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Shadowstats' John Williams: Prepare For The Hyperinflationary Great Depression

Tyler Durden's picture


John Williams, who runs the popular counter government data manipulation site Shadowstats, has thrown down the gauntlet to deflationists, and in an extensive report concludes that the probability of a hyperinflationary episode in America over the next year has reached critical levels. While the debate between deflationists and (hyper)inflationists has been a long and painful one, numerous events set off in motion by the Bernanke Fed (as a direct legacy of the Greenspan multi-decade period of cheap and boundless credit) may have well cast America as the unwilling protagonist in the sequel of the failed monetary policy economic experiment better known as Zimbabwe.

Williams does not mince his words:

The U.S. economic and systemic solvency crises of the last two years are just precursors to a Great Collapse: a hyperinflationary great depression. Such will reflect a complete collapse in the purchasing power of the U.S. dollar, a collapse in the normal stream of U.S. commercial and economic activity, a collapse in the U.S. financial system as we know it, and a likely realignment of the U.S. political environment. The current U.S. financial markets, financial system and economy remain highly unstable and vulnerable to unexpected shocks. The Federal Reserve is dedicated to preventing deflation, to debasing the U.S. dollar. The results of those efforts are being seen in tentative selling pressures against the U.S. currency and in the rallying price of gold.

And even as Bernanke continues existing in a factless vacuum where he sees no asset bubbles, Williams takes aim at the one party almost exclusively responsible for the economic carnage that will soon transpire:

The crises have been generated out of and are centered on the United States financial system, triggered by the collapse of debt excesses actively encouraged by the Greenspan Federal Reserve. Recognizing that the U.S. economy was sagging under the weight of structural changes created by government trade, regulatory and social policies -- policies that limited real consumer income growth -- Mr. Greenspan played along with the political and banking systems. He made policy decisions to steal economic activity from the future, fueling economic growth of the last decade largely through debt expansion.

The Greenspan Fed pushed for ever-greater systemic leverage, including the happy acceptance of new financial products, which included instruments of mis-packaged lending risks, designed for consumption by global entities that openly did not understand the nature of the risks being taken. Complicit in this broad malfeasance was the U.S. government, including both major political parties in successive Administrations and Congresses.

As with consumers, the federal government could not make ends meet while appeasing that portion of the electorate that could be kept docile by ever-expanding government programs and increasing government spending. The solution was ever-expanding federal debt and deficits.

Purportedly, it was Arthur Burns, Fed Chairman under Richard Nixon, who first offered the advice that helped to guide Alan Greenspan and a number of Administrations. The gist of the wisdom imparted was that if you ran into problems, you could ignore the budget deficit and the dollar. Ignoring them did not matter, because doing so would not cost you any votes.

Back in 2005, I raised the issue of a then-inevitable U.S. hyperinflation with an advisor to both the Bush Administration and Fed Chairman Greenspan. I was told simply that "It's too far into the future to worry about."

Indeed, pushing the big problems into the future appears to have been the working strategy for both the Fed and recent Administrations. Yet, the U.S. dollar and the budget deficit do matter, and the future is at hand. The day of ultimate financial reckoning has arrived, and it is playing out.

Looking at the events over the past year demonstrates that Williams is not just being a drama queen.

Effective financial impairments and at least partial nationalizations or orchestrated bailouts/takeovers resulted for institutions such as Bear Stearns, Citigroup, Washington Mutual, AIG, General Motors, Chrysler, Fannie Mae and Freddie Mac, along with a number of further troubled financial institutions. The Fed moved to provide whatever systemic liquidity would be needed, while the federal government moved to finance corporate bailouts and to introduce significant stimulus spending.

Curiously, though, the Fed and the Treasury let Lehman Brothers fail outright, which triggered a foreseeable run on the system and markedly intensified the systemic solvency crisis in September 2008. Whether someone was trying to play political games, with the public and Congress increasingly raising questions of moral hazard issues, or whether the U.S. financial wizards missed what would happen or simply moved to bring the crisis to a head, remains to be seen.

More on the impending timing of the complete economic collapse of the US financial system:

Before the systemic solvency crisis began to unfold in 2007, the U.S. government already had condemned the U.S. dollar to a hyperinflationary grave by taking on debt and obligations that never could be covered through raising taxes and/or by severely slashing government spending that had become politically untouchable. The U.S. economy also already had entered a severe structural downturn, which helped to trigger the systemic solvency crisis.

The intensifying economic and solvency crises, and the responses to both by the U.S. government and the Federal Reserve in the last two years, have exacerbated the government's solvency issues and moved forward my timing estimation for the hyperinflation to the next five years, from the 2010 to 2018 timing range estimated in the prior report. The U.S. government and Federal Reserve already have committed the system to this course through the easy politics of a bottomless pocketbook, the servicing of big-moneyed special interests, gross mismanagement, and a deliberate and ongoing effort to debase the U.S. currency. Accordingly, risks are particularly high of the hyperinflation crisis breaking within the next year.

What are the alternatives for the US? In a word, none. Presumably this means you should ignore what the axed "experts" from various bailed out sell side research chop shops try to tell you.

The U.S. has no way of avoiding a financial Armageddon. Bankrupt sovereign states most commonly use the currency printing press as a solution to not having enough money to cover obligations. The alternative would be for the U.S. to renege on its existing debt and obligations, a solution for modern sovereign states rarely seen outside of governments overthrown in revolution, and a solution with no happier ending than simply printing the needed money. With the creation of massive amounts of new fiat dollars (not backed by gold or silver) will come the eventual destruction of the value of the U.S. dollar and related dollar-denominated paper assets.

What lies ahead will be extremely difficult, painful and unhappy times for many in the United States. The functioning and adaptation of the U.S. economy and financial markets to a hyperinflation likely would be particularly disruptive. Trouble could range from turmoil in the food distribution chain to electronic cash and credit systems unable to handle rapidly changing circumstances. The situation quickly would devolve from a deepening depression, to an intensifying hyperinflationary great depression.

While the economic difficulties would have global impact, the initial hyperinflation should be largely a U.S. problem, albeit with major implications for the global currency system. For those living in the United States, long-range strategies should look to assure safety and survival, which from a financial standpoint means preserving wealth and assets. Also directly impacted, of course, are those holding or dependent upon U.S. dollars or dollar-denominated assets, and those living in "dollarized" countries.

In other words, the economic cycle will come back with a vengeance. Having pulled America out of the abyss by the last hairs on its Rogaine infused head, the Fed and the Administration have merely purchased one-two years of excess time in which insiders can sell all their holdings (look at recent reports indicating the ratio of insider sellers to buyers) and banks can book one/two years of record bonuses before signing off.

And whether one is a deflationist or inflationist, the take home message from Williams' thesis that everyone should be able to agree on, is what everyone knows yet is unwilling to admit: that the US economy (and its derivative, the undecoupled global economy, which that most certainly includes China) is that we are now caught in the greatest Ponzi bubble of all time. One small hiccup in which there is no incremental hollow value added on the margin courtesy of printing presses pushing fiat pieces of paper in overtime, would lead to precisely the same outcome as the world saw with Bernie Madoff: from $50 billion to 0 overnight. It is somehow fitting that world GDP is 1,000 time greater, at $50 trillion. Take away the fiat illusion, and the real value collapses to those concepts of tangible value that will remain in a post bubble implosion scenario: whether these be spam, gold, or lead.

And just so there is no confusion about the course of events, Williams presents the Zimbabwe hyperinflation episode as the case study that the historian Bernanke should have been focusing on, instead of spending long nights, "learning" from the Great Depression.

Hyperinflation in Zimbabwe, the former Rhodesia, was a quadrillion times worse than it was in Weimar Germany. Zimbabwe went through a number of years of high inflation, with an accelerating hyperinflation from 2006 to 2009, when the currency was abandoned. Through three devaluations, excess zeros repeatedly were lopped off notes as high as 100 trillion Zimbabwe dollars.

The cumulative devaluation of the Zimbabwe dollar was such that a stack of 100,000,000,000,000,000,000,000,000 (26 zeros) two dollar bills (if they were printed) in the peak hyperinflation would have be needed to equal in value what a single original Zimbabwe two-dollar bill of 1978 had been worth. Such a pile of bills literally would be light years high, stretching from the Earth to the Andromeda Galaxy.

In early-2009, the governor of the Zimbabwe Reserve Bank indicated he felt his actions in printing money were vindicated by the recent actions of the U.S. Federal Reserve. If the U.S. went through a hyperinflation like that of Zimbabwe’s, total U.S. federal debt and obligations (roughly $75 trillion with unfunded liabilities) could be paid off for much less than a current penny.

What helped to enable the evolution of the Zimbabwe monetary excesses over the years, while still having something of a functioning economy, was the back-up of a well functioning black market in U.S. dollars. The United States has no such backup system, however, with implications for a more rapid and disruptive hyperinflation than seen in Zimbabwe, when it hits.

