John Williams Sees The Onset Of Hyperinflation In As Little As 6 To 9 Months As Fed "Tap Dances On A Land Mine"

Tyler Durden's picture

John Williams, arguably one of the best trackers of real, unmanipulated government data via his Shadow Stats blog, has just released a note to clients in which he warns that hyperinflation may hit as soon as 6 to 9 months from today. With so many established economists and pundits seeing nothing but deflation as far as the eye can see, and the Fed doing all in its power to halt the deleveraging cycle, both in the open and shadow economies, what is Williams' argument? Read on. Incidentally, even if some fellow bloggers disagree with Mr. Williams' assesment, we believe it is in our readers' best interest to have them make up their own mind on this most critical economic development.


Systemic Turmoil is Unthinkable, Unacceptable but Unavoidable.  Pardon the use of the Aerosmith lyrics in the opening headers, but the image of tap-dancing on a land mine pretty much describes what the Federal Reserve and the U.S. Government have been doing in order to prevent a systemic collapse in the last couple of years.  Now, as business activity sinks anew, much expanded supportive measures will be needed to maintain short-term systemic stability.  Such official actions, however, in combination with global perceptions of limited U.S. fiscal flexibility, likely will trigger massive flight from the U.S. dollar and force the Federal Reserve into heavy monetization of otherwise unwanted U.S. Treasury debt.  When that land mine explodes — probably within the next six-to-nine months, the onset of a U.S. hyperinflation will be in place, with severe economic, social and political consequences that will follow.  The Hyperinflation Special Report is referenced for broad background.  The general outlook is not changed. 

What does this mean for US financial markets? (take a wild guess)

In these circumstances, the financial markets likely will be highly unstable and volatile.  Looking at the longer term, strategies aimed at preserving wealth and assets continue to make sense.  For those who have their assets denominated in U.S. dollars, physical gold and silver remain primary hedges, as do stronger currencies such as the Canadian and Australian dollars and the Swiss franc.  Holding assets outside the U.S. also may have some benefits.

Source: Shadow Stats, where the full piece can be located

h/t Justin

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NOTW777's picture

so, when does he get attacked by mish

Pladizow's picture

Right, he already dismissed the ideas of Gonzalo Lira, Peter Schiff and Dr. Marc Faber.

He even called Dr. Faber, too US-centric - WTF!

anonymous_user_000001's picture

Get rid of the porn picture!  We're accessing ZH from work

SWRichmond's picture

Just like in the anti-Lira interview, Mish will assert that he is far too wise to stoop even to answering, for to do so would be to give credibility to his opposition.

B9K9's picture

Mish is a spent force. Just as he made his bones properly emphasizing the correct definition of inflation as a net increase in the supply of money-credit aggregates, he is going to ride his personal ship down by misunderstanding the true definition of hyper-inflation.

Perhaps it's the 'inflation' part that throws him off. In actuality, the spark of hyper-inflation has hardly anything to do with supply, but rather a rapid withdrawal of goods/services from the market. (Note the velocity component - not on the monetary side but the rapidity of abandonment of open exchange.) Given increasing fears of default risk in the underlying hard asset(s) backing the $USD (in this case, Ts & MBS), who would willingly exchange real assets (oil, food) for officially approved legal tender?

Ben monetizing a few $trillion or so of Treasuries doesn't really put sufficient new reserves/dollars into the system to create a push effect (ie money chasing goods). Rather, the market wakes up (Mish's 'shazam' moment) to the reality of what's driving Ben's actions and realizes the USA ain't gonna make it. It is this loss of confidence and expectations of heightened default risk that results in a pull effect as goods/services flee open exchanges.

As Gonza, FOFOA and others patiently explain, it is the government's response to its critical need to acquire these goods/services at any cost that then results in hard-core money printing.

George Orwell's picture

If hyperinflation is a confidence game, why would other countries lose confidence in a country with more than 5000+ nuclear weapons and a record of using those weapons?  The US dollar is backed by plutonium and uranium, not gold.  We are not a fiat currency!

I don't think we will ever see hyperinflation because if things get sufficiently bad, we will launch those nukes to wipe out the foreign countries holding out debt and those countries with oil.  Tactical nukes can be used on those with oil so as to not damage the oil wells.

Nothing inspires more confidence in the US than a display of nuclear prowess.

To quote Dick Cheney one more time.  "The American Way of Life is NOT NEGOTIABLE."

