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Biggest Debt Bomb in History

John Williams of ShadowStats Warns Hyperinflation Will Start in the Next Couple Months!

Economics / HyperInflation Dec 11, 2010 - 04:32 AM GMT

By: Mac_Slavo


Best Financial Markets Analysis ArticleJohn Williams of Shadowstats has repeatedly warned that our economy is not doing as well as some would have you believe. From unemployment to GDP to current and future liabilities, there are fundamental problems that will not be resolved anytime soon - in fact, they’re likely to get worse.

The end result according to Williams?

A hyperinflationary depression.

(Video available below excerpts and commentary)

Eventually it’s going to be a hyperinflationary great depression in the United States.

We’re already seeing food and energy prices rise significantly - with price jumps of 30% or more year-over-year. We can argue about deflation or inflation, but we will not be sure of exactly what comes next until  it actually happens. John Williams provides some recommendations, all of which we’ve discussed before, for preparing yourself and loves ones for the possibility of a complete meltdown in the US dollar. Williams is a respected economist who has a high level understanding of the fundamental numbers behind our economy, so his forecasts and recommendations should not be taken lightly:

In terms of maintaining the purchasing power of your assets and wealth - and this is primarily a problem for people who live in a US dollar denominated world - Canada is not going to necessarily have this problem - you look to put your dollars in hard assets like physical gold and silver, getting the dollar into other currencies such as the Canadian dollar, Australian dollar, Swiss franc.

In the US we don’t have a back up system. Zimbabwe had the worst hyperinflation anyone’s ever seen. But, they survived. They had an ongoing economy. That was because of a black market in US dollars. We don’t have a black market in the US. There’s no backup to our system.

It gets very difficult when food starts to disappear from food shelves. What happens? You can probably use common sense. It’s probably a good idea to store goods that you would normally consume for several months, just to protect yourself, your family and to have goods for barter.

That four pound bag of rice, roll of toilet paper or bottle of Jack Daniels you have stored up in your prep closet may very well be worth it’s weight in silver if and when goods start flying of the store shelves.

One of the primary concerns for people who know a major collapse is coming is how to identify it when it is happening. What are the signs?

Sign number one is what governments do before a hyperinflationary collapse. If history is any guide, then the monetary actions of our Federal Reserve are a clear indicator. As Jon Stewart humorously pointed out recently, the Fed is “imagineering” money out of thin air. This means more money in our overall money supply chasing fewer goods, which inevitably leads to higher prices. We’re seeing this the world over in commodity prices, as well as other assets. One of the big complaints coming out of China is that the policies of the Federal Reserve are leading to the US exporting inflation to China, as evidenced by significant increases in their own domestic stock market prices and real estate values. The Chinese are already taking steps to curb this inflationary bubble in the making. Another sign of coming fiscal problems, which ultimately leads to more monetary quantitative easing policies is the continued uncontrolled spending of Federal, State and local governments. As they waste more money, more needs to be printed to “monetize” the debt that no one else wants to buy.

We’ve warned about it before, and we’ll say it again because it is going to be the trigger that sets the whole thing into a complete collapse. When our creditors start offloading US Treasuries and stop buying new debt issues, the game is over. John Williams confirms this view and provides some more insights as to what you should be looking for as telltale signs that hyperinflation is upon us:

This is not good news. Weakness in the dollar is what will kill the system, it’s what will trigger the early signs of hyperinflation. Which, as you mentioned, could be as early as the next six to nine months. Down the road that remains to be seen as to the timing.

Watch the dollar. Watch for panic there. If it gets out of control you’ll see massive dumping of dollars. The Fed will be intervening even more than it does now. People will be turning dollars over as quickly as they can - they’re not going to want to hold them. Prices will sky rocket. We’re going to see this in the next couple months starting with gasoline and food prices.

We have yet to see the ramp up in commodities hit the store shelves and gas stations. But be assured that it will happen (unless stocks and commodities crash in the near future). This price increase simply cannot be avoided. It’s already happening. Most of us have seen small percentage rises in grocery store prices already, and media outlets are reporting $3 gas by Christmas. These price bumps are nothing compared to what must happen as a result of price rises in commodity markets over the last year.

Thus, in the next 1 - 3 months, we should start seeing the early signs. Mr. Williams’ forecast in this regard falls in line with those made by Gonzalo Lira in Hyperinflation Tipping Point By Early 2012, an insightful article that provides some more technical and economic signs to look for. Both forecasts suggest that 2011 will see the beginning of our hyperinflationary spiral.