Maybe in retrospect it is good that banks are not lending out. If the $1.2 trillion in excess reserves were to actually hit circulating currency overnight, or even in a much more gradual fashion, then hyperinflation would surely be unavoidable, not so much as function of the consumer becoming a dominant force once again, which is the deflationists' key point, but as a result of the excess liquidity of the capital markets, which is the only reason why the S&P is where it is, into Main Street. As it stands, banks' unwillingness to recreate the cheap credit bubble by lending to anyone who has a pulse and can walk is the only thing that is so far preventing America's name change to the United States of Zimbabwe.



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Mon, 12/14/2009 - 15:48 | 163505 ZerOhead
ZerOhead's picture

Hyperinflationary great depression it is... although I find the outrageous remark about the Zim notes reaching the Andromeda Galaxy (2.5MM light years) a bit far flung... my calculations suggest that Alpha Centauri (4.37 light years) is achievable however...

Mon, 12/14/2009 - 23:32 | 164127 Anonymous
Anonymous's picture

All depends on the weight of the paper. Is our currency 1-ply or 2?

Tue, 12/15/2009 - 02:07 | 164230 George Orwell
George Orwell's picture

Japan's debt to GDP is much higher than the US.  Yet Japan has been experiencing deflation for nearly 20 years.


If any modern industrialized country is going to have hyperinflation first, it is going to be Japan.  So watch Japan carefully.  If the BoJ cannot or will not print money and hand it out on street corners, you can be certain that the Bank of Bernanke will not be dropping money from helicopters.


George Orwell


Tue, 12/15/2009 - 02:39 | 164247 lookma
lookma's picture

What about the fact that Japan is not in debt, but is a net creditor nation?

Or that the Japanese own most of the Japanese debt, and their external debt/gdp is quite small?


Isn't amount of external debt/gdp and being a net debtor the red flags we should be looking for?

Tue, 12/15/2009 - 05:11 | 164301 Anonymous
Anonymous's picture

It is not going to be that straightforward...

First off, Japan is fine because they are a creditor nation. They are not going to implode first...

USA is fine for now as well because it owns 3 times more Gold than any other country.

A big country which is guaranteed to be screwed is the United Kingdom.

It has only 310 tonnes of Gold to show for its external debt of 12.6 Trillion dollars.

There are many other countries in the Euro zone which are in big trouble(Ireland, Netherlands, Belgium to name a few...). Chinese and Japanese are basically going to take over these countries when they repeatedly default.

Tue, 12/15/2009 - 20:58 | 165286 Anonymous
Anonymous's picture

External debt is not a good measure either - it's only half of the equation. All countries have external debt, but they have external assets as well. What matters is the balance between those.

For instance, $2.2 trillion is a huge external debt for a small country like the Netherlands, but they have even larger investments abroad, and the Netherlands have a healthy net foreign asset position - the world owes them more than they owe to the world.

Also, don't ignore internal assets. Many W-European nations have big and well-filled coffers (pension funds, social funds, etc.) and their people tend to be savers rather than lenders.

Tue, 12/15/2009 - 20:59 | 165289 Anonymous
Anonymous's picture

External debt is not a good measure either - it's only half of the equation. All countries have external debt, but they have external assets as well. What matters is the balance between those.

For instance, $2.2 trillion is a huge external debt for a small country like the Netherlands, but they have even larger investments abroad, and the Netherlands have a healthy net foreign asset position - the world owes them more than they owe to the world.

Also, don't ignore internal assets. Many W-European nations have big and well-filled coffers (pension funds, social funds, etc) and their people tend to be savers rather than lenders.

Wed, 12/16/2009 - 05:15 | 165670 Anonymous
Anonymous's picture

The debt of the Netherlands is nowhere near $2.2 trilion.
€ 346,687,000,000 is the official debt according to eurostat.
or $ 530,000,000,000 just over half a trilion dollars.

Wed, 12/16/2009 - 05:26 | 165674 Anonymous
Anonymous's picture

The debt of the Netherlands is about
$ 530.000.000.000 or just over half a trilion dollars.

Wed, 12/16/2009 - 17:59 | 166560 whacked
whacked's picture



I actually support all Anonymous' comments ...

Thu, 12/17/2009 - 01:55 | 167125 Rusty Shorts
Rusty Shorts's picture

...hell, the UK digs up that much Gold every year in Africa.

Tue, 12/15/2009 - 07:29 | 164319 BRAVO 7
BRAVO 7's picture

Prepare for more nation-states, which are now to be foreclosed and  liquidated in a wave of sovereign defaults.You just thought we owned America.The orientals will be picking our bones in foreclosure like so many vultures on a shopping spree. according to the bible, "the rich ruleth over the poor, and the borrower is servant to the lender." Our so-called leaders will be all too willing to sell us out even further (re: calif. garage sale), to insure their parasite / host status over Americans. And these traitors will crouch down and lick the boots of America's new financial overlords. From the land of the free to perpetual debt slaves in less than a generation.

The number of countries which are currently in jeopardy, due to their own bankruptcy is extensive. On Nov. 30 alone, the following nations were mentioned: Ireland, Greece, Hungary, the Baltic States, Ukraine, Pakistan, Romania, Bulgaria, Spain—and the United Kingdom and the United States. The least unto the greatest.

  You might want to read what you can on Peter Bernholz, an economic academic,( book: Monetary Regimes And Inflation) who has spent all of his adult life researching the collapses of the 28 largest fiat money systems.The one salient point of his work might be distilled into this; all these fiat currencies had in common this tipping point into oblivion, WHEN THE DEFICIT EXCEEDS 40% OF EXPENDITURES .

  The U.S. of A  BORROWING is now at this level, and the congress and senate are still digging in the hole, 2 trillion more on cap extension  just last week and more in the pipeline. When the other nations can't or will not buy any more of our debt, the curtain comes down on this pathetic America. The fat lady is tuning up in the wings, making ready to sing.

God have mercy on u.s.


Tue, 12/15/2009 - 08:29 | 164330 moneymutt
moneymutt's picture

still does not address Japanese example raised, is Japan exceptional because debts or more internal or not? Primary reason to inflate currency is external debts...foreign investors have influence, no doubt, but except for extreme case of international war, in times of great economic distress, foreigners are less of a threat to politicians than domestic populists at home who vote or riot. If politicians have to choose, they typically choose to default from debts by inflation, not good in many ways, but technically better and quicker than debt slavery.

according to research you mention, has every nation that has deficits over 40percent of expenditure tipped to inflation, as Japan seems to have not, or is it, that no country has tipped into inflation unless hit 40 percent, but some 40 percenters did not tip into inflation.

Also,  I think its important to note that not all inflation is due to govt printing press.... as deflationists argue, credit is money, so it seems some inflation could come just as easily from private banks, as they are the manufacturers of leverage credit..and seemed to be the case in Weimar, banks printing money to short currency actually was a major issue.

I find monetary issues very interesting but from just the little I have read, there seems to be a lot more going on with fiat money value than government deficit spending and government printing digital dollars.

Tue, 12/15/2009 - 08:58 | 164342 BRAVO 7
BRAVO 7's picture




Wed, 12/23/2009 - 16:10 | 172944 Anonymous
Anonymous's picture

That would be "ATMs", Bravo.

Calling them "ATM Machines" is literally calling them "Automatic Teller Machine Machines" ---- redundant.

And curiously, I had my first ATM card back in 1980, so even Paul Volcker is wrong on this one.

Sat, 01/02/2010 - 13:50 | 180634 Anonymous
Anonymous's picture

I'm not an expert, but it seems that national economies are complex situations, so any single causal factor is too simplistic to be true. So the US problems are a combination of various (corporate, private, government) debts, deficit spending, corrupt banking, an apathetic populace, central banks, a horribly abused world reserve currency, an out of control printing press (drug addiction analogy), a forced and failing petro-dollar standard, and literally hundreds of other causal factors.

Japan has its own conditions, unique to itself. One of the major ones, I think, is the yen carry trade. This had a similar effect of the US world reserve currency status - exporting inflation instead of the monetarist hope of pumping the economy up. The idea here is that the government debt binge merely side-stepped the real economy of Japan.

Tue, 12/15/2009 - 04:14 | 164291 hidflect
hidflect's picture

Boy, some of you guys aren't getting it. Japan won't follow America. America will follow Japan. You think something "bad" will happen and the only bad thing you can think of is hyper-inflation. Because you've never experienced deflation.

All the US conditions are either exactly the same or worse than Japan 1997.

Convoy of zombie banks – check
Liquidity trap – check
Rising unemployment – triple check
No new lending – triple check
Govt. indebtedness – check
Bailouts – check
v. low biz sentiment – quadruple check
no white knight industries left - check
Deflation a-comin’... for the next 15 years.

