Is it true? Yes and No. If you consume 5000 calories it's unlikely you're going to lose any fat. However, if you eat too little it's just as unlikely you're going to lose any fat. Eating below your BMR (basal metabolic rate) will stress your body. Yes, at first you'll lose weight. Losing weight, however, isn't the same as losing fat. "Weight" comprises water, fat and lean muscle. Losing fat and water are just great - but losing lean mass/muscle isn't. Since muscle is easier for your body to break down, and since it is made of amino acids, it's high up there on the list of things an under fed body will go after.

Losing lean mass will also lower your metabolic rate. Losing muscle for the sake of weighing less can mean that after you've lost 30 lbs you can actually be just as fat as when you started off. It's all about body composition.

Very low calorie dieting is notorious for this. Your BMR is lowered and you lose body fat and lean muscle. Eating so few calories can only be sustained for so long. You end up weak, tired, moody and hungry. When you being eating 'regular' sized portions again you put on all the 'weight' you lost - only this time most of what you put on is fat. Do this a few times and you'll become a yo-yo dieter .

LCing has the effect of decreasing your appetite. Good and bad. It's good to not be ravenously hungry all the time. It's good to not be unfulfilled, cranky and moody. It is bad to eat too little.

Research indicates that eating less than 1300 calories a day on a consistent basis can permanently lower your metabolism. A good rule of thumb is to aim for 10x your current body weight in calories every day. This should fulfill basic metabolic functioning allowing your body to get on with the job of burning body fat.

HTH
Nat