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John Williams Exclusive - US Dollar Selling & Hyperinflation

With so many questions surrounding the U.S. dollar and rising inflation, today King World News interviewed internationally followed John Williams of Shadowstats to get his take on the U.S. dollar, Fed and hyperinflation. When asked about the current fiscal crisis the United States faces Williams stated, “Well, very simply I have very little respect for a political system that goes to the brink each time the debt has to be raised. They have to raise the debt ceiling because the government already is obligated to spend the money beyond what it can raise in taxes. I would be very surprised if the US actually defaults.

What they are doing now is the type of thing that has happened a number of times before, although there seems to be more of a serious challenge this time around and risk of an outright default on the US debt. This would be disastrous for the financial system. Indeed it likely would trigger very heavy selling of the US dollar, which would accelerate the inflation process and move us towards the hyperinflation scenario.”

John Williams continues:

“The actual deficit, including the increase in the unfunded liabilities for social security and medicare that we go through each year, have us looking at an annual deficit of four to five trillion dollars. So the small cut being proposed of four to five trillion dollars over ten years is not going to do much to bring the system into balance.

If you actually have a default in US Treasuries, you destroy the credibility of the dollar, you destroy the financial credibility of the US government. A lot of work has already been undertaken in that area in the last couple of years by the Federal Reserve and by the extremely irresponsible fiscal policies of both parties.

But an actual default takes you a quantum leap forward towards loss of credibility in the dollar and as I said before the general response to something like that would be heavy selling and dumping of dollar denominated assets such as US Treasuries. If you default, interest rates will go higher.

The economy is still in trouble. Whatever so-called recovery there was, was due largely to short-lived stimulus effects. We’re going to see some major downside revisions in the next month or so to the GDP.

Going forward, all of the happy forecasts in the stability of the banking system or projected budget deficit levels, those are all based on assumptions of underlying economic growth. If the economy contracts, which I think it will think it will be doing, and in fact is doing, all those numbers get blown apart. We’re still in the depths of the worst downturn since the Great Depression.

As activity begins to turn down again, you are going to see things get even worse, and the continued economic trouble is going to be very long and very deep. That puts the Fed in a circumstance where you virtually are assured of a quantitive easing three. That in turn will weaken the US dollar further.

We have borrowed short-term growth from the future through debt expansion. That’s what Greenspan encouraged over the last couple of decades, and that was behind most of the economic growth seen in recent decades. It was not strong income growth, it was strong debt growth. Now we’ve seen a debt collapse....

Continue reading the John Williams interview below...

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“and the debt expansion is not there for the average American consumer.

So at the moment you don’t have any way to get the economy going again, it’s going to get worse. The Fed and the Federal government are faced with an untenable circumstance. They can’t get the economy going and they are afraid of systemic collapse.

None of what you had following the Lehman crisis in 2008 has worked in terms of resolving the issues. You still have systemic solvency problems; you still have a very deep and protracted economic downturn. They did everything they could to prevent a systemic collapse in 2008. They’ll do whatever they can to prevent a systemic collapse now, but that requires spending money, creating money. That’s why you are going to see more easing by the Fed and the cost of that is inflation

When asked what King World News readers globally should be doing to protect themselves in this environment Williams had this to say, “One of the best bets I can give you over time is that the dollar is going to be much weaker than it is today, and you eventually are heading for a dollar collapse. It’s just a matter of when someone very major moves to get out of the dollar, and we already are seeing signs of that happening.

I’m looking for the dollar to collapse in terms of its purchasing power. For people who live in a dollar-denominated world, they need to look at taking some action to preserve their wealth and assets. This primarily involves holding some physical gold and silver and getting some money outside of the dollar, perhaps outside of the United States.

Things can be difficult enough here with a real hyperinflation that you want to be prepared for disruptions to the system. Have a store of basic goods and supplies as you would for any natural disaster, only in this case we are looking at a man-made disaster."

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Eric King

KingWorldNews.com

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