Tue, 12/15/2009 - 08:47 | 164332 moneymutt
moneymutt's picture

agreed, Japan seems the best corollary in modern world to our current thing I wonder though, is/was Japan consumer zombified like US consumer? I think of the banks offering to extend interest only payments on mortgages indefinitely so homeowners become like renters, but are paying over market rates for "rent" (interest). If more deflation is on its way, then this will work itself out, but wonder how much they can/have thwarted deflation to date by bank/Fed policies...not that they can stop it, but like Japan, they can drag it out.

Also, I want to know, once Japan had bubble and was going to crash, was their zombie ways the worse choice? Sure our economic "geniuses" mocked them but would a sudden crash have been better than their gradual erosion? I get that it is better, for say housing prices, to quickly bottom, so then people can enter market without worrying about losing money in future as they might not make any money on asset but won't lose 50 percent either...however, Japan populace in general seems to have done fairly decently over last 20 years, not great, but not impoverished either, of course not like bubble times, but really, has it been that bad for Japanese middle class?..they seem better off than us, now...just wondering.

And yes, I understand all the reasons its not good to have zombie economy, but a crash is harmful too, the question to me seems obvioius, which is worse for for regular people: spreading the harm over decades and increasing the overall costs accordingly or suffering a quick brutal crash and starting up from the ashes? It seems we went in for the more quick brutal crash in early 1930s than we have in 2001 or 2008, so what is objectively worse choice?

Tue, 12/15/2009 - 11:16 | 164482 BRAVO 7
BRAVO 7's picture







Tue, 12/15/2009 - 08:43 | 164335 BRAVO 7
BRAVO 7's picture








Wed, 12/16/2009 - 15:11 | 166269 Ripped Chunk
Ripped Chunk's picture

What!!??? I can't hear you, type louder.

Tue, 12/15/2009 - 10:23 | 164418 blindfaith
blindfaith's picture

HUM....could you please tell me where the deflation is:

Comcast (up20%)

the water department (up 20%)

the electricity department (up 17%)

ATT ( up 13%)

my property tax collector (uP 25%)

drivers license ( up 200%)

hamburger ( now mixed with 20% water)

chicken ( now injected with 20% water)

ice cream ( now 1 1/2 quarts but says 1/2 gallon)

pound bag of chips now 13.5 ounces

gas with 15% corn syrup

Medium "flat rate" USPO box ( up 20%)

and, on and on and on and on...

all within the last year AND that is just the tip of the iceberg.  Look around, you don't think there is inflation under your nose, then open your eyes.  The only 'deflation" is the number of people this government is claiming are loking for jobs..and that too is trickery to fool and deceive.  Blindfaith gets you into trouble, keep your eye on the bottom line.

Tue, 12/15/2009 - 17:40 | 165004 Anonymous
Anonymous's picture

I believe that this price inflation is due to the bleeding of customers from all of these places. It cannot last and it is a different symptom of the deflationary spiral--deflation on a macro scale refers to the extinction of massive amounts of credit which was acting as money. It's gone. The price inflation you are talking about is a direct result of that massive loss.

Tue, 12/15/2009 - 18:35 | 165067 BRAVO 7
BRAVO 7's picture


Tue, 12/15/2009 - 23:58 | 165477 Rusty Shorts
Rusty Shorts's picture




 - always underline your post, that way it stands out.


 - then you must sign it, like this;


by R.S. ; I AM A MORON.


...Any questions?




Tue, 12/15/2009 - 19:44 | 165183 sharonsj
sharonsj's picture

I agree completely.  For more than a year all I've seen is prices going up.  Pet food up 40%.  Food packaging down 25% but prices stay the same.  All my utilities went up.  My school and property taxes are going way up to pay for raises and pensions the PA state gov't voted itself 7 years ago!  And next month the cap comes off the electric company--estimates are bills will go up 50%. 

I am running out of money to pay all these costs even though I have cut back on everything.  I buy nothing new (more people like me are probably the main reason retails stores are closing).  I bet you will see lots more people freezing to death this winter.


Tue, 12/15/2009 - 23:38 | 165456 QuantumCat
QuantumCat's picture

What's been deflating?  Real estate and paper IOUs of various sorts.  Depends on your definition of inflation and timeframe, but how about contracting credit which is necessary to keep the Ponzi Scheme alive.  And where is all of  that newly printed money?  Sitting in reserves at the FED.  Velocity of the green confetti is quite damaged!  Deflation.  I feel very alone... therefore, I must be right.

Wed, 12/16/2009 - 09:15 | 165737 moneymutt
moneymutt's picture

I hear people say things are more expensive but this has not been my experience other than the price of oil/gas. I called Comcast 2 months ago and said my hours at work had been reduced and needed to save money, I got a 45 percent reduction in my TV/internet bill...since I've got several pets including me in the house that love sports, movies etc, we had almost whole package, so this was significant savings.

Elect and nat gas prices, while still high, are lower than many past high years.

Construction labor and construction materials are down greatly, meaning bids on everything from remodels to commercial building to new highways are down 30, 40 percent from just a few years ago. Caltrans and school districts have been shocked and ecstatic about how low bids are coming in for projects they budget estimated two years ago.

Margins at grocery stores are lower and coupons are better, restaurants are offering way better deals.

Travel, in spite of higher oil prices, is way cheaper..see Travelocity adds comparing vacation packages prices from 2008 to 2009, leisure and business travelers I know have saved tons on hotels and flight, as mnay hotels are barely making it. Cruise ships have been offering packages for 30-50 percent less than just two years ago.

Land prices, cost to build houses, are way down, rent is way down.

regular folks earnings are lower, we are 70 percent of economy, and credit is tighter, stimulus and military spending can't make up the difference,

Wed, 02/10/2010 - 17:51 | 225620 Anonymous
Anonymous's picture

That's just it: now is a GREAT time to have money. If you have the cash (or someone will give you credit), there are plenty of deals to be had all over.

Therein lies the rub: fewer people are able to come up with the cash because they're losing their jobs. Credit card companies are cutting off credit (and raising minimum monthly payments, also contributing to the cash squeeze).

I read an interesting blurb about the great depression that there was plenty of food available, but people couldn't get it because of lack of cash (it rotted in the fields or farmers burned it for heat).

Whether prices go up or down, it's inconsequential to the person who doesn't have the money.

Wed, 12/16/2009 - 12:55 | 166029 Anonymous
Anonymous's picture about gasoline? (down 40%)
House prices (down 35%)
Rent prices (down 20%)
and, on and on and on and on...

Sat, 02/27/2010 - 04:35 | 247780 kurt_cagle
kurt_cagle's picture

Inflation and deflation tend to be excessively simplified concepts that masks a great number of different measures. Deflation in the macro-economic sense indicates that large scale assets - houses, commercial real-estate, vehicles, shares in corporations, wages, etc., reduce in value. Such deflation usually accompanies a credit crunch, because it is harder to buy when there is little credit, and at the same time buyers anticipate that prices will fall farther.

Food, energy, and consumables don't always follow this trend short term, though they do longer term - food prices may rise dramatically as the cost of production rises, but eventually this forces excess out of the market first. We're at that stage now. Additionally energy, which is a primary input to these prices, tends to go up as well as suppliers reduce inventories (there's also Peak Oil to factor into this), but eventually you get too much supply in the market and prices drop again. I actually think we're seeing a localized commodity boom right now due to a number of factors, which will also hurt the economy.

What about insurance, health care, package distribution, cable, and taxes?

Most of these are about recovery costs, and represent a point where the system is effectively broken. If you're looking for the next major crisis points, these are a good place to watch. The insurance industry is in nearly as desparate straits as the banks, largely due to the same reason - significant malinvest that has disappeared. Health care is on the verge of implosion - when you have 30% or more of the population (and climbing) that can't afford health care, it either will have to become more affordable or the companies providing these services will go out of business. When demand ultimately collapses (as it is), the health industry will go with it.

Finally, taxes. Tax allocation ultimatey lags economic conditions because most tax bonds are set over several years. Moreover, when you have strong economic conditions, this is the best time to impose taxes, because you can raise money and put it into a rainy day fund. Then, when economic conditions deteriorate, you first spend down the fund in order to reduce the tax burden when it's most painful, and even cut taxes if at all possible.

Unfortunately, we've had an attitude in the US that seems to run precisely counter to this position, where surpluses developed at a time when the economy was running at high speed are distributed back as tax cuts, typically resulting in a lot of malinvestment (oh, hey, I can take a vacation to Maui!), rather than this being saved for bad times ahead.

As a consequence, now that the bad times are here, there's no money in the pot, and government services (schools, libraries, emergency relief, unemployment insurance, road maintenance, etc.) have to be cut AND taxes have to be raised, at the worst possible time. There are people on this board who likely would cheer the government cuts, and while gov't can periodically grow unwieldy, without a profit motive most gov't work is actually notoriously low paid, stressful and in many cases far more dangerous than for profit work.

We're definitely in deflationary territory right now, and will be for some time to come. Money has become scarce, assets are generally falling in price, and ultimately services that are overpriced will be forced to go down or go out of business.

