Long-time readers are well aware of the esteem we hold for John Williams. No, not the composer of Star Wars, Superman, Jaws, and Raiders of the Lost Ark; although clearly, that John Williams is the closest thing the 20th century had to Beethoven. And certainly not the John Williams that, ironically, is the current President of the San Francisco Federal Reserve Bank. You know, the one that last week claimed stocks are not overvalued.
No, we are of course referring to John Williams of Shadowstats.com; in our view, the pre-eminent dissector of government economic data. His work on REAL inflation, employment and GDP trends is unparalleled and has been for many years. Consequently, those who read him understand U.S. inflation has averaged roughly 9% for the past decade, while unemployment is well above 20%, and GDP negative when incorporating a REAL inflation rate.
At the Miles Franklin Blog, we shy away from near-term market forecasts – particularly given the overwhelming intervention currently permeating the equity, fixed income, and commodity and currency markets. To wit, our 2014 predictions focus principally on trends we anticipate to prevail in the next 12 months, as opposed to specific market “targets.” And generally speaking, Williams has in the past done the same; which is why we’re particularly intrigued by his outright call for a dollar crisis – resulting in hyperinflation – commencing in 2014. In other words, this year – per this interview he taped last week.
Certainly, the ingredients are in place for such an event to break out at any time – as we have discussed ad nauseum. Global money printing has never been more powerful – as evidenced by the below, terrifying post-2008 chart of the U.S. “monetary base.” FYI, the monetary base is the portion of commercial banks’ reserves held in accounts with the Fed, plus total currency in circulation. Thus, a surging monetary base typically suggests the economically lethal combination of money printing without coinciding lending activity.
To wit, recent U.S. “recovery hype” has been fostered principally by printed money being injected directly into financial markets, principally benefitting “the 1%” that invest heavily in them. Not to mention, a compliant MSM willing to report whatever they are told. In fact, the ferocity of official efforts to create a so-called “wealth effect” – both actually and perceptually – via goosing the stock market, has created levels of bullishness and margin borrowing not experienced since the late 1990s tech bubble. Not to mention, the Fed’s maniacal defense of the 3.0% level on the benchmark 10-year bond; which frankly, can only be compared in intensity to its capping of gold and silver. Of course, such inexplicable equity appreciation may simply be evidence of burgeoning hyperinflation – as exemplified by the recent, near parabolic surges in Greek and Venezuelan stocks. And if it is, the resulting real losses will ultimately dwarf the early, nominal gains.
Unfortunately, empirical evidence depicts the polar opposite of “recovery”; as evidenced by the morbid U.S. holiday shopping season, which not only was far worse than anticipated, but looked a lot like the post-2008 crisis environment. As you can see below – per this fantastic chart from the great Ronald-Peter Stoeferle of Incrementum – U.S. credit growth has dramatically weakened in the past year; which is precisely why the Fed engaged in “QE” at unprecedented levels, and why the recent “tapering” (which as you know, is but a mirage) must ultimately be reversed.
Sadly, this trend is global in nature; as evidenced by this morning’s ECB decision to maintain a 0.25% benchmark rate indefinitely, per this Fed-like quote from “Goldman Mario” Draghi:
We firmly reiterate that we expect the key ECB interest rates to remain at present or lower levels for an extended period of time.
As the Governing Council strongly emphasizes its intention to maintain an accommodative monetary policy stance for as long as necessary.
–Business Week, January 9, 2014
Per below, anyone can see the European economy is falling off a cliff; and thus, requiring massive monetary “stimulus” to prevent instantaneous collapse.
In Williams’ opinion, America’s financial problems supersede all other nations; not just because its debt/GDP is higher than any other nation (including off balance sheet obligations and unfunded liabilities), but because its “reserve currency” is subject to massive global selling at any time. We concur entirely; and despite our hope that gold and silver are unchained from government manipulation as soon as possible, could not be more fearful of what Williams forecasts. If hyperinflation does indeed commence in 2014, the world will become a far more dangerous place; which is why we strongly suggest you take Williams advice, to PROTECT yourself, and do it now…
With no viable or politically practical way of balancing U.,S. fiscal conditions or stabilizing the financial system – avoiding this financial and economic Armageddon – the best action that individuals can take at this point remains to protect themselves, both as to meeting short-range survival needs, as well as to preserving current wealth and assets over the long-term. Efforts there, respectively, would encompass building a store of key consumables, such as food and water, and moving assets into physical precious metals and outside of the U.S. dollar.
–Shadowstats.com, January 25, 2013
If you have any questions about how to trade your dying scrip for the historical inflation protection of REAL MONEY, please give Miles Franklin a call at 800-822-8080. We have been in business for 24 years, and not only promise the industry’s best service, but highly competitive prices; as well as a world class, segregated storage facility in Montreal, Quebec “in partnership with Brinks.” Remember, we put a sufficient amount of resources into producing this free publication; and thus, hope you will give us a chance to earn your business!