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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?
Williams:
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
currency worthless.
Obama says America will go bankrupt if Congress doesn't pass the health care bill.
Well,
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?
In
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
1930s.
What kind of hyperinflation are we talking about?
I
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
wine.
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?
We
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
officially reported.
Wow.
These numbers
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?
If
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?
We
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
this up.
What can individuals do?
The only
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?
We
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...
[Gold is]
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
h/t Steve
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What's for dinner, honey? Your parents just flew in from 212, or was it 202, so it must be special...
With merlot? No fucking merlot!
This is exactly what one would expect from a psychopathic disinformation agent, hellbent on protecting 'his kind'.
There are wolves among the sheep, but they pose as shepherds, that much has been clear for a long time.
The mainstream media is the wolf-howl. It is such a great analogy...
"Sheep always look after their women and children. Sheep are that way. Wolves aren't. Wolves are the first in the life-boats."
Say what you want, but this man understood something, subconsciously or consciously we cannot know for sure.
'we lack the imagination'..
This is the entrance to the SuperPsychicWar between good and evil as it presently stands.
The evil love to malign the good as the 'imaginers' of the evil, thus authoring the Writ.
'Father, why hast thou created me so?' - the final plea of the cornered son of perdition.
-MobBarley
Wow. MB, have I been missing your likely introspective typo for so long? I am lukewarm with your posts at times (as many must be with mine) but your penultimate line shook me plenty. It exposes my ex-religiosity, but how valid it is in human psychology. 'It's your damn fault for making me this way!'
And as someone who sees corn and soybeans still in the (snow-covered) fields on his daily commute, and saw farmers out harvesting corn on Christmas Eve and Day, all this in a state not even listed as having any harvest issues or crop damage - well, keep your eyes and ears open.
Potatoes and corn? Hardy-har.
It's a damn shame that our farmers have to wonder if they are going to make it year in and year out with the likes of corporations ready to buy up their land. I guess that's what makes a strong society - keep working or die; nobody is going to give you a break. Now it's just 'betting against the house' - law of averages says you will be making a wage instead of a living.
Pun not intended, but unintended pun is funnier...
Soylent green anyone?
looking closer at the report, their basing their data on September. Still what we are seeing in the recent crop reports now is horrible.
Just wait till this is reflected in prices; The defecation will certainly hit the oscillation.
Keep your eyes on this one, this is going to surprise a lot of people.
***UPDATE****
HA! I present to you, the December report.
Then read these:
http://www.chron.com/disp/story.mpl/ap/business/6783315.html
http://www.pekintimes.com/news/x1679100990/Long-tough-harvest-Yields-loo...
Hey Yall I have the answer to your question.
4 Trillion bailout coming = HR 4173.
Tarp is an ongoing 'project' now.
Look, Greenspan made it clear that the big mistake the last time the fed blew everything up was they failed or FORGOT to print an endless supply of money to plaster over all the holes in the rapidly decaying FACADE. In a nutshell, the cure for a depression is hyper inflation. This from Greenspans Oratory hole, direct to you, the CONSUMER (useless eater).
-MobBarley
and now Bobcats will also be made in China ? yipeeee
Help me out here, oh my brothers and sisters.
Based on the amount of money that evaporated in the last leg down, and is set to evaporate when the banks are forced to write down their bad assets (deflation), has the Treasury/Fed printed or can they print enough to offset those losses and still cause inflation?
using good ole american fighting spirit, they sure will try.
The best way to achieve instantaneous, 100% guaranteed inflation is for the treasury to deposit $1MM in everyone bank account immediately. Cheaper than all the stimulus with immediate results.
PS If i receive a call from Timmy soon, then you'll know he's a ZH reader.
Yes, they can continue to print. Unfortunately, the math doesnt lie.
http://research.stlouisfed.org/fred2/series/MULT
It is calculated by dividing total bank deposits by the reserve requirement.
It has dropped below 1, so for every dollar Bernanke throws out of the helicopter window, it is only worth 82.7 cents of offset when it hits the ground.
Look carefully at the trend, and fear what you are seeing.
what do you mean evaporated,the fed has promised our money, to cover a lot of those losses. the only losses not getting bailed out, are the people funding the bailouts.
Man oh man is this going to be a fun two years watching deflationists eat their stained Keynesian shorts.
On the flip slide, living in the U.S. is going to really, really suck.
John does great work in his re-calculation of official economic statistics, although I disagree with some of his adjustments. It gives people an important set of alternative data, an explanation of the variance, and a chance to judge for themselves the extent to which they are being hoodwinked by the USG.
OTOH, his analysis of this data and inferences he draws from are routinely way over the top. I've stopped listening to what he has to say about the economy because his assumptions and arguments are too often faulty and highly spun, but I won't stop tracking his data.
You have obviously drunk the Kool-Aid.