In the long run, deflation is probably a good thing; it's the market's way of redistributing highly unstable distributions of wealth, of forcing localization on the markets (globalization becomes less competitive), of eliminating the inefficient, the obsolete and the corrupt, of instilling a regime of savings, thrift and fiscal responsibility, of opening up new markets that had hitherto been blocked by established players, and of laying the ground for the next major growth period.

Of course, right now, everything is being done to fight it, because at the end of the day it means that people who have a lot of money (and who benefit most from the status quo) typically lose a lot of money, while those who have little are usually able, in the main, to get by. It's not pleasant for anyone, but it's brutal to those who had power and lost it.

Here's where both Austrians and Keynesians get things a bit wrong, however. The Keynesian impulse is to borrow from future revenues (i.e., when the economy has recovered) with higher taxes and inflation put off later in order to protect the most vulnerable today. Financial Keynesians, however, rather pervert this viewpoint, and argue that it is best to recapitalize the banks first, in order for them to return to a point where they can effectively function to increase the velocity of money.

However, what we had during the 2000s was a financial services bubble - in real estate, investment, and insurance (esp. health insurance). This means that this sector has to go through a recession - banks need to fail, and large banks have to fail the hardest, in order to break up the inefficiencies and malinvestment in the market. Until that happens, we're Japan, all over again, save that we don't have the requisite savings that sustained that country through a couple of decades. Once it does happen though, one or more of the majors will likely disappear, and a lot of small, agile, technologically savvy companies will replace them, with an inbred ethos that "this will not happen again".

Tue, 12/15/2009 - 03:12 | 164264 Anonymous
Anonymous's picture

Hyperinflationary great depression it is NOT.

Good god, how on earth do you even get inflation out of this, let alone hyperinflation?

Where is the increased liquidity coming from? To date we have seen plummeting monetary velocity. We have massive unemployment, and we have decreasing household income.

We have a massive (MASSIVE) overhang in productive capacity, and we have continuing credit-destruction on an epic scale.

Until I see mom and pop America suddenly flush with hordes of cash, I'll call it like I see it: DEFLATION.

Anyone calling for inflation is also calling for a return to the fast money days of 2006. Anyone? Anyone?

Tue, 12/15/2009 - 23:41 | 165462 QuantumCat
QuantumCat's picture

Exactly... who else is left to leverage up?  Dave Ramsey's audience? Iceland?  Greece? Dubai? California?

Wed, 12/16/2009 - 09:17 | 165739 moneymutt
moneymutt's picture


Thu, 12/17/2009 - 18:52 | 168124 Anonymous
Anonymous's picture

Hyperinflation in other countries happened when there was a flight of capital. People dump their currency in favor of something else, such as US$, foreign assets, precious metals. They tried to dump it faster than it becomes completely worthless. This causes their country to get flooded with local currency that no one wants. A vicious circle.

In order to have hyperinflation in the US there would need to be a compelling reason and a destination for capital to flee.

Tue, 12/15/2009 - 05:44 | 164307 Anonymous
Anonymous's picture

Actually, I just did the math and came out with ~2.7 million light years assuming each bill was 10 mils thick That would mean a stack of 100 bills is about 1 inch. (6.3 million per mile, or 3.7x10^19 per light year). This is quite reasonable considering there would be almost no gravity to compress the bills after the first couple billion of them.

Sounds like we had better dramatically increase NASA funding so there will be some way to stack these bills high enough for a trip to the supermarket in the future.

Thu, 12/17/2009 - 00:38 | 167072 ZerOhead
ZerOhead's picture

2.7 million light years it truly was... my paws must have hit the wrong keys.

My apologies :)

Tue, 12/15/2009 - 16:01 | 164881 ATG
ATG's picture

Not one man in a million understands deflation,
including our friend John Williams.
People tend to lose a lot of money when they
extrapolate recent trends, ie the 86% collapse in
the dollar versus gold since 2001.
The last default-driven deflation America had was
in the 1930s, when very few living today were old
enough to comprehend what was going on. Bernake, Romer
and Summers claim they studied the bug D, but so far
they are receiving failoin g grades with the neoKeynesian rostrums.Nope, this one will call for the painful cycle
of creative destruction of Schumpeter, with the lower
taxes of Adam Smith and Aristotle, for the savings of
Ricardo and the reward of labor of Marx...

Tue, 12/15/2009 - 17:17 | 164985 Anonymous
Anonymous's picture

There was still a light "peg" to the gold standard during the 1930s. On commodity based systems of course there will be deflation. On fiat systems with trillions in derivatives outstanding there will be hyperinflation

Bernanke is not a keynesian by the way, he is a Friedmanite. The chicago school is not much better if not worse than the keynesians.

Tue, 12/15/2009 - 23:46 | 165469 JR
JR's picture

Bernanke is more Keynesian than Keynes.

As Norman Markowitz said in 2008 in Bernanke and the Return of Keynes,  “Ben Bernanke announced that the Federal Reserve supports a Keynesian solution, a fiscal stimulus package.”

Said Markowitz on the Political Affairs Editors Blog,  “When the chairperson of the Federal Reserve calls for a fiscal stimulus package, you know, as Bob Dylan famously sang, ‘The Times they are a changin.’

"'Fiscal stimulus' approaches to fight business cycle downturns derive from the thinking of John Maynard Keynes, the British economist who, after WWI, contended that the capitalist system faced a 'secular crisis' which called for state fiscal policies to sustain mass purchasing power in the economy in order to counteract stagnation that would produce decline.”

And as Mish said in January of this madness and Undeniable Shift to Keynes even though every such attempt in history has failed, in Bailouts Breeding Something for Nothing Economic Policy: Bernanke has come out blazing with 8 new policy tools, including the TALF, TARP, PDCF, ABCPMMMF, CPFF, TAF, and MMIFF to go on top of Open Market Operations, Discount Rate setting, and setting reserve requirements."

And concluded: Bernanke's policies are going to make this depression worse. Yes, I used the word depression. It may not be as big as the great depression, but the word "recession" does not do justice to what we are in and what is coming down the pike.

Wed, 12/16/2009 - 04:22 | 165643 Anonymous
Anonymous's picture

Bernanke is a monetarist who believes that printing money can solve any economic crisis. The deregulation and bailing out of banks is clear chicago school. Bernanke is now even complaining about fiscal deficits at this point, apparently there is not enough money to go around for the people and the banks, the banks and investment houses of course get first priority.

Either way both the keynesians and the chicago schoolers have been discredited. It is not a mere matter of consumption or aggregate demand that drives an economy nor is it a matter of the money supply. It is the amount of industrial production that a nation is capable of. This is what -separates (used to anyway) the first world and the third world.

Tue, 12/15/2009 - 19:15 | 165125 Anonymous
Anonymous's picture

Not as far flung as suggested, but based on available data the stack of Zimbabwe notes would reach about 46.4% of the way to Andromeda.

As for Alpha Centauri, that many notes would stretch over 265 thousand times that distance.

Mon, 12/14/2009 - 15:53 | 163513 etrader
etrader's picture

Thanks!  John Williams did a very good interview on Eric kings site the other week.

 Which included some steps to take including stocking up on miniatures ;-)

Mon, 12/14/2009 - 16:18 | 163564 Internet Tough Guy
Internet Tough Guy's picture

I have heard him say in several interviews that he stores whiskey for the coming barter economy.

Mon, 12/14/2009 - 16:41 | 163605 Duck
Duck's picture

I think he is drinking it now.


Can you say Quack

Mon, 12/14/2009 - 19:26 | 163871 E pluribus unum
E pluribus unum's picture


Mon, 12/14/2009 - 21:49 | 164039 janchup
janchup's picture

Yeah, except for his intellectual capacity, his education and his training.

Tue, 12/15/2009 - 03:14 | 164266 Anonymous
Anonymous's picture

What's intellectual about spouting beliefs which are utterly unsupportable by empirical evidence?

Deflation is everywhere you look. His charts are pretty, but his conclusions are utter tin.

Tue, 12/15/2009 - 10:18 | 164413 tip e. canoe
tip e. canoe's picture

"Deflation is everywhere you look."  except the grocery store (sans corn)

Wed, 12/16/2009 - 04:26 | 165645 Anonymous
Anonymous's picture

The charts were proven to based on fraudulent input data to begin with. The whole ability for banks to create loans via credit derivatives without counting them in their capital ratios was already hyperinflationary. The same derivatives that are artificially keeping the treasury market from collapsing.

Hyperinflation is a currency devluation, asset prices can still go down even in the initial stages of hyperinflation.

Tue, 12/15/2009 - 01:10 | 164197 Anonymous
Anonymous's picture

You have Goldman Sacs saved by intervention by the federal gov't from bankruptcy now acting as a commercial bank with all the privileges of access to the Fed, YET WITHOUT ANY DEPOSITORS. Its prop desks and trading patterns are the most ANTI-SOCIAL and short-term "gain the system" disfigurements our economic system can produce.

