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John Williams: A Hyper-Inflationary Great Depression Is Coming

Another good reason to be purchasing silver like there is NO tomorrow.

John Williams: A Hyper-Inflationary Great Depression Is Coming
Source: Tim McLaughlin and Karen Roche of The Gold Report 04/30/2010

ShadowStats' John Williams has done his math and believes his numbers tell the truth. He explains why the U.S. is in a depression and why a "Hyper-Inflationary Great Depression" is now unavoidable. John also shares why he selects gold as a metal for asset conversion in this exclusive interview with The Gold Report.

The Gold Report: John, last December you stated, "The U.S. economic and systemic crisis of the past of the past two years are just precursors to a great collapse," or what you call a "hyper-inflationary great depression." Is this prediction unique to the U.S., or do you feel that other economies face the same fate?

John Williams: The hyper-inflationary portion largely will be unique to the U.S. If the U.S. falls into a great depression, there's no way the rest of the world cannot have some negative economic impact.

TGR: How will the United States' decreased economic power impact global economies? Will the rest of the world survive?

JW: People will find to their happy surprise that they'll be able to survive. Most businesses are pretty creative. The thing is, the U.S. economic activity accounts for roughly half that of the globe. There's no way that the U.S. economy can turn down severely without there being an equivalent, at least a parallel downturn outside the U.S. with its major trading partners.

When I talk about a great depression in the United States, it is coincident with a hyper-inflation. We're already in the deepest and longest economic contraction seen since the Great Depression. If you look at the timing as set by the National Bureau of Economic Research, which is the arbiter of U.S. recessions, as to whether or not we have one, they've refused to call an end to this one, so far. But assuming you called an end to it back in the middle of 2009, it would still be the longest recession seen since the first down-leg of the Great Depression.


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Good topic!

I think it is a good idea to be prepared as much as each of us can be. That being said get informed...do at least the minimum in getting yourself prepared. Having some gold and silver is a good idea as it will never be worthless. I think the best way to be prepared would be to have some food and water stored and other highly sought after commodities such as gas and oil if it can be safely stored. A run on banks is terrible but a run on your local supermarket is much worse, after all most people are not self sufficient and after the supermarkets are ransacked that is it! and who knows how long it will be until things get back to "normal". As for those of you with gardens, and small farms, etc. ...good on you!for you are much more prepared than most!

Fear knocked on my door and Faith answered!

All I can say is

Inflation is here and i can feel it in my pockets.

Maybe what you feel in your pockets has more to do with

your reaction to the last good looking woman you saw.

Several people here have said that inflation is a monetary issue, not a price change issue. Prices change for a number of reasons beside changes in money supply. You might be feeling a pinch, and this could easily be the result of something other than changes in money supply, like weather effect on food prices, or supply problems with oil.

Here is the most recent year over year rate of change in M3 money supply which has now reached an astounding negative 8.5%. If this keeps up the supply of money will be cut in half in less than 10 years, all in spite of the desperate attempts by the federal government and the Federal Reserve Bank to bring back inflation.


Don't bet your life on a future of hyper inflation!

"Bend over and grab your ankles" should be etched in stone at the entrance to every government building and every government office.

and once again:


We fully expect inflation to set in in the US, and likely in many other parts of the world. But that will become an issue only after debt deflation, propelled by a deleveraging that boggles the mind, will have run its course. And, as I've indicated before, the damage to our societies caused by this deflation scourge will be so severe that inflation will be the least of your worries.

The deflation we're talking about will be a scourge of truly Biblical proportions. And it won't be so short that it can be brushed off, either, as I saw Peter Schiff contend recently. Our economic and financial system lived the high life off the credit expansion of the past few decades. Now the bill is presented in the (yes, predictable) form of a credit contraction, and there's no way we can escape it, or wish it away, or outsmart it by creating more debt -as our political class tries to make us believe-.

Yes, there is a huge risk of inflation, but it's not now. And when we get there, we will all have completely different concerns from the ones we have now. Or, at least, that is, should have.

We are not alone in warning of this debt deflation. Today alone, I can present Steve Keen, Martin Weiss, Hugh Hendry, Niels Jensen, John Mauldin, Antal Fekete and Minyanville's Mr. Practical. They all predict deflation. Not bad for one day, if I may say so. And many more will follow, while most of those who don't will be held back by the immovable stone their ideas are held captive in.

Meanwhile, we've explained it numerous times, and we will continue to do so. The danger ahead simply is too grave to be silent.

