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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Internet Tough Guy's picture

Not really. Imagine the forces at work, the pressure building. California isn't shaking right now but it could be in a moment. Impossible to time, but inevitable.

idoubtit's picture

Yeah velocity is important.  It's like having a formula one car in your garage.  Velocity represents the movement of money in the economy.  Because nobody wants to borrow, there is no money exchanging hands.  Right now the only way money is moving in the economy is via federal spending.  Not enough for hyperinflation in my opinion.  When they start a) giving money away or by b) everybody starts getting raises, I'll change my tune. 

Big Corked Boots's picture

Well, they are already doing (a) based on the US Budget Deficit. Ben is dropping cash all over the place, except he is using T-bills and such to cover his tracks, and the drop points are semi-secret, like Freddie, Fannie, USDA food stamps, UIB, and on and on.

True that (b) isn't happening but the serfs still have to be kept in chains. 

Yophat's picture

Very important constraint that must be must be - "Debt free money"....otherwise its still inherently deflationary.

The only other force for hyperinflation is the confidence factor....which supposedly is what is forcing them to hyperinflate....which is why John Williams is full of the stinky stuff! 

MrSteve's picture

As one bag-head avatar to another, I will point out the only debt-free money is gold. The FRNs subject to hypervelocity, hyperprinting and hyperinflation are backed by the credit/debt of the USA government FRB/FDIC/Congress.

You poo-poo Williams at risk to your own financial survival.

Yophat's picture survival....give me a break!  Far far more at stake than just "financial survival".....and Williams is a government shill!  CIA disinformation 101!

Gold is a waste of precious resources imo fwiw!  At best it sits in a safe and gathers dust (like burying talents).....thanks but no thanks!  I'll put my resources into assets that multiply or add value.

I don't know what everyone else is seeing....but my FRNs continue to gain value on a daily basis!  I can buy 4X the house today that I could 3 years ago.....and lots of other stuff on similar track.  Only thing I see that isn't is food!

....and I highly recommend at least a years supply of food along with a means of production!

RockyRacoon's picture

How have you survived this long -- anywhere?  Having an open mind in all matters will become an asset.  Consider it a survival tool.

Yophat's picture

.....maybe its the training I got in the Boy Scouts....nah....maybe its the training I got in Marine Corps bootcamp....nah...maybe its the training I got in the Persian Gulf....nah.....maybe its the time in the alley's of Bangkok, Pattaya Beach, Roppongi, Dubai, LA - South Gate, Kowloon, East St. Louis, Memphis - south of Beale street, or Tijuana....nah.....maybe its just sheer dumb luck....YES that's it!

From one open minded soul to another.....ROFLMAO!

RockyRacoon's picture

You just proved my point.  I have very similar training and have travels as well to some of the same exciting places.  (I was born in Memphis, and was with the Air Force in Thailand for starters.)  Two people can see the same things and have different perceptions.  Seeing is not reality since it is tinged by personality, etc.   Since you mentioned the Gulf, I'll bet I have half a generation on you in age.  Let's see how you think when you are 62 years old and have seen several shit-covered fans.

Yophat's picture

Prove what point?  Air Force training is similar????  Don't think so flyboy!  Those boys pack up and go home at the hint of trouble!  How were the 5 star hotels in Korat?  LOL!

Air Force chumps at Millington got substandard housing allowance....

Memphis was okay except for the fast food....45 minutes to get from the order screen to getting the meal in the drive through at Taco Smell....vs LA which is 30 seconds and a honking car behind you.

Amen on the different perceptions!  Like the third time in a row we were going to take Saddam out and Billy Bob Blythe the third called it off hour before execution and all three happened to coincide with Linda Tripp tapes, Monica's dress, etc etc....and 99.9% can't see the connection and don't bother wondering why!

The fan & turd ball that's coming up will be the biggest of them all!  Everyone is gonna stink!


RockyRacoon's picture

Oh, alright.  You're tough and a real man.  I'm not.  I'm obviously inferior.  Happy now?