But they are the King's (obama) men and are protected from the law, regulation, shame, or loss. They nearly single-handedly reflated our equity market and participate openly and on the sly to prop our debt auctions and all the myriad paper money exchanges in between.

This is inflation and corruption. Too Big to Fail is inflationary. All losses which cannot be realized are made whole by inflating the currency and distributing to the bad actors with political friends.

The system has passed an inflection point where it no longer even needs the lower order economic actors. It will remedy its situation by cunning transactions between the Fed and banking system.

Main Street is IRRELEVANT, except for the frankenmaschine described above, to use in dumping its worthless currency upon to extract the living and useful things to keep itself alive.

It all depends on the faith which the fiat can hold and the degree to which the bankers can disguise their deluge of counterfeiting and IOU printing.

It is hyperinflation and it is screaming to you all around. Peruse carefully all economic agents about you, scrutinize pricing, supply, selection and you must come to the conclusion that deflation is NOWHERE.

Mon, 12/14/2009 - 17:25 | 163678 Cindy_Dies_In_T...
Cindy_Dies_In_The_End's picture

Many argue that things for barter will be far more of a worthwile investment than gold during an initial full scale disruption, then as things settle, metals will be as good, but likely better. It makes sense to stock up on barter if one is of that school of thought.

Mon, 12/14/2009 - 17:41 | 163695 etrader
etrader's picture

Tend to agree :-)

Perscription Meds , tobacco, cooking oil even  crapper roll will be better barting tools if it ever gets that far gone.


Mon, 12/14/2009 - 18:37 | 163793 VegasBD
VegasBD's picture

Thats why I am currently banging a hot lil pharmacist chick. Im just about as stocked up on meds as possible. Now on to finding a liquor distribution manager...

Mon, 12/14/2009 - 19:06 | 163831 Ripped Chunk
Ripped Chunk's picture

Just closed out the savings and heading for Costco with cash and plastic.


Probably rent a truck on the way.



Mon, 12/14/2009 - 19:32 | 163880 putbuyer
putbuyer's picture

watch "Moscow on the Hudson" - movie and a comedy if you have not see it, starring Robin Williams.

I was in Moscow during the time where the Soviet flag changed to the Russian flag at the Kremlin - USSR Whitehouse was on fire. The best store way called The Irish House. This place had it all - Western TVs and food.

I stood in bread and  T paper lines. It was weird in the sense that people demoralized so much thought it was normal. There was an instant where I was buying bread - I took to long in the long line choosing between 2 bread choices. I was yelled at and was told to leave. I said  NO, I need bread. I got it. No one else was resistant like I was. It can happen here.


Mon, 12/14/2009 - 20:53 | 163982 Conchita Buika
Conchita Buika's picture


Mon, 12/14/2009 - 22:08 | 164059 msjimmied
msjimmied's picture

Learn to make bread. Get a bread machine.

Tue, 12/15/2009 - 12:17 | 164582 WaterWings
WaterWings's picture

Which just might be as useful as your icebox once the power goes out - get a solar cooker.

Wed, 12/16/2009 - 12:20 | 164584 WaterWings
WaterWings's picture

How did this happen? Well, first double post. But I won't waste the space:

go to before it's tooooooo laaaaaaate!

Mon, 12/14/2009 - 18:23 | 163766 Anonymous
Anonymous's picture

Try bartering with a prostitute - He only wants the benjamins

Mon, 12/14/2009 - 19:15 | 163843 etrader
etrader's picture



Mon, 12/14/2009 - 21:42 | 164036 dark pools of soros
dark pools of soros's picture

did he already have enough meth?

Mon, 12/14/2009 - 18:27 | 163773 ghostfaceinvestah
ghostfaceinvestah's picture

In case you haven't come across it yet, this is a good site, this guy really lived through what we are facing.

Mon, 12/14/2009 - 18:38 | 163796 VegasBD
VegasBD's picture

I love  his site. Just ordered his book too

Tue, 12/15/2009 - 07:21 | 164316 Anonymous
Anonymous's picture

I guess I already know the answer, but do you believe this site is entirely credible?

I found it a good read but I'm not a bit over dramatic.

You guys seem to have spent more time on the site - what's your take?


Tue, 12/15/2009 - 12:31 | 164603 WaterWings
WaterWings's picture

Credibility or not, your brain is exposed to all the possibilities/threats in a collapse. People are busy debating deflation/inflation - unless you're watching your investments to scrape margins off here and there before the plug is pulled you are better off learning how to compost, pull teeth - frontier style, and barter, etc, etc, etc.

All the skills our hyper-specialized, division-of-labor society is almost entirely without. So what if you can design the slickest webpage in the world - you won't be able to trade baked beans for your skills when people are scrounging for food. 

People think, "Collapse eh? That's going to suck for a while." Tell all the welfare queens there are no more food stamps. None. Gone. Gotta hike it to the nearest food distribution center - put all the kids in shopping cart and go, lady.

Well, I could go on and on, but FerFal does it better than me - and whether or not he's lying it makes sense. You can always not do what he suggests, and there are other sources for the same type of information, but to imagine we are all going to be singing Kumbaya while our gubbmint figures out how to feed it is a joke. Think crime isn't going to rise when people have nothing to eat? Nationwide Katrina, without FEMA showing up, ever.

Tue, 12/15/2009 - 14:20 | 164739 Anonymous
Anonymous's picture

Keep in mind that Ferfal is trying to leave Argentina and settle in the US. It might be that due to his experiences in Argentina, he feels he has the skills to prosper better even in a US that is undergoing a hyperinflationary episode. Or as bad as he thinks it will get in the US, people in the US will still be in a better position than most other citizens, and especially Argentinians.

Thu, 12/17/2009 - 11:32 | 167424 Anonymous
Anonymous's picture

Actually, he probably does have the skills. Most immigration to the US was in times of troubles. Immigrants were generally self sorted with the ones with initiative willing to to re-locate. Those with the ability to rationally evaluate current events and future trends. And the courage to act. Long term success seems to combine the ability to keep an eye on the future goal with a sharp focus on
today's opportunities. This seems to preclude the entitlement attitude. Other than the right to keep
what one has earned.

Mon, 12/14/2009 - 18:29 | 163776 Anonymous
Anonymous's picture

This is what the anti-goldbugs don't seem to get...a lot of us aren't stocking up on "junk" silver and gold as an investment opportunity, but as a barterable currency if/when the supply chain collapses.

My pre-1960 silver dollars and half dollars (along with a few Krugerrands) may only be "worth" a few pieces of FRN toilet paper right now, but when the stores are looted and/or empty, each of those coins represents an ounce of silver that I might be able to barter for some groceries, or preferably a tank of gas to get me and my family the hell out of the suburbs and to the parents' ranch.

Apart from (incredibly cheap right now), booze, toiletries, and any medications you can get your doctor to write. The Vics my doctor gives me for my back spasms though...they ain't for trade. =)

Mon, 12/14/2009 - 19:09 | 163829 etrader
etrader's picture

"Junk" is the key world.

Most don't think about Junk  coins   Maples

Philharmonic ,Kookaburra, Silver eagle ect ect are always the foucs with the usual %mark ups.

A Junk bag of pre 1963 sliver coins will serve just as well..


Mon, 12/14/2009 - 19:34 | 163885 Anonymous
Anonymous's picture

I'm not an anti-gold bug. I think gold served a very important international currency-stabilizing function for a hundred years and I would like to see it do so again. It's also very pretty and very practical for electronics and dental fillings.

But, I've got to wonder, what makes anyone think that if we had a total financial collapse (to the extent that we couldn't even substitute the existing fiat currency with another as most countries have done) with all the associated trade, production, and employment loss and accompanying social breakdown, that for some reason those who have land, water, food, clothing, medical supplies, etc, etc, would be willing to give them to you (when they know there are no more being produced) in exchange for pieces of this pretty metal? Perhaps they would be seeking it for their electronics or dental projects?

Mon, 12/14/2009 - 21:20 | 164016 nedwardkelly
nedwardkelly's picture

If things get so bad that you need to barter for a tank of gas to escape to the ranch do you really think a few 1960 silver piecs will save you? Those silver pieces will be as useful as tits on a bull..

I mean think about it. Lets say I have a tank of gas. The shit has hit the fan. You need a tank of gas. You offer me eleventy billion silver pieces. What the f am I gonna do with them? Assuming I believe you that they're actually real silver of course.

If things do go completely FUBAR your silver/gold will have value once there's some return to normalcy. If/when things did stabilize there's also going to be a place for an easily transferrable store of value, but that wont be when stores are being pillaged/looted and people are escaping etc...

Mon, 12/14/2009 - 21:41 | 164035 Squid-puppets a...
Squid-puppets a-go-go's picture

That's right - gold and silver is old thinking, for previous crises.

