John Williams Predicts Hyper-inflation in A.D. 2014

Unlikely hero? John Williams @ shadowstats.com
[courtesy Google Images]

Somewhere between ten and twenty years ago, Williams realized that the government was repeatedly and persistently changing the mathematical formulae it used to calculate “official” economic indicators like inflation, unemployment and national debt.

For example, if inflation was once calculated on the basis of A + B = 2% (inflation rate) and inflation rose to levels (say, 9%) likely to diminish public confidence in the economy, then the government would simply change the formula (A + B) into a new-and-improved formula of A + B – 7%.  Now, with the new formula, even though the real inflation rate was 9%, the “official” inflation rate would still be 2%—and the people would cheer and say “Hooray for government economists!  Let’s reelect the incumbent politicians!”

These formula changes were initially justified by politicians as a means to maintain the economic sin qua non:  public confidence in both the economy and incumbent politicians.  But, despite the original justification, these formula changes were designed to deceive the American people into believing that the US economy was stronger than was really the case.

More than anyone else, Mr. Williams has made it possible for Americans to see those deceptions and begin to hold politicians accountable.

Recognizing that the government was constantly cooking the books by changing the formulae used to calculate economic indicators, John Williams had the simple genius and fortitude to start calculating US economic statistics with the same formulae as were used back about A.D. 1990.  The result was a more accurate description of what is really happening to our economy.  When we strip away the confidence-building deceptions that have been added into the formulae used to calculate the “official” economic indicators, we see that the US economy is, in fact, in a long-term, and persistent state of decline.

It’s true that government’s ability to maintain false confidence in our economy has allowed our economy to avoid a serious decline over the past several decades.  It’s also true that government’s economic deceptions can’t be continued indefinitely and, when they finally fail to fool the people, the economy will suffer a very painful “correction”.

About seven years ago, John Williams research caused me to realize the true, unpayable magnitude of the National Debt.  That realization is the cornerstone for whatever else I know or suspect about economics.

So far as I know, 99% of the American people have no idea who John Williams is.  But if and when any honest history books are written, I believe they’ll recognize that by simply telling the truth, John Williams has had a more powerful effect on the national economy than Ben Bernanke.

I’m grateful to Mr. Williams for his contributions to truth in general, and my own understanding in particular.  He is my one true contemporary hero.

•  Last December, Mr. Williams commented on the possibility of hyperinflation for A.D. 2014:

“Again, at this onset to the New Year, the hyperinflation timing remains in place for 2014. By its nature, a currency panic-the likely proximal trigger of the hyperinflation event—is difficult to time.

“With all the underlying fundamentals for the collapse of the U.S. dollar having been in place for some time, the potential for an imminent break in the system also has been and remains in place.

“In the wake of the Panic of 2008, the hyperinflation timing reflects the period in which many of the economic- and systemic-related crises of 2008 likely will intensify or resurface, in a confluence of market-roiling circumstances.

“Extraordinary financial intervention by the federal government and Federal Reserve in 2008 saved the U.S. banking system from collapse, but those actions did little more than to push mortal problems for the economy and financial system a couple of years down the road. Those actions also had inflationary consequences, and they limited the flexibility of federal-government and Federal Reserve options in addressing future crises, accelerating the approach of a day of reckoning for the U.S. dollar into the near future. The U.S. currency has been set up for its ultimate demise, in debilitating inflation.

 “Little has changed in the basic outlook for the 2014 onset of the Great Collapse, a hyperinflationary great depression. Extraordinary fiscal imbalances by 2004 had set the United States on course for a hyperinflation before the end of this decade.”

These “fiscal imbalances” are a “fundamental” in the sense that the past cannot be changed.  If we really, really, really played the fiscal fool before A.D. 2004, we may be able to postpone the consequences of that foolishness for a decade or so—but, inevitably, fiscal foolishness isn’t like a government  scandal that can be forgotten in the wake of the next government scandal.

