JOHN WILLIAMS – SHADOW STATS
The U.S. economic and systemic-solvency crises, which began to unfold in 2006 and 2007, and which brought the domestic financial system to the brink of collapse in September 2008, still are playing out and still threaten systemic collapse.
The unfortunate reality remains that there were not then in 2008, and are not now in 2012, any quick or politically-easy fixes for the intertwined systemic-solvency, fiscal and economic woes. Bank problems largely have been papered over and propagandized or jawboned away, out of public sight, as much as is possible. Given the politicians that currently run the U.S. government, there is no chance of meaningfully addressing the deteriorating fiscal solvency issues currently dooming the U.S. dollar.
The outside timing for the onset of a U.S. hyperinflationary great depression remains 2014 at this time, but the vulnerability today of the U.S. dollar to a massive sell-off leaves open the real prospect of a dollar panic at any time, a panic that could provide the start-up conditions for a hyperinflation.
I have been warning of a hyperinflation for at least seven years, but those warnings have been about a hyperinflation that was sometime in the future…Now, however, along with the passage of time, circumstances have evolved and are aligned for the hyperinflation to develop in the near future, specifically, within the next two years or so, by the end of 2014. Key developments, such as global loss of confidence in the U.S. dollar, and the dollar losing its safe-haven status, fell into place during 2011.
While inflation is far from being out of control at the moment, the U.S. dollar is relatively strong, due to the euro crisis. That can change rapidly as global markets and domestic holders of the U.S. currency begin to flee the dollar, along with dumping dollar-denominated assets. Fiscal, systemic-solvency and economic conditions are deteriorating markedly, with a confluence of unstable circumstances likely to come to a head within the next year or so, placing extremely heavy selling pressure on the U.S. dollar and, before 2014, setting the stage for hyperinflation.
The damage to the U.S. financial system and to U.S. dollar credibility have been so severe in recent years, that countermeasures likely to be taken by authorities—such as currency intervention and/or restrictions on capital flows—should be short-lived and of limited impact.
The U.S. economy is far weaker than commonly viewed—it never recovered from the 2006/2007-to-2009 plunge in activity—and has begun to show renewed deterioration in terms of already moribund consumer income growth. Economic and political issues rapidly will expand the current federal budget deficit well beyond existing official projections or market expectations. In response, the global markets should turn on the U.S. dollar, with massive selling and dumping of dollar-denominated assets.
Normal annual transactions, could push the reporting of total GAAP-Based U.S. obligations—including gross federal debt and net present value of unfunded liabilities—from $80 trillion in 2011, into the $120 trillion range for 2012, or roughly eight times the level of U.S. GDP.
Flight from the dollar is likely when the Federal Reserve moves once again to support the still-troubled banking system with new liquidity or “easing” measures. The global markets view such actions as highly inflationary and as direct efforts at debasing the U.S. dollar. The Fed easing will come, but as a prop to the banks, not to the economy, although the action politically will be touted and explained as an effort to stimulate the economy.
A major risk that also remains in play – would be the movement of the U.S. financial system, again, to the brink of collapse. As before, the federal government and Federal Reserve would do everything within their powers to prevent such an event, creating, spending and lending whatever money was needed, and guaranteeing whatever assets had to be backed.
A confluence of debilitating economic, fiscal, political and systemic-solvency issues threaten to collapse the U.S. dollar and to lay the foundation of domestic hyperinflation in the not-too-distant future. The unavoidable big change, of course, is the passage of time and the nearing of the event horizon, beyond which the hyperinflation cannot be escaped. In all likelihood, the event horizon already has been passed; that circumstance just has not been recognized, yet.
Ahead lies the prospect of the U.S. currency losing virtually all of its value in a very short period of time.