Remember that Mad Max ii movie ? petrol was the post-apocalyptic currency, as volatile as those who were prepared to use force to get it

Mon, 12/14/2009 - 23:38 | 164131 I am a Man I am...
I am a Man I am Forty's picture

Road Warrior.  Lord Humungus speach.

Tue, 12/15/2009 - 14:42 | 164778 Anonymous
Anonymous's picture

gold ans silver is preservation of wealth. I'm still stocking up on guns ammo toilet paper food whiskey and such. having a 300 gallon above ground gas tank put in.

Tue, 12/15/2009 - 00:06 | 164152 wangchung
wangchung's picture

Yeah, that may be true for people 100% invested in junk silver.  I would suspect that most people insuring thremselves against mad max outcomes would be smart enough to would diversify with other things that they can barter with.

I agree with you on gold/silver having their time. 

Tue, 12/15/2009 - 02:17 | 164235 Anonymous
Anonymous's picture

I think of barter in two forms. The first case is where I have, say, bread, and you have gasoline. If we agree that we each need what the other has, we can come to a deal: so many loaves per gallon. If we both consume what we have just bartered for, then we have to go looking for something else to trade for tomorrow's bread or whatever. In 1946 Germany, BTW, the currency of choice was American cigarettes, the kind that came with K-rations. People actually worked regular jobs for a time for a certain number of cigarettes per piecework or per hour. The cigarettes had a known value and only the hardcore nicotine fiends actually smoked their money.

The second kind of barter is where you need something to pass through a whole string of connections to get what you want, or to trade later, say next week. Gold (or silver) has a known value that you can save to trade to someone else at a later date without the barter materials rotting or being used up. That's the whole point of precious metals. They allow you to wait to trade for something down the road. While they may not have any practical purpose, they have value as stored wealth. In Zimbabwe, workers would take their pay packets (which they got every day) to the remaining stores, where they would buy anything available to convert the nearly-worthless scrip into something physical, whether they needed it or not. The purchases would be used to barter with others who saw value in the trade goods.

Most of the scenarios presented for a hyperinflationary depression have a Mad-Max period of chaos, where consumable barter is necessary because everyone will concentrate on escaping, eating, and keeping warm and safe. But eventually, people will need to have precious metals which will form the basis of the future money system. That's how the German economies were restarted in 1923 and 1946, and the economies of the broken-up Soviet Union and its satellites. As an example of how gold stores wealth, an ounce of gold bought about 250 loaves of bread in Germany before 1921, and the same gold ounce bought the same 250 loaves of bread in 1924, even though the price of gold was in the trillions of marks per ounce. Precious metals and land holdings were the basis of the new money supplies. The apartment you occupied, even though you hadn't owned it before, was given to you and it came with a declared value in the new currency. You could sell it or hold it, depending on if you wanted to cash out. Gold and silver were bought by the government for certain prices, putting currency into the system.

Precious metals do have a value in a barter economy, especially if black markets are set up by people who know how precious metals work and accept gold and silver as de facto currency.

Tue, 12/15/2009 - 02:30 | 164242 DoChenRollingBearing
DoChenRollingBearing's picture

Vicodin and similar drugs are a great stocking item "WTSHTF" scenario.  I have a good stock of such as well as Valium.  Any drugs like that that are stable with good shelf life are good.

Au, Ag, and Pt are the best for a longer run disaster IMHO.  I do think that anyone should have some 3 months worth of FR$ even with risk of hyperinflation, as dollars everyone here knows.

If things get even uglier than I think as likely, well then items like guns & ammo (esp. ammo), dental floss, cheap plastic bags, water purification devices (solar still devices that convert seawater to fresh water), CIGARETTES (assuming there are sufficient addicts left), knives, vitamin pills, seeds (non GM-ed seeds), stockpiles of rare earth metals (Terbium, Dysprosium, Europium, etc. -- all very important in high-tech appliactions), etc. are all assets that may be tradeable in extreme circumstances.

Tue, 12/15/2009 - 03:16 | 164270 Anonymous
Anonymous's picture

I'm going 'all in' on Viagra.

Tue, 12/15/2009 - 17:30 | 164994 Anonymous
Anonymous's picture

Best way to protect against either deflation or inflation or unknown future barter/currency: boxes of nickels from the bank. 22 lbs of cupro-nickel for $100 bucks. Deflation? It's 100 USD. Inflation? It's 22 lbs of copper and nickel. General crisis? It's recognizable.


Thu, 12/17/2009 - 12:51 | 167581 Anonymous
Anonymous's picture

All very interesting. This is not the first time this type of thing has happened. Think of the last days of Imperial Russia, Weimar Germany, Rhodesia, and countless others. What did the 'successful' refugies own? How about those that staid behind? History has a tendancy to repeat so there is a hundred years of statistically relavent information available.

Mon, 12/14/2009 - 19:33 | 163883 MileMarker17
MileMarker17's picture

When the going got rough in Zimbabwe's inflation, when TSHTF, gold was the only way to procure food and other necessities.


Mon, 12/14/2009 - 21:23 | 164018 nedwardkelly
nedwardkelly's picture

The difference there is that when TSHTF in zimbabwe, it was still pretty stable everywhere else. You could take your gold in Zimbabwe and sell it in other countries/markets and know you're going to get back what it's 'worth'.

You can't compare zimbabwe to the US though. If the SHTF in the US in any way even remotely close  to zimbabwe, the whole global economy is going to be going batshit crazy.

Not saying there's not value in gold, but I'm not on the bandwagon that thinks having a closet full of gold is the way to having a secure future.

Tue, 12/15/2009 - 09:22 | 164357 ConfederateH
ConfederateH's picture

In the SHTF scenario there will still be some trade between countries, and if there is civil war or secession in the US, then between states, counties or even cities.  Obviously, gold will be the most universal and reliable medium of exchange between these entities, and will ALWAYS have value.

Mon, 12/14/2009 - 22:15 | 164067 Rusty_Shackleford
Rusty_Shackleford's picture


Mon, 12/14/2009 - 21:06 | 164003 Anonymous
Anonymous's picture

Gold's utility comes not DURING a financial crisis, but AFTER it has passed. Gold is what you use to rebuild. It acts as a STORE OF VALUE in such circumstances, not as a medium of exchange.

Tue, 12/15/2009 - 03:14 | 164267 Anonymous
Anonymous's picture

I think it's first best to be off grid as much as
possible and to have enough of what you'll need so
as not to have to barter. Such as having a home you
can heat with firewood (and the firewood), rather than
having to use natural gas or whatever other on-grid

After that, I agree assuming one will have enough
security where they are. Which is where gold finds
it's shine. Hauling a lot of value in gold if you
have to run from a bad situation is a lot easier
than hauling your ass off with as much
value in vitamins, booze, seeds, and ammo.

Tue, 12/15/2009 - 03:41 | 164282 carbonmutant
carbonmutant's picture

Hand  Tools

Tue, 12/15/2009 - 10:06 | 164398 blindfaith
blindfaith's picture

well, go to the Caribbean and sail around a bit and you will see that beer, cigarettes, fuel...that sort of thing mean more than bucks and you had better have them to trade with.  Bucks "represent" those things at the checkout counter in 'civilized' coat and tie society. 

Mon, 12/14/2009 - 22:52 | 164090 Anonymous
Anonymous's picture

What do you think of Jack Daniels and Coke as a trading commodity ??

Mon, 12/14/2009 - 23:18 | 164116 Assetman
Assetman's picture

Where does he store the Prozac?

Mon, 12/14/2009 - 15:46 | 163520 dan10400
dan10400's picture

just for the sake of argument, assume the above is true.  just what is the hedge against this type of scenario if the bulk of your net worth is in cash (TP)?  this economic pendulum swinging between the two black holes of deflation and hyper inflation is maddening.  I want the days of Louis Rukyeser back.

Mon, 12/14/2009 - 15:58 | 163535 ZerOhead
ZerOhead's picture

A temporary deflationary event may occur however long term paper will become worthless... tangible assets are better.

Buy dollar hedges... silver and gold on weakness of course... palladium is still a great play and is industrially strategic so you win both ways.

Agricultural real estate is still undervalued IMO... wait for a possible collapse in oil to buy profitable resource companies with low leverage and the usual suspects...

Tue, 12/15/2009 - 02:41 | 164248 DoChenRollingBearing
DoChenRollingBearing's picture

+1 re Au, Ag, and Pd.

Some ag real estate, though, seems expensive (in Florida anyway).

Tue, 12/15/2009 - 09:36 | 164363 ConfederateH
ConfederateH's picture

One thing I noticed while watching the Tudors was that Henry VIII was constantly stripping his opponents of their land and rewarding it to his current, loyal servants.  Ditto Mugabe in Zimbabwe.   Unlike gold, you cannot hide or move land...

Mon, 12/14/2009 - 15:56 | 163537 lookma
lookma's picture

Hyperinflation and deflation are not opposite outcomes, deflation is what leads policymakers to cause a hyperinflation.