I.e., an unpayable National Debt can’t be papered over like a scandal in Benghazi.  Fiscal foolishness has a tangible reality that can’t be ignored, forgotten or simply dismissed.

Why?  Because, in a debt-based monetary system, one man’s debt is another man’s asset.  Therefore, we can’t ignore, forget or dismiss the existing paper debt without also destroying an equal amount of paper wealth needed as the “capital” used to run the economic system.  Wiping out existing debt may seem to most to be cause for celebration.  But wiping out existing paper wealth could cause catastrophe and trigger the public’s rage against government.

In truth, we’ve been living on an illusion that can be traced back at least as far as A.D. 1971—when Nixon ended the last vestige of the “gold standard’s” relationship to the fiat dollar.  Sooner or later, that truth will out because fiscal foolishness is not merely a temporary scandal—it’s a mathematical phenomenon that has mathematical consequences as fixed and certain as the force of gravity.

The “fundamentals” for eschewing the fiat dollar and purchasing physical gold aren’t merely about the present or even the future.  Those fundamentals are also about the past.  Insofar as our government has played the fool in the past, our government must, sooner or later, pay the fool’s price in the future:  bankruptcy.  Insofar as we wipe out the existing debt, we also wipe out existing paper wealth, and the nation slides deeper into depression.

Whether the economy “recovers” today or next year is almost irrelevant.  Government has run up a huge national debt in the past that must either be paid or defaulted on.  It can’t be paid.  But if the government defaults on the debt, that would shatter confidence and perceived value in the fiat dollar.

The government’s predicament is that no amount of economic genius, market manipulation or new formulae to calculate economic indicators can put us back on the road to recovery unless we first and foremost repay our existing debts.  That debt can’t be forgotten or ignored because millions of Americans are holding that debt as assets.  They will scream if the debt is cancelled because their correlative paper assets will also be cancelled.

No economic “recovery” program that ignores the national debt can succeed for long.  Sooner or later we have to face the National Debt and pay it or default on it.

Both solutions have adverse consequences.  We can only pay the debt by accepting higher taxes and fewer services from government.  Under that “austerity,” we’ll have less money to spend and our standard of living must decline.  We would probably suffer another Great Depression.

On the other hand, if we openly default on the national debt, trillions of dollars in paper assets will be wiped out, the US dollar will probably fail, and we’ll probably be plunged into an another Great Depression.

There’s no painless escape from the National Debt.  We’ve had our 40-years of party.  It was grand.  But now, it’s time to pay the piper.  We lived like a bunch of merry drunks for a couple of decades, but now we must face a five or ten year hangover.

Until the national debt is resolved, there’ll be no economic recovery.

John Williams concluded:

“The Panic of 2008, and related extreme actions taken by the Federal Reserve and the U.S. government to prevent the collapse of the financial system, brought in the hyperinflation timing to 2014, which now is at hand.

“A looming crisis in the U.S. dollar—a panicked sell-off in the U.S. currency in the months ahead—remains the likely proximal trigger for the early stages of the hyperinflation.  A sharp decline in the exchange-rate value of the dollar would spike dollar-denominated commodity prices, such as oil, and related inflation.

“The unfolding circumstance will encompass a complete loss U.S. dollar purchasing power; extreme disruption in the normal stream of U.S. commercial and economic activity; a collapse in the U.S. financial system; and a likely realignment of the U.S. political environment.”

John Williams is my hero—but he’s not my prophet.  I don’t claim that Mr. Williams’ prediction for A.D. 2014 is necessary correct.  But there’s no part of his prediction that’s impossible.

Williams is predicting a sudden, sharp decline characterized by hyper-inflation.  I’m more inclined to expect an accelerated rate of inflation, but still a fairly gradual rate of economic decline.

If either of us is right, we’re saying that this year—A.D. 2014—will mark the overt beginning of a serious devaluation of the dollar and similar decline in the US economy.

If you agree, buckle up.