Rocky Vega

Trillions of dollars have been spent on US stimulus, and like all activities — the good, the bad, and the extremely dubious — it must eventually, necessarily come to an end. This is true if for no other reason than it’s simply too expensive to support. Heck, even the Brits have ended their version of quantitative easing… and so now Bernanke is reviewing US options for doing the same.

An article in Barron’s today suggests the stimulus has been a good thing, and points to the fact that “the money stock is shrinking in real terms” to defend why it should persist. To support the case, John Williams of ShadowStats is cited:

“As John Williams, the proprietor of Shadow Stats, explains, the drop in real M3 is a sign of the double-dip ahead. ‘In modern economic history, every time there has been such a year-to-year liquidity contraction, the economy subsequently has turned down, or if already in recession, the economic downturn has intensified,’ he writes in a report to clients.

“‘A signal for such an intensification of economic contraction was generated in November and December, and the signal got significantly stronger in December,’ Williams adds.

“Based on this contraction in broad money, the question for a double-dip isn’t if, but when.

“‘The timing on this is open, but I would be surprised if the recognition of the onset of a largely unexpected new major dip in a double- or multiple-dip economic downturn does not roil the markets significantly in the year ahead. The renewed economic weakness should be increasingly evident in the next couple of months,’ he concludes.”

The quote from ShadowStats shows that Williams is dissatisfied with the way the stimulus has worked, because it’s clearly still ongoing — it hasn’t been stopped — and yet it’s been ineffective. But somehow, in light of this data, the Barron’s author comes to a different conclusion, stating:

“If so, why the rush to withdraw the reserves the Fed pumped into the system to make sure banks had a more-than-adequate cushion? That’s the question I’d like to hear Bernanke answer. But I doubt it will be asked.”

It seems fairly straightforward that stimulus needs to be wound down because the financial burden to the nation is too high. This is, of course, in addition to the fact that the stimulus has already been shown to be ineffective at boosting the economy. The market has experienced a temporary upturn, but with little support in job growth or other key areas needed for ongoing economic expansion.

Poke around a bit more on the Shadow Stats site and Williams’ intensive and ongoing research into government figures actually seem to result in opinions more consistent with this reaction that he has to the work of the Federal Reserve:

“The U.S. economic and systemic solvency crises of the last two years are just precursors to a Great Collapse: a hyperinflationary great depression.

“Such will reflect a complete collapse in the purchasing power of the U.S. dollar, a collapse in the normal stream of U.S. commercial and economic activity, a collapse in the U.S. financial system as we know it, and a likely realignment of the U.S. political environment.

“The current U.S. financial markets, financial system and economy remain highly unstable and vulnerable to unexpected shocks. The Federal Reserve is dedicated to preventing deflation, to debasing the U.S. dollar.”

Williams predicts a “hyperinflationary great depression,” within the coming year. He also fingers the Fed for “debasing the U.S. dollar.” It’s difficult to see him supporting the use of his statistics in a case for ongoing stimulus.

However, you can make your own opinion on the matter by visiting Barron’s coverage of money supply data and what the figures may mean for the US economy.

Rocky Vega

Rocky Vega is publisher of Agora Financial International, where he advances the growth of Agora Financial publishing enterprises outside of the US. Previously, he was publisher of The Daily Reckoning, and founding publisher of both UrbanTurf and RFID Update -- which he ran from Brazil, Chile, and Puerto Rico -- as well as associate publisher of FierceFinance. Rocky has an honors MS from the Stockholm School of Economics and an honors BA from Harvard University, where he served on the board of directors for Let?s Go Publications, Harvard Student Agencies, and The Harvard Advocate.

  • tony bonn

    john williams is always worth reading…however hyperinflation will not occur until those excess reserves sitting in the federal reserve are released….right now the banks are too insolvent to release them….in the mean time the prevailing forces will be depressionary….

    of course the question i have asked numerous times without response is why is m3 is declining while excess reserves are increasing? are they not part of m3? they should be unless they are in treasuries…

    interest rate swaps volatiility will be a leading indicator of hyperinflation

  • himesh patel

    In the end we hindu will teach you arrogant western dog lesson you wont forget soon. waoit and see christian dog

  • Mark Aussie

    Himish Patel—

    Go back to that dog ugly, stinking wife of your mate!!! Nobody wants to smell your stink here- take a shower curry boy!

Recent Articles

In the Downdraft of Hormegeddon

Bill Bonner

The economist Milton Friedman didn’t go far enough when he said, “Concentrated power is not rendered harmless by the good intentions of those who create it.” Oftentimes, that power is rendered more harmful -- to the point of Hormegeddon -- the better the intentions behind it. In today's essay, Bill Bonner highlights the conditions necessary for popular delusions and the disasters they lead to. Read on...


Addison Wiggin
Health Care Costs: Still the Pig in the Federal Python

Addison Wiggin

Right now, health care makes up about 25% of the federal budget. A scary statistic to be sure... But here's an even scarier one: health care's portion of the federal budget doubles roughly every 20 years. Yikes! Addison Wiggin explains why this is and what needs to change to prevent health care from taking up half the federal budget. Read on...


Six Signs Your Government’s Too Big

Chris Campbell

Is your government too big? Find out in today’s Laissez Faire Today with six “red flags” to look out for. Chris Campbell covers everything from one ObamaCare whistleblower to the strange case of our new Ebola czar. Read on…


McDisaster: Fast Food Is Dying – Make a Killing From It…

Greg Guenthner

McDonalds stock is getting crushed right now. Shares have been in a tailspin since June. But it’s not just Mickey Dee’s. Coca Cola shares are in freefall, too. Bad news for them. But if you want to rake in a pile of easy money, it could be great news for you. See, Americans just aren’t choking down this junk like they used to. The fast food burger, fries and a Coke are just down payments on an early coronary - and Type II diabetes. And everyone’s finally gotten the message. So how can you play the trend? Greg Guenthner explains…


In the Year 2024

James Rickards

Panopticon goggles? Severe market panic in 2018? Gold confiscation by 2020? Jim Rickards' shocking thought-piece in the spirit of A Brave New World or 1984. Click to see how markets, economics, your money, gold, privacy, wealth building and more look a decade from now in the year 2024...