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A contraction greater than 25% peak-to-trough puts you in a great depression. That is what I envision, but we'll be taken there by hyperinflation and a resultant cessation of normal commerce.
TER: Hyperinflation means different things to different people. How do you define it?
JW: My definition has been and will remain very simple. When the largest-denomination note in circulation—the $100 bill in the case of the U.S. dollar—has the same value as toilet paper, you have a hyperinflation. You saw that in the Weimar Republic. People papered their walls with money.
TER: I think you've said that the only reason that Zimbabwe's economy survived is because they started using dollars as black market currency.
JW: But you don't have anything like that in the United States as a backup. We're going to have a much rougher time in the U.S., of all places, than they had in Zimbabwe. Zimbabwe was able to function because people could exchange the local currency into dollars, and then buy things with the dollars, so the economy continued to function. Without some kind of a backup system, as the currency becomes worthless you'll see disruptions to key supply chains. When people don't have food, you end up in very dangerous circumstances.
TER: Do you see any real potential for precious metals or another currency as a backup?
JW: Well, yes. I think they will become a backup fairly quickly, but we don't have any widely developed black market for another currency at this point because the dollar remains the world's reserve currency. All sorts of things may develop that we don't anticipate. What will be used to cover for the dollar? Gold and silver? The precious metals are limited in supply and not widely held by the population in general. Hard currency from Canada or Australia? That wouldn't be in wide circulation, at least not early on. I think a barter system is where it will go until the currency system is stabilized, but the currency system can't stabilize until the government's fiscal house is in order.
There's no sense in setting up a currency on a gold standard if you can't live within your means, because you'd just end up going through successive devaluations against gold. So whatever's done to set up a new currency system will have to be in general conjunction with the overhaul of the government's fiscal condition. But in the interim, something of a barter system would evolve. Even that, though, is something that may take six months to get stabilized.
TER: It's hard to imagine.
JW: In the Weimar Republic, you could go into a fine restaurant one evening and enjoy its most expensive bottle of wine with a nice dinner. You'd probably negotiate the price before you sat down, because the price would be higher by the time you finished dinner. By the next morning the empty wine bottle would be worth more as scrap glass than it had been worth as an expensive bottle of wine the night before. That's how rapidly things change in a hyperinflation.
But we have a circumstance that did not exist in the Weimar Republic. Our society is heavily dependent on electronic cash. Say you have a credit card with a $10,000 limit. In hyperinflation, that $10,000 might be enough to buy you a loaf of bread.
TER: There's not even enough physical cash running around anywhere in the United States that actually represents what goes back and forth electronically. If you can't use your debit card, how do you pay for your coffee at Starbucks? And how will companies and banks adjust?
JW: You're not going to have electronic payments that are in-barter equivalent that I can foresee. That would be a fairly sophisticated system and the needs are going to be immediate. When hyperinflation starts to break, it can unfold in a matter of weeks, months. You'll need to be able to handle things rapidly. Frankly I think the system will tend to break down. It's not a happy circumstance. How will a small company get its goods to people? There might be blackouts. Who's going to get the fuel to the power plants?
TER: And to the gas stations for the cars for people who still have jobs?
Massive hyperinflation
ReplyDeleteand systemic collapse
fits well with the Agenda 21
population reduction
article below this one.
I appreciate John Williams' insight, but I struggle to believe we will suffer through hyperinflation in this country. That being said, I am extremely well prepared, primarily due to the fact that I have a problem most would appreciate--massive amounts of cash. So I have very few options: gamble in equities, keep everything in dollars, or diversfy by allocating a percentage in physical gold/silver. I choose the latter.
ReplyDelete4:59
ReplyDeleteWhatever!!?
4:59 your pm will be riped from you.u may know the message but your demeanor will be easy to target and the rest will depend if your assailant is faster or better..if i'm who you are lookin at i'd suggest leavin before i'm 50 yards of you(really i won't let you get that close).
ReplyDeleteThe more I think about the Fed, the more I think it's like the Red Queen in the Resident Evil movies. Is it good, is it coldly evil? Hard to tell until it kills you for the greater good!
ReplyDeleteand 538 you wont be a target?
ReplyDeletei love these im armed and ill take what i want
you will be a target tooo.
and more so .
reality youll be shot on sight as a looter.
people who have saved money and prepared are prepared for dirt bags daaaaaa
clint eastwood your nott.
Anonymous said...
ReplyDeletePopulation reduction needs to occur in job stealing POS countries like India. They deserve to be wiped off the face of the earth!
America the beautiful at its cultural finest!
Job stealers?
Grow up chump!
The Great Ponzi is over. Bombs will not get your job back .
The world is no longer going to give you a free ride with a high paying job .
They are not "American jobs" they are owned by capital not the workers and in free trade capital is highly mobile and international but labor is not.
But,perhaps if your skills are high enough and you are prepared to work for a more realistic low wage ,you might be able to move to india and get your "American" job back.
Can you speak "inglish" or "chinglish" ?
Capitalists are internationalists.
Under the dollar hegemony (backed by the oil puppets) in world finance and trade, the US was able to export paper $ in return for real things.
Oil from the middle east ,cheap labor commodities from china and the third world.
America was de-industrialized as its high waged industry was unable to compete in free trade.
Balance of trade deficits and the cost of endless wars to prop up local puppet elites mounted up over recent decades .
