"There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion or later as a final and total catastrophe of the currency system involved."
- Ludwig von Mises

Friday, February 4, 2011

John Williams of Shadowstats Calls for the "Great Collapse"

Here's an interview that took place just less than a month ago.  I don't agree with everything that John Williams says here, but I do have a lot of respect for him and his website shadowstats.com.  I am posting this interview as an alternative view.

Williams points out all the dangers we are facing, and his website tracks such metrics as inflation and unemployment in a much more accurate way then the government provides.  You have to keep in mind, the US government, over the past 30 some years, has altered, on multiple occasions, the methods used to measure such things as inflation and unemployment.  The end result of course is to paint a better picture of the economic situation.

My one major point of contention with John Williams is that the US, as holder of the largest gold reserves in the world, can never experience a true hyperinflation.  If the US finds itself in a currency crisis, it can easily back the US Dollar with gold.  The price of gold however, would need to be well over $5,000... maybe even $10,000 and above.  It all depends on what money supply metric the US uses:  M1, M2, etc...  Such a scenario would involve extreme inflation, but not Zimbabwe type hyperinflation.  Only pure fiat can experience true hyperinflation, never a gold backed currency.

I also want to mention that if the US did take that route to snuff out a potential hyperinflation, the US Economy would still suffer tremendously as it is all too reliant on an easily expandable fiat monetary system.  Take that away, and the financial industry gets crushed.  Maybe that's not a bad thing after all?

John Williams is giving a timeline for severe inflation to take off within the next six to nine months.  Sounds crazy, but you know what?  The US Ten Year Treasury Note yield just spiked over 3.6%.  We may have hit a bottom in yields last Autumn.  Maybe Bernanke doesn't have the control he thinks he does.

Here's the interview:

No comments: