Key Theme In Interview With ShadowStats' John Williams - (You Guessed It) Hyperinflation And The Death Of The US Economy
If you thought John Williams, who a month ago prophesied that the US could be facing hyperinflation as soon as 2010, has changed his tune, think again. In an interview conducted by Phil Maymin of the Fairfiled Weekly, the man who has made a business out of debunking the government's data fabrication machine, dishes out some very hard to swallow truths about the US economy and where the fiat world is headed. As always, Williams' perspectives are debate-worthy by all, whether inflationist or deflationist: in a field of media sycophants, JW is not afraid to speak what we all know, yet rarely wish to acknowledge.
Maymin: So we are technically bankrupt?
Yes, and when countries are in that state, what they usually do is rev
up the printing presses and print the money they need to meet their
obligations. And that creates inflation, hyperinflation, and makes the
Obama says America will go bankrupt if Congress doesn't pass the health care bill.
it's going to go bankrupt if they do pass the health care bill, too,
but at least he's thinking about it. He talks about it publicly, which
is one thing prior administrations refused to do. Give him credit for
that. But what he's setting up with this health care system will just
accelerate the process.
Where are we right now?
terms of the GDP, we are about halfway to depression level. If you look
at retail sales, industrial production, we are already well into
depressionary. If you look at things such as the housing industry, the
new orders for durable goods we are in Great Depression territory. If
we have hyperinflation, which I see coming not too far down the road,
that would be so disruptive to our system that it would result in the
cessation of many levels of normal economic commerce, and that would
throw us into a great depression, and one worse than was seen in the
What kind of hyperinflation are we talking about?
am talking something like you saw with the Weimar Republic of the
1930s. There the currency became worthless enough that people used it
actually as toilet paper or wallpaper. You could go to a fine
restaurant and have an expensive dinner and order an expensive bottle
of wine. The next morning that empty bottle of wine is worth more as
scrap glass than it had been the night before filled with expensive
We just saw an extreme example in Zimbabwe. ... Probably
the most extreme hyperinflation that anyone has ever seen. At the same
time, you still had a functioning, albeit troubled, Zimbabwe economy.
How could that be? They had a workable backup system of a black market
in U.S. dollars. We don't have a backup system of anything. Our system,
with its heavy dependence on electronic currency, in a hyperinflation
would not do well. It would probably cease to function very quickly.
You could have disruptions in supply chains to food stores. The economy
would devolve into something like a barter system until they came up
with a replacement global currency.
What can we do to avoid hyperinflation? What if we just shut down the Fed or something like that?
can't. The actions have already been taken to put us in it. It's beyond
control. The government does put out financial statements usually in
December using generally accepted accounting principles, where unfunded
liabilities like Medicare and Social Security are included in the same
way as corporations account for their employee pension liabilities. And
in 2008, for example, the one-year deficit was $5.1 trillion dollars.
And that's instead of the $450 billion, plus or minus, that was
are beyond containment. Even the 2008 numbers, you can take 100 percent
of people's income and corporate profit and you'd still be in deficit.
There's no way you can raise enough money in taxes.
What about spending?
you eliminated all federal expenditures except for Medicare and Social
Security, you'd still be in deficit. You have to slash Social Security
and Medicare. But I don't see any political will to rein in the costs
the way they have to be reined in. There's just no way it can be
contained. The total federal debt and net present value of the unfunded
liabilities right now totals about $75 trillion. That's five times the
level of GDP.
What can we, the people, do to stop the government from, you know, taking all our money?
should have acted 20 years ago. There's not much you can do at this
point to prevent the eventual debasement of the dollar. This involves
both sides of the political spectrum. It's not limited to the
Republicans or the Democrats. They've both been very active in setting
What can individuals do?
thing individuals can do now is look to protect themselves. I wish I
could see a way, but shy of severe slashing of the social programs that
is so politically reprehensible and would create such problems and
social unrest, I don't see that as a practical solution.
If you're a young 20- or 25-year-old guy or gal, would you move to another country? What would you do?
still have a great country. We're going through a period of economic
pain. It's happened before. This is the kind of thing that's taken us
decades to get into and it will take us decades to get out. Although
the hyperinflation is going to be limited largely to the U.S., the
economic downturn will affect things globally. I can't tell you how
things will go with a hyperinflationary Great Depression, which is
where I see things going.
It's the type of thing that will tend
to lead to significant political change. People tend to vote their
pocketbooks. You could have the rise of a third party. You could even
have rioting in the streets. I'm not formally predicting that — anyone
can run these different scenarios. For the individual, what you need to
do, from an investment standpoint, look to preserve your wealth and
assets. Don't worry about the day-to-day fluctuations in the markets.
What I'm talking about here is over the long haul...
going to be highly volatile, as will the dollar, over the near term,
but longer term, physical gold I would look at as a primary hedge for
preserving the purchasing power of your wealth and assets. Maybe some
physical silver. Get some assets outside the U.S. dollar. I might even
look to move some assets physically outside the United States. The key
here is to look at a longer range survival package, battening down the
hatches, and preserving your wealth and assets during a very difficult
time. Once you're through that, you'll have some extraordinary
investment opportunities, and I can't tell you what it's going to be
like on the other side of this crisis.
Dr. Phil Maymin is an
Assistant Professor of Finance and Risk Engineering at NYU-Polytechnic
Institute. The views represented are his own