Yophat's picture

LOL...may I remind you that you were the one questioning my ability to survive...then when I mention a few things and a few hotspots I've been in you try to draw a parallel to yourself albeit with wings rather than EGA....and I can't resist in giving a little back to you - my bag.  Now you get your panties in a bind. 

Reality is anyone who can apply a couple pounds of pressure on a trigger can be equal or superior to anyone else!  Gotta luv the leverage watching a 13 yr old take out a special forces trooper with an old AK in Somalia.  Of course these days they do a pretty good job of shooting themselves as Pat found out the hard way.  Price of supporting CIA/Bush's drug empire I reckon.'s picture

Linda Tripp = john goodman

SNL  priceless

Inspector Bird's picture

In addition, changes in supply of money can alter velocity.  Assume a doubling of supply in an environment where velocity of 6X.  The increase in supply should (in sheer number value) reduce velocity to 3X.


However, we know this is just temporary.  The real net result of supply changes on velocity varies based on the economic need.


Velocity is a more important consideration when supply is held steady or decreasing.

Imminent Crucible's picture

Here's the chart Vergeltung is looking for:


As you can see, there is some velocity.  As you can also see, the chart has turned up.

Dollar holders beware.

RoRoTrader's picture

Sublte difference;

Velocity of money in the usual or positive context implies an accelerating exchange for productive goods and services signaling the advent of an economic upturn.

Velocity of money in hyperinfaltion simply means how fast can someone get RID of the money in exchange for a useful commodity before that money becomes worthless........flight to safety out of fiat paper.

bronzie's picture

"how fast can someone get RID of the money in exchange for a useful commodity before that money becomes worthless"

I'm currently reading, "When Money Dies", by Adam Fergusson - very dry reading but interesting insight into the Weimar hyperinflation

There were numerous strikes by the workers - they demanded higher wages repeatedly because of the inflation - it got so bad that they demanded daily payment for their labor - each day they found something tangible to trade their wages for

Imagine inflation being so high that the money you earned yesterday is essentially worthless today - that's how bad it was!


Yophat's picture

LOL....print billions and trillions...but if it all goes into a vault'll never see an inflationary result.  Simply shoring up the balance sheets of the sharks as they prepare for a mighty deflationary feast!

Asset transfer time!

Better load up on all the debt you can load on while buying "useful commodities"....and fyi - the only real useful commodity that's not oversupplied by several magnitudes at this point is food!

MrSteve's picture

Costco just mailed us a flyer pitching 84 #10 cans of freeze-dried food for 20% off. It was pitched as a one person's one year supply, net about $800 US.


Funny coincidence that it would show up in the mail "at this time".

Yophat's picture

....not much into freeze dried and CostCo charges a premium for that stuff!  Wheat is the best bang for the buck with nice protein/carbs ratio.  Also 30+ years if you store it right!

HungrySeagull's picture

Mountain house is better I would think.

However, anyone buying something is better than no one waiting until weather man says the word Hurricane or snow.

Yophat's picture

like CostCo's 45 lb buckets of wheat for $14 a whole lot better!!!  .....along with the honey & olive oil!

New_Meat's picture


"LOL....print billions and trillions...but if it all goes into a vault'll never see an inflationary result."

yep, me an' my trusty computer got my digital printing machine all queued up.  Just gotta find a way to get my ones and zeros to print onto Bob Kraft's  paper, that's the trick.

- Ned

Bendromeda Strain's picture

When you get done with When Money Dies I suggest you dive right into Defying Hitler by Sebastian Haffner. Written in 1939, it wasn't published until 2000 by his son. Has a mind blowing chapter on 1923, and the whole book is an excellent peek into the Weimar psyche.

DavidAKZ's picture

Can you see wage inflation happening in so called advanced economies ?Nixson's unhitching of the USD from the gold standard was supposed to make American industry competitive. Take a look at all these former factory towns in New England for example and realise the extent of so called competitiion.

