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John Williams Discusses The Reasons For The Upcoming Dollar Dump
Lately, anywhere we look, there seems to be a pattern emerging: those economic thinkers who actually construct and run their own macro models (not the glorified powerpoint presenter variety) and actually do independent analysis and tracing of the money flow, instead of relying on Wall Street forecasts that have as much credibility as a Moody's home price hockey stick from 2006, almost inevitably end up having a very dire outlook on the economy. One such person is and has pretty much always been Shadowstats' John Williams, whose "shadow" economic recreation puts the BLS data fudging dilettantes to shame. That said any reader of Zero Hedge who has been with us for more than a few weeks, knows all too well our eagerness to ridicule the increasingly more incoherent lies coming out of the US department of truth, so no surprise there. Yet another aspect over which there is much agreement is that no matter how one slices the data, the outcome for the US currency is a very grim one. Which is why Williams over the past several years has become a major fan of the shiny metal. Below we recreate portions of his latest observations on the upcoming currency collapse, courtesy of King World News.
John Williams today was dispatching information regarding gold, silver, M3, nearby massive selling of dollars and inflation. Here is a portion from his commentary, “Despite November 9th’s historic high gold price of $1,421.00 per troy ounce (London afternoon fix) and the multi-decade high silver price of $30.50 per troy ounce (London fix) on December 7th, gold and silver prices have yet to approach their historic high levels, adjusted for inflation.”
Real Money Supply M3: The signal of the still unfolding double-dip recession, based on annual contraction in the real (inflation-adjusted) broad money supply (M3), continues and is graphed (above). Based on today’s CPI-U report and the latest estimate on the November SGS-Ongoing M3 Estimate, that annual contraction in November 2010 was 4.0%, narrower than October’s 4.5% contraction, and May’s post-World War II record annual decline of 7.9%.
Incidentally, if there is one thing we disagree with John on is that the broadest aggregate (M3 for Williams, Shadow Banking for Zero Hedge) is declining. That said, an expansion in the most critical broad money signal is merely the missing piece of the puzzle that we believe John Williams needs in order to confirm his thesis of upcoming hyperstagflation through (or rather resulting in) currency collapse.
As to how this perceived volatility will impact asset classes, regulars will find nothing surprising in the following:
Currency values and precious metals prices can be volatile, but the long-term weakness in the U.S. dollar and relative purchasing-power-preservation attributes of gold and silver, and the stronger currencies outside the dollar, remain in place. As with systemic risks in the United States, risks in other areas of the world — such as among the countries using the euro — likely will be addressed by the spending or creation of whatever money is needed (indications of any needed U.S. backing are in place) in order to prevent systemic failure. Keep in mind that the U.S. remains the proverbial elephant in the bathtub in terms of pending effective sovereign bankruptcies.
The various European crises remain an intermittent foil for the U.S. dollar, pulling market attention away from the unfolding solvency crisis in the United States and a likely move to massive selling against the U.S. currency. Accordingly, high risk of the early stages of a hyperinflation beginning to unfold by mid-2011 continues.
The full piece can be found at King World News.
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Euro/Freegold bitchez
Ah even in Freegold the Euro would take a brutal pounding. From what I've read over at FOFOA he acknowledges they would take a devaluation only under that scenario they would survive. So if one believes that Freegold will come then they should hold 100% gold and not touch the Euro.
Anything but dollars.
Even Rainbowtrader gets this, but something tells me that I will do better with my gold and gold stocks then he will with US resturant and retail stocks.
What about Renminbis?
Those will do very well once the Yuan is allowed to float. Assuming they export their inflation back to the US, it might even do better than gold. As a spike, might even do better than silver. I won't be risking it though. Who knows what is going on in the minds of their central bankers? You don't want to have to bet on the actions of a few people, because they could act illogically.
Do you ever consider the possibility of a "De-Peg" lowering the value of the Yuan?
Cause that is what is going to happen if they allow the "Float"
You don't know much of anything, do you?
The Chinese maintain the dollar peg by purchasing every single dollar that comes into thier country at the peg rate, and selling dollars for the same rate on any Yuan leaving the country. Dropping the peg means that a) they aren't printing Yuan anymore, and b) they don't need thier dollar stockpile any more.
Exactly.
China is the creditor.
And by extension c) they are not exporting any more. (Not that they wouldn't want to, but the US may not be able to buy as much since China won't want to accept USD.) So how, then, RMB becomes so valuable?
they will consume their own production just like the US did after WW2 when they converted thier production to consumer goods.
The Chinese will consume their own goods? Like all the houses?
China is a lot more fragile than you think.
Because everyone around the world now needs RMB to purchase Chinese manufactured goods.
which of their 7 billion empty rooms are they in???
I know. People are clueless about China.
Let me tell you friend, you never know when Chinese bureaucrats will stick their fingers in your pie. It is a highly highly corrupt nation. Not just the government. Lying and Cheating is in Chinese' Chinese blood (read 99% Chinese nationals will fuck you in the ass while smiling after you just handed them your last winter coat).
Special Addendum: They especially love to fuck "Laowai". Consider yourself warned
Teddy K: "That's not my belly button."
Wen: "That's not my finger."
Mr. Williams also notes in his article: "The earlier all-time high of $850.00 of January 21, 1980 would be $2,391 per troy ounce, based on November 2010 CPI-U-adjusted dollars, and would be $7,840 per troy ounce in terms of SGS-Alternate-CPI-adjusted dollars.
