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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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Tue, 09/14/2010 - 12:07 | 580841 Eternal Student
Eternal Student's picture

+1 in real terms. +1,000...000 in nominal votes.

Tue, 09/14/2010 - 12:25 | 580910 Spitzer
Spitzer's picture

No inflationist EVER said we would have demand pull inflation.

Only currency flight inflation.

Tue, 09/14/2010 - 12:49 | 580985 chrisina
chrisina's picture

Please explain

Tue, 09/14/2010 - 13:14 | 581082 Spitzer
Spitzer's picture

lower interest rates cause prices to be bid up. That is demand pull.

When a currency sells off, it loses value. That is flight inflation.

Tue, 09/14/2010 - 18:07 | 581823 B9K9
B9K9's picture

'Flight inflation' - very nice. Also, 'trade refusal', 'default scarcity', etc.

The "inflation" part of hyper-inflation is what seems to throw everyone off. All they can see is declining credit-money aggregates, which of course spell out deflation.

However, at some point the system simply cannot sustain itself given a reduced volume of economic activity. At that point, it becomes obvious to all that a default event is at hand.

A Treasury/$USD sell-off would cause hyper-inflation even if the Fed's reserves were back at historical norms. Hyper-inflation doesn't require too many dollars chasing too few goods. Rather, it merely requires no one wanting to exchange items of real wealth (farm, food, oil) for fiat confetti.

Tue, 09/14/2010 - 19:10 | 581963 hamurobby
hamurobby's picture

 at some point the system simply cannot sustain itself given a reduced volume of economic activity. At that point, it becomes obvious to all that a default event is at hand.

That is what the peasant/debtor cant see coming. How can MY CURRENCY not matter anymore, I need it to pay my bills. Dont those dumb people with all the money realize its important to me and that is all I have ever known?  Why wont they sell me groceries for my currency? 

Wed, 09/15/2010 - 00:02 | 582516 merehuman
merehuman's picture

yep, they are still taking those little green squares of paper and giving me real things. Amazed every time it still works.

Tried to give them beads and other worthy items, but they insisted on green paper. Its kinda funny really when i think about it.

Tue, 09/14/2010 - 13:09 | 581060 packman
packman's picture

chrisina -

Excellent chart, however there's one very important thing it doesn't show - and that is the components of the credit.

The problem is this - the government-debt component is very rapidly increasing as a percentage of overall credit, with no end to this trend in sight.

That being the case, ask yourself this - how does the non-governmetn compoent go down?  One of two ways:

1.  People get frugal and start paying off debt more than they take on new debt (very tiny fraction of current credit reduction)

2.  Bank writeoffs of debt as consumers default (the vast majority).

So now think abot the government:

1.  Is a government surplus feasible at all in the near future?  Per the CBO and OMB we're nowhere close for at least 10 years.

2.  Ahem.  No.

Thus the government has to revert to option 3, which is not available to the private sector - print, print, print.



Tue, 09/14/2010 - 13:46 | 581194 chrisina
chrisina's picture

I agree with that but the question is whether the money printing will accelerate or decelerate and whether the dollar will depreciate in value (ie buy less goods/assets) or appreciate?

Wed, 09/15/2010 - 13:08 | 583480 DavidAKZ
DavidAKZ's picture

+ estimated $T600 in losses because of so called credit derivatives. Infalate that one away.

Tue, 09/14/2010 - 12:31 | 580921 pslater
pslater's picture

"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?"

Zero Power,

I have wrestled with this for over a year and come to the conclusion that while inflation and deflation are mutually exclusive, deflation and hyper inflation are not.  I believe there are VERY powerful deflationary forces at work (there is no velocity of money right now) that will last at least several more years or until the political class come to it's sense (unlikely...).  Hence the rally in bonds is likely to continue longer than almost anyone expects.

However, the possibility of hyper inflation, which I believe is a crisis of confidence in currency (ies), is distinct if not inevitable.  In this environment, a balanced portfolio of long term bonds and precious metals has worked really well.  I am well aware that the bond positions will get killed in hyper inflation which is why I am a nervous holder of them and using the cash flow generated by the bonds to add to my PM holdings.

Tue, 09/14/2010 - 12:32 | 580927 pslater
pslater's picture

"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?"

Zero Power,

I have wrestled with this for over a year and come to the conclusion that while inflation and deflation are mutually exclusive, deflation and hyper inflation are not.  I believe there are VERY powerful deflationary forces at work (there is no velocity of money right now) that will last at least several more years or until the political class come to it's sense (unlikely...).  Hence the rally in bonds is likely to continue longer than almost anyone expects.

However, the possibility of hyper inflation, which I believe is a crisis of confidence in currency (ies), is distinct if not inevitable.  In this environment, a balanced portfolio of long term bonds and precious metals has worked really well.  I am well aware that the bond positions will get killed in hyper inflation which is why I am a nervous holder of them and using the cash flow generated by the bonds to add to my PM holdings.

Tue, 09/14/2010 - 09:26 | 580359 LeBalance
LeBalance's picture

If the predomonant "wisdom" is deflation, may I also suggest that wise readers might wish to broaden their monetary phenomenon bandwidth by reading FOFOA's blog.

His recent series on the mechanics of Hyperinflation is instructive and includes the present deflation as one act in the drama.

Tue, 09/14/2010 - 09:29 | 580373 SheepDog-One
SheepDog-One's picture

Indeed I agree we'll get both.

Tue, 09/14/2010 - 11:32 | 580734 Bananamerican
Bananamerican's picture

Democracy is the theory that the common people know what they want, and deserve to get it good and hard. 
H. L. Mencken 

Tue, 09/14/2010 - 09:33 | 580381 VK
VK's picture

We'll get both, but first deflation and then hyperinflation. The plebes are going to find their stocks, homes and assets are worth 5 to 10c on the dollar, then the elites will buy it up as they have already transferred the wealth of the middle class to themselves (Like what happened in the Soviet Union, post collapse, all the productive assets and stocks were bought up for cents on the dollar as people were starving). Following this, they will hyperinflate and further increase their grip via gold and silver. 

Tue, 09/14/2010 - 09:55 | 580442 LeBalance
LeBalance's picture

The predominant snatch and grab will be done via the paper legal system.  Only in rare cases of mercy will worthless value scrip be exchanged by elites for the pittance of the serf.  The paper legal system includes all those who hold mortgages but (a) regiestered upon purchase or (b) did not pay with specie and then proceed to obtain allodial title.  This paper system is backed by the law of force, that goes without saying.

Tue, 09/14/2010 - 11:00 | 580632 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Ding ding ding! We have a winner. Deflation has to run its course first. If everyone is unemployed and deep in debt it is impossible to have a high rate of inflation no matter how much Helicopter Ben prints. Once defaults tear through the economy, inflation will take root due to a shock in supply side. All of the companies that produce will be bankrupt and gone. Then inflation will kick in. This is 3 to 4 years plus in time frame. Hyperinflation will be the endgame. 

Tue, 09/14/2010 - 11:21 | 580700 1100-TACTICAL-12
1100-TACTICAL-12's picture

They way I understand it is Hyperinflation is not about the money, It is a lack of confidence in the money. No confidence, no bonds get bought, fed prints, viola.... But what do I know.

Tue, 09/14/2010 - 14:14 | 581265 Yophat
Yophat's picture

When Walmart starts demanding gold....or some other commodity then you'll have your confidence signal!  Right now its just EDLP...and falling!

Tue, 09/14/2010 - 11:42 | 580765 Rainman
Rainman's picture Mish clarified : hyperinflation means end of game.

and I say the 6-9 month scenario is wildly off target.

