John Williams of Shadowstats has repeatedly warned that our economy is not doing as well as some would have you believe. From unemployment to GDP to current and future liabilities, there are fundamental problems that will not be resolved anytime soon - in fact, they’re likely to get worse. The end result according to Williams?
A hyperinflationary depression.
(Video available below excerpts and commentary)
Eventually it’s going to be a hyperinflationary great depression in the United States.
We’re already seeing food and energy prices rise significantly - with price jumps of 30% or more year-over-year. We can argue about deflation or inflation, but we will not be sure of exactly what comes next until it actually happens. John Williams provides some recommendations, all of which we’ve discussed before, for preparing yourself and loves ones for the possibility of a complete meltdown in the US dollar. Williams is a respected economist who has a high level understanding of the fundamental numbers behind our economy, so his forecasts and recommendations should not be taken lightly:
In terms of maintaining the purchasing power of your assets and wealth - and this is primarily a problem for people who live in a US dollar denominated world - Canada is not going to necessarily have this problem - you look to put your dollars in hard assets like physical gold and silver, getting the dollar into other currencies such as the Canadian dollar, Australian dollar, Swiss franc.
In the US we don’t have a back up system. Zimbabwe had the worst hyperinflation anyone’s ever seen. But, they survived. They had an ongoing economy. That was because of a black market in US dollars. We don’t have a black market in the US. There’s no backup to our system.
It gets very difficult when food starts to disappear from food shelves. What happens? You can probably use common sense. It’s probably a good idea to store goods that you would normally consume for several months, just to protect yourself, your family and to have goods for barter.
That four pound bag of rice, roll of toilet paper or bottle of Jack Daniels you have stored up in your prep closet may very well be worth it’s weight in silver if and when goods start flying of the store shelves.
One of the primary concerns for people who know a major collapse is coming is how to identify it when it is happening. What are the signs?
Sign number one is what governments do before a hyperinflationary collapse. If history is any guide, then the monetary actions of our Federal Reserve are a clear indicator. As Jon Stewart humorously pointed out recently, the Fed is “imagineering” money out of thin air. This means more money in our overall money supply chasing fewer goods, which inevitably leads to higher prices. We’re seeing this the world over in commodity prices, as well as other assets. One of the big complaints coming out of China is that the policies of the Federal Reserve are leading to the US exporting inflation to China, as evidenced by significant increases in their own domestic stock market prices and real estate values. The Chinese are already taking steps to curb this inflationary bubble in the making. Another sign of coming fiscal problems, which ultimately leads to more monetary quantitative easing policies is the continued uncontrolled spending of Federal, State and local governments. As they waste more money, more needs to be printed to “monetize” the debt that no one else wants to buy.
We’ve warned about it before, and we’ll say it again because it is going to be the trigger that sets the whole thing into a complete collapse. When our creditors start offloading US Treasuries and stop buying new debt issues, the game is over. John Williams confirms this view and provides some more insights as to what you should be looking for as telltale signs that hyperinflation is upon us:
This is not good news. Weakness in the dollar is what will kill the system, it’s what will trigger the early signs of hyperinflation. Which, as you mentioned, could be as early as the next six to nine months. Down the road that remains to be seen as to the timing.
Watch the dollar. Watch for panic there. If it gets out of control you’ll see massive dumping of dollars. The Fed will be intervening even more than it does now. People will be turning dollars over as quickly as they can - they’re not going to want to hold them. Prices will sky rocket. We’re going to see this in the next couple months starting with gasoline and food prices.
We have yet to see the ramp up in commodities hit the store shelves and gas stations. But be assured that it will happen (unless stocks and commodities crash in the near future). This price increase simply cannot be avoided. It’s already happening. Most of us have seen small percentage rises in grocery store prices already, and media outlets are reporting $3 gas by Christmas. These price bumps are nothing compared to what must happen as a result of price rises in commodity markets over the last year.
Thus, in the next 1 - 3 months, we should start seeing the early signs. Mr. Williams’ forecast in this regard falls in line with those made by Gonzalo Lira in Hyperinflation Tipping Point By Early 2012, an insightful article that provides some more technical and economic signs to look for. Both forecasts suggest that 2011 will see the beginning of our hyperinflationary spiral.
Keep in mind, however, that it is not likely you’ll see prices jump 100% from January 2011 to April 2011 (unless of course the Chinese stop buying our debt in the next 4 months which probably won’t happen just yet). What we’ll see is a progressive and sustained increase in food prices over many months and several years. Eventually, the dollar’s tipping point will be reached - perhaps a year, two or three down the road - and then the fireworks will really start.
Here is a chart of the acceleration of hyperinflation in Zimbabwe - this was a multi-year breakdown and we can expect something similar here:
Chart provided by Howard Katz
| year | rate of increase in prices | |
| 1999 | 56.9% | |
| 2000 | 55.22% | |
| 2001 | 112.1% | |
| 2002 | 198.93% | |
| 2003 | 598.75% | |
| 2004 | 132.75% | |
| 2005 | 585.84% | |
| 2006 | 1,281% | |
| 2007 | 66,212.3% | |
| 2008 | 231,150,888.87% (July) | |
As a country, we might be able to handle the price increases for the first 2 - 4 years, but even that is a stretch considering that one in eight people require food stamps to keep food on the table and roughly one in four are out of work.
Even if we do survive those first three years intact, they will have taken a toll and probably altered the average American’s way of life for the worse. By year four or five however, we’d be looking at a total breakdown in our economic system that may very well include disruptions to food supplies and the normal flow of commerce. The majority of people in America would be financially destroyed by that point, or be very close to it.
This is the Zimbabwe time line, and they did not owe trillions of dollars to foreign creditors, nor were they the reserve currency of the world. Given our status as the world’s super power, it is possible that a currency breakdown in the United States may happen on a much more accelerated time line.
Perhaps Mr. Williams’ forecasts are wrong, and we’re willing to admit that we might be wrong too.
But this isn’t about who is right or wrong. It’s about identifying the many possibilities - because it is clear that we’re not going to see recovery until maybe the end of this decade - and taking steps to protect yourself and your family as best as you can.
The signs are all around us. Would picking up a a few hundred dollars in bulk rice, wheat, alcohol, tobacco, or other good susceptible to hyperinflationary price increases be such a bad idea?Watch John Williams on BNN - December 2010:
Related Reading:
Hyperinflationary Depression - No Way of Avoiding Financial Armageddon
Shadow Stats Founder On Hyperinflation: Disruptions to Food Supplies, Normal Flow of Commerce
What is Money When the System Collapses?
H/T Zero Hedge
Author: Mac SlavoDate: December 10th, 2010
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