Keep in mind, however, that it is not likely you’ll see prices jump 100% from January 2011 to April 2011 (unless of course the Chinese stop buying our debt in the next 4 months which probably won’t happen just yet). What we’ll see is a progressive and sustained increase in food prices over many months and several years. Eventually, the dollar’s tipping point will be reached - perhaps a year, two or three down the road - and then the fireworks will really start.

Here is a chart of the acceleration of hyperinflation in Zimbabwe - this was a multi-year breakdown and we can expect something similar here:

Chart provided by Howard Katz

year rate of increase in prices
1999 56.9%
2000 55.22%
2001 112.1%
2002 198.93%
2003 598.75%
2004 132.75%
2005 585.84%
2006 1,281%
2007 66,212.3%
2008 231,150,888.87% (July)

As a country, we might be able to handle the price increases for the first 2 - 4 years, but even that is a stretch considering that one in eight people require food stamps to keep food on the table and roughly one in four are out of work.

Even if we do survive those first three years intact, they will have taken a toll and probably altered the average American’s way of life for the worse. By year four or five however, we’d be looking at a total breakdown in our economic system that may very well include disruptions to food supplies and the normal flow of commerce. The majority of people in America would be financially destroyed by that point, or be very close to it.

This is the Zimbabwe time line, and they did not owe trillions of dollars to foreign creditors, nor were they the reserve currency of the world. Given our status as the world’s super power, it is possible that a currency breakdown in the United States may happen on a much more accelerated time line.

Perhaps Mr. Williams’ forecasts are wrong, and we’re willing to admit that we might be wrong too.

But this isn’t about who is right or wrong. It’s about identifying the many possibilities - because it is clear that we’re not going to see recovery until maybe the end of this decade - and taking steps to protect yourself and your family as best as you can.

The signs are all around us. Would picking up a a few hundred dollars in bulk rice, wheat, alcohol, tobacco, or other good susceptible to hyperinflationary price increases be such a bad idea?

Watch John Williams on BNN - December 2010:

By Mac Slavo

Mac Slavo is a small business owner and independent investor focusing on global strategies to protect, preserve and increase wealth during times of economic distress and uncertainty. To read our commentary, news reports and strategies, please visit

© 2010 Copyright Mac Slavo - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2015 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


17 Dec 10, 13:17
Doomer bandwaggon

Williams has simply jumped on the doomer bandwagon. Thus, he is not one to listen to. As Mike Stathis has discussed many times, hyperinflation in the US is not possible. i'd believe him over Williams anyday.

Just because a bunch of people say something is so doesnt make it so. What matters is the intellectual basis behind the facts or in the case of Williams, the misinterpretation and exagaration of the facts. Williams is out of touch with reality because he makes money through being promoted by the doomer crowd.

Back before anyone knew how bad things would be, Stathis wrote an amazingly detailed analysis predicting a depression for America in America's Financial Apocalypse. Even the doomers like Peter Schiff who warned about the real estate bubble came nowhere close to Stathis' analysis. Stathis predicted an inflationary depression, but not hyperinflation. He has been banned by the media because he is the only person who got it all right and did not hold back any punches. The others have no credibility so they wont be taken seriously by people who matter. Everyone else is lost.

18 Dec 10, 08:21
Doomer Bandwagon

Right Avery,

Williams, as a Johnny Come Lately has only been a private consulting economist for 30 years and he is paid by clients and subscribers.

The Gov't. statistics that you take for reality are paid for buy extorting money from you & me.

You should visit the Williams web site. His numbers do not lie.

Not to knock your promotion of Mike Stathis who is not missing any paychecks either and who is simply saying the same things that a lot of newsletter writers (still writing today) said back in the 1970's. Nobody believed, back then, that the PTB could keep the ball in the air this long bubble after bubble.

18 Dec 10, 10:12

Avery = Stathis

18 Dec 10, 11:03
Williams has no idea what he is talking about

If you believe hyperinflation is possible in the US you have some loose screws in your head.

Williams is not much more than an amateur economist. In order to be a credible economist you need a PhD.

Also, just because he has people that pay for his service that doesnt mean a thing. Thousands of fish pay for newsletters from thestreet and realmoney and thousands of others who seem to get most things wrong.

While Williams lays out data based on previous ways the gov used to calculate inflation, this is not difficult for anyone else to do. But when it comes to making hyperinflation predictions, he is reaching outside of his limits of expertise.

Just because someone predicts it will rain followed by a massive flood, and it rains the next day, that doesn’t mean the massive flood will come. Williams is good at what he does but you shouldn’t listen to him when he steps out of his reach, which is what he is doing.

I agree that Williams has jumped on the doom bandwagon in order to get publicity.