Tue, 09/14/2010 - 14:16 | 581271 Yophat
Yophat's picture

....yeah more along the lines of 18 to 24 months...barring natural disasters of unfathomable scale, frequency, and duration of course!

Wed, 09/15/2010 - 00:43 | 582582 RockyRacoon
RockyRacoon's picture

You're both wrong. It will be on Sept 22nd, 2011, at 4:32PM.

Wed, 09/15/2010 - 10:31 | 583091 DaveyJones
DaveyJones's picture

pacific or central?

Wed, 09/15/2010 - 12:31 | 583404 Yophat
Yophat's picture

LOL...well we'll know how the story goes in the US by December 23, 2011......and the rest of the world by June 2015!

Wed, 09/15/2010 - 13:43 | 583532 RockyRacoon
RockyRacoon's picture

I always give time in GMT.

Wed, 09/15/2010 - 16:24 | 583979 Yophat
Yophat's picture

Prefer biblical time myself. 

If you use the formula in Ezekiel 4:6 to peruse the prophecies in Daniel, Ezekiel, Revelations, Jeremiah, etc a person a whole new perspective in terms of timing!

We'll see the game wrap-up within the next 5 years!

Tue, 09/14/2010 - 12:04 | 580835 Rasna
Rasna's picture


I agree with your assessment... The mistake that has been made (and I include myself) is that it is one OR the other and then placing bets... The impossibility of timing events is the second mistake... The FED could drag this on for years absent any EXTERNAL EVENT(S)... We would LIKE for this situation to unwind now, but I personally have been waiting for over a year... The FED will do ANYTHING to prevent deflation, but based on current stats, they are losing the battle... So it seems to me that deflation is definitely in play, when it becomes full blown, I don't know... Then, Mish not withstanding, a hyperinflationary blowoff sweeps the nation as the failed policies of the FED and all of the administrations since FDR become apparent to all... I don't mean that in a negative way, but we will be walking on a razors edge...

Either we will get back to our founding principles, abolish the FED, recognize that the banksters and the financial services industry have nearly ruined our great nation and get some god damned politicians in Congress who are smart and have the welfare of the nation in heart and will start guiding our country back on track; or we will fall further into corporate oligarchy/plutocracy, maybe even dictatorship and police state to maintain the status quo.

But in the here and now, if you are a trader, you trade what you see and put aside trying to impress individual biases on the market... It won't work... The market will do what it does irrespective of what we "want" or how we "feel" about it, in its own time.

Tue, 09/14/2010 - 13:06 | 581044 Millennial
Millennial's picture

There is a failure to understand deflation. There is deflation in assets particularly financial assets. However this is self induced behavior as the Fed print money investors will jump out of financial assets because the currency is depreciating. That said if you want to know the rate of inflation compare the money supply to a fixed commodity then you will understand the real rate of inflation. Gold is rising in price because we are printing. 


Look at the 70's, we defaulted in 1971, the US currency holders sent their US dollars back to us resulting in inflationary pressures, now if you look at the DJIA, and other financial assets the prices shot down. People were forced to spend more on immediately needed goods which results in sell offs of financial assets and delayed purchases of big things like homes and cars which also experienced deflation. But look at Gold or Silver or Commodities at the time they did fairly well. 


You can have deflation and high inflation and high unemployment all at the same time, trust me history has show that it's entirely possible. 

Tue, 09/14/2010 - 12:26 | 580913 Spitzer
Spitzer's picture

no, deflation does not have to run its course. the dollar just has to sell off.

Tue, 09/14/2010 - 12:46 | 580972 1100-TACTICAL-12
1100-TACTICAL-12's picture

I'm with u Spitzar...

Grandpappy always said... " If you're goona get caught with a trollip, make damn shoure she's a good lookin sumbitch"

Tue, 09/14/2010 - 18:20 | 581851 B9K9
B9K9's picture

Keep preachin' it.

The "inflation" part of hyper-inflation has everyone bamboozled. Yes, we are experiencing radical deflation as money-credit aggregates implode upon themselves.

However, how long can an insolvent zombie continue to 'live'? How long will people continue to accept fiat Ts & $dollars from a dead-country walking? A Treasury/dollar sell-off would usher in hyper-inflation regardless of a contracting monetary base.

Rapid price increases due to sudden dollar depreciation = hyper-inflation. Sudden dollar depreciation (sell-off) occurs when everyone wakes up and decides they don't want to be the last fool holding fiat confetti.

Tue, 09/14/2010 - 12:56 | 581006 Millennial
Millennial's picture

Yeah cause in the 70's we didn't have high inflation, high unemployment, and asset deflation. 

You forget your history. 

We will have hyper-stagflation. 

Tue, 09/14/2010 - 13:04 | 581036 1100-TACTICAL-12
1100-TACTICAL-12's picture

what was the national debt in the 70's?

hyperinflation will come when the world realizes the $14 trillion+ will never be paid back/loss of confidence in the fiat dollar=HYPERINFLATION...

Tue, 09/14/2010 - 13:08 | 581049 Millennial
Millennial's picture

No, you don't get it. We defaulted in 1971. 

Tue, 09/14/2010 - 13:09 | 581057 Millennial
Millennial's picture

The reason we didn't have hyperinflation was because we still had a positive trade balance and positive savings.

Tue, 09/14/2010 - 14:27 | 581303 augmister
augmister's picture

We have just finished about 30 years of now it's time to deflate.  Amazing how "over thought" this simple premise is?

Tue, 09/14/2010 - 14:19 | 581278 Yophat
Yophat's picture

LOL....because nobody else in the world is in a similar spot!!!

How many countries don't have central banks tied to the central bank of central banks the BIS????  How many private shareholders are there in the central banking system????

Tue, 09/14/2010 - 13:31 | 581138 BetweenThe Coasts
BetweenThe Coasts's picture

In the 1930s worldwide sovereign debt defaults drove the flight to safety in U.S. gold backed dollar assets –the U.S. government hadn’t defaulted. World demand for dollars intensified deflation in the U.S. as its dollar became increasingly valuable. Today the U.S. dollar is the world reserve currency. However the U.S. money supply today is 99% credit and only 1% actual cash backed by the full faith of the U.S.  When a 1930s scale panic to riskless assets happens again, don’t count on renewed demand for the US$, at least not worldwide. In the 30s the U.S. was the largest creditor nation; today it is the biggest debtor. As Mr. Martian Armstrong suggests, back then the U.S. dollar was gold, today not not so much.

Tue, 09/14/2010 - 14:18 | 581274 augmister
augmister's picture

+1 Komerade.....can I trouble you for a crust of rye bread and bowl of borscht?

Tue, 09/14/2010 - 09:37 | 580389 Buckaroo Banzai
Buckaroo Banzai's picture

Yes. FOFOA's take is a compelling one. 

Tue, 09/14/2010 - 11:26 | 580714 Greyzone
Greyzone's picture

It's a compelling take when FOFOA says that 91.5% of the workforce is working? Exactly what is FOFOA smoking? In pure workforce terms, we've fallen from 65% utilization to 58% utilization of the available workforce over the last decade or so. Secondly, even if you use the BLS U3 number of 9.6% unemployment, that's 90.4% of the "workforce" working. But the reality, even admitted by the BLS is the U6 number which is 17%, so only 83% of that 58% are "working", which means that less than 49% of the capable workers in the US actually work today.