George Orwell

B9K9's picture
  • Nuclear weapons are useless. If they had any value at all, we would have crystalized Tehran, Kabul & Baghdad on 9/12.
  • The Cold War was always about making sure we kept the post-WWII war time economy running.
  • When China finally makes its (land) move, do you think there will be a nuclear exchange?
  • The USSR failed with an equal/greater number of nuclear warheads.

The USA is like some macabre portrait of Dorian Gray. Anyone who has spent anytime in LA, NYC (outside of Manhattan), Chicago, etc can see that it's no different than Sarajevo.

We had a sweet run due to some unusually lucky circumstances. These included plentiful natural resources, an empty continent (re)populated by young, hard scrabble immigrants, a vast productive economy, and no meaningful (public or private) debt and/or future obligations/promises.

Scratch the surface and you can see it's already dead - it just doesn't know it yet. The power-elite who milked it for everything it had know it though. They used their influence to get (their paid for) Congress/Fed to help them get out of worthless private debt instruments (MBS, etc) and convert them into publicly guaranteed debt (Ts).

The hyper-inflation event begins when the power-elite begin to convert out of Ts and into other available mechanisms for wealth storage. Once the sheeple get wind of the looming danger, off go the goods/services from stores & shelves as hard-core hording begins in earnest.

Spalding_Smailes's picture

Russia was not the reserve currency at the time of their fall, most trading is done in dollars, other countries need to keep dollars on hand to buy oil & pay off debt's. Boatloads of dollars floating around, tons of them, also lots of debt that needs to be serviced using dollars also.Everyone is in the same boat, all tied to the dollar.

The Cold War was always about making sure we kept the post-WWII war time economy running.

Really ?


Many Americans feared that the end of World War II and the subsequent drop in military spending might bring back the hard times of the Great Depression. But instead, pent-up consumer demand fueled exceptionally strong economic growth in the postwar period. The automobile industry successfully converted back to producing cars, and new industries such as aviation and electronics grew by leaps and bounds. A housing boom, stimulated in part by easily affordable mortgages for returning members of the military, added to the expansion. The nation's gross national product rose from about $200,000 million in 1940 to $300,000 million in 1950 and to more than $500,000 million in 1960. At the same time, the jump in postwar births, known as the "baby boom," increased the number of consumers. More and more Americans joined the middle class.


When China finally makes its (land) move, do you think there will be a nuclear exchange?


The USSR failed with an equal/greater number of nuclear warheads.


They failed because they were communist money grabing pig's... Capitalism drives innovation.

Mad Max's picture

Capitalism drives innovation.

Then it's a shame that the US isn't capitalist any more.

fiddler_on_the_roof's picture

what happens if Oil Producers don't want to park money in dollars and refuse dollar payments ? Now what will dollar reserve(T-Bonds) holders do ? US can furhter run a knife through that by taxing the coupon payments. Then buy it back cheaper, but by then US Dollar is no longer the reserve currency and there is short term pain until a new currency arrives.

Spalding_Smailes's picture

The house of Saud' needs us to keep the family * Safe- Oil=Dollars 360'-24/7

Tuesday, September 14, 2010

The Obama administration is seeking to sell Saudi Arabia advanced aircraft worth up to $60 billion in what Pentagon officials say would be the largest-ever single foreign arms deal.

Sabibaby's picture

The Oil Fields in Saudi Arabia are in decline and Russia is now the number one producer of oil...

Looks like we need to make new friends!

traderjoe's picture

They give us back some of their worthless fiats, and we give them advanced weaponry. They are better in the bargain. 

UncleFurker's picture


"Capitalism drives innovation."

The last 10 years of "innovation" haven't been a good example of capitalism.

Cronyovation. Put fuckers in jail. That'll restore my faith in capitalism.

piceridu's picture

I've spent the last 3 years traveling in Europe/world, from east to west. There were many days that fx exchange centers/kiosks would not take dollars. They would say "not today euros only". I couldn't believe it. I thought the US dollar was like gold. It made me think: are these little anecdotal events a precursor to things to come?

goldsaver's picture

Really? You truly believe in your heart of hearts that President Obama's administration (or his handlers the PTB) would release nuclear weapons on other countries because of their rejection of the US dollar as a reserve currency? The same administration that wont call terrorist acts terrorism for fear of offending a medieval civilization. You believe it so deeply you are willing to bet your financial future and maybe your life on this? And you deeply believe at the same time that if the US does uses nuclear weapons against China that such nuclear strike would not be retaliated in kind?


minus dog's picture

"Nuclear weapons are useless."

