Wednesday, December 2, 2009

John Williams: A Negative Voice, I'm Talking Real Negative

John Williams at Shadow Stats published his Hyperinflation Special Report today. It’s a subscribers only piece, but here’s the overview (Via Rolfe Winkler)  :

A Great Collapse. The U.S.economic and systemic solvency crises of the last two years are just precursors to a Great Collapse: a hyperinflationary great depression. Such will reflect a complete collapse in the purchasing power of the U.S. dollar, a collapse in the normal stream of U.S. commercial and economic activity, a collapse in the U.S. financial system as we know it, and a likely realignment of the U.S. political environment. The current U.S. financial markets, financial system and economy remain highly unstable and vulnerable to unexpected shocks. The Federal Reserve is dedicated to preventing deflation, to debasing the U.S. dollar. The results of those efforts are being seen in tentative selling pressures against the U.S. currency and in the rallying price of gold.

Williams' negative forecast can't be ruled out. However, I see at least a temporary deflationary period, with lower stock prices, a stronger dollar. This could very well be followed by what Williams details, as the Fed will most likely will attempt to print its way out of any downturn. At such time a perfect storm of negative events could dovetail into everything Williams outlines.

1 comment:

  1. John takes note of the slowdown in broad money supply (as you have many times here) and calls for a significant contraction in the first half of 2010.

    He goes on to say

    "In theory, though, slowing or outright contraction in broad money supply growth should be reflected in slower inflation or outright deflation. As with most economic theories, however, there often are simplifying assumptions that may not be appropriate under certain circumstances. Money supply, for example, works best as a predictor of inflation in a closed system, as was seen in Zimbabwe."

    He goes on to say...

    "In the case of the United States, however, significant dollars are held outside the country, where shifting dynamics may have significant impact on U.S. inflation."

    He basically says that this supply of offshore dollars is creating a significant supply overhang that can seriously offset the contracting money supply.