In like manner, the all-time high price for silver in January 1980 of $49.45 per troy ounce has not been hit since, including in terms of inflation-adjusted dollars. Based on November 2010 CPI-U inflation, the 1980 silver price peak would be $139 per troy ounce and would be $456 per troy ounce in terms of SGS-Alternate-CPI-adjusted dollars."
I guess I'm still a buyer until the world gets its shit together.
http://therookiecynic.wordpress.com/
Anytime anyone asks me where I think gold and silver are going? I look them straight in the eye, put one hand on their shoulder, take a sip of my heineken, and tell them politely "It's going to the f*ckin moon."
How about a debate between Nic Lenoir and John Williams??
Nic seems to think that the dollar is going to rally, the Euro is going to crash, and all risk assets are going to go down in a flaming heap....
LOL...
Nic just forgot that the dollar is not backed by gold. 2008 did not change ANY long term trends.
I'd love to see you go into any bank in the EMU and demand gold for your euros haha you'd be in a padded cell within the hour.
Dollars grant access to oil..you keep your "gold" and ill retain access to oil.
You have allot to learn.
Nobody said anything about a gold backed Euro. The ECB floats the price of gold and its funny you mention oil because that is one of the pillars of Euro/freegold.
When the paper gold system die's, so does the US petro dollar system.
By suppressing the price of gold in the paper markets the parties to the oil-US$ dollar scheme were able to make gold artificially cheap in US dollars. The ME oil producers could then pick up under-priced physical gold in various ways with the US$ profits from their oil sales. This wasn't US Govt gold. It was gold supplied by other parties such as dollar bloc allies (including Australia and Canada) and privately owned gold.
Oil was therefore artificially cheap in terms of US dollars as well for all purchasers of oil who could access US dollars cheaply. Obviously the major beneficiary was the USA.
One of the ways this scheme was disguised was through funding gold miners via gold loans (repayable in gold) and by purchasing the forward sales from gold miners undertaken as part of their hedging programs.
The key element in this scheme was focusing the attention of gold 'buyers' on the paper price of gold. In Western minds this IS the price of gold to this day. In Eastern minds the price and value of physical gold is the real benchmark.
While foolish Westerners shuffled pieces of paper around thinking that they were becoming rich, wealthy Easterners were accumulating real wealth, real jobs and hard assets.
The ME oil producers will realize the real profits of their oil for gold scheme when the dollar dies and freegold sets in. Then nobody will have the privilege of cheap oil like the US did, that will be history.
You got the PetroDollar thing almost nailed. You forgot the part when U.S Dollar hedgemony ends, a false flag event gets set off that is blamed on Saudi Arabia and the U.S then will go in and pilfer their gold. The U.S will then roll out a the new gold backed Dollar or join in some Euro backed Free Gold system. Why do you think we have all our military crap over in the middle east still? Plan A is to ensure the PetroDollar ponzi continues as long as possible, and if that plan fails, to basically steal all the gold in the middle east. The freegold idea is basically the biggest poker game in the world. The country with the biggest stack will have a giant advantage.
Except that maybe you both forgot that the value of gold outside of a 'store of value' has virtually no use. Oil on the hand is needed for transportation, production, and as a commodity for other petroleun based products. And, we are probably sitting on 100 years of nat gas and their other sources of power generation.
Seriously, do you really think that Europe is better positioned than the US for any of the stuff going given that they are leveraged far more than we are and their demographics mean the end to their political/economic systems...I'll take the $US over Euro.
And China is going to export inflation back to the US? Really? How exactly are they going to do that? Let's see...by making more stuff to stick in warehouses and call it exports? Why don't you look at IMPORTS globally - they have been flat since Q2 of this year and a weighted basis have actually fallen. Given the drop in IMPORTS in the US from China it would seem hard for China to export inflation wouldn't it?
I find it surprising the talk of 'false flag' events and false numbers coming out of the US governement without a concurrent belief that other countries aren't capable of the same thing. Do we have problems? Of course but, they are no bigger than any other large nation and some are even a lot less problematic.
Plan A - get out of your mother's basement
Plan B - Take off your tinfoil hat and live a little
If you still don't understand gold then you have no capacity to comment on anything else. ME oil producers would rather just have their oil stay in the ground then exchange it for a stack of paper IOU's.
I could have guessed that. You don't seem to realize that Europe did not have this oil/gold advantage that the US has had. Europe is already used to paying a real market price for oil, the US is not. That is why gas is more expensive in Europe.
Gas is more expensive in Europe because of taxes.
That;s correct of course. Spitzer is completely delusional.
hint hint
The Euro is worth more then the US dollar.
How do they export inflation back to the US? Oh, I don't know, maybe they could use their vast stockpile of dollars and dollar denominated assets to purchase commodities? What the hell do you think will happen to the commodity complex when a trillion dollars is dumped on top of it?
You don't even understand basic economics. Why exactly do you think imports from China have dropped? Because prices are too high, which has pushed down demand. Push that to the extreme. Why do you think people starve during hyperinflation?
You think our problems are no big deal just because a bunch of other people have the same problem? I guess you are fine with getting AIDS, then, since a bunch of other people have that too. Or Hep C. Or Ebola. Take your pick.
Christ, "live a little"? What the fuck is wrong with you?
Gee aren't those dollars supposed to be worthless by then? Oh, and why have imports dropped from China? How about consumers have gotten off the credit tit. They are not buying as much crap since the housing ATM card has been taken away.
Gee aren't those dollars supposed to be worthless by then? Oh, and why have imports dropped from China? How about consumers have gotten off the credit tit. They are not buying as much crap since the housing ATM card has been taken away.