As for the recession -which would be called a depression by any logical standards-: Honey, we're just getting started, and everything our governments have done to date only serves to make it infinitely worse. That's what politicians will do to hold on to power. You got to snatch it from their cold dead hands.

I think deflation is the greater danger.

First of all, virtually all of the "money" in circulation is bank debt (except for the small amount of coinage used for change).

Bank debt means liabilities of banks. Your local bank periodically publish its "Balance Sheet" listing its assets, liabilities, and equity. Your checking account, savings account, and CD balances are included in the liability total. All the Federal Reserve Notes in circulation are listed in the liability section of the Federal Reserve Bank's Balance Sheet.

In order to expand the money supply (expand bank debts) the banks must find someone or some entity to borrow newly created Federal Reserve Notes or newly created checking account balances. This means that people, businesses or government must go further into debt in order for the banks to go further into debt, and the resulting expansion of banks' balance sheets puts them in an even more leveraged position since their equity does not change.

The banks themselves are scared, and are limiting new loans to only the most credit worthy, which is one reason why the expansion of the monetary base in 2008 had a temporary and limited effect on the expansion of the money supply. And fear is building over the collapse of banks. As the economy contracts and unemployment increases the ability of those who owe banks to repay comes into question. When people don't repay banks the assets on the banks books decrease, but their liabilities stay the same.

Deflation means that the money supply contracts. This means that banks' debts go down, either because people pay off what they owe banks, destroying money into thin air (the reverse of creating money out of thin air) or because banks default on checking, saving, and CD balances, and FDIC is inadequate (balances over limit) or in the extreme, unable to pay themselves.

We appear to be experiencing a debt collapse, probably a terminal debt collapse. Debt collapses feed on themselves because defaults make more likely the insolvency of the holders of these debts. The collapse cascades through the system like a chain reaction. These are not the conditions for rapid expansion of bank debt; these are the conditions for massive contraction of all debts, simply because debt levels are much too high in relationship to incomes (also incomes are contracting) and in relationship to historic norms.


"Bend over and grab your ankles" should be etched in stone at the entrance to every government building and every government office.

Sovietologists would be as

Sovietologists would be as qualified to predict inflation or deflation as any economist. The point is whether the government will continue to mask debt defaults with cheap money and bailouts, or whether they will let the house of cards collapse. The government can print as much as they want and inflate as much as they want. The question is whether they will do that or not. There is more evidence that they will than that they won't, although I still think its pretty close.

Ventura 2012

blahhh blahh blahh.. you

blahhh blahh blahh.. you still have not answered the question of how zimbabwe went through hyperinflation with no credit crunch.. The currency was destroyed by the government.. not the economy. Not credit shrinking.. It was debased by a government printing money to pay its bills. wether that be paper notes or digits in a computer.. same thing.

“Defiance of God’s Law will eventually bring havoc to a society.” - Dr. Ron Paul

they printed money... BUT

hyper-inflation has very specific pre-conditions in foreign currency obligations and a loss of tax revenue and productive resources....

‘printing money’ alone doesn’t get you there.

zimbabwe, like weimar, owed debt in foreign currency... both had to aggressively sell their own currency and buy the foreign currency-- this drove down the value of their own currency and prices of everything rose in massive inflation...

the US only issues debt in its own free floating non convertible currency--- no external constraints...

also: zimbabwe had a civil war that destroyed huge chunks of its production capacity...

and: 'land reform' collapsed their food production... they had to rely on impotrted food using foreign reserves... unemployment was at 80%...

and: zimbabwe manufacturing collapsed: 29% in 2005, 18% in 2006, and 28% in 2007...

there really is no comparison between zimbabwe and the us....

so what did the government

so what did the government do? they printed the money top pay their bills.. what do you think the US government is doing/going to do? you don't understand what you are talking about. What happens when China and other creditors demand payment in currency other then FRN's? we will sere shortly who is right and wrong on this issue.. To be honest it really does not make any difference to me. I agree with Prechter that we will see Dow 800.. I disagree with him that we will see gold 150.00.. I do agree with Ron Paul.. an inflationary depression. If the USD was still backed by gold like it was during the 30's then yes I would say we were in for a deflationary depression, but since the dollar is not backed by Gold there is no way you will see deflation.