Now, if FOFOA gets such basic facts wrong, what else does he get wrong? He assumes there is some sort of massive windfall in salaries and wages, yet once again, all available data indicate that this assumption is false and that he is wrong. Salaries are contracting. Wages are contracting. Hours worked are down. This means total take home pay is down, which reinforces basic spending patterns. People are scared precisely because of these phenomenon. And they are not saving. No, indeed, they are paying down debt, as Denninger has noted 1000 times in his debt graphs.

Finally, FOFOA appears to assume, as most inflationists do, that the politicians are the ones in control here. If they were, the Fed would not be an "independent" bank. It would be like Weimar Germany or Zimbabwe where the government fully controls the currency. But the politicians do not control the currency. They ceded control in 1913 to private parties. For these private parties, hyperinflation is a disaster so why would they hyperinflate?

No inflationist ever answers the above question!!! Why should the Fed hyperinflate and voluntarily destroy itself? Someone please tell me why the Fed will voluntarily commit suicide? Buehler? Anyone?

Thus far we have seen somewhere between at least $30-$40 TRILLION in debt destroyed versus a couple trillion total monetized. If Bernanke was going to save the politicians, why hasn't he done so before now? I'll tell you - because he never intended to save the politicians. All that Bernanke has done to date is monetize enough to keep the market afloat and to help cover any potential "run" on any of the major NY banks. He's not interested in hyperinflating and sacrificing all the bankers on Wall Street to the crowds. He's interested in saving his cronies. Now I am not saying he will succeed, but that's his goal.

P.S. Much of the problem in these debates comes from the many different definitions of inflation and deflation that people carry around. I use a defintion that is strictly based on the monetary supply increasing or decreasing. And since credit IS money in a fiat system, the destruction of credit is a deflationary event. Price movements are a bad way to track monetary inflation and deflation because supply and demand can affect prices at the same time and have nothing to do with the expansion or contraction of the money supply. Every time a hyperinflationist resorts to price arguments, I know I am dealing with a nitwit who has accepted his brainwashing from the Fed, since the Fed itself has tried for decades to wash the monetary definition of inflation and deflation out of the public discourse. And why would the Fed do that? Because the monetary definitions of inflation and deflation clearly point right back to the Fed itself as the root cause of these problems. People who talk price changes as inflation and deflation have simply been assimilated by the Fed collective and can no longer see the forest for the trees.

Tue, 09/14/2010 - 11:40 | 580762 Eternal Student
Eternal Student's picture

The other, rather glaring, thing which the Hyperinflationists (and especially FOFOA) ignore is the response of the other fiat currencies if the dollar were to collapse. That would especially kill their exports, and right now everyone is trying to export their way out of this mess. They will debase their currencies as well, in order to preserve their export engines.

What is the worth of a collaping dollar, when the other currencies are collapsing as well?

Tue, 09/14/2010 - 15:57 | 581521 Eternal Student
Eternal Student's picture

Heh. Lots of replies elsewhere since I posed the question, but it's telling that not one hyperinflationist can answer the question.

It's not surprising, since the answer completely shoots down their arguments. Oh well.

Tue, 09/14/2010 - 22:30 | 582281 Spalding_Smailes
Spalding_Smailes's picture

The other, rather glaring, thing which the Hyperinflationists (and especially FOFOA) ignore is the response of the other fiat currencies if the dollar were to collapse. That would especially kill their exports, and right now everyone is trying to export their way out of this mess. They will debase their currencies as well, in order to preserve their export engines.




The other fiat currencies running from the dollar? You just described inflation, if they all run to the door asset prices fall, rates go up in the US overnight, inflation. (Also the other fiat currencies just cant exit the "Dollar Hegemony". The dollar underpins everything, you would need a global reset, derivatives, ect. we are all locked up, bretton woods 2.0 needed stat.!!!)

If China buys up German currency, Germany must buy up dollars to keep its currency from going through the roof, killing exports for the Germans.Or if the Germans do not buy dollars, Chinas transfer our debt to them.

Beggar thy' neighbour look it up it was tried before, this made the Depression worse.

Tue, 09/14/2010 - 23:07 | 582417 Eternal Student
Eternal Student's picture

"The other fiat currencies running from the dollar? You just described inflation, if they all run to the door asset prices fall, rates go up in the US overnight, inflation."

I do wish the Inflationists would make up their minds. First it's prices go up, and that's inflation. Now, it's prices go down, and it's inflation. Sorry, that's not a convincing argument.

"The dollar underpins everything, you would need a global reset, derivatives, ect. we are all locked up, bretton woods 2.0 needed stat.!!!)"

That part is correct. A global reset would mean massive credit loss, and monetary deflation. Which is why  monetary inflation can't take place until that happens.

"Beggar thy' neighbour look it up it was tried before, this made the Depression worse."

Correct. And if you've been reading the news at all, that's exactly what's been going on over the past year. From China's stubborn pegging to the dollar, to Germany's reluctance to bail out Greece. All countries like having their exports at a competitive price advantage. ZH might have even run a few articles with that headline. Certainly a number of other sites have.

Tue, 09/14/2010 - 23:40 | 582464 Spalding_Smailes
Spalding_Smailes's picture

I do wish the Inflationists would make up their minds. First it's prices go up, and that's inflation. Now, it's prices go down, and it's inflation. Sorry, that's not a convincing argument.

China dumps dollars then,

Interest rates and inflation rise rapidly as dollar demand and value falls, import prices rise, and the Fed moves to raise rates to stem the tide or dollar repatriation... Inflation.


Tue, 09/14/2010 - 23:43 | 582471 Spalding_Smailes
Spalding_Smailes's picture

Please reread everything I posted. Then read what your post said calling out Inflationist....

I just destroyed your argument.

Wed, 09/15/2010 - 02:00 | 582653 Eternal Student
Eternal Student's picture

Umm, no. Contradicted yourself is what you did. Originally you claimed that prices would fall, and later made up an example where they rose.

And, of course, in your hypothetical (which ignores the peg to the dollar, I might add), you ignored the subsequent responses of other Countries, which would be to cheapen their currency, driving U.S. import prices down again. Which has been what has happened. It's tough to compete against ChiAmerica, and impossible to compete when the prices are low.

The point is that as long as Debt and Credit are going on, a depreciation of the dollar needs to be met by depreciation of other currencies. Otherwise, their exports are badly hit, and cheap imports flood in to their own economies.

As far as the Fed raising rates goes, this will indeed have to be done at some point. But then you're looking at massive Credit destruction (via derivatives and other leveraged bets, as you point out), and the fall of that House of Cards will be highly deflationary.

After the excess Credit/Debt in the system has been destroyed, then I would agree that we'll have serious inflation. The destruction of the dollar will also be on the table. But not before then.

Tue, 09/14/2010 - 11:49 | 580787 Bananamerican
Bananamerican's picture

"No inflationist ever answers the above question!!! Why should the Fed hyperinflate and voluntarily destroy itself?"

Because, "Shit happens"

(I think i just achieved the largest answer/question word count ratio in ZH history...)

Tue, 09/14/2010 - 11:53 | 580801 Bananamerican
Bananamerican's picture

What i mean to say by "shit happens" is, I don't expect the Fed to "stay in control" of the situation.

I can't imagine too many instances of hyperinflation which were intentionally instigated....Political intervention nearly ALWAYS tends toward inflation remember

Tue, 09/14/2010 - 12:08 | 580844 Greyzone
Greyzone's picture

"Political intervention nearly ALWAYS tends toward inflation remember."

There you go again, like every other hyperinflationist, assuming that the Fed will voluntarily choose to rescue the politicians. You didn't answer the question. You did exactly what every hyperinflationist does - made a statement of faith, a religious statement of belief. You didn't explain why, you instead made a leap of faith. Completely classic.