Right on.  We likely do not have the willpower to use the damn things even if someone nukes us first, which is increasingly likely.  We've busted up several (real, I'm not talking about Iraq) weapons programs in the last several years, some of which we had no fucking clue about until they were nearly operational.

Those who have not read this should do so:

fiddler_on_the_roof's picture

why launch weapons when you can confiscate the returning dollars, tax the bond coupons...

Cistercian's picture

George Orwell is correct.

  The United States is not the USSR.

 We will use the bomb.And any other means at our disposal.

 And we have lots of other means....and they are worse.

theoakman's picture

Rofl, you mean like the Soviet Union?  Seriously, how can you have a handle of George Orwell and make that post? 

Cistercian's picture

Not like the Soviets...they were amateurs. We are much, much more violent, depraved, and pernicious.


New_Meat's picture


"Not like the Soviets...they were amateurs. We are much, much more violent,..."

give ya that.  Others, not so much, unless you can top Stalin's record?

- Ned


Cistercian's picture

Stalin killed his countrymen like a pro...true enough!

 But if we go for broke(pun intended) I bet we can get the gold medal in all out no holds barred body count.Cities are dense target areas, think of only 10 high yield nukes over 10 cities and you see my point.I should also point out that TPTB are serious Malthusians.

  Which should give anyone pause!

TeamAmerica's picture

"Tactical nukes can be used on those with oil so as to not damage the oil wells."

No-no-no. We have a delightful little device called the neutron bomb (or "enhanced radiation weapon"). Kills the people and every other living thing, but leaves the oil wells. Perhaps that's what you were thinking of.


 Was that George Orwell or George Bush? If you think our nukes can settle anything or as dickie boy put it, "The American way of life is Not Negotiable" It would take an idiot to make a statement like that seeing how the " AMERICAN WAY OF LIFE" was compromised long ago. The day THE AMERICAN WAY OF LIFE  ignored the Constitution,  ARTICLE 1 SEC. 10, the AMERICAN WAY OF LIFE WAS NOT ONLY NEGOTIABLE ( 1913, fed. reserve) IT WAS PROSTITUTED....... SOLD OUT..... Today's problems didn't begin two tears ago nor did these problems begin 50 years ago. They began the day the gov. allowed a private business to SCREW THE ENTIRE COUNTRY...... NEVER HAS SO MUCH BEEN OWED TO SO FEW BY SO MANY !!!!!!!!!!!!!!!!!!! Don't believe me?  Research our country from it's inception until it's near end........ And don't research via George Orwell or The Wizard of Oz.

New_Meat's picture

sure glad you don't have any strong feelings on the subject ;-)



Moonrajah's picture

Ummm, welcome to ZeroHedge. And thanks for sharing this truly shocking bit of news.

fiddler_on_the_roof's picture

BINGO. Loss of confidence then leads to Money printing to service Govt liabilities.

I hope this hyperinflation does not play out and people don't lose confidence in dollar because I don't want to prepare for that. Hyperinflation is an altogether different animal - outside the control of Govt/rulers. Hopefully they come up with some idea - tax the returning dollars to US...or something they have to do "IF" it comes knocking.

decon's picture

You are correct, after all, dogs can't lie.

Inflation/Deflation are economic processes.

Hyperinflation is a psychological event.

Running on Empty's picture

Sorry to jump Q. Sometimes the truth does rear it's ugly head even on CNBC.


Hero Protagonist's picture

CNBC, the "truth", come on :)  Better link is


RockyRacoon's picture

Saw that live.  Kudlow was about to bust a gut -- the truth hurts.

His hammer is tax cuts, especially for anyone who lives in his neighborhood.

midtowng's picture

Mish is an arrogant prick. I understand and sympathize with the deflationist theories, but their supporters are such a**holes that I can barely stand listening to them.

Turd Ferguson's picture

Posted: Sep 14 2010     By: Dan Norcini      Post Edited: September 14, 2010 at 2:10 pm

Filed under: Trader Dan Norcini

Dear Friends,

Today is a case of being careful what you wish for – the Fed has pulled out all the stops in an attempt to avoid a deflationary trap tied to the inception of the credit crisis that broke loose in the summer of 2008. Since then they have flooded the system with liquidity through a process dubiously referred to as Quantitative Easing. They have also loaded their balance sheet with worthless loan paper and shoved interest rates practically to zero.

Not to be outdone, our illustrious administration has saddled us with enough debt at the federal level to last three generations all in the name of “stimulus”.