“Defiance of God’s Law will eventually bring havoc to a society.” - Dr. Ron Paul

as mish describes:

Here’s Mish again, from 2008, making clear the limitations of money printing in an attempt to prevent deflation in a fiat regime:

”Although Japan was rapidly printing money, a destruction of credit was happening at a far greater pace. There was an overall contraction of credit in Japan for close to 5 consecutive years. Property values plunged for 18 consecutive years. The stock market plunged from 40,000 to 7,000. Cash was hoarded and the velocity of money collapsed.

These are classic symptoms of deflation that a proper definition incorporating both money supply and credit would readily catch. Those looking at consumer prices or monetary injections by the bank of Japan were far off the mark. Yes, there was deflation in Japan. Furthermore, if deflation can happen in Japan, then there is no reason why it cannot happen in the US as well.”


my impression is that the deflation side of the argument has the advantage of using overwhelming facts to lay out their case--

the inflationist argument relies more on ideologically induced opinion... they start with the conclusion that we will have hyperinflation and then contort/distort reality and data to get to their preconceived ends... they start with the answer and work backwards--- the deflationist seems to work the other way--- they look at our reality and the data and only then make their conclusions....

i get the feeling that inflationists have a lot riding on their side being correct... they appear to have built their reputations, careers, political agendas, and personal self worth on a theory of inflation and will not let it die so easily... even if reality is lined up against them...

i read articles everyday from these people who somehow are able to skip over the sorts of data and evidence in the news that point to deflation.... i am always wondering how they have the ability to look so far ahead rather than seeing what is happening all around them right now.... its like keeping your eyes on muhammad ali's left hand all while his right hand is pounding you to pulp.... or like riding a motorcycle and keeping your eyes fixed at least 12 car lengths ahead but failing to see the car stopped dead, right in front of you...

i just dont get it...

i foresee all of us getting wiped away by the tsunami of deflation--- at which point we will then reverse and hyperinflate-- and the inflationistas will pick up their battered, bloody heads from the mud and muck holding bars of gold and silver and proclaim triumphantly that they were right about hyperinflation all along.......

trouble is--- it just won't matter.......

the inflationist argument

the inflationist argument relies more on ideologically induced opinion...

so Ron Pauls opinion is ideologically induced? What are your credentials Mr Revere? You problem is that you don't know what Inflation/deflation is.. As always all the "deflationistas" can't explain how hyperinflation occured in zimbabwe when they had not had a "credit" crunch/collapse... just exactly how did that hyperinflation occur? Just exactly what is hyperinflation? you deflationionisatas are getting your dollar "strenghtening' at the moment, so if your theory is true then why is gold also climbing to new highs at the same time the dollar strenghtens? Before you shoot off your mouth-- look up Martin Armstrong.. then look up Alph Fields.. Then look up Ron Paul. Peter Schiff,Jim Sinclair, and the list goes on and on... all of these Men know one hell of a lot more then you. Just exactly where is all this Deflation? its not in food, Its not in fuel.. Housing? yes but is that a product of deflation or just a bubble that burst? you Paul revere are funny.. Dead wrong but very funny. The man who runs shadow stats even shows you the math but you still can't get it through your thick skull.. Hyperinflation is a currency event.. when will you get away from your high school economics class keynsian brainwashing and get it figured out?

“Defiance of God’s Law will eventually bring havoc to a society.” - Dr. Ron Paul

inflation and deflation

are monetary phenomena...

and above YOU speak of it in terms of price... and so does john williams... who exactly is the keynsian?

The amount of 'money printing' that as happened so far is completely dwarfed by the scale of credit contraction. We are not vulnerable to inflation as a result of this. On the contrary, most of it has disappeared into the black hole of credit destruction, never to be seen again. Much of the rest is being hoarded. It is doing nothing substantial to increase the velocity of money, although rallies are accompanied by a temporary return of liquidity along with the temporary return of confidence. In a very real sense, confidence IS liquidity. Once the rally is over, both will disappear again and the velocity of money will plummet.

price is result of to much

price is result of to much money entering the system. Price is a side effect.
AGAIN how did zimbabwe have hypinflation with no velocity of money increase threw money being lent? there was no credit expansion in zimbabwe.. you have not answered the question.

“Defiance of God’s Law will eventually bring havoc to a society.” - Dr. Ron Paul

i have answered your questions...

they printed money... BUT

hyper-inflation has very specific pre-conditions in foreign currency obligations and a loss of tax revenue and productive resources....