Take another swill and breathe deep from the MSM.
It will end where it always ends; the parasites in American society who don't work and produce useful goods will starve or be shot dead.
Is that where it will end? Seems like I've read of too many cases where the parasites were the ones to shoot and kill the productive workers.
A sad outcome for sure. Those murderous parasites!
Those bucking felfare wasterds! But really, just think if there is any breakdown from where we are right now. So many survive on what they can get access to right here, right now. "I need my f****** Prozac! What do you mean you have no f****** Prozac!" "Whaddya mean you don't have any more mozzarella sticks. Ever? Ever! EVER!"
Not to mention my favorite insta-freakshow, the crack addict. And you know, these people are former aunts, grandpas, siblings, etc. It really is so f****** sad to these dependencies. Goddamn sad. This kind of thing breaks my heart:
http://www.youtube.com/watch?v=y1qo0R2GcFY
And it makes me angry. Angry to see human beings suffering in this broken system. Nobody gives a shit if it ain't them.
Living in the US is going to really really suck? Really? Can you think of anywhere else better?
I think the USA will be the better place to be.
Think of how nations dependent on food imports will cope. You dont want to be there.
You're obviously a self made man, based upon you self made Avatar. I love the bow tie but you should consider some eyebrows. And a comb over. :>)
costa rica, canada, australia, new zealand, panama, brazil
When the Saudis pull their oil off our exchange in January, that will kick hyperinflation into gear.
Who? What? This is a new one to me. Any links to provide more info or is this something you think might be coming. I would appreciate any input you could provide because I'm always interested in looking in dark corners.
What happens to the euro if the dollar collapses?
What happens to the euro if the dollar collapses?
I'll bet John $1,000,000 there will be no hyperinflation.
"what they usually do is rev up the printing presses and print the money they need to meet their obligations"
"it's (the US) going to go bankrupt if they do pass the health care bill"
Okay, how can a country go bankrupt if it has an endless supply of money to pay its bills?
Is that a rhetorical question?
Because no one will accept hyperinflated money.
It's the only currency in town. When you go to pay your taxes, will the government accept chicken eggs? No. You'll still need green slips of paper and so will the guy your selling to or buying from.
To say the government can run out of money is lunatic. It can run out of gold, but it can't run out of green slips of paper.
Ask anyone from Bavaria or Rhodesia what it feels like to have all the paper you want.
Hyperinflation: The act of inhaling and exhaling rapidly into a paper bag of marine goop until the bottom of the bag blows out.
Credit destruction trumps money creation
Credit destruction trumps money creation.
Forget this deflation-hyperinflation debate. Stagflation is coming to stay for the next 10 years. Just like the 70's.
Oh yeah, the 70's... Nice times... Led Zeppelin... And Ramones!
"Sheena is, a punk rocker
Sheena is, a punk rocker
Sheena is a punk rocker now"
Deflation schmlation.
The federalies are monetizing all of the bad debt in the system. If a loan fails in the hands of FRE, FNM, or GMAC, nobody actually loses money. The government just prints enough to pay it off! Yes, in general ledger accounting terms the taxpayer is put on the hook for it, but since no one is ever going to pay off that debt, it doesn't matter.
Wage inflation is coming via extended unemployment benefits, medicaid, medicare, socialized healthcare, social security and disability payments, not to mention the continued employment of all of the nationalized companies, as well as all of the banks that are cashing in at the discount window.
Printed money is inflationary.
Since our debt is sovereign, I don't think we will ever see hyper inflation. I think you just wake up one day and no one will accept the dollar anymore.
And then the government resets, and life goes on at a much lower standard of living.
I still think the US will be the place to be, not Canada only because of global cooling, since at least we should still have adequate food production.
Please elaborate.
I am currently in Canada and it is 6 degrees, oh my bad, 43 F.
No snow on the ground, and plenty of farms in the surrounding area.
So you are willing to experience hyperinflation, knowing you could go to Canada before it hits, living somewhere moderate like British Columbia, and you choose not to, because there will be a food shortage?
My take is that the US will experience water shortages before Canada experiences food shortages, but we can atleast partially chalk that up to bias. :)
28 deg F in NYC, so we're a LOT colder than you.
Must be a pole shift!
And remember that we own half of that fresh water to the South of you, so don't you worry about the US water supply.
Much like Canada, it seems the largest population centers are not any where near the sources of freshwater.
Speak you of Minnesota and the Great Lakes?
I am lucky enough to live in an area where people stupidly complain that we receive too much rain! Yes, it is gray at times, but I swear, have people considered the alternative (drought!) for even a moment?
People need to start physically writing on their money.
"The Federal Reserve cares only for the destruction of the US dollar, and cares not at all for the United States of America."
If I was American I would have already started doing this, so I leave it in your hands!