Your god is hyperinflation and there can be no debate with a purely faith based position from someone who is also engaged in a circular argument.

Tue, 09/14/2010 - 12:23 | 580902 lookma
lookma's picture

The printing is a consequence of the onset of hyperinflation, which is ushered in by a loss  of confidence.

The massive money creation many mistakently believe causes hyperinflation is really just the response to the onest of hyperinflation.



Tue, 09/14/2010 - 12:35 | 580943 Spitzer
Spitzer's picture

The FED does not have to back up the politicians to cause hyperinflation.

When the dollar sells off, it is inflating. The Fed can only print money to temporarily stop hyperinflation.

money printing is the result of hyperinflation, not the cause. The cause is the sell off.

Tue, 09/14/2010 - 12:58 | 581018 Millennial
Millennial's picture

Hyper inflation is the shock in supply of currency within the economy. The Fed is totally responsible for money supply. Sell off is just a result of huge injections because people know that the dollar is going to become worthless because they noticed the huge increases in supply. 

Tue, 09/14/2010 - 13:20 | 581106 Spitzer
Spitzer's picture

not really

The Euro fell from 1.50 to 1.19 (inflation) before there was any money printing. Then the ECB printed and bailed out to stop the Euro-going-to-zero-talk.(hyperinflation)

The ECB did the same thing as the Fed, they printed to temporarily stop hyperinflation

Tue, 09/14/2010 - 14:39 | 581325 Millennial
Millennial's picture

The rudimentary cause of hyper inflation is a rapid increase in the money supply when there is no or little corresponding with growth in output of products and services. That said hyper inflation is a result bad monetary policy. Confidence games means nothing, but it does exacerbate the problem. When the FED creates trillions out of thin air all it has done is hyperinflate the dollar, once that money is put into the economy through the banks people will see this was all a farce and abandon the dollar. 


Tue, 09/14/2010 - 13:14 | 581083 chrisina
chrisina's picture

Ok, let's see if I understand what you are saying.

. when did the massive money printing start? Q4 2008

. so the sell off was prior to that. What caused it?

Correct me if I'm wrong, assuming we are now already in hyperinflationary mode, the sell off should continue and accelerate and the massive money printing should not only resume soon, but accelerate ?


Tue, 09/14/2010 - 13:26 | 581122 Spitzer
Spitzer's picture

The Fed printed money and bailed out America Inc. in late 2008 to stop hyperinflation. If the fed did not bail out anything, the flight out of the dollar would have been just as fast as the flight in. The dollar would have been done by June of 09.

In the Euro's case, the selloff happened in the Euro and then they announced the bailout.

Not all cases are the same but the printing is done to restore confidence either way. Temporary confidence I might add.



Tue, 09/14/2010 - 14:45 | 581346 Millennial
Millennial's picture

Spitzer is right that the dollar creation was used to bailout the banks. The problem is banks don't add production nor services to the economy they are simply a transfer entity from those who save to those who invest. Now since we aren't adding any production or services to the economy of any value to compensate for the Fed's printing thus in now are in a hyperinflation situation. All that is needed is the pin prick to set it off. 

Tue, 09/14/2010 - 12:38 | 580954 Bananamerican
Bananamerican's picture

"Your god is hyperinflation and there can be no debate with a purely faith based position blah blah blah"

quit flecking me with your spittle Greyzone...

Tue, 09/14/2010 - 12:09 | 580848 lookma
lookma's picture

He doesn't even recognize the difference between inflation and hyperinflation, i.e. he has no idea what he is talking about.

Tue, 09/14/2010 - 12:51 | 580992 cougar_w
cougar_w's picture

I think the poster was working from the assumption that while the Fed could destroy itself, it doesn't have to except to save the Common Man from deflation, and no one else can decide our fate because only the Fed can print money.

If hyper-inflation is strictly a monetary mishap, then the Fed cannot lose, and no shit happens.

But if hyper-inflation is (as is often commented) a failure in nerve/confidence and can be triggered by external realities then we can get it even if the Fed ties off the money teat and lets the Common Man deflate, default and die.

We often hear that we will have both situations and possibly at the same time; deflation for the Common Man in the middle-class as his resources dry up and he defaults, and inflation for everyone else as the money sloshing around in the monetary system suddenly has no useful home, and starts chasing commodities as a hobby.

It seems to me that it might be prudent to take all these arguments as they are, all at once, and as equally valid. I really do not see any internal contradictions in doing so. The economy is not a homogeneous thing but a series of layers and silos, many of which have a global existence. It is falling apart, and the layers and silos are rotting at different rates according to different properties and creating either inflationary forces for pricing, debt deflation, monetary dis-inflation, hoarding and panic buying, migration of money out of risk assets and into commodities, expatriation of funds and off-shoring, trickery and fraud, gold and silver hoarding, and probably rising of the lights.

It is not the US economy that is on the brink, and it is not the US currency that is on the ropes, rather it is the whole of 800 years of mercantile experimentation that has run aground, and honestly I don't think it's got more than a few years (maybe much less) left in it.

Wed, 09/15/2010 - 00:52 | 582590 RockyRacoon
RockyRacoon's picture

As someone said at another article: 

The economy is not a machine, it is an ecosystem.

That pretty much agrees with your comment.

Tue, 09/14/2010 - 12:08 | 580843 lookma
lookma's picture

Wow, so you assert your own defintions and then tell us others are wrong using your defintions.  Compelling.  Its like you haven't even read FOFOA - oh wait, you didn't.


Tue, 09/14/2010 - 12:31 | 580920 Spitzer
Spitzer's picture

You are reading FOFOA yet it is all going right over your head.

The chairman of the Fed was appointed by the govt. The dollar is backed by the US government, not the Fed.

Tue, 09/14/2010 - 13:10 | 581058 Greyzone
Greyzone's picture

And how well did that government attempt to audit the Fed go? Hmm?

Tue, 09/14/2010 - 13:17 | 581091 Shameful
Shameful's picture

What choice does the Fed have?  Will it come out and announce "We are a private unelected star chamber.  We exist only to loot and pillage the American public and world.  Now everyone bend over here it comes again!".  The Fed has suck power because they are "boring" and in the last 100 years have been mostly ignored as they pillage.  They are in no position to fight a full fight, and if they were to pull such a move the political backlash would be epic.  At least with hyperinflation they can claim ignorance and stupidity, the cornerstone of government life.

Now even the most crooked of politician would put pressure on them, they want their piece of the prize. Everyone wants to take a taste.

As to destroying themselves what about the assets they would gain, ad their member banks?  Remember freshly printed money spends the same as the existing money supply, a lighting blitz of the money supply could allow a smart player to amass an incredible amount of resources before J6P realizes that the game is fully afoot.

Tue, 09/14/2010 - 14:23 | 581288 Yophat
Yophat's picture

Amen!!!  But they will certainly portray the appearance of inflation or even hyperinflation while they take all your assets with that little tool called debt (specifically money created by debt....and a little usury or compound interest)!

Tue, 09/14/2010 - 20:11 | 582017 hamurobby
hamurobby's picture

Okay, forget the us gov, what actually does the fed res actually back its debt notes with? A firm, never to be changed static amount of debt notes? Their wonderful balance sheet, which contains what exactly. Their transparency is illuminating. I thought it was actually confidence in its biggest debtor, but maybe I am wrong. Since the USG is not part of the fed res, I guess it can default and not pay.

