"Hyperinflationary Depression"
Jeff Nielson
June 1, 2009
One of my favorite sources for real statistics is John Williams' site:
Shadowstats. com. For those not familiar with his work, Williams' is a highly
respected U.S. economist, who has previously been invited to speak to the
U.S. Congress.
Williams has dedicated his site to producing authentic, U.S. economic
statistics. By this, I mean that Williams has discarded all of the methods
of lying-with-numbers which the U.S. government has invented over the last
thirty years - and calculates real statistics, using the same methodology
employed before this "pollution" of statistics began.
Thus, his calculations are not only extremely useful for getting a genuine
picture of the current state of the U.S. economy, but unlike all other
current, calculations his numbers can also be directly compared to previous
eras - because the methodology in the calculations is the same.
It was Williams who first coined the phrase "hyperinflationary depression" a
few years ago to describe what he saw as the certain future for the U.S.
economy. More recently, he did an updated essay on this subject one year
ago.
Williams has foreseen two dynamics in the U.S. economy. First, crippling
levels of debt, combined with gigantic, excess-inventories of numerous, U.S.
asset classes means that these assets will continue to deflate - no matter
how much money the U.S. government stuffs into Wall Street vaults. Thus, an
asset "depression" will continue in the U.S.
Second, insane levels of money-supply growth (i.e. more new debt) in the
U.S. and most of the rest of the world ensures that there will be a dramatic
surge in prices of all assets in relatively scarce supply, meaning primarily
commodities - and especially precious metals. In countries with very weak
currencies (like the U.S.), rapid rises in commodity prices combined with
rapid devaluation of the currency will lead to extremely high inflation.
With the highest debt-levels in the industrialized world, and the weakest
economy, Williams expects the U.S. to bit hit hardest - with hyperinflation.
With this context, the recent spike in U.S. interest rates, despite all-out
efforts to manipulate these rates lower by the U.S. government, is a clear
sign of Williams' prophecy coming to fruition.
The first consequence of this spike was immediate: U.S.
mortagage-applicati ons are plummeting. Mortgage applications from two weeks
ago sunk by a sickening 14% week-over-week - and 37% since the most recent
peak in activity only one month earlier. With U.S. interest rates still
rising, expect the next report to be even worse.
This immediately torpedoes the wishful thinking by the Obama regime that
"distressed" , U.S. homeowners would somehow be able to "refinance" their way
out of foreclosure. Looking ahead, as the next, huge wave of mortgage-resets
approaches (see "U.S. mortgage-crisis to get MUCH worse in 2010-11"),
millions of homeowners who can barely manage their payments today are doomed
to lose their homes as these resets kick-in - in roughly six months time
(and for two years after that).
While the U.S. propaganda-machine tried to hype a tiny up-tick in U.S.
existing home sales last week, the reality is that even this "good news" is
actually merely setting up the U.S. market for another crippling, down-leg
(see "U.S. housing-sector stability dependent on vultures"). Speculators are
buying over-priced, U.S. homes at foreclosure sales - duped into believing a
"bottom" is near, thanks to incessant propaganda which fraudulently predicts
this (again and again).
Meanwhile, the collapse in the U.S. commercial real estate market has just
begun. With U.S. interest rates soaring upward, the largest block of
commercial real estate "maturing debt" in history ($178 BILLION this year
alone) now must somehow be refinanced. Obviously, there will not be nearly
enough market "chumps", willing to throw away their money - by buying into a
market just beginning to collapse.
This has two additional implications for the U.S. economy. First, it shows
how ridiculous the lies are which are emanating from U.S. banksters about
"improving profitablity" . These fraud-factories, who are boldly predicting
"repayment" of billions in TARP loans, will undoubtedly soon be attempting
to mooch additional trillions to bail out their leveraged bets.
With grossly inadequate loan-loss reserves for U.S. banks, every category of
U.S. debt is simultaneously at record levels of delinquencies (except for
commercial real estate, which won't start breaking records until next year).
And the U.S. financial crime syndicate has leveraged all this debt by a
minimum of 10:1 - and a maximum (in their hidden, "off balance sheet
assets") of 30:1. Thus, even a 10% loss on any of these "assets" guarantees
a 100% loss for the banksters.
Even more insolvent than they were a year ago, these fraud-factories will
not be willing to make concessions to "under-water" U.S. homeowners facing
foreclosure. This closes off the last ray of false-hope for the U.S. housing
sector.
This reality confronts the U.S. economy, just as the number of delinquent
mortgages hit yet another all-time record of over 12%. Millions of these
homeowners are hopelessly "under water" on their mortgages, and thus have
absolutely no incentive to continue making payments.
All this doom-and-gloom does not even begin to take account of the horrific
implications for the broader, U.S. economy - caused by higher interest
rates. This will further impair margins for all U.S. businesses (especially
the U.S. financial crime syndicate), and continue to fuel crippling, U.S.
unemployment (see "U.S. economy to lose 20 MILLION jobs this year").
However, in the rest of the world, what we are seeing is that the tidal wave
of new "liquidity" is already being transmitted through soaring commodity
prices. Gold, silver, oil, grains, and even some base metals are all seeing
rapid moves higher in their prices. With U.S. debt-instruments guaranteed to
continue to deflate (see "U.S. Bond Bubble Bursts - bye-bye equities
rally"), it is obvious which assets are being targeted with all this new
money.
Much higher commodity prices guarantee much higher prices for many of the
basic necessities: food, clothing, and energy costs. Thus, at the same time
the collapse in U.S. asset prices are robbing Americans of more trillions in
wealth, and record numbers of Americans are losing their jobs, households
will be "squeezed" much harder through soaring prices.
This is the future which was promised by John Williams, years ago. Sadly,
for Americans, "the future is now."
The original commentary has many reference links not included in this
version. To view these links, please go to...
http://www.bullionb ullscanada. com/in... red&Itemid= 102<http://www.bullionb ullscanada. com/index. php?option= com_content& view=article& id=527:rising- us-interest- signal-hyperinfl ationary- depression& catid=53: featured& Itemid=102>
Jeff Nielson
www.bullionbullscan ada.com
Tuesday 2 June 2009
"Hyperinflationary Depression" coming soon
Posts