18 Dec 10, 16:34

Need a PhD? Like all of the hacks in govt. who got us into this jam in the first place? You sound like that elitist Fed water carrier who wrote the very same thing not so long ago. Either the Phd's are stupid or liars. Either way, hanging your hat on what the elite try to shove down your throat, well, you deserve what you're about to get.

G Million
18 Dec 10, 21:42
Never confuse

Jay - Never confuse education with intelligence. By your standard Einstein would be an idiot.

19 Dec 10, 15:48

PhD is known as Piled High and Deep. And, these folks have been groomed for accreditation (not to be confused with education) within institutions that simply spit out more PhD's to support the lies and stupidity of those in charge of making policy.

With regard to the "doomers:" How is it we are supposed to grow a healthy economy when all of our jobs have been bled out through outsourcing after NAFTA? There simply is no economic infrastructure to support the ridiculous heraldings of a recovery. Oh, the corporations will recover all right. Off to conquer other, cheaper lands and peoples. But the american citizens won't. Anyone get the connection with the fact that our roadways, water ways (fresh water in, sewage out), buildings, etc., are crumbling - and no money to fix 'em.

Bond Bull
12 Jun 11, 01:15
Hyper-inflationist are wrong again!

Well it looks like John Williams is wrong about hyper- inflation coming in a few months. In fact as of today, inflation is actually moderating after a brief rise. The odds of hyper-inflation happening anytime in the near future is virtually nil.

13 Jun 11, 17:12
Hyperinflation definition

Avery, I read the article you referenced.

I dont think that yourself nor Mike Stathis know what hyper-inflation is. I dont think we will see hyper-inflation in the coming months and maybe not at all but your arguments are flawed and you dont have a grasp of the subject. Read Bernholz book on hyper-inflation if you want to understand the subject. Hyper-inflation is a loss of confidence in the currency which we have. One definition of hyper-inflation is a 50% rise in prices in a given month. The only reason we arent in hyper-inflation now is the dollar is the worlds reserve currency and holders have so many dollars they cant get rid of them. For this reason I think Williams timetable is early but he has a better grasp of the subject than Stathis.

Likewise, Bond Bull doesnt know what inflation is. Inflation means a rise in the money supply which we have. The effect on prices is what most call inflation but that is not the definition of inflation. I would suggest getting your terms straight before making any statements.

13 Jun 11, 18:34
Hyperinflation - inflation

The reason why John Williams is wrong is beause he does not understand that hyperinflation is a market event, i.e. along the lines of a market crash in the value of currency as people panic sell in exchange for anything else, which is why it can't be forecast.

Inflation as understood by 99% of the population is the rise of general prices in an economy.

13 Jun 11, 18:40
I 2nd Nadeem

Nadeem, I agree that hyper-inflation cant be predicted because its a panic sell of the dollar. Very difficult to call the timing on that.

15 Jun 11, 16:26
Deflation is coming

Your debate is futile, prepare for deflation. It is right around the corner.

15 Jun 11, 19:04
Deflation Panic

IF deflation were around the corner then it would prove very shortlived as Bernanke would start using B52 bombers instead of helicopters to drop money - The result - hyperinflation.

A deflation panic would quickly resolve in an hyperinflation crash.

16 Jun 11, 12:59
Helicopter Ben

"Your debate is futile, prepare for deflation. It is right around the corner."

How do you draw that conclusion ?

I would agree with deflation if the Fed didnt have a printing press and wasnt willing to use it. The US has a debt problem. The Fed cant allow delflation because that makes the debt problem worse. Govts devalue their currency when they have a debt problem.

QE is designed to keep interest rates in the bond market down because the govt cant afford higher rates on the $14 plus trillion debt. In addition, foreign bond buyers are stepping away from Treasuries so the Fed has to buy. Thats all printed money expanding the money supply ie inflation.

So we have a short reprieve from QE, only until the numbers (GDP ect) drop. Then there will be more QE (maybe called QE and maybe called something else). The Fed is not going to stand down and allow a deflationary depression especially in the middle of a sovereign debt crisis.

Net summary is inflation not deflation.

16 Jun 11, 16:01
B52's will not be used

If Ben B uses the B52 option, he will be out of a job because the US dollar will be toast. He will choose to live than to die, he will not print like mad. Instead the media will downplay the hardships that will be occurring in society. The Major banks will buy treasuries using cheap fed money and life for them goes on.

17 Apr 12, 06:14
balance sheet recession

Williams can't forecast because he is clueless when it comes to understanding the money supply and banks. QE operations simply injected excess reserves from the banking system. It was an asset swap - bonds for reserves. And the reserves just sat because there is little demand for credit. Exactly what one would expect in a balance sheet recession.

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