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.
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Fastest Food Inflation Since Riots Means Milk Up 39%
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ReplyDeleteDeflation is a much higher risk than inflation right now. All the money printing has not made its way to the real economy. Bank are still not lending at the rate they should be and all the trillions are still sitting in reserves. Hyperinflation is very very far away, we should be worrying about deflation.
ReplyDelete9:26 take the Chris Martenson Crash Course. Its been inflation for YEARS. I used to think we were in deflation until I learned how it works. Listen to #13 you will never think deflation again and really understand how we are getting screwed with the media.
ReplyDeleteOh for the love of God, we are in a deflationary depression. I highly recommend you view Mike Shedlock's blog concerning this topic. Deflation is not about lower prices. Deflation is the decrease in credit. And thus the symptom of a decrease in credit means a decrease in prices.
ReplyDeleteNimesh, Shedlock does not know what Inflation or deflation is..trust me take the course
ReplyDeleteYour both right. However, here is where the deflationist have a problem.
ReplyDeleteThe Obama administration is going to FORCE banks to make loans in the near future. Bob Chapman spoke about this.
So your right "if" everything remained as they are. However, the Govt. needs money badly (Both Fed and State) Besides taxation the Fed will also be “forcing” lending to stimulate the economy. This will be the mother of all bubbles.
There is going to be direct liquidity injections down to the sheeple and there is going to be hell to pay.
At first because of the deflationary pressures this ULTIMATE stimulus will feel great as consumers will be intoxicated with the new direct injection. The consumer economy will boom for a very short period of time.
This will be done via printing by the fed and doled out to banks at all levels with the “force” of the govt. making the banks loan the money.
The 1st stimulus was to pay off their cronies. The next is to “force feed” the already broke public.
The very loans will be backed by even MORE phantom printed money by the Fed creating a viscous inflationary cycle.
Even with good credit your lucky to get a loan at this point in time. However, stimulus 2.0 will again allow ANYBODY to get a loan like they did during the housing bubble.
However, unlike the “Housing” bubble where at least you had a “so-called” asset. This next bubble is going to be based on consumables like cars, appliances, clothes, ipods, etc, etc
Unlike housing, consumables either have NO value or quickly depreciate after purchase.
Mark my word, this next bubble is going to be called the Consumer Bubble.
A direct injection to the end user (Sheeple) with deflated prices is going to make the sheeple go consumption crazy and this will be the last hoorah of consumer debt spending.
Once that explodes we are finished.
9:47 You need a crash course on economics....by saying that deflation is a risk does not mean we are experiencing deflation. The current inflation rate is just too low and we have a high risk of slipping into deflation. An acceptable level of inflation would be between 2% and 3%, and anything bellow that risk deflation and above that high inflation with a risk of hyperinflation.
ReplyDelete"Deflation is the decrease in credit. And thus the symptom of a decrease in credit means a decrease in prices."
ReplyDeleteIf that was true, how come mortgage rates are at or near all time historic lows? People still are able to get homes with little or no money down. If credit was tight the rates would be much higher to reflect higher risks. The reason why loan volume is down is because people and business aren't willing to borrow money in a economic downturn. Most people don't want to make big purchases when there job future is uncertain.
The real issue is that the gov't is devaluing the currency and by borrowing and spending the most since WW2. Foriegn creditors are losing faith in the dollar. Consider that during hyper-inflation and currency collapse in Weimer, Russia, and Zimbabwe, credit was non-existant for thier citizens and businesses, but it didn't stop the currency from collapsing. Lack of credit does not mean that money will increase in value.
"An acceptable level of inflation would be between 2% and 3%"
ReplyDeleteAn inflation rate of 2% is way too high, and is consider a high inflation rate. In 25 years, savers will lose half of their purchasing power. An inflation rate of 3% is insane! Inflation rates must sustained below 1%.
In addition, Gov't expenditures are about to explode as the entitlement bomb is about to explode now that the boomers are retiring on mass. Already SS is losing 5 Billion a month, and in a few years it will begin to soar as large numbers of boomers start collecting unfunded entitlements. Boomer retirement is a double edge sword, since when they retire, they stop paying taxes to support the system and start draining tax money from the system. There is no way the gov't can raise taxes enough to support entitlements without collapsing the weak economy. They have no choice left but to print money to pay for the entitlements.
Third, I would put much stock into gov't inflation figures as they constantly adjust how they are calcuated. Real inflation is much higher than what is reported. Import prices still are rising, as we can see that the month trade deficit has resumed moving back up, yet import volume is falling.
Stocks fell in early trading Tuesday after wholesale inflation rose more than expected in November.
ReplyDeleteThe increase likely will be discussed as Federal Reserve policymakers begin a two-day meeting on interest rates.
The Labor Department said wholesale prices jumped 1.8 percent last month, more than double the 0.8 percent gain analysts expected.
Note: the numbers being reported may not be accurate as some numbers maybe worse then stated.
http://biz.yahoo.com/ap/091215/us_wall_street.html
"The Labor Department said wholesale prices jumped 1.8 percent last month, more than double the 0.8 percent gain analysts expected."
ReplyDeleteWow, is the 1.8% an annualize figure? If its not than the anualize rate is 21.6%! (ie 12 x 1.8%)
Why? I want to trade with him
ReplyDeleteFace it! Prepare for the worst. You can't believe anything the news media reports on the economy. Anybody with even the slightess economic sense can see that our economy is fixin to collapse. But don't worry. Just prepare. Think of the things that you would need to survive if the dollar becomes worthless. This could happen any day now. The government has it all planned out for us. Think of the control they will have over people if they are cold and hungry. So many people are looking to the government for the answers to all their problems. The people who run the government are no smarter than I, so why should I trust thier judgement. They wil break us financially and try to break our spirit, but do not let them win. Do not be weak and do not let them herd us like sheep. Be prepared spiritually, physically, and mentally. Don't think that there is hope in gold and silver, realestate, or any kind of asset. If the government gets strong enough it can cease all that you have. Fight now or forget life as you know it now.
ReplyDelete