OR ... China is decoupling from the US (slowly), and will dump those dollars in due course. Then you will have to buy your own dollars, with dollars! SOUNDS LIKE A PLAN! A stupid plan to be sure, but a plan none the less.
BTW, the US banking/political/military cartel have already attempted to steal middle eastern gold, IN IRAQ! Unfortunately, Euro says NO!
Mark S,
"And China is going to export inflation back to the US? Really? How exactly are they going to do that? "
They are already doing it, by using Treasuries to buy Hard assets, hand over fist, farmland, and mines(rights to them, making ,forming partnerships ), with every PM's miner that has large reserves.
And using US Treasuries cashed out to do so.
So, when these M3 dollars start making their way home, who's currency will be Hyper Inflated then?.
Sure not China, (they have written us off), they are de facto buying the future of the globe.
Who's the fat blonde in your avatar?
ouch...
Until the coming day when only gold provides access to oil. Of coursek the US might then start exploiting its shale oil.....
It'll be a strange day.
The reason the dollar is the oil-exchange currency is because of the Saudis.
And the reason the Saudis are so gung-ho to take dollars is so they can buy our military equipment.
If there were another country with military technology on-par with the US, we'd have lost that sweet deal a long while back. The shine's coming off both US military and the Saudi production dominance.
Strange days comin'.
Not true, unfortunately. A cold war arrangement between the US and SA was to exchange oil for treasuries. SA was guaranteed military intervention by the US in the event of an invasion from anywhere (and even called that chip in for Kuwait). SA buys very little military equipment for the dollars they hold. The service is not equipment, but protection.
The US then got to bankrupt the Soviet Union by controlling the price of Oil. The side effect of this arrangement was for all Oil to be traded in USD. SA still doesn't want to be invaded, but now has a choice of protectors (if it so wishes).
If the Gulf States decide to form a Gulf wide currency, that is backed by France, Russia, China, then it is all over for the USD.
If the Saudi royal family want to remain in power, the dollar is it.
Not true, unfortunately. A cold war arrangement between the US and SA was to exchange oil for treasuries. SA was guaranteed military intervention by the US in the event of an invasion from anywhere (and even called that chip in for Kuwait). SA buys very little military equipment for the dollars they hold. The service is not equipment, but protection.
The US then got to bankrupt the Soviet Union by controlling the price of Oil. The side effect of this arrangement was for all Oil to be traded in USD. SA still doesn't want to be invaded, but now has a choice of protectors (if it so wishes).
If the Gulf States decide to form a Gulf wide currency, that is backed by France, Russia, China, then it is all over for the USD.
you know a war would break out first... and who knows.. the dollar could survive while the world burns
A Gulf-wide currency?
Is that a joke?
As Dubya once said, "They look the same to me."
Yeah,and the Saudis import 9-11 terrorists to fly Jets into the Twin Towers, what a trade deal.
We have such wunnerful fwends.
@robo
What happened during the last (post Lehman) dust up? Did stocks hold up? PMs to the moon? How about that Euro, or the Asian currencies?
No, when TSHTF all the rats ran into Uncle Sam's barn, and some even paid extra (neg yields) to get in. But you're a smart, global-minded, chart readin' trader who knows that this time will be different.
We'll see who has the last lol.
Post Lehman ?
Gold was up $25 the day of the flash crash. That was pre $1200 gold too.
It didn't stay above $1K until 2009. The only reason gold is above $1K is Bernanke's misguided QE. Watch what happens to PMs when the punch bowl is empty.
The minute the punchbowl is taken away the banks collapse. Then confidence is lost and the currency falls apart. Gold rises substantially. Deflation equals collapse through hyper-inflation.
Please point out at least one example of a case where money printing was initiated and then stopped prior to destruction of that currency.
Sure, the USA, and the year was 1981.
They weren't monetizing the debt back then. As such, they weren't really printing money. They were increasing the money supply by flooding the world with credit, but that is quite different.
Try again.
When the punchbowl is empty you get hyperiflation because the dollar is backed by debt.
And only the $US is backed by debt? Let's name all of the curencies backed by gold...there's...and then there's...and how about....
Oh yeah, THERE AREN'T ANY. In the end they are all backed by the full faith and credit of the issuer. But no, you keep going right on with this being a $US problem while Europe refuses to restructure...and that restructure means virtually every bank and every country in Europe because in the end they all hold each others paper...
You buy gold for the hyperinfaltion trade and when you go to the store to buy a loaf of bread make sure you bring a nail file to shave off a few flakes to pay for it...and make sure you bring your gun to keep all the have nots from taking it away from you.
So what's your answer to storing value? I'd love to store lots of oil, but not practical...
a 21st century commodity money?
I nominate Viagra.
Don't forget antibiotics,beans n rice, and Trojans.
traderjoe, that would be my preference too. I have done a bit of research, but the shelf life of most petroleum based products seems limited. Kerosene appears to be best for storage, but obviously not as useful as petrol or diesel.
I would love to learn more from anyone knowledgeable in this area.
Diesel just requires a biocide added to last a hellofa long time. Still have the same fuel in my sailboat, as was there 8 years ago. Burns fine for those 12 mins to get out.
Spitzer loves Schiff, and Schiff got the picture wrong with respect to the euro. Of course they will say they aren't wrong, they just aren't right yet... Anybody want a free copy of "Crashproof"?
The Euro is hanging in there. People are protesting bailouts like mad. That is Euro positive.
Crashproof is a classic. It Predicts some of the biggest bankruptcies in history.
