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.

Comments

[Royal Fleming]

As for de-pegging the Yuan...How about letting the markets do the work...cny/usd...if china wants to continue the illusion of a free market...lets see it...new safe haven currency? Or new carry funding currency..How about cny/jpy..As of now I have half my fuck'n wall papered with 100yuan coupons..And remember that if we actually still have the largest gold reserve, then by the Fed shittin on the dollar, the country as a whole has become wealthy..what do you think the cost basis for the gold reserve was or is...Audit the reserve..and by all means stay short the eur/usd

[Temporalist]

Rollover with Kanjorsky on CSPAN

http://www.youtube.com/watch?v=KUsj7EdZigM

Direct Kanjorsky clip from CSPAN

http://www.youtube.com/watch?v=m_atOvrTtT8&feature=related

[woofer]

It's all in history. In Weimar Germany, the government debt was vanquished by the raging inflation, while the people were destroyed. In the end a new currency was established, backed first by property and then by gold but the new mark was not allowed to be exchanged for gold by the ordinary folk. It looks like we are headed for serious inflation with global interest rates behind inflation presently and with no signs that this will change. SO government debt will be removed while we, the people, will have our wealth destroyed. After that there will be a new reserve currency emanating from a new global central bank, the BIS most likely, as its already in place and already uttering accurate warnings and predictions. With the Fed increasingly discrediting itself (it's track record is appalling) someone has to be being groomed to take over and they have to have credibility already established. That's the BIS. These crises are just softening us up for a new arrangement. And why? Not enough cheap oil around for everyone is my guess.

[woofer]

It's all in history. In Weimar Germany, the government debt was vanquished by the raging inflation, while the people were destroyed. In the end a new currency was established, backed first by property and then by gold but not the new mark was not allowed to be exchanged for gold by the ordinary folk. It looks like we are headed for serious inflation with global interest rates behind inflation presently and with no signs that this will change. SO government debt will be removed while we, the people, will have our wealth destroyed. After that there will be a new reserve currency emanating from a new global central bank, the BIS most likely, as its already in place and already uttering accurate warnings and predictions. With the Fed increasingly discrediting itself (it's track record is appalling) someone has to be being groomed to take over and they have to have credibility already established. That's the BIS. These crises are just softening us up for a new arrangement. And why? Not enough cheap oil around for everyone is my guess.

[Element]

The three pillars of the US Recovery:
1) Print --> spend da ca$h
2) Dole --> spend da ca$h
3) Default --> spend da ca$h

Instant growth!

#1 looks big now but #2 is getting ready to go bigger, but #3 is going to be the real growth story going forwards, but only after that over-production capacity has been massaged out of existence ... via a few million JDAMs.

Thus, buy Lockheed Martin stock!

Remember to sell before the war ends and you'll make a killing on the top!

Supply and demand baby! ;-)

Goldman (ran)Sachs

[Strongbad]

Interesting discussion taking place in this thread about USD, Euro, gold, oil, etc.  How does the Yen fair going into the future, specifically if John Williams is right?