‘printing money’ alone doesn’t get you there.

zimbabwe, like weimar, owed debt in foreign currency... both had to aggressively sell their own currency and buy the foreign currency-- this drove down the value of their own currency and prices of everything rose in massive inflation...

the US only issues debt in its own free floating non convertible currency--- no external constraints...

also: zimbabwe had a civil war that destroyed huge chunks of its production capacity...

and: 'land reform' collapsed their food production... they had to rely on impotrted food using foreign reserves... unemployment was at 80%...

and: zimbabwe manufacturing collapsed: 29% in 2005, 18% in 2006, and 28% in 2007...

there really is no comparison between zimbabwe and the us....

inflation is to easy to " predict " now......

insidious deflation is what we should be terrified of ..

FYI: The Austrian School

FYI: The Austrian School doesn't see deflation as a bad thing because when there's less money in circulation it lowers prices of goods and services by increasing the purchasing value of money.

Deflation is a good thing.

quilts, and anyone else with fruit trees

I hang bars of soap on my fruit trees, and it keeps the deer away, and I live way out, with deer coming through at least twice a day. They used to browse on all my fruit trees daiy, until I hung bars of soap on them. Motel/hotel bars with a hole drilled through, hung on a string, tied tight. (we have a lot of wind).

look at this:

if you think we are facing inflation--

you just don't understand what this chart is showing you...

and you are not defining inflation like ron paul does...


once again credit has nothing

once again credit has nothing to do with inflation.. did they have a huge credit contraction in Zimbabwe.. answer that question..

“Defiance of God’s Law will eventually bring havoc to a society.” - Dr. Ron Paul

credit has nothing to do with inflation?

Thanks to a credit boom that dates back to at least the early 1980s, and which accelerated rapidly after the millennium, THE VAST MAJORITY OF THE EFFECTIVE MONEY SUPPLY IS CREDIT!!!! A credit boom can mimic currency inflation in important ways, as credit acts as a money equivalent during the expansion phase. There are, however, important differences. Whereas currency inflation divides the real wealth pie into smaller and smaller pieces, devaluing each one in a form of forced loss sharing, credit expansion creates multiple and mutually exclusive claims to the same pieces of pie. This generates the appearance of a substantial increase in real wealth through leverage, but is an illusion. The apparent wealth is virtual, and once expansion morphs into contraction, the excess claims are rapidly extinguished in a chaotic real wealth grab. It is this prospect that we are currently facing today, as credit destruction is already well underway, and the destruction of credit is hugely deflationary. As money is the lubricant in the economic engine, a shortage will cause that engine to seize up, as happened in the 1930s. An important point to remember is that demand is not what people want, it is what they are ready, willing and able to pay for. The fall in aggregate demand that characterizes a depression reflects a lack of purchasing power, not a lack of want. With very little money and no access to credit, people can starve amid plenty.

Attempts by governments and central bankers to reinflate the money supply are doomed to fail as debt monetization cannot keep pace with credit destruction, and liquidity injected into the system is being hoarded by nervous banks rather than being used to initiate new lending, as was the stated intent of the various bailout schemes.

the 1930s deflation argument is ill-conceived

We had a gold standard in the 1930s. Dollars were a banking liability backed by gold assets. A dollar in the 1930s was a claim on an amount of gold held by the reserve.

All deflationists please consider this:

Today, dollars are a banker's debt, collateralized by TREASURY DEBT. Not gold as it was in the 1930s.

If treasury debt crashes, the dollar will go down with it because treasury debt is the asset that backs the dollar (mostly)!

This is exactly what is happening in Euroland.

vanilla gorilla

At some point we are likely to see a relatively sudden dislocation in the bond market as we see international borrowing become more difficult, with continuous bailouts making the bond market nervous. Essentially, bailouts will be overtaken by events. That would involve bond prices falling substantially and interest rates soaring - quite possibly into the double digits.

People frequently worry that this will be inflationary, but it would actually precipitate an enormous amount of deflationary credit destruction. Interest rates on all debts would rise with bond rates to crippling levels, leading to a huge wave of defaults. This would amount to hitting the 'emergency stop' button on the economy, and is one reason we point out that holding debt can easily be financially fatal during deflation. In addition to a default tsunami, we would see governments cut back services drastically in order to reduce terribly expensive borrowing. This means being on your own in a pay-as-you-go world, which is why we emphasize the need for you to hold cash in hand. For many people, the only way to achieve no debt and cash in hand is to sell property and rent. For others, pooling resources may achieve the same thing.