I dont want to be pedantic, BUT: The European protests are about austerity measures, not the bailouts. Most of the protests are buy government workers who do not see why they should loose their jobs or suffer wage and entitlement cuts. I think we are a long long way from general protests about the bailouts. Most people just dont understand that adding more debt to an impossible debt burden will do nothing other than impoverish them and future generations. Shame but true.
WHY do you think the Austerity measures where put in place?.
Debt, from what?.
The 2010 elections were about Bailouts, the American sheeple, are waking up.
You think the Tea Party folks got in because of Congressional and Owhammys frugal fiscal policies?.
No, it was STOP running up the Debt Stupids.
Are you in the James Chanos camp where China experiences a hard hard hard landing?
Full faith and credit of the issuer...
Approval ratings of Congress and Obama (faith factors)
Congress: 13%
Obama: 46%
http://tpmdc.talkingpointsmemo.com/2010/12/congressional-approval-rating...
O'Mamas newest # 40%, up from 38%.
MarkS,
You answered your own statement.
"Let's name all of the curencies backed by gold...there's...and then there's...and how about....
Oh yeah, THERE AREN'T ANY. In the end they are all backed by the full faith and credit of the issuer. But no, you keep going right on with this being a $US problem while Europe refuses to restructure...and that restructure means virtually every bank and every country in Europe because in the end they all hold each others paper...
And, WHO wants any of theirs either?., full faith and credit?.
They have no credit, nor credibility,their currency is shit also.
Where does that leave your position?.As long as we have a debt that is impossible to pay off, WHAT exactly do you propose to invest in, to retain the value of your hard earned savings?.
Instead of filing , do you propose to RENT a U HAUL to take your fiat FRN's to get a loaf of bread?.
What you planning on using for trade?.
We are a gold, food and many ways an energy power. We have options to 'back' our currency. The dollar won't 'collapse.'
Buy physical gold, silver, black gold and dollars.
The dollar might still exist but oil will be priced in dollars.
"Doomers are crazy" ... Lyrics'
This old trader and me, were at the bar and we
Were having us some beers and swappin' I dont cares
Talking gold, silver and leveraged short etf's
Old calls and new shorts, and gold miners we just sold ....
We talked about Ben's pomo, and all the zombies it raised
Then I heard the ol' man say
Ben is great, the dollar is strong, and doomers are crazy
He said I fought bull markets, had shorts blown out.... and gold miners blowtorched
What brings you to BankofAmerica, he said chasing profits ...ya' know
We talked an hour or two, bout every financial & industrial we knew
What all we leveraged up, like two old traders will do
We pondered gold and silver, he lit a cigarette with an old gold miner derivative I.O.U'
Said these damn things will kill me yet
But Ben is great, the dollar is strong, and doomers are crazy
Last call is $1,430.00, I said goodbye to that
I never seen that price again
Then one sunny day, I saw the old mans face
Front page IBD, he was a millionaree
He made his fortune on shorting gold
Mr.T was mad as hell, but me, Im doing well
And I dropped another $100,000 on US Steel today, to make my year
Ben is great, dollar is strong, and the doomers are crazy
That was prior to QE 1, QE 1.1 Lite and QE 2. QE 2 was the turning point; the world will never forget that The Fed can and will dilute US sovereign debt by creating greenbacks out of thin air.
You FORGOT TARP 2............
That was one that wasn't advertised.
how about a debate between me and Jim Sinclair?
It might be fun (for us, not you), but we'd have to shove a long wooden rod up your ass first, because Sinclair would utterly mop the floor with you, Jonny boy. Just seeing you do something productive and socially useful for once might be interesting to witness all by itself.
That's rich.
I'm a subscriber. I like his stuff. I don't get though how you can like any fiat currencies if you don't like the dollar. If the USD collapses, you think the C$'s going to make it? The AUD$? What country wouldn't use that opportunity to default on their debt? Their exports to the US would dry up in a second - they're not going to devalue too? Finally, how can the Canadian economy decouple from the US economy and the Aussies from the Chinese. Sorry, one goes, they all go.
The bottom line is that if the U.S. goes down, any country exporting a significant portion of its products to the U.S. market will suffer as much, if not moreso.
Canada will be electrocuted, being the U.S.'s largest trading partner, and no nation relyin on the U.S. for 1/3 of its exports, such as China, will suffer anything less than a near Depression if not outright Depression. If China suffers that fate, Australia will, too, as China is their biggest destination for metals, minerals and other mined products.
Decoupling is a myth.
I live in China, and you're an idiot. Only 12% of Chinese exports are destined for USA. The truth is that a lot of the world is successfully decoupling from the USSA, and will do quite well when it sinks. Have fun being a rat on that ship.
Wrong! It's more than double that. http://www.uschina.org/statistics/tradetable.html
Uhm, no, you are wrong and you lie about China exports.
Hey Tsukato, do you also think gold is going down to 200? help me out here, from one propaganda monger to another
I live in China, and you're an idiot.
that's a great line, by the way, he he
kinda reminds me of the good ol' days on SNL, with Chevy doing the news: "hi, I'm Chevy Chase.....and you're not"
Either way, Tsukato,is correct, even if it is double,you think a 24% (temporary) export market loss will tank them?.
No way Jose'.
While we're running two wars, (that we know of) the Chinese, are making friends, and lucrative business deals, sucking every ounce of PM's they can get up, for the soon coming day when WE do shit, and fall in it.
They,unlike our morons think ahead past next quarter stats.We do not have a 2yr plan, much less a 50yr plan.
Tsukato is not only incorrect, he's silly.
