Key Theme In Interview With ShadowStats' John Williams - (You Guessed It)
Hyperinflation And The Death Of The US Economy
http://www.zerohedge.com/article/key-theme-interview-shadowstats-john-williams-you-guessed-it-hyperinflation-and-death-us-eco
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.
Hyperinflation And The Death Of The US Economy
http://www.zerohedge.com/article/key-theme-interview-shadowstats-john-williams-you-guessed-it-hyperinflation-and-death-us-eco
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.
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