Miramanee's picture

In my opinion, what is often missing in this conversation is a "big picture" understanding of credit and debt. As a history teacher currently teaching my students about the Panic of 1873, the focus of our study rests squarely upon an understanding of the roles played by over-exuberance and credit (or debt) expansion. As the post-Civil War railroad "bubble" burst (in 1873), and as overly-indebted banks found themselves unable to sell railroad company bonds, deflation---or a contraction in available and/or sought after credit---precipitated a fairly dramatic contraction int eh greater economy. During this time, the actions of the Grant administration further exacerbated monetary unavailability (interest rates rose), and depression was upon the nation. Many argue TODAY that it was "tight" monetary policies (a misnomer of sorts, in that fiat currency per se did not exist in 1873) that led to contraction and depression. But the REALITY is that ALL credit expansions must end with contraction, as there are little to no profits being realized in the "productive" economy. Hyper-inflation, again in my opinion, cannot occur in the U.S. because, even if the FED were to "print" 100 Trillion dollars, or a QUADRILLION dollars, those dollars would only find their way into the coffers of a few oligarchs...but the rest of the nation---some 300 million people, give or take---would still experience the results of a contraction of availability of credit. Yes, you can inflate the money supply---operationally---to the moon, but a lack of access to credit for the common man means IS deflationary, pure and simple.

pan-the-ist's picture

With all that money, the monied interests will not be able to help themselves from buying commodities and increasing the prices, causing real inflation for those of us who must buy the product at the new price.  The government, to keep order, will need to give bigger and more unemployment checks (as more people lose their jobs and food and fuel become more expensive.)  The will cause hyperinflation.  The problem with economists is that they tend to fail to understand politics.

Yophat's picture's the theory holding up?  Unemployment, at best, is 60% of previous wages.  Add in food stamps, housing assistance, etc etc etc and maybe on a long shot you might hit 80-90%.  Doesn't cause inflation let alone hyperinflation.

In 120 days we will experience the biggest tax increases in history.  That isn't inflationary.

Housing is forecast to take another 20-50% dump in the next 12 to 18 months.  That isn't inflationary. 

Foreclosures are rising forcing people to start paying rent of one form or another - that isn't inflationary.

For every dollar the government prints the private side is losing two or three.  That's not inflationary.....just a transfer of power!

ColonelCooper's picture

It would seem that you missed Pan's point entirely.

Yophat's picture would seem that way!

packman's picture

Agree with pan-the-ist above.  IMO it's an incorrect assumption that the oligarchs will simply hold onto the money in perpetuity.  Money held as such is useless.  Eventually they will spend it - be it on personal luxuries, investments (e.g. commodities), whatever - it will make it's way out.  This is especially true when we get into an inflationary environment - the oligarchs aren't stupid, they know that holding cash in such an environment is a net loss.

As a history teacher, I'm surprised (and disappointed) that you wouldn't realize this.  History is rife with examples of money being created for the purpose of stopping deflation in one asset class (e.g. housing) instead making its way into other asset classes and causing inflation there.

In this case the "other asset classes" will be just about everything, due to the scale of the current and coming money supply inflation via QE.

The initial primary conduit being the U.S. government.  Not all this QE is going to the banks.  QE done for treasuries does get spent by the U.S. government - almost immediately in fact.  It doesn't go into a vault.


Miramanee's picture

@ Packman

You miss my point. I'm not asserting that the "monied class" will hold theier wealth, or that COST inflation will not result from monetization. What I am asserting is that in a system in which money IS credit, and vice-versa, the operational ability of the central bank to "print" money ad infinitum will not halt the crach in the availability of credit. IN FACT, it may accelerate the lack of such access, as institutions become even more reluctant to lend and borrow in such a destabilized monetary regime.

Miramanee's picture

I should not have said "coffers" of the wealthy. That was misleading.

Yophat's picture

Should have mentioned the current stimulus (paying interest on non-required reserves) that further exacerbates the current lending panorama!

Its all about power transfer.....the final shift to dictatorship!

B9K9's picture

Please see my comment above. As long as people continue to conflate hyper-inflation with 'normal' credit-money inflation (and/or deflation), there is just going to continue to be confusion.

Look at it from your perspective - as a merchant, would you accept a personal check from a dodgy character? No - then you are unwilling to sell at any price. So too the market - at some point, everyone will wake up and realize the US is never going to make good on its debt obligations. At that point, sellers of goods/services will refuse to sell at any price in exchange for dollars backed by the soon-to-be defaulted debt.