A big ding in any 24% (I'd argue more, but I digress) market will crush any economy; also, where is China going to backfill the gap if U.S. imports of Chinese goods plunges - from Europe? From Chinese consumers? Some plan they have.
And this is why Bernanke, as harmful as his policies are to many constituencies in the U.S., has China cornered - they won't admit this, and will even state the opposite, because they're not just big aggregrate purchasers of U.S. debt (for the time being), but that doesn't make it not so. Look at the inflation they're being forced to deal with now whch is devouring their consumers and putting a double edge sword of pressure on the Chinese Government, forcing it to either massively ramp up subsidies to its domestic consumers or drastically increase interest rates (or, believe it or not, do both).
I find this whole Chinese story comical; about as comical as official Chinese GDP growth rates.
China has to create 1.2 million jobs per month to keep employment stable. This is a conservative estimate. This is why there are good odds that the Chinese Government, if push comes to shove, will take the inflationary hit, and see to it that the inflation their importing is offset one way or another and DOES NOT filter into export pricing - they can't afford export degradation, no matter what.
Also, who is the fool on foreign policy in terms of bases of control? The U.S. has a sphere of influence over oil reserves 8.5x the size of what the Chinese have - this is a fact, not ideological ferver or conjecture.
You can rightfully point to the glaring and factual inefficiencies, moronic planning and lack of a strategic vision on economic issues regarding U.S. economic policy, and you'd be right to do so.
To suggest, however, that China is superior in these matters...let's just say central planning has about as good a track record as central 'non-planning,' if history is a guide.
And as for Australia and Canada, those two respective nations, as much as love many of their attributes, are beyond toast if the U.S. and China (their two largest export partners, by a wide margin) go down, rich in natural resources or not.
And to think that I'M clueless for mentioning that no nation comes close to being a destination of Chinese exports to the U.S., when we do in fact import roughly 1/3rd of their products (I know the chart says 24% but adjustments should and can be made), and someone who claimed we only import 12% in the wake of my statement is calling me an idiot.
It's not about the US share of exports, it's the fact that we aren't paying for the exports with economic contributions of our own, save perhaps for acting as body guards for Arabia.
This is the important chart: http://en.wikipedia.org/wiki/File:Country_foreign_exchange_reserves_minu...
I would think they all go, but not simultaneously, but rather like slow motion dominos...If the Euro gets stabilized temporarily before it fails, you'll have the Yen collapse as soon as JGB yield hit an inflection point...but I would expect a temporary flight to the dollar in each case before it's ultimate collapse...despite having about 1/4 of my net worth in metals, I still need to retain the flexibility to unwind with a few keystrokes should a bold leader emerge.
Why does the Chinese go, and the AUD?.
Two of the strongest economies on the planet, PM's lying on top of the ground in many areas of Austrailia.( Asset rich, mineral out the wazoo).
China has bought,made deals with everyone and their dogs, to be self sufficient.
Chavez is selling them crude on the CHEAP, Canucks, yeah, may be rough for them a while,but they too, like the Aussies have a country jammed with minerals and PM's.
If your a scriber to Big Jim, you KNOW he loves the USD.Since it is so unencumbered.
^
"those economic thinkers who actually construct and run their own macro models ... almost inevitably end up having a very dire outlook on the economy"
The problem is that more attention is paid to the CNBC anchor babes who do not even come close to independent thinking but rather just read off whatever appears on the tele-prompter. I guess sooner or later reality always wins.
More from John Williams...
Gold and Silver Highs Adjusted for CPI-U/SGS Inflation. Despite November 9th’s historic high gold price of $1,421.00 per troy ounce (London afternoon fix) and the multi-decade high silver price of $30.50 per troy ounce (London fix) on December 7th, gold and silver prices have yet to approach their historic high levels, adjusted for inflation. The earlier all-time high of $850.00 (London afternoon fix, per Kitco.com) of January 21, 1980 would be $2,391 per troy ounce, based on November 2010 CPI-U-adjusted dollars, and would be $7,840 per troy ounce in terms of SGS-Alternate-CPI-adjusted dollars (all series not seasonally adjusted).
In like manner, the all-time high price for silver in January 1980 of $49.45 per troy ounce (London afternoon fix, per silverinstitute.org) has not been hit since, including in terms of inflation-adjusted dollars. Based on November 2010 CPI-U inflation, the 1980 silver price peak would be $139 per troy ounce and would be $456 per troy ounce in terms of SGS-Alternate-CPI-adjusted dollars (again, all series not seasonally adjusted).
As shown on page 22 in the Hyperinflation report, over the decades, the price of gold has compensated for more than the loss of the purchasing power of the U.S. dollar as reflected by CPI-U inflation, while it has effectively fully compensated for the loss of purchasing power of the U.S. dollar based on the SGS-Alternate CPI.
people don't realize what was occurring in the 70s. It was the total collapse of the USA. The US's oil production peaked in 70 and then we were forced to unhinge from gold because we simply didn't have the metal to support the Nam debts plus the trade deficits to import oil.
We averted collapse by roping much of the ME into the dollar sphere. Things are presently not worse than the years following when we completely abandoned currency backing and were facing unsustainable trade outflows.
The horror of war and MASSIVE political and civil unrest is COMING TO THE UNITED STATES.
Please watch the video “Hero of War” at (http://youtu.be/z0XPqiQM92Q) and see what the MAINSTREAM MEDIA doesn’t want you to see.