A hyperinflation is monetary panic in the face of defaltion.  Hyperinflation is an attempt to save debt/credit from collapsing.

Mon, 12/14/2009 - 16:28 | 163582 Anonymous
Anonymous's picture

Then when will Japan see hyperinflation? I believe they are going on 20 yrs of deflation.

Mon, 12/14/2009 - 17:05 | 163647 lookma
lookma's picture

Then when will Japan see hyperinflation? I believe they are going on 20 yrs of deflation.

The stronger the deflationary forces, the stronger the monetary response.

Japan's monetary stimulus pales incomparsion to US.   I wonder if its because they didn't have deflation for 20 years?

Mon, 12/14/2009 - 18:29 | 163777 ghostfaceinvestah
ghostfaceinvestah's picture

Lack of opportunity to print money too - they don't have GSEs, whose paper now backs up 50% of our money and climbing.

In a lot of ways backing up your currency with corporate bonds, representing the industrial base of your economy, is better than backing it up with GSE counterparty risk.

Mon, 12/14/2009 - 16:28 | 163583 Anonymous
Anonymous's picture

Exactly. Hyperinflation and Deflation are both economic collapses. The difference is policy.

Those who pretend to have reached their position via mathematics, statistical analysis or any other form of computation are gazing into the smoke and lights while ignoring the man behind the curtain.

Mon, 12/14/2009 - 16:53 | 163629 chumbawamba
chumbawamba's picture

You got 3/4 of it right.  The last part is wrong.  You do not "create" hyperinflation.  You can influence it, and promote policies that encourage it, but hyperinflation is a beast of its own makings.

Hyperinflation occurs when people no longer have faith in the currency or what's backing it.

In this case, we are looking at a hyperinflation of the world's reserve currency.  Unprecedented, certainly in modern times.

I am Chumbawamba.

Tue, 12/15/2009 - 16:29 | 164925 Anonymous
Anonymous's picture

Bingo Chumba!

I was looking to see if someone got around to mention that tiny detail of USD being the world reserve currency as opposed to Yen.

That makes the whole difference in my mind. The issue is the huge international position in Treasuries, and what will happen if that is sold off one day due to terminal confidence loss in the dollar.

Wed, 12/16/2009 - 03:43 | 165628 Anonymous
Anonymous's picture

I would say that the reality is just exactly the opposite.

To have hyperinflation one thing is absolutely necessary. That the central government create vastly more money than the normal increase in the yearly increase in the creation of goods and services.

The central governments of some countries have historically done this, but I do not think that there is much chance of this government choosing to destabilize our country by doing so.

On the other hand, deflation is not under the control of any central government, but is the result of the collective choices of million of people in regard to what they do with their incomes.

If they chose to cut back drastically on their purchases, and opt to take their weekly pay packet and stick some of that under their mattress, then the velocity of money goes drastically down, and demand for goods and services plummets. The result? Businesses drastically reduce prices to try and entice more spending. Thus, money goes further, and people can get their basic necessities with less money, resulting even more hording of cash.

Bottom line? Inflation can be completely controlled by policy at the national level. A deflationary spiral is uncontrollable.

Mon, 12/14/2009 - 15:45 | 163522 curbyourrisk
curbyourrisk's picture

Deflation is still my view point.  The government...has speaking out both sides of their mouth on this one....Openly deying it...and effectively using it to prevent such a collapse (hyper-inflation).

They will not allow it to happen, they have other tools......that would just prolong the direction we are currently on.

Mon, 12/14/2009 - 16:22 | 163569 Internet Tough Guy
Internet Tough Guy's picture

Good luck buying Spam on the black market with your green confetti.

Mon, 12/14/2009 - 18:07 | 163740 Anonymous
Anonymous's picture

for people to lose faith in the dollar, the masses have to accept something else to trade with. Good luck with that. Gold - good luck getting 95% of the population to take gold coins.

Also, dont forget, the dollar will not collapse until our military is no longer number 1.

Mon, 12/14/2009 - 22:23 | 164072 Rusty_Shackleford
Rusty_Shackleford's picture

When the dollar loses most of it's current value, do you think the soldiers will keep working for paychecks that don't allow them to purchase anything?  If you were paid in a currency you couldn't use to buy the things you needed, would you still show up for work?

The US military is dependent on the US dollar, not the other way around.

Mon, 12/14/2009 - 22:55 | 164095 pikledbill
pikledbill's picture

the US military has stores on every base...they will be paid in whatever currency can be used to purchase whatever they need from AAEFES.

Tue, 12/15/2009 - 15:17 | 164818 Rusty_Shackleford
Rusty_Shackleford's picture

What will the PX/AAFES use to purchase the goods to restock their own shelves once they go empty?


I find your over-abundance of faith disturbing.


Tue, 12/15/2009 - 18:38 | 165075 Ripped Chunk
Ripped Chunk's picture

How will they be paid when they are occupying your town?

They just feed them, then pay them when they are relieved and head back to "base"?

Mon, 12/14/2009 - 23:27 | 164124 delacroix
delacroix's picture

I lost faith in my girlfriend, when I found out she had been unfaithful, I didn't wait to find a new girlfriend, before I kicked her to the curb. when It ain't worth nothin to someone else, it won't be worth anything to you

Tue, 12/15/2009 - 08:53 | 164341 moneymutt
moneymutt's picture

technically, girlfriend is luxury item, you can live awhile without one, but food, and some clothing and shelter are demanded daily for our survival. We have to have a way to get these every day.

Tue, 11/30/2010 - 03:18 | 763881 Karston1234
Karston1234's picture

This was actually what I was looking for, and I am glad that I finally came here! This for sharing and keep up the good work...
online degrees | universities | online universities | distance learning universities | campus based universities

Wed, 12/16/2009 - 04:31 | 165647 Anonymous
Anonymous's picture

There doesn't have to be an alternative. The British pound defaulting on the gold standard in September 1931 proved that to be the case. While gold may seem silly to you, it was a measure of confidence internationally, that is all it takes a lack of confidence, A shutdown in world trade would occur, without a centrally trusted reserve currency.

Mon, 12/14/2009 - 18:25 | 163739 tip e. canoe
tip e. canoe's picture

"and effectively using it to prevent such a collapse (hyper-inflation)"

issuing ultimatums to 'fat cat bankers' that have ~$870B in reserves to 'increase lending' is not quite what some of us would consider prudent prevention.  if the fatcats call hopey's bluff in the sick little prisoner's dillemma game they're playing and start efficiently processing those huge stacks of loan applications they're sitting on, the fuse will be lit and not a car full of clowns will be able to stop it.

Mon, 12/14/2009 - 22:28 | 164073 Rusty_Shackleford
Rusty_Shackleford's picture

I believe we're actually up to $1100 billion now.[1][id]=EXCRESNS&s[1][range]=5yrs


Mon, 12/14/2009 - 18:36 | 163791 Anonymous
Anonymous's picture

I somewhat agree. What the neo-classical inflationist camp has consistantly refused to recognize is the effect of debt and credit in the money supply.Even after they botched their predictions before, during and after the Great Depression.

Which is why they've been so staggeringly wrong about inflation and gold going to $5,000 per ounce this year, after the Fed has dumped Trillions into the Black Hole of Wall Street.

The debt built up in the derivatives market has to collapse first, since debt and credit make up the lion's share of the total money supply.

Since the underlying problems in the Financial system weren't fixed this year, we'll see a repeat of September 2008, when there was a run on the derivatives in the Shadow Banking system.

Only the next time, the Government will be hard pressed to come up with another $12+ Trillion in cash and promises to stop the panic.

After the debt is gone though, I would agree that we'll see inflation like we've never seen before. All fiat currencies destruct. They always have and always will, and there's over 2000 years of history to supprt this. The U.S. dollar is no different.

From Eternal Student

Wed, 12/16/2009 - 04:35 | 165650 Anonymous
Anonymous's picture

The same shadow banking system is propping up the whole US treasury market. Over half of all derivatives are at least dollar denominated Interest rate swaps, unbacked naturally and much larger than credit derivatives. When the IRS market collapses, so will treasury prices causing the amount of dollars that foreigners hold to artificially prop up the US dollar outstanding to decline, thereby feeding itself into self-destruction and terminal decline.-

Mon, 12/14/2009 - 19:57 | 163912 delacroix
delacroix's picture

deflation= debt destruction=defaults=bankruptcies=currency collapse. do not pass go, do not collect $200                                    hyperinflation= currency collapse.   missionary, or doggie, you're still fucked

Wed, 12/16/2009 - 04:33 | 165648 Anonymous
Anonymous's picture

Hyperinflation can start when a massive amount of capital printed out of thin air, ends having no productive value. Printing money can be productive as Lincoln proved.

Mon, 12/14/2009 - 15:47 | 163525 bugs_
bugs_'s picture

I'm going to buy me a Mercury or two.

