John Williams Confirm 🔴 Is the End of the U.S. Dollar Nearing? Fed Will Crash Markets & Dollar"

Economist John Williams warns the Federal Reserve has painted itself into a very tight no-win corner.

No matter what the Fed does with rates it’s going to be a disaster. Williams explains, “You had some very heavy selling towards the end of the year and when you saw the big declines in the stock market you also saw that accompanied by a falling dollar and rising gold prices."

"That was foreign capital which was significant fleeing our markets. So if the Fed continues to raise interest rates, and they want to do and they still don’t have rates where they want them, it’s going to intensify the economic downturn. That’s going to hit the stock market. If they stop raising rates . . . and they have to go back to some sort of quantitative easing, that’s going to hit the dollar hard. Foreign investors are going to say the dollar is going to get weaker and let’s get out of the dollar. Then, you are going to see heavy selling in the stock market.

So either way they go, they created a conundrum for themselves because of the way they bailed out the banking system (in 2008-2009). At this point they don’t have an easy way out of this.”

Williams says the U.S. is already entering into a recession. Williams contends,

“The first quarter, which is the quarter we are in right now, the first quarter of 2019 likely will be in contraction partially due to the government shutdown. That is slowing the economy on top of the interest rate hikes, but the cause of the recession here is not the government shutdown. It’s the Fed hiking rates...

...the fundamental driving factor that was putting us into recession even before the government shutdown was the rapid rise in interest rates.”

Williams says that in the first and second quarters of 2019 do not look good.

“I think we will have back to back contractions that will give you a formal recession...Even if we did not have the government shutdown I think we would have back to back negative quarters in the first and second quarter.”

Williams also warns, “This is a very dangerous time both domestically and globally.” Maybe this is why gold and silver prices keep steadily climbing higher. Williams says,

“As things get worse here there is going to be a flight from the dollar into other currencies and in particular into gold. Gold is the long term store of wealth here...

Where we are ultimately headed here the precious metals are a long term store of wealth. They preserve the purchasing power of your assets... if you have high inflation you will still have your purchasing power. With debt collapsing and currencies collapsing you are going to end up with inflation. Expanded debt is rapid money supply growth. It is debasement of the currency and debasement of the currency means inflation...

It’s the type of thing that can be accelerated very rapidly if you have another crisis such as a big stock market crash. The economy is tanking and people start fleeing the dollar means you are going to be seeing rising inflation.   If you see a big hit on the dollar gasoline prices will go up.”

Is the End of the U.S. Dollar Nearing? Here Are Few Reasons Why That Might Happen

Confidence in the U.S. Dollar Seems to Be Dwindling

The end of the U.S. dollar could be nearing…

This may certainly sound like an overly dire warning, but it is true. Know that this is not just a gut feeling. This argument is backed by a lot of data and developments.

Before going into any details, we have to ask, why is the U.S. dollar so well recognized?

You see, this is because the U.S. dollar is used for global trade and payments, and central banks hold it in their reserves. There’s confidence in the U.S. dollar.

Now, the big question: What do you think will happen if, all of a sudden, major countries around the globe decide to question the way the U.S. dollar is used? It could have detrimental effects on the greenback.

That is what’s happening these days. The value of the U.S. dollar is being questioned.

Look at Russia.

The country’s Prime Minister, Dmitry Medvedev, said that the U.S. actions are incentivizing de-dollarization:

This is probably the paradox of the current situation. And the paradox is that the idea of de-dollarization receives constant incentives from the issuer itself…Obviously, the trend to reduce dependence of national economies on the dollar will only increase. Economic actions such as sanctions and protectionism of the most powerful player in the economic arena only increase tensions.

Russia is also focused on non-dollar denominated trade.

Over the past few years, the country has built a strong relationship with China and is trading with China using the yuan. Russia has even bought the Chinese yuan for its reserves.

Why should you care? Russia is the 12th biggest country in the world and China is the second-biggest hub in the global economy. If these countries are ditching the U.S. dollar for trading, don’t you think other countries will follow?

Central Banks’ Yuan Reserves Increase by 78%

Mind you, we are seeing an emergence of the Chinese yuan as a currency that a lot of central banks and countries are leaning toward.

Look at central banks, for example. They are increasing their Chinese yuan reserves. At the end of the third quarter of 2018, they had $192.54 billion worth of Chinese yuan in their reserves. In the same period a year ago, this figure was $108.16 billion.

So, over a one-year period, their reserves increased by 78%!

Dear reader, know that the only thing keeping the U.S. dollar up is the confidence among governments, central banks, businesses, and investors that it has some value. There’s really nothing else beyond that.

The day this confidence breaks, you can say goodbye to the greenback. The examples above show that there are cracks in the confidence. And know that these are not the only developments that show a loss of confidence in the U.S. dollar.

I am watching the U.S. dollar closely. If you follow this publication closely, you will know I don’t believe in the “outright collapse” thesis for the dollar. I believe we are going to see gradual declines in the value of the dollar at first, and then we are going to see selling escalate once it fails to stay strong.