It has nothing to do with the push + positive velocity of credit/money, it has everything to do with the pull + negative velocity of goods/services. Governments respond to this initial scarcity by upping the ante (hence, the wheelbarrows of cash). Ok, so you won't take $100 of our confetti for your used sofa, how about $1 million?

Miramanee's picture

@ B9K9

You make fine points. My primary points are these:

1. There are two separate worlds in play vis-a-vis monetary policy. There is the world of the monied class, whose interests and wealth are directly impacted by FED policy. And there is a growing under (middle) class, who despite, claims official to contrary, NEVER in the long run benefit from loose monetary policy---because loose monetary policy ALWAYS decomposes into economic (Credit) contraction, inflated asset values (that the middle class cannot access), and the destruction of real, productive wealth.

2. Regardless of FED efforts of inflate the money supply (of course to artificially stimulate demand and economic growth), the AVAILABILITY OF CREDIT for the middle class WILL CONTINUE TO CRASH. This phenomenon is deflationary (by definition), and the middle class in America (of whom 1 in 7 are currently on food subsidy) will suffer tragically from the credit expansion of the past decades.

B9K9's picture

1. I would only slightly quibble on your order of control. To wit, the Fed is impacted by the power-elite's goals & objectives. It is important to understand who works for whom. The Fed was created long after a powerful cabal of monied interests controlled both the British & US empires. The Fed was just a mechanism to streamline this control into a more manageable entity.

2. As you correctly observe, credit availability for the middle-class will continue to crash. This is actually what brings on hyper-inflation aka scarcity of goods. Again, envision a tapped out, out-of-work neighbor. Would a local grocer/merchant extend credit to this person in exchange for an IOU and transfer (real) goods? If the answer is no, then he would experience his own personal "hyper-inflation" even in the face of zero/limited cash and/or credit.

Again, hyper-inflation is the absence (pull) of goods/services for any price in exchange for worthless fiat, not the presence (push) of excess/available cash/credit.

sharonsj's picture

Some people, who don't have enough money, will be unable to buy goods at the grocer.  This is not the same as hyperinflation, where the price of goods is so high that most people cannot buy them.  It's not personal hyperinflation, it's being poor and not affording it any any price vs. having money but choosing what you can afford.

You are defining hyperinflation as the absence of goods.  If the grocery is empty, then it doesn't matter if paper money is worthless or not.  If the grocery is partly full, then prices depend on availability and how much someone is willing to pay for an item.

There's a lot more at work here than hair-splitting.  And I'm still annoyed that the media has completely ignored all the price inflation we've had over the last two years.  I think a 40% increase in a bag of sugar qualifies as hyperinflation for me.

B9K9's picture

If you continue to believe that hyper-inflation is purely a monetary phenomenon, then you will end up being caught by surprise when it happens with limited money-credit expansion.

Hyper-inflation isn't an absense of goods per se, it's an unwillingness to sell them at any price in exchange for the legal tender being offered. Hyper-inflation can occur during natural disasters, whether it be a hurricane, flood or earthquake. Typically called price gouging and/or profiteering, it's the same exact reaction when the herd panics and begins to horde.

As FOFOA, Gonza and others have patiently tried to explain, many people confuse the government's follow-up actions in terms of printing money to acquire necessary goods/services (paying cops & soldiers usually comes first) as the period of hyper-inflation. Excess money is merely the after-effect; the initial cause was loss of confidence in the means of exchange and subsequent removal of goods from markets.

HungrySeagull's picture

Plenty of credit, at 24.99% to 29.99% for 78 months or whatever to keep a number low enought to choke (RAM) a monthly payment just sign here.


Also here, dont worry about the words "Security Agreement." that is all boring and routine.

scaleindependent's picture

I used Gresham's law to understand B9K9'S post; " "Bad money drives out good". As the dollar becomes the bad money, through QE, and as more and more people realize this then the good money (less inflatable stores of wealth) will be sought out. Therefore bad money will drive good money into private hoarding.