Mon, 12/14/2009 - 15:50 | 163527 CD
CD's picture

Wow. What a cheerful way to start the afternoon...


Central banking is (in the words of Tony the Tiger): GRRRRRRREAT! Hey, at least for a while it may reduce dependence on foreign oil, and long-forgotten technologies such as the steam-engine powered automobile may make comeback:


Mon, 12/14/2009 - 16:10 | 163532 DaveyJones
DaveyJones's picture

Modern Central Banking follows either tony the tiger's words or tiger the woods words - who can we fuck next?

Mon, 12/14/2009 - 15:52 | 163530 AnonymousMonetarist
AnonymousMonetarist's picture

'Without the slightest artificiality of face, without the faintest counterfeit of voice,and without more than a slight exaggeration of natural manner, he could become the typical American schemer'.
- Famous American Actors of To-day (1896)

'Populism espouses government by the people as a whole (that is to say, the masses). This is in contrast to elitism, aristocracy, synarchy or plutocracy, each of which is an ideology that espouse government by a small, privileged group above the masses.'

'The story that democracy is not to last for ever is as true, and as little to the point, as the assertion that human reason is not to last for ever, since only democracy provides an institutional framework that permits reform without violence, and so the use of reason in political matters.'
-Karl R. Popper

The butterfly wings of the banks, too bankrupt to go broke, need imaginary pricing for their imaginary collateral -tis too humptied to get dumptied.

The state, too captured to go real, pressures the squints to 'Less Nessman' the bad speculative bets.

The bets, whilst still on the books, are an option ... the regulatory put socializing the downside, the upside beholden only to imagination.

Such an imagining is the MSR(mortgage servicing rights) bucketshop, where there is no active trading and hence the value in the bucket depends largely on the expected life of the mortgage.

Extend and pretend is the proposed means to mend. Pay no attention to the marks behind the curtain. What ever the banks want to show they show. 

The Nancy Capitalists proclaim its' all good, and we all should support that which brings recovery home.

But a storm is being created.

What they fail to realize is that they are corrupting, not supporting the American Dream; through their desire to be prophets they have ceased to be makers of their own fate.

The American Dream is becoming the American Scheme as moral hazard is writ large. 

With Mr. & Mrs. America feeling no compunction to walk away from their home if their neighbor does it, with the neverending Federales policy of exalting drunks and punishing the sober, with the phrase 'the whole thing's a Ponzi' being uttered by even the most ardent of conservatives at family functions - life is imitating the arts of the elites. 

People are losing faith.

Lies have consequences.

Trust can be gained once and lost once. Once lost, it's lost forever.

The American Dream of working hard, making it, and making a better life for your children is being replaced by synarchy for all

Mon, 12/14/2009 - 16:04 | 163549 Dixie Normous
Dixie Normous's picture

So what you're saying is, things are better than expected?

Mon, 12/14/2009 - 16:51 | 163624 Anonymouse
Anonymouse's picture

Yes, Mr. Liesman

Mon, 12/14/2009 - 20:13 | 163930 AnonymousMonetarist
AnonymousMonetarist's picture


The bet is still on.

Mon, 12/14/2009 - 16:07 | 163552 Anonymous
Anonymous's picture

A kudos for Kitco (

I sold some glod to Kitco and delivered to their NYC (Inwood) collection location on Dec 1 (the prices were high approx 1200). Someone messed up and didnt inform that I had delivered. I kept following up with phone calls emails. Finally on Dec 9th I spoke to lady named Sileh who was extremely helpful, tracking down the delivery and keeping me updated as to what was happening.

By then the prices had dropped to 1130 (approx 5%). I thought would have to do a song and dance to get the Dec 1st prices. There was no fuss and transaction was completed at the Dec 1st prices.

So, a kudos and my recommendation of for your glod transactions.


Mon, 12/14/2009 - 16:51 | 163623 NumisEX
NumisEX's picture

From the tone of this article, you may cry a river and wish you had some *glod* at Dec. 14, 2009 prices in the near hyperinflationary future when you are using your fiat for toilet grips.

Mon, 12/14/2009 - 17:29 | 163683 Anonymous
Anonymous's picture

Not quite. Well aware of the issues. This was to purchase an other asset, a food producing one. Yes, I am getting ready.

Mon, 12/14/2009 - 20:33 | 163959 Winston Smith 2009
Winston Smith 2009's picture

As Karl Denninger at The Market Ticker points out, when it gets so bad to the point where you really NEED gold, lead will be the far more valuable commodity as long as it's diameter is .223, .308, 9mm, .40, etc.

Mon, 12/14/2009 - 21:27 | 164022 nedwardkelly
nedwardkelly's picture

At least with that sort of metal you wont have to convince anyone that it's real... They probably wont argue as to it's real value either

Mon, 12/14/2009 - 16:16 | 163553 Internet Tough Guy
Internet Tough Guy's picture

I wanted to use Hyperinflationary Great Death Spiral as my ZH screen name but it was too long so I made it my legal name instead.

Mrs. Great Death Spiral is not happy about this turn of events.



Mon, 12/14/2009 - 16:24 | 163573 tip e. canoe
tip e. canoe's picture

neither is Mrs. Canoe Approaching Waterfall

Mon, 12/14/2009 - 16:43 | 163611 Cognitive Dissonance
Cognitive Dissonance's picture


However, changing your last name (after you were married) did not change your spouses last name. That will be rectified after the divorce and the subsequent marriage to another spouse. Assuming the new spouse is willing to get into the canoe.

Mon, 12/14/2009 - 18:22 | 163761 tip e. canoe
tip e. canoe's picture

CD, i actually took her name in honor of the equilization of gender roles.
my maiden name is actually Toes Through the Timebombs :)

Tue, 12/15/2009 - 06:27 | 164310 agrotera
agrotera's picture


Mon, 12/14/2009 - 20:34 | 163960 bilbert
bilbert's picture


Mon, 12/14/2009 - 16:19 | 163566 Michael
Michael's picture




What are the best ways to stave off the banksters from collecting on the unsecured debt? All advice welcome.

Mon, 12/14/2009 - 16:23 | 163571 Anonymous
Anonymous's picture


That will get you ahead.

Mon, 12/14/2009 - 16:27 | 163580 economicmorphine
economicmorphine's picture

In a hyperinflation you won't be able to pay off the property taxes on your paid off home. Just saying.....

Mon, 12/14/2009 - 16:31 | 163588 hack3434
hack3434's picture

Most governments don't survive hyperinflation

Mon, 12/14/2009 - 18:29 | 163753 MsCreant
MsCreant's picture

Holy shit. In all my plotting and planning, hyperinflated property taxes never crossed my mind. OMFG.

I have a "paid off" house. Maybe my gold will hold enough value to get the bastards off me.



You know what I mean, nothing left to lose...

Mon, 12/14/2009 - 18:39 | 163789 AN0NYM0US
AN0NYM0US's picture

not to worry hyper-inflated property values coincide with hyper-inflated property taxes - and to pay those taxes you can borrow against your hyper-inflated property and pay back the loan with more borrowings from your ever more valuable home - debt is good in a hyper environment. But rest assured all will be well - some dude is on Bloomberg right now talking cruise lines and what great upside they have as the soon to be un-unemployed will be finally taking that well deserved vacation.

Mon, 12/14/2009 - 18:43 | 163804 ZerOhead
ZerOhead's picture

Borrow in a hyperinflationary situation? Wow if you are lending when this shitshow goes down please give me call. :)

Mon, 12/14/2009 - 22:29 | 164076 Anonymous
Anonymous's picture

Maybe you could borrow someone's gold vs. the equity in your house (after all, a house is still a house), then when the prop tax bill is issued, immediately convert the gold to currency and pay the tax.


Tue, 12/15/2009 - 06:04 | 164308 Anonymous
Anonymous's picture

Every year? Or even several times a year?

Mon, 12/14/2009 - 18:48 | 163790 ZerOhead
ZerOhead's picture

Chill lady...

You won't be the only one with the problem remember... and yes gold and silver will suffice although the government (Federal Reserve again) is more likely to confiscate the gold like they did in the 30's rather than the silver. And when they "outlaw" gold you will become an "outlaw" (You enemy of "The People" you...).

They really really like to get their hands on other peoples gold shortly after they destroy our currencies.... hmmm... coincidence? Probably.

Mon, 12/14/2009 - 19:21 | 163863 Oracle of Kypseli
Oracle of Kypseli's picture

Black markets were everywhere during the first. Gold markets are in every city in every country. legal or underground. I've lived it. I've used it.

Jewlery stores were still operating during the depression.

Underground Real estate deals by the Kennedy's with silver or for silver was a well known fact during the first.  

18K gold wire and .750 silver wire in semicircle profile crudely made into bracelets is what the Iraquis the Bedouins are using (as we discuss this) in the Middle East for barter, not trusting the Israeli Shekel, the Jordanian Dinar or the Egyptian Lira or other fiat currencies.



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