-Anonymous
Wow this look like a movie but the truth is that it’s not.
why are there often links on this website to youtube videos about the coming collaspe of america? what's more is that there mostly all courtesy of clips from RT (Russia Today).
http://thefinalphaseforum.invisionzone.com/index.php?showtopic=44
http://docs.google.com/viewer?url=http://www.archive.org/download/GolitsynAnatoleTheNewLiesForOldOnes/Golitsyn-NewLiesForOld-TheCommunistStrategyOfDeceptionAndDisinformation1984.pdf&pli=1
Schaundenfreude!
TD,
I do not understand specifically why you believe M3 is expanding again.
And yes, I did read the article you posted last Friday about how Bernanke has finally printed enough to offset the losses banks have incurred due to devalued assets they hold on their books.
The problem with the analysis is that a good deal of those assets that have been marked down are subject to further devaluation, as the banks are still carrying much of them (think BofA, Citi).
Moreover, I don't think it would be too difficult to argue that there has been an intentional attempt by government and The Federal Reserve to allow all institutions holding assets in vulnerable (and for the time being, very illiquid) asset classes to mark these assets to extremely suspect levels (i.e. artificially inflating their values), which would only necessitate more dollar destruction in the future. Where is the demand or price stabilization for retail/commercial, office, industrial properties? Major retail developers/owners like Simon Properties and Taubman are literally walking away from retail properties all over the nation, essentially strategically defaulting on what they built or bought under non-recourse loans with eager commercial lenders during the bubble days.
Finally, I do not think Bernanke has that great a shot of producing sustainable inflation. Yes, his monetary policy has produced skewed inflation in particular asset classes due to speculation (and not underlying demand), as investors are reluctant to hold cash in low yielding savings, money market or other such accounts. But again, this is a speculative push on inflation, and not a demand driven one, with few exceptions.
Until Bernanke formulates and coordinates policies with economic policy makers in government that address structural problems such as very high unemployment and underemployment, the U.S. economy grows weaker, threatening the global economy further, the myths of decoupling and the BRIC story nothwithstanding. As an example of this, look at what's happening in China right now, with serious cracks emerging in their exports and real estate market.
Yes, in spades. What is an empty house with no A/C worth after two years in a humid climate like Florida? The land has residual value but the structure has a negative value equal to the cost of demolition. What's the value of any HELOCs associated with these properties? Z-E-R-O.
Bernanke put a bandaid on the wound, and that's all.
Agreed. The Bernank is trying like hell to inflate, but can't. Further erosion on the price of assets are a given, as no one has the ability to pay for previously inflated values. Very deflationary going forward.
Biflation is the word - inflation in the things we need and deflation in wages and discretionary items (and home values).
I remember the collapse in oil industry in West Texas in the early 80's. You could not give away a bass boat or RV. Anything that carried any monthly expense became almost worthless. Banks had parking lots full of luxuries that had been repossessed, and no one would give them a dime for them.
Can't inflate, huh?
You must have gotten all your shopping done in 1971.
He can try harder?
the value is whatever the Fed will pay for it
del'd
Excellent comment.
It's basically the Bretton Woods system (US as world demand and supply of reserve currency) coming to an end.
Regarding inflation...I'm hearing from the most clueless, ignorant, misinformed of people that we will be wiped out by inflation. Everyone is embracing the lie now.
and that is dollar positive in your mind ? Dollars will gain value(deflation) under that scenario ? not lose value ?(inflation)
Since mostly everyone is so indebted the only way to pay back debt is in devalued currency. So, just keep printing it up. It's the logical end to unfunded entitlements.
Except most entitlements are indexed to inflation - especially medical payments.
Oops. And you're all of a sudden a bad guy for "depriving" old people of medicare when all you're trying to do is smack doctors upside the fucking head and say HEY FUCKER. GET REAL. FUCK you're 40,000 dollar procedure that doesn't fucking work you fucking thief.
From the moment a Human is born (everything else, for that matter!), it spends the rest of its life dying -- guess you did NOT get that memo.
Unjunk.
Indexed to reported inflation, which counts everything except the things you need to live.
Big deal. So, they'll de-index them or cook the indexes to achieve the desired result. Just like they do with the CPI.
Tell that to the Doctors !
See, you have to try harder.
John Williams knows his 'ish from shineola when it comes to economica y statistica. Pretty good with music too. Oh wait, that was the other John Williams, sorry.
seems no one is paying attention to yields rising, which equals a move back to USD... as noted in the EURO... just saying...
No, just the opposite.
The more rates rise, the faster the banks in the US will go broke again. Especially now that everyone is refinanced to lower rates.
I like this Williams guy, but he's been telling us dollar hyperinflation is "right around the corner" for years.
I'm not buying it.
Very high inflation seems likely, yes. Month over month price increases, dollar debasement, sure sure. But for hyperinflation to occur, at least domestically, we'd need some other transactional medium to abandon the dollar for.
I don't see anything like that available right now.
What seems far more likely is double-digit inflation over a period of a few years (domestically) coupled with steady and significant price increase in commodities and imports as the dollar falls relative to the resource-rich exporting countries. For certain products (let's say bananas and chocolate, heh), this may entail very rapid price increases in nominal dollar terms, but would not result in "hyperinflation" even for those goods, because there is no relatively "stable value" medium of exchange to replace our devaluing green linen WITH.
Yes, there will be a few million people with "hard assets." They'll do better than the majority. Barter could definitely become more common, but because there are so few barter-ready Americans w/precious metals, it's hard to imagine a scenario in which the paper dollar actually dies here on US soil.
The US could not afford to service its debt with those sorts of interest rates. It would not be sustainable. We are painted into a corner.