Great idea. Especially considering your name.
this bill costs 2 cents to print. make a stamp, and do every dollar that passes through your hands. ironically, the dollar has lost 98% of its value since 1913, so the 2 cents it costs to print, is what its worth
Yes please! And then sell the stamp!
Just because you can’t see a transmission mechanism for hyperinflation doesn’t mean it won’t happen. Sure, there’s a deflationary abyss in front of the curve. But hyperinflation is caused by and is a consequence of deflationary collapse.
Here's how it’s going to roll:
1) Money supply drops toward zero, causing endless bankruptcy, foreclosure, and vaporizing money and credit everywhere …
2) Governments steps in with keynesian witchcraft and starts spending money it can't borrow from "the future."
3) Tax receipts fall toward zero as the system unravels, forcing the "we're not going to monetize" CBs to monetize the debt.
*
Remember: In a fiat system, debt = money. We've now got $1000T, according to all these newfangled banker instruments. That’s a lot of debt. I mean “money.”
Enormous amount of debt is clearly deflationary not inflationary.. Inflation builds up during the debt accumulation phase but as debt has to be liquidated deflationary forces prevail..
The massive build up of capacity in China is clearly deflationary as well.. Once China bubble blows up - it will be deflation galore in the world..
"Remember: In a fiat system, debt = money. We've now got $1000T, according to all these newfangled banker instruments. That’s a lot of debt. I mean “money.”"
Clearly debt accumulation phase is inflationary.. We have already seen that in the past decade with inflation materializing in asset prices rather than consumer prices. However, debt liquidation phase which is where we are today is deflationary quite unequivocally so.
Additionally, the massive overbuilding of capacity in china will be a deflationary force for years to come. Once China bubble blows up - the deflation bomb caused by that even will be pretty nasty..
Transmission mechanism towards high inflation is tough to envision. Obviously, strustural fiscal picture is inflationary but it has been so for some time and deflationary forces will prevail for some time and might well overwhelm the inflationary effect of the fiscal picture
Many hopeful thoughts for change and better times. Will buy more gold in the new year and moving the ones I have to Australia. Maybe my family too next year.
My problem is that I just can't see beyond the trillions of dollars that are going to be evaporated through default. I do not understand how deflationary events lead to hyperinflation especially in the case of the U.S. where I believe the inevitable sovereign default will mean the end of the present regime (by which I mean the government established by the Constitution of 1789) long before the printing presses can be ramped up to the necessary speed to keep up with wealth destruction. What am I missing?
I'm not certain myself, but I think the hyperinflation is an overshoot trying to correct for the deflation.
They just never manage to get it quieeet riiiiight....
War is a highly inflationary event.
Excess supply is eliminated, and temporary demand is generated.
Then things need to be built all over again, which benefits whoever has not been destroyed.
My take on it all is that you have to take the big picture view, somehow the trillions in derivatives that have been created will have to be eliminated, or the money will have to be printed (conjured, in the case of electronic 1s and 0s) to resolve all this.
Then you have the simple fact that all trade is based on trust. What is a receivable? You trust someone to pay in the future. What is a payable? Someone trusts that you will pay them in the future.
Without trust this entire system comes down, and currency death as far as I know can only be accomplished through currency crisis, aka hyperinflation. I mean how would deflation accomplish the elite's goals? Reward savers for their prudence? Please, only failure and excess is rewarded in this new/current paradigm, not hard work and discipline!
We don't have a mere supply/production imbalance this time. That produced the classic recessions of post WW II. Inflation and deflation within that system are mere oscillations, temporary imbalances. Last time we had a bond fide credit collapse and outright evaporation of money, the Great Depression, relentless deflation was the outcome, which allowed for an eventual reset of the economy. This time, this tried and true - albeit painful - "cure" for an economy built on phony transactions and weath extraction techniques disguised as "liquidity enhancement" and "risk management" has been short-circuited by Ben and the Policy Makers, who have decided to borrow, and if it cannot be borrowed, to print (actually both at the same time!) enough "money" to fill the holes created by the wealth destruction. What we observing is an experiment on a massive scale.
I say keep your eyes on the monetization of the US debt. Regardless of what anyone says, it will be massive in 2010. There is no way anyone is buying the amount of Treasury debt and GSE debt that needs to be issued in 2010, so it will be monetized at a fantastic rate, dwarfing what occurred in 2009 (read ZH's important Sprott report post earlier this month). No one has any idea what this will lead to. Could be fine, could be a complete disaster, could be a long slow almost unnoticed slide into oblivion (like freezing to death.) Nobody knows, as I think this is uncharted territory. Who tells the Big Dog with all of its guns that it can't print money?
I am sorry to report that the man has not all his data correct. The hyperinflation of the Weimar Republic was not in the 1930s - which in an case was a decade of the Nazis, no longer Weimar - but in the early 1920s.
It was stopped in November 1923 with the issue of a new paper currency, the Rentenmark