If you hold the U.S. dollar, I’d be very careful in the coming years.

The 2 Things Holding the U.S. Dollar Together Say Downside Is Ahead

Government’s Reckless Spending Could Result in Lower U.S. Dollar

If you think holding U.S. dollars is a great investment, think again. The case against keeping the greenback as an investment continues to get stronger.

Before going into any details, know this: a currency is only as strong as its government and economy. If both of these factors aren’t sustainable, the currency faces headwinds.

As it stands, the U.S. government is relatively unstable and the economy is moving in the wrong direction. This is bad news for the U.S. dollar.

First, assessing the U.S. government…

The federal government is having a hard time getting its act together. It continues to spend without remorse.

The U.S. national debt stands at well over $21.0 trillion. For the coming decades, there isn’t really a sign of a balanced budget or surplus. The U.S. government is only expected to register deficits.

So, with ballooning budget deficits, the U.S. national debt could soar much higher. It’s not an out-of-this-world idea that we’ll see the national debt soar to over $30.0 trillion within a decade.

Right now, the U.S. federal government is the most indebted government in the world when looking at nominal value. No other government comes even remotely close to its $21.0-trillion figure. When the debt hits $30.0 trillion, will the creditors to the U.S. government question the country’s ability to pay that debt back?

Out-of-control spending by the U.S. government could be deadly for the U.S. dollar.

But this is not all. Over the past few years, the U.S. government hasn’t been able to get things done. There’s too much noise and deadlock. This is not good for the U.S. dollar either. The longer the standoff persists, the bigger the headwinds will be for the greenback.

Recession Ahead for the U.S. Economy? This Could Be Bad for the Greenback

Second, looking at the U.S. economy…

The economy had a solid run in the past few years, but there are risks brewing. A recession could be on its way in the coming quarters.

Just pay attention to the yields on long-term and short-term U.S. bonds. Whenever the difference between these yields edges close to zero, it’s one of the surest signs that a recession could be near. This difference in bond yield has predicted the last two recessions with great accuracy.

With that said, the current difference in yield between the 10-year and two-year U.S. bonds is awfully close to zero, at 0.21%.

U.S. Dollar Outlook: Don’t Ignore Gold

Dear reader, the two things that hold any currency together are saying that the U.S. dollar could decline in value in the coming quarters. It’s not sustainable at the current levels.

I really don’t think we will see a collapse-like scenario anytime soon with the U.S. dollar, but keeping it as an investment could result in gradual losses.

Also, I am paying close attention to gold. The yellow precious metal is a great hedge against currency depreciation. It could help investors preserve wealth as the U.S. dollar falls.

If This Is Economic Growth, a Slowdown in the U.S. Could Have Severe Consequences

Average Americans Struggling Says Economic Growth May Not Be Real

At the time of this writing, the U.S. government is in a partial shutdown, and it has been going on for several weeks. The shutdown has revealed something significant about the U.S. economy: there isn’t much economic growth.

You see, economic growth occurs when the general standard of living improves—when average Americans have savings, better-paying jobs, optimism about the future, and so on and so forth.

This, however, is not the case these days.

The partial U.S. government shutdown means that close to a million government employees have been furloughed.

What happens to furloughed workers? They are not working and are not getting paid. However, they are still promised back pay.

The longer this shutdown has continued, the more evidence we have seen that the government employees are facing severe hardships.

The Brookings Institutes states, “Furloughed workers have already started taking steps all too common to families living paycheck to paycheck: curtailing spending, increasing credit card debt, delaying paying bills, and seeking short-term, small dollar credit.”

What does this say? Americans are strapped for cash.

Mind you, federal government workers get paid relatively higher wages compared to workers doing similar jobs in the private sector. So, imagine what would happen if Americans in the private sector were told that they would not be getting their paychecks for a few weeks. Would they be able to sustain themselves for long?

55% of Americans Face Volatility in Their Paychecks

Don’t think it’s only the furloughed government workers who are facing hardships in the U.S. economy. It’s important that you also look at the overall conditions of workers’ paychecks.

According to a study by the JPMorgan & Chase Co. Institute, 55% of American workers experienced volatility in their paychecks of 30% on a month-to-month basis. 

Where’s the U.S. Economy Headed Next?

Dear reader, looking at all this, I am just going to ask one question: If this is what economic growth looks like, how dire will the economic slowdown be?

I believe that things in the past few years have been taken out of context. Everyone looked at the stock market as an indicator of economic growth in the U.S. economy. The thinking has been, “if the stock market is rising, the average American is doing alright.”

This, however, is not true.

Stock markets were boosted due to low interest rates and all the easy money that was around. Average Americans weren’t buying a lot of stocks, though.

Mind you, in every economic growth period in the U.S. economy, there was one factor that played a major role: average Americans spending money.

In the coming quarters, I will continue to watch the U.S. economic data closely. This data is making a strong case that an economic slowdown is ahead.