No matter what policy gets implemented, the current standard of living has to collapse. Retirees can't keep their current healthcare plans, government workers can't keep their pensions and high wages, and NO ONE gets to keep $3 gas, dirt-cheap electronics, and cheap electricity. Seems most likely we just return to the living standards of the '50s.
Agreed it's a corner.
When everyone's riding bikes from village to village to trade eggs for milk, though, we should kick the hell right out of the obesity problem.
The only way out of that scenario,is tell the Fed, Bye.Issue them a US Note, PAID IN FULL, and shut em' down.
Allow Congress to print US Notes, and why should we pay Private Banks(the Fed) interest on our own currency?.
We can print it just as easy as they can, and owe no one but ourselves.
Our Debts are basically to ourselves....FTHEFED.
No more printing a $.06 note, charging face value, and interest on it until it's paid off(meaning NEVER).
What a racket.
DEflation John, Deeee flation:
http://www.xtranormal.com/watch/8094745/
You don't understand slavery. If you won't borrow the money to inflate the government will do it for you.
+1
But I also argue that when/if the time comes at which the FED is the sole purchaser of debt, then we are only a sneeze away from the collapse of the fiat regime.
I like both Shadowstats and KWN.
Real inflation and real unemployment are higher than TPTB want people to know
Trying to cipher in uncharted waters is not easy. There be dragons.
Just buy the fucking dips! What else do you need to know?!?!?
its morning here in lovely oz and i can finally chat with fellow zh readers in usa
i'm gonna come over and bolster your economy with a trip to vegas in jan and so i'm looking forward to that
but i came across this on a site -
Signs America is becoming a rotting, post-apocalyptic, post-industrial wasteland … “1. The second most dangerous city in the United States – Camden, New Jersey – is about to lay off about half its police. 2. In the city of Camden, about the only ‘industries’ that are truly thriving are drug-dealing and prostitution. It is estimated that there are literally dozens of open-air drug markets in Camden … 3. At least 1000 people now live in the 200 miles of flood tunnels that exist under the city of Las Vegas … 4. All over America, asphalt roads are being ground up and are being replaced with gravel because it is cheaper to maintain … 5. Gang violence in America is getting totally out of control. According to authorities, there are now over one million members of criminal gangs operating inside the country, and those gangs are responsible for up to 80% of the violent crimes committed in the US each year … 6. Oakland, California, Police Chief Anthony Batts has announced that due to severe budget cuts there are a number of crimes that his department will simply not be able to respond to any longer. The crimes that the Oakland police will no longer be responding to include grand theft, burglary, car wrecks, identity theft and vandalism.”(The American Dream, December 9)
Whats the story guys?
One million!!?!?!?
That has got to be wrong...it's WAY more then 1 million! I doubt they are counting Federal/State/Local government employees at all.
Don't worry, just cultivate an appearance of poverty and desperation so you blend in.
When you think about it - a million gang members is just what you want to hear when you're heading off to vegas.
there must be a big lot of drug use going on to support those numbers
:D
well, a million is nothing to brag on, but thats only 0.33% of the population. and they're mostly interested in shooting up each other over drug turf. FBI stats show 70% of all shootings are drug related.
1) wallet and minor spending money in the front pockets. passport and real cash stash in your sock.
2) don't get falling down drunk without wingmen covering you.
3) watch out for the street hookers. only go to the legal places outside of town.
have a good trip.
Thanks for the advice, cobber.
i'm looking forward to being back in the usa - i was there as a teenager and had a great time.
Street hookers! Moi?
:o
I've always been too intellectual for the gang drugs, but hey, if that's your thing...
Seriously for a moment, Vegas is a pretty damn scary place to pick up a drug rap. Drink all you want, gamble, go to strip clubs, all well and good...drive a few miles and there's legal hookers...but the bigs in that town can *capriciously* fuck your life for any kind of narc rap.
I'm using a new cologne that smells of cheap vodka and despair.
"In the city of Camden, about the only ‘industries’ that are truly thriving are drug-dealing and prostitution."
Good. There's nothing wrong with entrepeneurship in the fields of pharmaceuticals and entertainment. It's only the criminal government that wants to interfere in the peaceful, voluntary actions of freely acting people.
"According to authorities, there are now over one million members of criminal gangs operating inside the country"
Does that figure include government employees? How many of these 1 million "criminals" are likely to steal 30% of your paycheck every 2 weeks? Do they murder pregant Iraqi women by blowing them up? Or is it more likely they commit victimless crimes like growing the wrong kind of plant, or perhaps the crime of bearing arms uninfringed?
"The crimes that the Oakland police will no longer be responding to include grand theft, burglary, car wrecks, identity theft and vandalism”
Nothing new. The police have never protected people from the shotgun-toting tax thugs either.
It's a conflict of interest for the police to claim to protect people's property rights when they are operating with stolen money. The only right thing to do is disband the police and return the stolen money to the rightful owners, viz. the taxpayers.
There is no economic difference between the business of providing cheeseburgers and the business of providing security guards or nightwatchmen. Let private providers of protection and arbitration services compete to alleviate consumers' felt uneasiness. Unlike socialist government monopolies that provide low-quality services at high prices, private competitors can provide high-quality services at low prices.
They still make Campbell's soup in Camden I think-it's close to all those Jersey tomatoes but having half the cops laid off isn't a big loss-the cops there are bad as everyone else-I live closeby.
Duke, when visiting America just stay out of the inner cities-that's where the gangs are-most downtowns and surburban areas are fine during normal hours but always keep your wits about you.
