Skip to comments.Hyperinflation Is Virtually Assured – John Williams
Posted on 09/13/2012 6:52:57 AM PDT by blam
Hyperinflation Is Virtually Assured John Williams
Economics / HyperInflation
Sep 13, 2012 - 01:41 AM
The Federal Reserve is talking about unlimited QE, or money printing, to boost employment. Economist John Williams says, Thats absolutely nonsense. The Fed is just propping up the banks. Williams says, Youre likely going to see a dollar sell-off . . . That should evolve into hyperinflation.
Williams, Doesnt see the current system holding together without hyperinflation beyond 2014. He contends the real annual deficit is $5 trillion per year and says, Thats beyond containment. Williams predicts, Hyperinflation is virtually assured because the Fed doesnt have any options left. Williams says people should get prepared because we are facing a man-made disaster. Join Greg Hunter as he goes One-on-One with John Williams of Shadowstats.com.
Click here to see the video
This is why I’ve invested in Vanguard’s VIPSX.
Common sense from Captain Obvious has no chance of being acted on by Obozo and his servant Bernanke.
And when it happens and is blamed on efforts to prop up the banks, politicians like the Fake White Indian will rule the day.
(likely many not as benign as that)
I think I will wait untill the SM crashes and then buy some big name stocks that pay dividends
A question for you if I may: you mentioned investing in Vanguard’s VIPSX. Do you have everything in that fund or just a portion? I just rolled a 401K into a Vanguard IRA and am still tinkering with fund allocations. I didn’t run across that fund in my initial research and it looks interesting.
We have invested in gold, silver, ammo and food.
Be sure to add water, or access to water to that list.
Personally, I’ve stocked up on Bourbon! :-)
[babbling screed begins...]
Inflation is used to bridge the inevitable gap between the actual aggregate of wealth in the country vs. the claimed ownership thereof. As people _think_ they own more than they do, and bank balance sheets represent this, the money supply must be adjusted to make people comfortable in the notion that their invested money (checking/savings accounts included) can be retrieved upon demand; so long as investors believe this, they’ll leave their money invested and the currency can better reflect the actual value within the economy.
In the following example, notice there is a denoted difference between $1 of _value_ (say, the inherent value of a cheeseburger which constitutes one meal for your sustinence, see my tagline), vs. 1 dollar (the piece of paper claiming to represent that value but suffering inflation or deflation, so it may or may not cover that $1 of economic value).
When $100 is deposited in a bank, $90 of that is loaned out to people who think they “have” it, who may then deposit that in another investment, which is then 90% loaned, etc. $100 of actual value becomes some $200 of perceived value. To keep this arrangement moving smoothly, the $100 of actual value needs, say, 120 dollars available for active manipulation. Without the extra, the 10% held at each bank would eat up the original $100, leaving nothing to move; increasing money supply a bit (20%) devalues the dollars a bit but gives some slack allowing actual economic activity.
A problem occurs when too many people start pulling cash out of the investments, converting into either less-redirected investments or physical cash outright. When investors become more interested in withdrawing money than investing it, more cash is needed for people to work with and hold; most still owe someone else along the chain, so the money starts moving faster and more is needed so people can have cash in-hand when they need it ... so the money supply is increased, say to 150 dollars. The velocity of money increases, and the value represented by each dollar decreases: what was originally $100 of actual value represented by 120 dollars is now represented by 150 dollars, so an additional 20% inflation has occurred ... or 50% since the original investment. If the original investor withdraws his $100, he finds it’s now worth, in practical current value, 66% less than the exercise started with. Ouch.
Seeing the original investor cheesed off by his 33% loss and pulled his $100 out, other investors (having built on borrowing upon his investment) look at the remaining $50 still in the system (put there by money-supply managers as described to facilitate smooth economic activity).
Recap: Originally, there was $100 of value in the economy, represented by 100 dollars. But 100 dollars invested is hard to move, as repeated loans from investments must retain some of it to keep at least a bit of cash on hand at each bank (broadly defined). Invested and loaned often enough, that means that 100 dollars has been spread out and locked down ... so a little more (20 dollars) was injected to loosen that cash and allow easy economic activity. More dollars were injected when investors got nervous and wanted to handle their money more: if 50 dollars are withdrawn to re-invest, there better be 50 dollars available to withdraw.
There is now a problem, a bit tricky to mentally follow (which is why I’m writing this: to noodle it out). The original investor withdrew his 100 dollars (not considering interest here, which makes the whole thing worse), which only represents 2/3rds of the 100% of value he originally invested. Worse, investments on paper total $200. There’s only 150 dollars floating around. The original economic value, represented by the original 100 dollars, has been diffused thru inflated dollars. 66% of economic value has been withdrawn by the original investor’s 100 dollar withdraw. 50 dollars remain in the system, representing 33% of total economic value. But there’s another alleged $100 of economic value on the books - but only $33 in reality, and only 50 dollars to represent it. There’s less value in the system than the books say there is.
So what? everyone cashes out. Well, not everyone can race to the bank simultaneously (though digital banking is making this near possible). Predicting the incoming run on banks, government currency managers inject another 50 dollars into the system, so there is enough cash to withdraw if everyone does (citizens do not take it well when they can’t withdraw their money). Now there’s 200 dollars in hand somewhere, $100 in total original value, with 100 dollars covering $100 book value (remember, original investor pulled his out) and $33 real value. We’ve inflated the remaining currency 200%. That’s 3 dollars representing $1 actual value. Your $1-value cheeseburger just tripled in price. Ouch.
But people don’t just hold the cash. They invest it. 200 dollars goes back into the system. 90% of each invested dollar is loaned out. The perceived value of the system doubles (or so, just estimating convenient numbers here). Between inflation from “quantitative easing” and investing, the original $100 economic value now has a book value of $400 based on investment of 200 dollars. Simplified and over time, the money supply managers get nervous and inject another 200 dollars into the system so there’s enough representation of book value that everyone can withdraw everything and get actual currency instead of a “Closed” sign ... but at the price of a currency inflated 300%. Ouch.
[At this point I’m sure I’ve flubbed some numbers. Work ‘em out for yourself. The overall point, however, is made.]
The cycle continues. Sociopolitical realities being what they are, the cycle time reduces from years to months to weeks, and the inflation rate compounds. For a cheeseburger of $1 inherent value, the number of dollars representing that value double... quadruple... 8x... 16x... 32x... etc for every loop of the cycle, which thru fear starts moving faster. Not only is inflation doubling, the frequency of doubling increases.
An inevitable outcome of “fractional reserve” banking, plus the insistence that every withdraw be honored (albeit with inflated currency).
WIlliams 2012 Hyperinflation Report from January of this year:
I do not think there will be hyper inflation. There will be inflation but it will be limited, controlled if you will. Some guess <10%. My guess it will be allowed up to about 7%.
The word hyperinflation is used to attract and scare readers.
"There is a difference, though, between inflation and hyperinflation. They are not the same thing. And for the most part, there is no gradual path from one to the other. To wind up with true hyperinflation, some very bad things have to happen. The government has to completely lose control - the populace has to completely lose faith in the system - or both at the same time."
That is what I do not expect to happen. I do not think there will be a cataclysmic event
This article was posted on JS Mine Set and along with the article on the Sentinel ruling should give people pause about what they think they own.
Great find! Thanks!
” - - - He contends the real annual deficit is $5 trillion per year
That sounds a lot more realistic than the $1.1 number they try to con us with.
Does Williams have a “real” number for the Total National Debt?
I’ve seen most experts say 50 to 60 Trillion Dollars.