One more thing, the fed isnt worried about saving the gov, well thats an interesting point of view. I guess because they own everything in debt, they dont need any gov. But answer this, how are they going to have ownership of any asset without the gov to claim their claims to assets (you know, property rights, rule of law)as legal? They may need a pretty big army to do so.

Wed, 09/15/2010 - 13:21 | 583496 DavidAKZ
DavidAKZ's picture

*No inflationist ever answers the above question!!! Why should the Fed hyperinflate and voluntarily destroy itself? Someone please tell me why the Fed will voluntarily commit suicide? Buehler? Anyone?*

The Triffin dilemma (less commonly the Triffin paradox) is the observation that when a national currency also serves as an international reserve currency (as the US dollar does today), there are fundamental conflicts of interest between short-term domestic and long-term international economic objectives. This dilemma was first identified by Belgian-American economist Robert Triffin in the 1960s, who pointed out that the country issuing the global reserve currency must be willing to run large trade deficits in order to supply the world with enough of its currency to fulfill world demand for foreign exchange reserves.

Tue, 09/14/2010 - 10:09 | 580477 DaveyJones
DaveyJones's picture

I'll second that on FOFOA

Tue, 09/14/2010 - 10:26 | 580531 Assetman
Assetman's picture

I think the discussion on what gets us to hyperinflation is an important one.  But I also think that hyperinflation as an "either/or" proposition to deflation is a bit myopic.  Here's why...

Any economy deals with inflationary and deflationary forces.  They're constant pressures, but they're also highly variable. 

Sometimes, monetary and/or fiscal intervention is used in situations where either inflationary and/or deflationary sources are so great that it does long term damage to the economy.

Over the past 18 months, the Fed has embarked on a campaign to combat deflationary pressures with very extreme easy monetary policy.  It's not everyday you see zero percent interest rates for the banking system and an ongoing policy of monetizing debt in the $trillions.

So far, these moves have basically managed to offset the forces of deflation.  It doesn't mean that those deflationary forces have disappeared.  It does mean that the Fed (so far) still needs to apply offsetting pressure to the wound.

Are we at risk of hyperinflation?  Given the pattern of Fed policy and its preference for monetizing government debts, the answer is "of course".

The central question is: how far will the Fed go down this path?  While the Fed would prefer to debase the dollar in a no consequence fashion if it could, they also know the process could get out of hand.  Hyperinflation, as CD correctly asserted, is the byproduct of a world totally losing confidence in a currency.  And I'm having a hard time understanding why Uncle Ben would be receptive to the idea of losing world currency reserve status-- or risk the Fed remaining a viable institution-- if the USD faced outright collapse.  Those are some pretty serious unintended consequences... you know, the kind that can get you hung or shot in a period of turmoil.

The above article from Williams is correct is one important respect-- at this point, there isn't really a solution that will cure all ills.  The Fed could stop short of its dollar breaking point and sacrifice the stock market to fund Treasury debt in a massive flight to quality trade... it would save the dollar, but bring back those deflationary forces we've been trying to avoid.  Or the Fed could go full bore monetization-- knowing that the major unintended consequence would be currency collapse, hyperinflation, and social disorder.

Tough choices, indeed.  I'm sure they're still looking for that miracle before having to take the next nasty steps.

Tue, 09/14/2010 - 12:00 | 580830 Eternal Student
Eternal Student's picture

You raise a number of good points, and say them well. I'd like to add one key thing which I haven't seen discussed, regarding the losing of the reserve currency status. In a word - China.

What happens when (or if) China starts seriously issuing Bonds? They are moving into the CDS game; it will only be a matter of time IMO before they join the world in other ways.

Remember, Bonds were created, and historically used (rather successfully), to fund armies and wars.

China has the means to produce. Flush with even more cash from Bonds would allow them to greatly build up their military, enough to challenge the U.S.. Particularly in the offshore waters it lays claim to, as well as protecting its trade routes with the Middle East, and its up and coming wheat fields in its (soon to be) colonies in Africa.

Losing the ability to combat that as cheaply as we have right now, will make it difficult (at best) to combat an aggressive China. We'll not only have lost the means of production, but have lost the ability to cheaply fund a build up as well. It will be a hard loss for the U.S., especially as resources become more valuable.


Tue, 09/14/2010 - 10:57 | 580620 Joeman34
Joeman34's picture

My observation is that we have both inflation and deflation currently.  We are seeing deflation in credit-driven assets where prices were bid up over the last few years as a result of easy borrowing policies [read: homes, cars, discretionary items].


We are seeing inflation in the prices of everyday items such as food and other basic necessities due to demographic shifts - the developing world is demanding more and more basic necessities everyday as the new middle-class continues to claw its way out of poverty.


It doesn't have to be 'one-than-the-other' deflation then inflation, or vice versa.  We are experiencing both, concurrently... 

Tue, 09/14/2010 - 12:17 | 580881 TrulyStupid
TrulyStupid's picture

I agree... we have inflationary pressures caused by deficit malinvestment on the fiscal  side. QE as well as stupidly low interest rates on the monetary, deflation fighting side.  The end result will be deflation of income producing assets and steeply rising daily prices... the hyperinflation death cycle of currencies and the final reevaluation of gold to USD..

Please note that the Fed/Treasury already has most of all the wealth - physical gold.. and will therefore survive the repegging of the dollar. Your finances will not.

Tue, 09/14/2010 - 12:42 | 580958 chrisina
chrisina's picture

I agree that FOFOA's latest post on how, conceptually, a credit deflation can lead to a hyperinflationary collapse was brilliant. And the graphics with the hourglass are now stuck in my mind.

Yet, as much as a credit deflation can lead to a hyperinflationary collapse, it doesn't automatically do so :

the last massive credit deflation this country has known, from 1930-1945, didn't end with a hyperinflationary collapse of the dollar (it ended with immense destruction, but not that of the dollar)

All in all, what I think we should keep in mind is that a credit deflation increases the risk of hyperinflationary collapse, and that this risk increases with time as the credit deflation takes its toll.

Whether that will be the end game, and when, is I think far too early too tell, it will depend on many other geopolitical factors, as it did last time we had a similar global mess of epic proportions.


Now it seems quite obvious that in such an environment where we have a looming and growing risk of hyperinflationary collapse, the one asset that will win against all others is Phys.Gold because it is the only store of wealth which is free from any liabilities from this deflating credit system and therefore the only way to transfer money savings from the old to the new world that will emerge if the dollar were to collapse.

I'd say it's still extremely unlikely that we see hyperinflation within the next 6 to 9 months but within the next 6 to 9 years, I'd assign it a 50/50 chance...


Tue, 09/14/2010 - 18:41 | 581889 B9K9
B9K9's picture

In 1935, total US population was under 150m. Domestic oil reserves in Texas, Alaska, California, etc had not even begun to be fully exploited. As for the massive oil reserves in the Middle East, they had only been recently discovered. Their utilization wouldn't fully occur until after WWII.

In 1935, it was inconceivable for the US to fail as a political entity. It was the world's largest manufacturing economy. The dollar was still backed by gold. None of the ensuing social programs and/or promises had (yet) been made.

Now compare and contrast that to where we stand today. We are well past peak-oil; there ain't gonna be a cheap energy subsidy to save our collective bacon. Plus, we now have over 300m citizens (+20m+ illegals), 50% of whom are non-productive leech-fucks. Given these underlying facts, it is incontrovertible that the public debt will never be repaid.

That leaves two choices: it can either be (attempted to be) inflated away or defaulted. Both lead to hyper-inflation even in the face of radical deflation in overall monetary aggregates.