Still ,for a while average Americans were able to maintain their lifestyles as beneficiaries of imperialism ,by getting a cut in the profits of Empire but could afford to keep their lifestyles only by America taking on increasing government and personal debts .
-Until they couldn’t .
The Finance sector in the end, was converted into pure AAA fraud to keep the foreign
investments and commodities coming in on credit.
But The interest on the debts could not be serviced and the Ponzi economy imploded in 2008.
Up till that time foreign investments in America appeared to be worthwhile for example investments in property and property mortgages, and US treasury bonds, when property values continued to rise. The debts appeared to be backed by real not fictional asset values.
The US now has nothing much that can be profitably exported to pay the cost of its imports with its high waged workers.
Take note:
The developing world China, Russia, Brazil etc. can get by trading amongst themselves in the future, now that US paper is becoming worthless. Who needs America?
They do not need to work and send more vendor debt financing to keep American workers in high waged jobs and Mc Mansion luxury.
Neither foreign investors or local US bailed out bankster want to make more loans in a dead ponzi economy .But ,true some debts are still being rolled over to stop bankruptcies and a complete write of of the earlier loans.
Otherwise forget about it, Americas credit card -the mighty dollar -is maxed out already and has past its expiry date.
Printing excess paper only delivers a signal that the US intends to float away the value of past invested capital by inflating the dollar.
In the meantime their is continuing property asset deflation meaning for foreign investors the value of the asset backing for their previous loans is disappearing -never to return again-,POOF -as the property bubble along with the value of the American homeowners savings implodes.
Only third world standards of living are the realistic future expectations for Americans as the government will tax future generations of working people to the hilt ,in order to pay for the bailouts for the bankrupt failed system anyway.
And the highly paid subsidized jobs of Americans are gone, or still going to workers prepared to work on more realistic ,profitable for capital, at third world wages level rates of pay, not the overvalued , ponzi economy ,old American rates of pay.
The rules of capitalist overpopulation and a permanent state of unemployment for many Americans exist now.
That "American" job now in india might even return to a capitalist or even a socialist
America when American workers are prepared to compete in free trade for capital at say Indian low waged levels.
Credit cards in Hyperinflation. Makes you really wonder. If you read John's story about people buying an expensive bottle of wine in Weimar Republic- he says that you would negotiate the price of the wine when you first sat down to dinner because it would cost more by the time you were ready to eat. Well, if you use a credit card, you don't have to pay the credit card company until much later when the dollars are going to be worth far less. Like spending $5000 and paying it back with $250 in equivalent purchasing power.
ReplyDeleteSo, I doubt that system will last for very long. Probably cash and carry or barter will replace credit cards. Even writing a check won't work since it will be worth less by the time they deposit it and have the money transferred into their account.
It'll be interesting to see how all this plays out! I wouldn't count on gold to pay for your food. Unless you want to spend an ounce of gold for a bag of rice. It'll not hold a candle to the value of food. Maybe other things, but not food if the SHTF.
The best thing to do is dig a hole, climb in it, and put the dirt in after you. Or you can stay on the internet all day and suck up all the doomster porn you can hold. Or you can close your eyes and keep going in the same direction. Or you can do all three but if you are that twisted why not just vote in November and resign yourself to hard times. Hard times make hard people. Better that than the laughable, disgusting things I see tottering around with their bellies so big they look like they swallowed a sow and all her litter.
ReplyDeleteIf you read the full article, the one reason given for the system no longer working is that people can't earn enough money to pay all their bills. So we had a period of credit card expansion, where people went into debt (since they didn't have the money to pay), and it was debt that kept the economy going.
ReplyDeleteNow the economy has stopped because people have no money and they have no credit cards (and they can't use their houses as ATM machines anymore). But prices keep going up anyway.
If we do get hyperinflation (which I doubt), all that would bring on is a lot quicker rioting, stealing, rampant crime, and martial law. More likely we'll just continue a slow slide down the drain.
4:59 Beware, we will be on your front porch disguised as Jehova`s Witnesses. You will know us by the Osiris third eye in our foreheads-some of us may also have scaly hands. The altar boy will exhibit a broad smile.... lol
ReplyDeleteLet's hope to God there will be hyperinflation and an instant death of the dollar. If not then our lives are going to become filled with more poverty, anger, depression, and pointlessness.
ReplyDeleteAs this unfolds at an accelerating pace the masses seem to be engulfed more in delusions as they get fatter and dumber. The delusions are so strong they'd fear a collapse which would bestow upon them virtue in building the foundations to a new world. Such pussies we've become. Either that or we don't think about the things we grow to believe in or against.
Designer Psychosis seems to be a fitting term. Several examples:
1) Get on your knees and beg another human (priest) for God's mercy.
2) Believe those that tell you something because they have a Ph.D (even though they don't know shit and got it through passing easy tests).
3) Watch a scene from a fictional show and grow to think it's real.
4) Respect groups, movements, events, or people in history. Respect for something keeps you underneath that which you respect - do not question their right to tell you what to think or do. They are well respected you know...
5) You can not control your own health, you need doctors.
The Salic Laws will be put to death when the collective psychosis is destroyed. The world will soon turn upside down and become right-side up.
We are still living of the "stimulus" alcohol, which is why everything still seems "OK". But soon we will hit depression, since the dollar will collapse, caused by the massive spendings (borrowing and printing)
ReplyDelete