“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.”
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