Tue, 09/14/2010 - 09:28 | 580367 NOTW777
NOTW777's picture

"The Fed’s primary function — as a private corporation owned by commercial banks — is to protect the banking system."


add:  at the cost to the American taxpayer.  Fed doesnt use its own capital

Tue, 09/14/2010 - 09:51 | 580433 i-dog
i-dog's picture

Bingo! And it is not "the Federal Government" that is bankrupt, it is ALL US citizens.

The gubmint is just a negotiating representative in "talks" ... then they come back to the citizens and report "pay now" (taxes) or "pay later" (debt obligation passed to children/grandchildren).

Every dollar printed by the Treasury is a debt obligation by a US citizen to a Federal Reserve shareholder. The more you let the Treasury print - to "pay" for your military, medicare and social security - the more you owe them from future taxes.

Tue, 09/14/2010 - 10:05 | 580461 hedgeless_horseman
hedgeless_horseman's picture

The Fed’s primary function — as a private corporation owned by commercial banks — is to protect the banking system. 

Ohhhh, the ramifications of this fact!


Know Federal Reserve Bank; know debt slavery.

No Federal Reserve Bank; no debt slavery.

Tue, 09/14/2010 - 09:29 | 580368 MarketFox
MarketFox's picture

Gold has never been so broadly and deeply distributed as it is today.....

Care to guess what that means ?

Distribution TOP....


Inflation does not happen without a increasing wage price spiral....


And China will not shoot itself in the foot....

If anything....China will allow a short order to buy cheap assets because of exaggerated currency moves.....

Sorry.....but this article is full of flawed logic....

Tue, 09/14/2010 - 09:37 | 580385 Spalding_Smailes
Spalding_Smailes's picture

Inflation does not happen without a wage spiral ??? What happens if their is a rush to get out of dollar assets because of the decline in the dollar, ... inflation, rates jump, ect ...


China = Overcapacity, no consumer base to take up slack of US consumtion.


John Williams flawed logic? Please ....

Tue, 09/14/2010 - 09:42 | 580406 MarketFox
MarketFox's picture

The CREDITOR (China) although not far better off than the DEBTOR(US)....The largest DEBTOR in the history of the world.....

Tue, 09/14/2010 - 11:06 | 580649 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Let me give you guys a hint. No wage spiral is coming anytime soon. With so many unemployed people the corporations are picking them up on the cheap and will for quite a while. I believe this is known as wage deflation.

Tue, 09/14/2010 - 14:44 | 581344 Things that go bump
Things that go bump's picture

What has corrected this problem in the past is a major die-off of some sort, a plague or a really big war or a famine.  It is not that there are too few resources, it is that there are too many claims on the ones we have and that is a breeding ground for conflict.  The population over the last 50 years has literally exploded and is quite unprecidented and I don't believe our numbers are sustainable.   I think that what happens to yeast when it reaches the limits of the Petrie dish is what is in our immediate future.  I believe there is a big die-off coming one way or another.  We've dodged the disease bullet a couple of times in the last 10 years or so, once with SARS and then with that high-bred, perhaps designer flu that petered out last year.  We are overdue.   

Tue, 09/14/2010 - 22:41 | 582341 HungrySeagull
HungrySeagull's picture

No worries, last years H1N1 is now availible along with the evolving N3 version plus another strain at your local walgreens right now for 29.00 or Medicare, insurance etc. Free.

Any one can get a needle now. No need to have mass die offs.


The last time we had one was during the Black Death and they spared just enough people to bury the dead and clean up the mess to move on.

Tue, 09/14/2010 - 09:39 | 580392 Cognitive Dissonance
Cognitive Dissonance's picture

There is a major difference between inflation and hyper inflation. Hyper inflation isn't "just" a lot of inflation. It's a currency crisis. Or more to the point, a failed currency.

Tue, 09/14/2010 - 09:42 | 580404 Turd Ferguson
Turd Ferguson's picture


Amazing that very few seem to understand this simple point.

Tue, 09/14/2010 - 11:16 | 580676 taraxias
taraxias's picture

Spot on. And this has been my argument in responding to JB's posts, whenever I'm not insulting him, that THIS IS A CURRENCY CRISIS and in this environment gold thrives. END OFF.

Tue, 09/14/2010 - 12:10 | 580850 Cognitive Dissonance
Cognitive Dissonance's picture

Can someone please explain to me why a civil discussion about inflation, deflation and hyperinflation warrants "junks" without explanation?

ZH seems at times to be rapidly degenerating into Yahoo finance.

Tue, 09/14/2010 - 12:31 | 580925 Dagny Taggart
Dagny Taggart's picture

As long as you and a few others post here, ZH will remain very cool. Just ignore the hoopleheads junking.

Tue, 09/14/2010 - 21:09 | 582177 Rusty Shorts
Rusty Shorts's picture

Ignore the junks, some people can't handle the truth.

Tue, 09/14/2010 - 12:56 | 581007 cougar_w
cougar_w's picture

I junked you.

Because you mentioned "ZH" and "Yahoo finance" in the same sentence. That's why.

15 minute timeout. Come back when you think you can play nicely.


Tue, 09/14/2010 - 14:11 | 581259 Cognitive Dissonance
Cognitive Dissonance's picture

Can I please come out now?

I promise never to use those words again within a country mile of each other. :>)

Tue, 09/14/2010 - 18:21 | 581854 Hulk
Hulk's picture

CD, you are showing your age. The new punishment is "outside" and therefore you may now come back "in"

Tue, 09/14/2010 - 18:39 | 581901 Cognitive Dissonance
Cognitive Dissonance's picture

It shows despite my best efforts. All kinds of "new" meanings for "out" that weren't used when I was a young lad. I was thinking I was sent to my room and thus I wanted to come "out" of my room.

Time to shut up before I dig the hole deeper than it already is.

Tue, 09/14/2010 - 20:33 | 582109 Hulk
Hulk's picture

Yes, the new punishment is to have the kid get out of their room and go outside. And if the kid is really bad, they have to stay outside all day! WiFi may just change that though...

Wed, 09/15/2010 - 10:40 | 583112 DaveyJones
DaveyJones's picture


Wed, 09/15/2010 - 13:41 | 583531 Geoff-UK
Geoff-UK's picture

To reduce the comments from jackasses who would be happier at Yahoo Finance, can someone ask Tyler to implement a nominal $5/month subscription fee to have posting rights?  I'm having to read two pages of comments for one good nugget from CD or others.

Tue, 09/14/2010 - 19:23 | 581991 Rasna
Rasna's picture

Haven't we been here before?  How many times does it have to be said?

Turd, you're beating a dead horse...

Tue, 09/14/2010 - 09:44 | 580407 Stormdancer
Stormdancer's picture

*bingo*.....and those come out of the blue and burn hot and fast...

Tue, 09/14/2010 - 10:11 | 580479 DaveyJones
DaveyJones's picture

right now, we just have a D-, but Hillary is gonna talk to the principal

Tue, 09/14/2010 - 10:20 | 580507 Cognitive Dissonance
Cognitive Dissonance's picture

Thank God for the Clinton dynasty. Grade inflation will soon turn to grade hyperinflation. From kindergarten to MBA in 12 short months.


Tue, 09/14/2010 - 11:53 | 580802 kathy.chamberli...'s picture

ring a ding ding

i have hyperconfusion,

hyperdiaper usage, coming to america.

Tue, 09/14/2010 - 12:59 | 581021 1100-TACTICAL-12
1100-TACTICAL-12's picture

There is a major difference between inflation and hyper inflation. Hyper inflation isn't "just" a lot of inflation. It's a currency crisis. Or more to the point, a failed currency.