The result – they have gotten their wish – sadly for all of us, who actually have to live with their damn stupidity, they have let slip the dogs of inflation who have bared their fangs and are now ravenously devouring the hopes and dreams of the middle class in this nation.

The funny money has made its way into the commodity sector driving food prices to unseemly high levels once again just as what happened in 2008. Corn is now within spitting distance of $5.00, wheat is more than $7.00, soybeans are over $10, sugar is over $0.24/pound, cotton is closing in on $1.00, coffee is up near $2.00 pound wholesale ( a 13 year high), cattle are just shy of $1.00/pound, bellies are trading over $1.50/pound for fresh product. In short, the consumer is on the verge of watching his or her’s disposal income decimated by high food prices at the very time that a record number of Americans are on food stamps and are either unemployed or underemployed.

I shudder to say it but based on what I can see of the price action across the commodity sector today, an evil has now been loosed upon the land that portends the eventual ruin of the middle class.

The only bit of saving grace is that energy prices have not YET begun moving up alongside the rest of the commodity complex. I think it is only a matter of time however before the crude complex gets involved. When it does, home heating bills, home cooling bills, industrial energy costs and gasoline prices will join the list of soaring costs nationwide.

The one-two knockout punch of higher soaring food cost and higher energy costs will finish off the consumer whose wages have been stagnant for longer than I can now remember.

Make no mistake about what you seeing, especially with the price action of gold and silver. Both metals are signifying a loss of confidence in the Dollar and particularly in its management team.  It is ironic is it not, that any supposedly friendly economic news now results in waves of Dollar selling whereupon in times not that far past, any negative news yielded a huge inflow into the Dollar as a safe haven. Good news – Dollar goes down; Bad news – Dollar goes up.

HungrySeagull's picture

Yes the coffee is a tad more expensive, but nothing approaching what it will make to have us stop drinking it. We use one can per month at home. You can price it at 50.00 and we will still buy and use that can.

We are fixing to make a special order for 24 coffee cans to hold in the closet. Depending on the freshness dates on them, we will rotate as necessary.

Energy Costs? Not yet, we replaced all electric motors and replaced the obselete eletrical system in the entire house. We have SLASHED daily kilowatt useage by over half and we have not yet seen the bottom yet. So in theory you can double the electricity bill in a year and we wont have a issue.

The rest of the food prices are high yes. But careful menu planning and slow cooking with one or two meals daily based on physical activity and needs keep our food costs low. No we dont eat ramen noodles either. We eat meat and taters. Just have to wait a half day or so for it to cook in the crock pot.

Or cook the same in a Dutch Oven over a slow fire outside. The results will nearly be the same.

And we have gotten out of debt sufficiently so that we can and will withstand increases into the future. To a certain point.


In short we eliminated waste in spending, converted to cash only and have a reserve adequate for a number of weeks should the Nation fail to truck food and gas into our walmarts for whatever reason.

I have done everything I know how to "Harden" the Household against future problems and am always seeking to improve on or find new ways to make a problem go away before it becomes a problem.

Dr. Sandi's picture

I'm with you, Bird. No, I don't like it, but yes, the insurance is nice to have in these uncertain days.

Temporalist's picture

So you think you are typical to most people?  If everyone were like you this mess probably wouldn't have happened at all.

Turd Ferguson's picture

"Holding assets outside the U.S. also may have some benefits."

Catallaxative's picture

Yah, also called private land grabs with the eco-rich ideologically smoothing the way forward with palatable cuddly concern for Nature.

Land, land, land, forests, water, minerals, land, land...

HungrySeagull's picture

uddly my ass.

Some city folks only think in parking, square footage and transit tolls. Section 8's and two day old produce too.

Drop em off into Nature and they will wave at a grizzly saying hi.



ZeroPower's picture

Risk remains exceptionally high in the next six-to-nine months for a combination of massive U.S. dollar selling and heavy Federal Reserve monetization of Treasury debt to boost inflation, and to open the early stages of a U.S hyperinflation

There we are.

How is there still a debate on deflation to begin with? Do people ignore the $$ being printed? Are they still constantly trying to calculate the velocity of money?

Vergeltung's picture

I thought velocity was an important consideration, no?

Internet Tough Guy's picture

Velocity can change instantaneously, too quickly to be predictable.

Vergeltung's picture

right. but it having some velocity is important, if I understand it correctly. the fact that there's little/none now is part of the problem, no?