B9K9's statement that "the US is never going to make good on its debt obligations. At that point, sellers of goods/services will refuse to sell at any price in exchange for dollars backed by the soon-to-be defaulted debt" can be misunderstood.  I will take some liberties in explaining it. B9K9 can correct me if I am wrong. One can read into his statement that the US will actually default or never make good on its debt. The way I understand it is that the US will print and create so much de novo money that people will realize that it is monopoly money. In other words, paying debts by devalued "legal-counterfeit" is another way of defaulting on ones debts.

packman's picture

What I am asserting is that in a system in which money IS credit, and vice-versa, the operational ability of the central bank to "print" money ad infinitum will not halt the crach in the availability of credit.

Here's the problem though - in a hyperinflationary environment money is not equal to credit (and vice versa).  Money created by the Fed and distributed via the Treasury is not a loan in the normal sense, where debt levels of the borrower cause the lender to pull back its credit and/or to increase its costs.  Since the Fed is part of the government (in essence), it's simply not subject to the normal supply/demand/risk rules of credit contraction.  The Fed isn't going to tell the Treasury it's not loaning to them because they're took risky.  This is the classic and all-encompassing case of the customer making the rules for the bank, instead of vice versa.

B9K9's picture

As long as you view hyper-inflation as excess money (or credit) chasing too few goods, you will fail to see the complete picture. It is the prospect of default risk that causes goods/services to flee; in order words, it is not a push function, but rather a pull function.

Miramanee's picture

You make an excellent point. I believe that we are somewhat discussing apples and oranges, in that I am referring to monetary policy as it impacts the majority of middle class citizens---people who will not have access to credit (money!) because there simply will not be any viable means toward expanding access to credit for people who will have NO MEANS to service their debts. Maybe I should attenuate my argument to say, deflation for many years to come, followed by a period in which decades of insane monetary policy make credit that BECOMES available virtually worthless---which I suppose could be called hyper-inflation.

Yophat's picture

what happens in default......transfer of assets!  The assets are the real value....the money (debt) is just a tool to obtain them.  First you lend creating inflation (more money chasing same relative number of goods) of which you get your money first (thus stealing the excess).....then when the debt saturation point is reached (maximum debt service load which fyi is variable based on the cost of debt - interest rates)....deflation occurs since credit growth slows, stops, and then contracts.  Now all of the assets come flowing back to the creator of the debt.....which in this case is the banks....which then flow through the banks to the private shareholders of the banks!

And in our particular case the cost to the banks is zero!

Bank loans $500k to you to buy a house....they don't have the money but create it against your promisory note.  Then at say 5.5% interest you either pay them back roughly $1.2 million or you foreclose and they get the property (asset).  What did it cost them for the $1.2 million or the asset?????

As the system implodes from deflation (housing, CRE, etc etc etc)....big banks (sharks) acquire medium and little banks (feeder fish) for ultimate asset rollup strategy!

What better cover than the threat of hyperinflation?  Now is John Williams a shill or what?


Matt's picture

So, are you recommending buying shares in TBTF banks?

Yophat's picture

If I were a betting man (paper pusher/acquirer) I wouldn't bet on the little guys!

New_Meat's picture

and transfer of (real) assets was envisioned in the U.S. Constitution as "resolution" for bk.

you emphasize the bank (as a responsible individual would) but do not look at the incentives all up the stream from the mortgage origination.  Bonuses paid now on a 30 year obligation? yep.  Bawney and I both know where that behavior will go.

and yes, those who came through Weimar were owners of real assets and owners of ongoing enterprises.  To your point of threat.

No opinion on shill yet...

- Ned

Yophat's picture

WWI & WWII had predetermined conclusion points.....and the Weimar event was simply a tool used in that process.  Must rise above the trees and look at the forest.....then ask yourself - Why Operation Keelhaul?  Why remove Stalin's potential opposition in Eastern Europe?  Why would Eisenhower screw around in south France waiting for Stalin to reach his (predetermined) destination?  .....and that's just one of a dozen starting points!

One could also approach it from a genealogy standpoint - Who hosted the 1931 Third International Congress of Eugenics?  Who helped finance Hitler?  Who took out JFK?  etc etc etc