I had the best time in Vegas when I drove into the western residential section of the city and hung out in a neighborhood bar on the main street-great food and lots of fun and interesting locals-they gave us a tip on a place called Mount Charleston about a half mile north in the mountains which we checked out-the temps dropped from 90 to 60 by the time we got to the mountain tavern there-very nice trip.
I
+1. Even if real crime goes up (not the victimless crap that puts the highest percentage of any population in prison), street criminals are a lot easier to avoid (or defend your property against) than the goobermint criminals and their legions of jackboot thugs. Given a choice, I'd choose the free market any day and let those on the gubbmint dole do something productive for a change.
Hi OZ,
Where your problem is, is the two locations.
Kalifornia is the gang, criminal capitol of America(Libs).
New Jersey, is Organzed crimes secong home, only to Chicago.
If you look at all three states, they are about TITS up.
Come to Texas if you want to see what law & order, and a real state looks like, and is run.
(exception Houston & Austin,Libtards and students run them).
Nice.
Then that means even the usa is like everywhere else....
you get boom times and the government pisses it all away on state government shit.
They behave like a cancer.
Well, if you want to talk "broadest" money aggregate, let's just go as far as possible with the Fed's "total financial sources". Flow of Funds, table F.5, line 21. It's got almost everything:
Open market paper, Treasuries, Agency/GSEs, munis, corporate and foreign bonds (including private ABS), mortgages, consumer credit, other bank loans, other non-bank loans and advances, official reserve assets (ie SDR issues), foreign deposits (by US residents - read: eurodollars), interbank lending, all kinds of domestic deposits (read: M2 and some of M3), money market fund shares, security repos, equities (in terms of net issuance), mutual fund shares, trade payables, security credit, life insurance reserves, pension fund reserves, deferred taxes, noncorporate equity, and "miscellaneous".
Phew, that's a bundle. Anything missing? I mean other than hedge fund shares, which as you know the Fed doesn't count because as you know it's none of your damn business.
I guess foreign bonds ought to be excluded but leave it to the Fed to piss in the data pool somehow or another. Shouldn't cause too much distortion.
After peaking at about $9 trillion in 2007, and bottoming out at an annualized rate of negative two trillion during the first two quarters of 2009, it swung back to an annualized rate of positive 2 trillion in 3q09, fell back to flat zero in 4q09, then bounced up to annualized rates of 1.3 tril, 1.9 tril and 4.2 tril respectively in the first three quarters of this year.
So by the broadest measure available, the liquidity contraction reversed during the 2h09 and has been gathering steam ever since, to the point that liquidity expansion is now running almost half as quickly as during the peak of the bubble.
I don't understand how it's possible to remain in the deflationist camp with all this obviously excessive liquidity around.
That camp is in the process of being flooded out by the overflowing Commodities Price Creek --- and yet the diehard campers there still insist that they are high and dry! They say that they are being saved by standing on Core CPI Hill, even though it looks more like a hole to me.
Oh, what's that I see being washed away --- it looks like the deflationist's credibility.
Can someone hurry the fuck up with that because these random intraday USD pumps that happen on the back of nothing are getting on my tits.
What was that saying about dips?
What you mean 'buy the fucking'? Not on these pairs you don't. The trend is ultimately still down for the a few months yet. I'll buy the fucking on the ascent.
http://www.youtube.com/watch?v=QSa4Vbbqj5E
My indicators continue to warn of serious weakness for the Euro / Equities and strength for the Dollar.
http://stockmarket618.wordpress.com
Merry Christmas Grand Supercycle.
BRING BACK THE ANIMATED SCARY CLOWN HEAD!
Your color wheel discredits your analysis.
(I didn't junk you.)
When in the market place you toilers of the sea and fields and vineyards meet the weavers and the potters and the gatherers of spices,
Invoke then the master spirit of the earth, to come into your midst and sanctify the scales and the reckoning that weighs value against value.
And suffer not the barren-handed to take part in your transactions, who would sell their words for your labour.
To such men you should say,
"Come with us to the field, or go with our brothers to the sea and cast your net;
For the land and the sea shall be bountiful to you even as to us."
And if there come the singers and the dancers and the flute players, buy of their gifts also.
For they too are gatherers of fruit and frankincense, and that which they bring, though fashioned of dreams, is raiment and food for your soul.
And before you leave the market place, see that no one has gone his way with empty hands.
For the master spirit of the earth shall not sleep peacefully upon the wind till the needs of the least of you are satisfied.
Robin hood
Some verbal vomit from me in the last week. And something I observed and commented on in the past. Feel free to ridicule or agree:
http://viewfromthewilds.blogspot.com/2010/12/2011-what-does-it-hold-for-...
http://viewfromthewilds.blogspot.com/2010/12/2011-what-does-it-hold-for-...
http://viewfromthewilds.blogspot.com/2010/12/2011-what-does-it-hold-for-...
http://viewfromthewilds.blogspot.com/2010/12/slippery-slope-to-hyperinfl...
http://viewfromthewilds.blogspot.com/2010/12/slippery-slope-to-hyperinfl...
I am just too lazy to retype everything here...
I like it. ALthough I disagree that if/when states default that they wont get bailed out. It would be nice to have some actual BK's and debt restructuring and all that fun stuff you heady types discuss, but "If thebenbernank bails out euro banks why can't he bail out 'Mericans?" says the guy with the rock in his hand standing in front of 33 Liberty. It would enable theronpaul and we can't have that. I also appreciate you not posting 4000 word essays, links are sufficient. bookmarked.