Once upon a time backed by Gold, Then backed by manufacturing, then backed by americans using houses as ATM's.Backed now by ?

Tue, 09/14/2010 - 20:20 | 582076 Dr. Sandi
Dr. Sandi's picture

Hyper inflation isn't "just" a lot of inflation.

And I suppose hyperspace isn't "just" a lot of space. Or that hyperbole isn't "just" a lot of bole.

Tue, 09/14/2010 - 09:42 | 580402 Al Gorerhythm
Al Gorerhythm's picture

Broadly? Maybe, but only as trinkets. Deeply, not so much, just ask both you neighbors and then walk the street knocking on doors about ownership. If their reply is a gun through the letter box you'll have an answer. If the door slams in your face, ask your family. . 

When Jonny Bravo is holding gold in his sweaty little hand, then it will be deeply distributed

Tue, 09/14/2010 - 10:07 | 580475 SpeakerFTD
SpeakerFTD's picture

Inflation and hyperinflation are two completely different monetary phenomenon.   You are right that traditional, garden-variety inflation cannot occur without a wage spiral, but hyperinflation is a completely different dynamic linked to confidence in a currency.

Tue, 09/14/2010 - 10:18 | 580490 MarketFox
MarketFox's picture

Exactly....Note the comment about China....

China will not shoot itself in the foot....

Tue, 09/14/2010 - 10:47 | 580593 fajensen
fajensen's picture

China will not shoot itself in the foot.... Not even when the allegoric foot is placed firmly on the "face" of the US? In chaos lies opportunity!

Tue, 09/14/2010 - 11:15 | 580673 MarketFox
MarketFox's picture


Tue, 09/14/2010 - 10:10 | 580480 Travelerjim
Travelerjim's picture

Why is it that you say gold is well distributed? I know very precious few people who have anything more than a token position. Most have no position at all.

Tue, 09/14/2010 - 10:22 | 580509 MarketFox
MarketFox's picture

No....on a relative basis....although GOLD is not owned by is still more broadly and deeply owned than it ever has been in recent history....


Big money does not care what the asset is that is utilized....Big money wants to create the sizzle....then distribute whatever the asset is at "publically logical" prices....

Just trade it like any other asset....



Tue, 09/14/2010 - 14:32 | 581313 augmister
augmister's picture

+1  Gold bubble!!!

Tue, 09/14/2010 - 09:33 | 580382 chinaguy
chinaguy's picture

Lot of respect for the guy, but Williams has been calling for this for the past 6-8 years already.

Tue, 09/14/2010 - 09:39 | 580393 Spalding_Smailes
Spalding_Smailes's picture

Yes because he could see the credit bubble developing over 25 years.

His call was early and wrong because the fed pumped up the market after the dotcom bust.

Tue, 09/14/2010 - 11:54 | 580809 Greyzone
Greyzone's picture

Don't you see the flaw in your own statement? The Fed "pumped up" after the dotcom bust? That wasn't inflationary? Then what the hell IS inflationary?

I love John Williams for his dedication to peeling away government obfuscation of economic statistics but he keeps drawing the same conclusion, over and over, and he's never gotten it right. Are you going to say he's right if we hyperinflate in 2017 after he's been wrong for 30+ years? Exactly how useful is an opinion that is played constantly but is correct only once in a lifetime?

Tue, 09/14/2010 - 12:42 | 580962 Spitzer
Spitzer's picture

The Fed pump after the tech bust caused some demand pull inflation because interest rates where not at zero.

now that rates are at zero, there is no demand pull left in the dollar.

Tue, 09/14/2010 - 13:15 | 581031 Spalding_Smailes
Spalding_Smailes's picture


Don't you see the flaw in your own statement? The Fed "pumped up" after the dotcom bust? That wasn't inflationary? Then what the hell IS inflationary?

A lot of guys thought credit bubble broke in 2002-03 but the quick drop in the rates created the housing bubble. They kept the game going 4 more years, but now that shadow banks/securitization is broke, they cant resart the debt machine with out the shadow banks. Deflation until they have a run on the dollar or put money on the street through tax cuts.

Not when your filling the void of debt destruction.

We have bail'd out, backstopped something like 13 trillion and we are still deflating. IS THIS INFLATIONARY?

Not if its sitting on the banks books for a few seconds then getting parked back at the fed (bailout/stimulus). Dollar dump, USA asset dump, in mass will be inflationary, a run on the dollar.

Or a huge tax cut for all ...

Tue, 09/14/2010 - 13:18 | 581099 kathy.chamberli...'s picture

^^ upgrade ^^

Tue, 09/14/2010 - 13:19 | 581102 kathy.chamberli...'s picture

^^ upgrade ^^

Tue, 09/14/2010 - 09:35 | 580383 Buckaroo Banzai
Buckaroo Banzai's picture

Launch all printing presses. For great justice!

Tue, 09/14/2010 - 10:31 | 580543 hedgeless_horseman
hedgeless_horseman's picture

You have no chance to survive make your time.

Tue, 09/14/2010 - 09:35 | 580384 The Rock
The Rock's picture

"69 months?!". "NO, 6 TO 9 months". --Madagascar 2

Tue, 09/14/2010 - 11:57 | 580812's picture
Now, if 6 turned up to be 9,
I don't mind, I don't mind.
If all the hippies cut off their hair,
I don't care, I don't care.
Cuz I got my own world to live through
And I ain't gonna copy you.

White-collar conservatives flashing down the street
Pointing their plastic finger at me.
They're hoping soon my kind will drop and die,
But I'm gonna wave my freak flag high . . . HIGH!

Hah, hah
Falling mountains just don't fall on me
Point on mister Buisnessman,
You can't dress like me.
Nobody knows what I'm talking about
I've got my own life to live
I'm the one that's gonna have to die
When it's time for me to die
So let me live my life the way I want to.

Tue, 09/14/2010 - 14:29 | 581309 The Rock
The Rock's picture

Classic Hendrix...

Tue, 09/14/2010 - 09:37 | 580391 bada boom
bada boom's picture

Where is john currently living? US or elsewhere?

Does John recommend living in the US during Hyperinflation?

Tue, 09/14/2010 - 09:45 | 580410 Al Gorerhythm
Al Gorerhythm's picture

It holds the reserve currency of the world. There is no escape as all currencies are floated and valued against it. All currencies to zero. Happy trails.

Tue, 09/14/2010 - 09:52 | 580436 bada boom
bada boom's picture

Yes, but it also holds a very large number of citizens with guns with very high needs/demands.

Would Finland or such a place like it be a little more "friendly" to live in.

Tue, 09/14/2010 - 10:05 | 580472 MachoMan
MachoMan's picture

Meh, I stayed a month there a little over a decade ago...  on the plus side, the women don't require a 401k statement to drop their panties...  on the bad side, winter is a bitch and about the only thing to keep you from killing yourself is being too drunk to load/aim the gun.  Lapland is definitely worth the effort... 

But, a controlled economy/socialist pseudo eutopia isn't where you want to be when the supply chain breaks down...  they have an incredible amount of lakes/rivers...  and have plenty of oceanic resources I suppose...  but, I think they're ultimately too far north to be versatile enough in the coming dark age.  (on the plus side, they're fairly close to the seed bank).  Also have the issue of former soviet states making a visit...

