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John Williams - Horrendous Implications for Systemic Stability

John Williams just warned that current problems have horrendous implications for the markets. Williams, who founded ShadowStats, also noted that Bernanke continues to pay lip-service regarding inflation-containment. Here is what Williams had to say about the situation: “Recognition of an intensifying double-dip recession as well as an escalating inflation problem remains sporadic. The political system would like to see the issues disappear until after the election; the media does its best to avoid publicizing unhappy economic news; and the financial markets will do their best to avoid recognition of the problems for as long as possible, problems that have horrendous implications for the markets and for systemic stability.”

John Williams continues:

“Until such time as financial-market expectations move to catch up fully with underlying reality, or underlying reality catches up with the markets, reporting generally will continue to show higher-than-expected inflation and weaker-than-expected economic results in the months and year ahead. Increasingly, previously unreported economic weakness should show up in prior-period revisions.”

Williams added this regarding the Fed and inflation: “Mr. Bernanke continued to pay lip-service to the Federal Reserve’s ‘inflation-containment’ in his semi-annual testimony to Congress, reaffirming the Federal Open Market Committee’s (FOMC) announcement on January 25th that it would target year-to-year inflation—as measured by change in the PCE deflator—at 2.0%.

Instead of suggesting a boost in interest rates, which would be the normal response to inflation being above the targeted 2.0%, the Fed keeps promising low rates into the foreseeable future, along with suggestions of possible renewed purchases of U.S. Treasury debt, actions that run counter to containing inflation.

As argued previously, this ‘inflation targeting’ effort primarily is pabulum for those in the markets who think the Fed really would move to contain inflation at the cost of impairing already-fragile banking-system solvency. The Fed’s primary function remains keeping the banking system afloat, at any cost.”

Williams also noted: “With unusual seasonal factors at work in January’s payroll estimates, and with Mr. Bernanke’s recent caution on the sustainability of the decline in the headline unemployment rate, odds favor a much weaker-than-expected payroll number, as well as an uptick in the headline unemployment rate.

The broader U6 and SGS unemployment rate estimates likely will move higher, with increasing numbers of unemployed shifting out of headline unemployment the headline labor force, into short- and long-term discouraged worker status.”

The above was just a small portion of another top shelf report by John Williams of Shadowstats.

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