John Williams - Dollar on the Brink of Disaster

John Williams of Shadowstats.com does a new interview with former CNN reporter Greg Hunter. In the interview he makes some pretty discouraging comments about the state of the economy and the future of the US dollar. Is he right or wrong?

I will paste some of the key comments below. John Williams is a well respected publisher and analyst. He clearly feels the economy is going downhill, the debt problem is going to get worse, and the US dollar will take a big hit. 

But on the other hand, we have daily reports in the mainstream media saying we are in the midst of a recovery. FED officials are talking about an unemployment rate below 6% and that interest rates might be moved higher sooner than expected. This, of course, implies the economy is improving enough to allow for the FED to reduce easing and let rates rise.

Obviously someone is way off target here. Both of the above scenarios cannot be accurate. If things are improving as the FED and financial media say, there is no reason to expect any kind of major monetary system change (what we watch for here). Why would any major changes be made if things are good and getting better?

If John Williams is correct things are totally different. If we get a lousy 2nd quarter and sharply rising US debt and a stock market decline, the markets will feel that the FED is out of touch with things and confidence will take a big hit. The dollar probably will too. Then major change does not seem so unlikely. 

So, who is right is important. At least for the short term. We can't possibly know here. All we can do is keep a watch on things. But the 2nd quarter GDP will obviously be a key piece of information because the weather will not be viewed as a factor for that quarter.

Below are some comments from Williams interview. There is also a video of it on the linked page above.

"Economist John Williams has a dire prediction for the U.S. dollar.  Williams says, “I don’t see what will save it at this point."

"Williams also contends, “The way I see it, the dollar could go to zero in terms of its purchasing power.  You don’t want to have your assets in U.S. dollars.”   How are we going to get there?  Look no further that the dismal first quarter gross domestic product (GDP) numbers that officially only eked out .1% growth."

"Williams goes on to say, “We’re turning down a new.  The first quarter should be revised to negative territory, and I believe the second quarter will be reported negative as well.  That will happen by July 30 when you have the annual revisions to the GDP.  In reality, the economy is much weaker than that . . . . Generally, when you adjust for inflation and you use too low of a rate for inflation, that overstates the economic growth.” 

"On the budget deficit, Williams predicts an explosion of U.S. debt.  He says, “All the projections on the budget deficit are based on positive economic growth going forward.  With the ongoing contraction, you’ll see a much worse budget deficit.  It’s going to do bad things to the banking system."