Tue, 09/14/2010 - 14:29 | 581153 kathy.chamberli...'s picture

on the plus side, the women don't require a 401k statement to drop their panties...

or your doctor signed negative HIV test.

close to the seed bank, the survival bank of man. hope it's not fraud.

they hold a lot of WC cross country ski races, have lights along the trails, though.

Tue, 09/14/2010 - 09:40 | 580397 Rantor
Rantor's picture

While I have a great deal of respect for Mr. Williams, I think the time scale is off.  The current deflationary depression, with tens of trillions in debt is like a massive blackhole which will continue sucking any quantitative easing/inflated money for at least a few years to come. 

I could be wrong, and it will take some time to know, but John has set a target and soon we should know whether he is right. 

Always good to have a little gold, a little land and a few guns. 

Tue, 09/14/2010 - 09:53 | 580435 Al Gorerhythm
Al Gorerhythm's picture

Timelines are crystal ball predictions. He may be out with his timing (Big call Mr. Williams) but his hypothesis is valid. As such, I'll continue to respect his work and place higher probabilities of his forecasts above those of say, Ben Bernanke who is batting 0 for 100 at most.

Tue, 09/14/2010 - 11:20 | 580694 taraxias
taraxias's picture

You think that the credit collapse blackhole is sucking all the QE efforts. The Gold and Oil and other commodity markets respectfully disagree. Or as a minimum, they are saying the FED will not be able to reverse it's actions (tighten) down the road and inflation is being priced in NOW. Mr Williams timing when looked from this vantage point doesn'T seem so far fetched.

Tue, 09/14/2010 - 11:59 | 580817 Greyzone
Greyzone's picture

If you are evaluating the price of oil solely in monetary terms, you are making a fatal mistake. The price of oil is being driven by factors other than just monetary ones. In fact, the primary problems in the oil industry right now are a plateau in supply despite a 400% rise in price. Does that sound like a purely monetary problem to you? That looks like a supply problem to me, which means that you must keep the price change in oil separate from price fluctuations in other commodities that are not experiencing ceilings in supply. Failure to do that leads to incorrect conclusions.

Tue, 09/14/2010 - 13:08 | 581052 spartan117
spartan117's picture

It's interesting how deflationist will claim that oil prices are being kept artificially high by forcing tankers full of oil to remain off the coasts which gives the appearance of a tighter market.  Can you guys keep your arguments consistent?

Tue, 09/14/2010 - 13:27 | 581128 Greyzone
Greyzone's picture

I didn't say anything about tankers full of oil. You did. Keep your own words in your own mouth.

What I said is there is decade long evidence of supply issues in the oil industry. There are two arguments on why the supply issue exists. One is the peak oil argument and the other is the insufficient investment argument. Regardless of WHY there is a supply problem, we have an increase in the price of oil from $18 per barrel at the beginning of this decade to $77 per barrel today - a number 427% of the lower number, yet the oil SUPPLY has been fairly static between 82 mbpd and 86mbpd - 5% variation in supply against a 427% price change. And note that I am kindly ignoring the $147 peak price of oil, which drives the point home even further - an 817% rise in price resulting in a 5% change in supply???? WTF???

If higher prices are supposed to result in more supply, then why didn't it work this time? So the conclusion is that there is a supply problem. Determing WHY there is a supply problem is a bit more difficult but the fact that there is a decade long supply problem is indisputable once you actually look at the facts. Even the IEA admits this. Thus, using oil as a barometer for monetary problems is not valid. Gold, on the other hand, does exhibit signs of decreasing confidence but confidence is falling in all fiats right now. There is no major fiat where gold is falling in price. Gold has set records against the Euro, the dollar, the yen, and the yuan. I'll discuss the gold problem but citing OIL as a barometer of monetary issues displays ignorance of the oil market and the dynamics thereof.

Tue, 09/14/2010 - 16:56 | 581689 spartan117
spartan117's picture

I said, "deflationsts"... plural.  You know, like more than one?  Surf the net and all you will find are a bunch of deflationists claiming tankers full of oil because they can't sell it!  People have no money because we're, well, in a deflationary depression.  So why is oil going up again?  Yeah, because we are running out of oil, and it's not a good barometer of inflation, just like food, healthcare, taxes, you know, the shit that people actually need!

So again I say, you deflationists (plural), need to get together and start getting your arguments in line with one another.  Consistency counts for something.

Tue, 09/14/2010 - 09:41 | 580399 Stormdancer
Stormdancer's picture

FOFOA has posted a (so far) three part essay on the deflation/inflation issue I suspect anyone interested in the topic will enjoy.

If you are not familiar with owe it to yourself

Tue, 09/14/2010 - 09:49 | 580422 fredquimby
fredquimby's picture

FOFOA is surely the most succinct and well written blog on the net! And the reason I have gold coins and no savings with the banksters!!

Long Live FOFOA!!! Bring on FREEGOLD !!

Yo TD! Can you ask FOFOA to do a guest post or two? He is rapidly becoming "the stig" of the blogosphere haha

Tue, 09/14/2010 - 18:13 | 581838 DoChenRollingBearing
DoChenRollingBearing's picture

FOFOA and zerohedge are my two favorite websites.  Although I have been buying gold since the 1980s, I have learned so much in the past two years.

I SECOND the motion, Tyler(s), re inviting FOFOA doing a guest post.

Price of gold?  How about $1500 by end-year?  How about many, many thousands when the end game comes?

Tue, 09/14/2010 - 21:23 | 582191 Rusty Shorts
Tue, 09/14/2010 - 09:41 | 580401 Chemba
Chemba's picture

Since Mr Williams was dumb enough to place a 6-9 mo horizon on his forecast, then all we need do is wait 6-9 mo to see how wrong he will be.

Tue, 09/14/2010 - 09:45 | 580411 Turd Ferguson
Turd Ferguson's picture

Exactly. Date and price in the same sentence can get you in a lot of trouble.

The man has the courage of his convictions and he should be held in high esteem for clearly stating his views. Unlike the endless stream of bloviating assholes you see on F-TV.

Tue, 09/14/2010 - 10:30 | 580542 MachoMan
MachoMan's picture

Two big problems I see: (1) he completely dismisses the notion of budget cuts...  this has been a staple of my predictions and I see our budgetary cuts as being temporary life preservers that push the inevtiable timeline further than 6 to 9 months; and (2) why the impetus now after governments of all sorts have began new fiscal years and there is 9 months til fiscal year end?  That's cutting it close isn't it?

I think making predictions falsifiable is a requirement to making fruitful and informed predictions...  the problem is that he gets in the business of timing the market, which is a dynamic force that has an incredible amount of untestable variables...  there are only so many times you can cry wolf...

Tue, 09/14/2010 - 11:25 | 580705 taraxias
taraxias's picture

Budget cuts???? What budget cuts????

The USA is not Greece. Austerity is not something any politician has the balls to even suggest and it is something the "government hand me down" American consumer mind set will never accept.

Don't look for budget cuts, look for more of the same, more stimulus.

Tue, 09/14/2010 - 12:04 | 580837 MachoMan
MachoMan's picture

necessity is the mother of invention...  what has been in the past is not required to be in the future...

Tue, 09/14/2010 - 13:13 | 581071 spartan117
spartan117's picture

Why don't you give us a timeframe for your budget cuts?

Didn't think so.

Tue, 09/14/2010 - 14:18 | 581273 MachoMan
MachoMan's picture

immediately or near immediately.  Next year's federal budget will be noticeably reduced and pain will be implemented for many but the select few dogs who bark the loudest.  Already began this year with state and local budgets.  Austerity is the ONLY way the charade gets to prolong itself...  the end is the same either way...  but a stay of execution is better than none.

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