‘s dollars, have reached an order of magnitude of well over $100 trillion, including $22.0 trillion in existing U.S. Treasury debt (the largest amount of sovereign debt in the world. That $100-plus trillion needed in hand to cover existing U.S. obligations not only is five-times greater than the headline nominal U.S. GDP, but also tops current estimates of the aggregate global GDP of about $85 trillion. Indeed that circumstance is unsustainable and uncontainable, yet those controlling the U.S. government consistently refuse to address the nation‘s long-term solvency issues, although they talk about it.
The GAAP statements include not only concepts such as Accounts Receivable and Payable, Assets and Depreciation, but also projections of the net present value (NPV) of unfunded liabilities tied to programs such as Social Security and Medicare.
As global markets look to escape their looming losses in U.S. dollar holdings, that day of ultimate reckoning for the U.S. currency likely remains near. A flight from the dollar and hyperinflation fears could break over a very short period, as quickly as the banking panic of 2008, for example, or it could evolve over longer periods and intermittent crises.
I have published the Shadow Government Statistics newsletter since 2004. Early on, I began discussing the long-term insolvency of the United States Government leading to a domestic hyperinflation likely around 2018 or 2019.
In the current circumstance, unless the U.S. government meaningfully overhauls its planned expenses (a significant reduction in spending) and/or increases its revenues (a significant increase in tax revenues) going into the future, including overhauling Social Security, Medicare and Medicaid, it has no chance of covering its net obligations going forward, other than by just printing the dollars needed, generating dollar-debasement and eventual hyperinflation. The potential hyperinflation here is every bit the same as seen in the German Weimar Republic post-World War I, Zimbabwe in the 1990s and 2000s and Venezuela, with inflation hitting 80,000% in 2018.
―Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation (Bernanke 2002 Deflation Speech).
Yet, the quantitative easing created by the Fed, in response to the 2008 financial panic, was designed primarily as a covert bailout for the still-shaky banking system. The Fed pumped trillions of dollars of new liquidity into the banking system, but not into the money supply. Had banks increased lending into the regular flow of commerce with the new liquidity, money supply would have soared, and the economy and inflation would have picked up. Instead, the banking system was directed to place the funds back with the Fed as excess reserves, earning interest on the cash.
Investors have no recourse other than common sense, such as investing in assets such as gold and silver, which will preserve the purchasing power of their assets against currency debasement.
More recently, Williams says, following an interview on a major cable news network (not CNBC), I was advised off-air by the producer that they were operating under a corporate mandate to give the economic news a positive spin, irrespective of how bad it was.