Whatever the fate of the dollar relative to other currencies during a bond market crisis, its value relative to available goods and services domestically should still be increasing. Of course some goods may not be available at this point if they are sourced from abroad and trade has collapsed. There may therefore be some goods that would be worth purchasing at today's prices, in order to secure items that could be very useful while all it takes is the internet and a credit card.

When we eventually do see inflation, it will not come from the initial havoc in the bond market, but from the aftermath of its destruction. Once deleveraging is over and countries must function in financial isolation, there will be nothing to prevent them from printing actual cash, as opposed to desperately trying to expand credit in a double-or-nothing gamble as they are currently doing. Down that road lies a currency hyperinflation on a Zimbabwean scale, but we are nowhere near that point now. You must survive deflation in order to have to worry about hyperinflation.

Timing is everything

So we agree that inflation is coming.

Deflationary Premise
Debt collapse will cause higher interest rates which will cause governments to cut spending

Inflationary response:
Nonsense. The Congress will nationalize the Fed and print 400 Quadrillion dollars if necessary. There will be no austerity in the US. It is politically untenable.

Deflationary Premise
Debt value collapse will cause bank defaults which will destroy money supply

Inflationary response
Default will just embolden the Fed to PRINT MORE and become THE lender to everyone, everywhere.

You deflationists are thinking in 1930s terms. There is NO REDEEMABILITY CONSTRAINT on monetization of debt today. They will print 400 quadrillion dollars if necessary.


I think the credit collapse = deflation argument hinges on falling velocity. Doesn't credit require MONEY in order to clear the transaction? If Bankster extends credit to a homebuyer, the Bankster must still pay money to the seller to acquire title.

Now, if you can increase the number of transactions over a period, you can increase the outstanding credit, no?

So the deflationists are saying that the loans go bad, the lenders fail, credit collapses, and demand for mortgages plummets- falling velocity.

This may be true, but how would a credit crunch effect consumer goods prices? Groceries are not typically bought on credit an amortized over 30 years.

pointless? how many houses

pointless? how many houses were being sold and people applying for credit in zimbabwe? what you people do not understand is that hyperinflation/inflation is caused by the government that prints the money. Please go find the thread that Michael posted with king world news.
I put up Jim Sinclairs economic downward sprial on there.. Notice what happens when the governmet can not pay its obligations when they have slowing tax revenue from a slowing economy.. THEY PRINT THE MONEY TO PAY THEIR BILLS.. THUS DESTROYING THE CURRENCY.. LOOK AT WHAT GOLD HAS DONE IN THE FACE OF A STRENGTHENING DOLLAR THE PAST FEW DAYS.. VELOCITY HAS NOTHING TO DO WITH A GOVERNMET/FED DESTROYING ITS OWN CURRENCY TO PAY ITS BILLS. they don't care if you and I pay 50% more for a box of wheatis! hyperinflation is a currency event. it has nothing to do with velocity, or money being loaned, or credit expanding or contracting. THE GOVERNMENT DESTROYS THE CURRENCY.

“Defiance of God’s Law will eventually bring havoc to a society.” - Dr. Ron Paul

I agree with you! I just want answers from them

Deflationists are ALL WET.

If the credit bubble collapses, interest rates will skyrocket. Sovereign Deficits will go parabolic as their debts are rolled over. They WILL RESORT TO DIRECT MONETIZATION to pay their minions and serfs to save themselves and their power.

I think deflationists are getting mixed up between "credit" and "money" and asset prices and consumer goods prices.

A hyperinflation would almost assuredly involve a plunge in REAL asset values and a parabolic rise in consumer goods prices as it did in Weimar Germany.

This is NOT the 1930s. We do not have a gold standard. We have a keystroke standard so there is no limits on the counterfeiting. There is no limit.

mike nystrom...

believes we are heading to deflationary times...

hence the elliot wave advertisement that has been at the top of the daily paul for a looooooong time....

answer the question above..

answer the question above.. how did zimbabwe have hyperinflation without a large jump in credit? were all the zimbabweans running to the corner bank to take out home loans? were they buying suv's? boats? doing home improvement? going on luxery vacations all over the world? just exactly where was the large credit supply in zimbabwe.. HINT... THERE WAS NOT ONE.. SO HOW DID THEY GET TO HYPERINFLATION?

“Defiance of God’s Law will eventually bring havoc to a society.” - Dr. Ron Paul