Potential Future Hyperinflation - by Stephen Lendman
Walter "John" Williams thinks out of the box. He makes disquieting reading, but you won't find him in the mainstream. At least not often. He runs a "Shadow Government Statistics" site with an electronic by-subscription newsletter. Anyone can access some of his data and occasional special reports. They can also assess his reasoning. In his judgment, government data are manipulated, corrupted and unreliable. He's not alone thinking that.
First, through technical changes over time in how data are collected and/or interpreted. The intent is to portray a more rosy scenario and ignore real world experiences of ordinary people. Calculating the CPI is an example:
-- in the 1980s, the Bureau of Labor Statistics (BLS) switched from using house prices to their rental equivalent;
-- then a decade ago, BLS made a spurious assumption for reasons other than it stated; it was that consumers substitute cheaper products for ones that have risen in price - such as hamburger for steak or chicken for meat; the idea wasn't to reflect their buying habits; it was to artificially lower inflation and distort its calculation; and
-- BLS has long adjusted prices for quality improvements; it's called "hedonic adjustment" that, in fact, cooks the books; so if computer speed increases, its cost is lowered proportionally even if its price rises; the same is true for autos with better brakes or other assorted innovations; again the result is distortion, and it affects all sorts of products; as a result, inflation is artificially and fraudulently lowered.
Another example is how federal deficits are calculated. Beginning with Nixon in 1969, a "unified budget" was adopted to artificially lower them by offsetting expenditures with "off-budget" Social Security revenues. The idea was to hide government's true cost at a time wartime and Great Society spending was high and would later factor into the 1970s and 1980s inflation. If deficits were calculated then and now by GAAP methodology (required of all publicly-traded corporations), they'd be much higher than annually reported - since the 1970s, in multiple trillions of dollars; fiscal alchemy sweeps them under the rug.
A further example was Nixon's "core inflation" idea. More artificial rigging - to exclude volatile food and energy prices to produce a lower figure. No matter that these items account for a large portion of consumer spending, especially for lower income households.
Others like this are numerous. They all amount to manipulative rigging for political or financial market purposes, and the practice goes back decades. A recent Bush administration one is switching to monthly instead of semi-annual jobs data seasonal adjustments to make the number friendlier. Later on (too late for markets to react) they're matched against payroll figures for a once a year adjustment and more accurate jobs created or lost reading.
The Clinton administration was also manipulative. In calculating employment, it lowered its monthly household sample from 60,000 to 50,000, reducing it mainly in inner cities. The effect is to artificially lower jobless numbers among blacks, Latinos and the poor overall. The calculation is also rigged by keeping out the 2.3 million prison population. The overall effect is illusion, not reality - to erase "free market" capitalism's defects and make it look wondrous and beneficial to mankind.
Williams reverse-engineers the GDP, employment and inflation data for more accurate readings. He backs out manipulative changes to produce more valid figures. Take the 5.5% May unemployment rate for example. BLS calculates it on persons who looked for work in the last 30 days. Williams adds those who want to work but gave up in frustration plus people working part-time who want (but can't find) full-time jobs. Result: real unemployment of over 12%.
The same methodology works for economic growth. The real value of all goods and services produced is lower than official GDP numbers when adjusted for higher inflation. More of it means higher prices, not increased output. It's how Williams makes his calculation, and he's worried. He sees inflation rising and a threat of hyperinflation ahead. He highlighted his concern in a recent April 2008 report called "Hyperinflation Special Report" with three dramatic sub-headings:
-- "Inflationary Recession Is in Place;
-- Banking Solvency Crisis Has Opened First Phase Monetary Inflation;" and
-- "Hyperinflationary Depression Remains Likely As Early as 2010."
Time alone will prove him right or wrong. But given current economic conditions, the financial malpractice that precipitated them, continued mismanagement since then, and resultant dangers they created, it pays to examine his analysis. It's not for the faint-hearted and hopefully won't bear out. But it's happened before at other times in other countries, and when it hits it ruins lives and savings. Is America now headed for that type future? Williams thinks so, and here's his argument.
I am a 72 year old, retired, progressive small businessman concerned about all the major national and world issues, committed to speak out and write about them.
this is an excellent article. The understanding of that which is not publicly taught requires a paradigm shift.
Hyperinflation is nearly guaranteed in the U.S.. By design, our monetary system creates inflation by charging interest. Where does the money come from to pay the interest? Inflation of the money supply is required.
Our energy/matter system is in direct conflict with our monetary system. To work properly, they would have to balance. Yet one is finite and the other in infinite. Money without an underlying standard (such as gold) can be produced infinitely, as the example of Post war Germany demonstrates.
The monetary system in the U.S. under the Federal Reserve has nearly run its gamut.
by
Mike Folkerth (120 articles, 0 quicklinks, 2 diaries, 566 comments)
on Monday, June 9, 2008 at 12:25:41 PM
at one time thoroughly ignorant of all these processes, have been educating ourselves rapidly. For somebody like me... who has no fortune in worthless dollars or anything else, the only option is to invest in heritage seeds immediately, make sure I've got the few acres necessary to grow them and raise a goat or two (and some chickens ... if the bird flu hasn't killed them off) and hunker down with my rifle.....
the chaos will not be pretty. But it will be well-deserved... for the greatest wannabe empire the world has ever known. And it is our own fault for not paying attention to the welfare of our Republic and to the machinations of the global elite.... may they suffer in Hell.
by
richard (0 articles, 5 quicklinks, 1 diaries, 785 comments)
on Monday, June 9, 2008 at 6:35:30 PM
Only occurs when a countries currency is under attack. As the worlds principal reserve currency, and a requirement that most oil purchases be paid for in dollars, there should be no reason for hyperinflation.
Domestically, inflation would occur if we had too many dollars in the local economy chasing goods and services that are in short supply, and the country is in full employment and maximimum capacity. This is not the case.
Internationally, we have flooded the world with dollars due to our trade deficits. This money gets used to buy oil and food, and the excess can be invested in US treasuries and earn interest. Countries only buy oil and food in quantities they need, and there is no limit to how many treasuries they can buy.
To use China as an example. We send their manufacturers USD for products they make. The manufacturers change the USD into RMB to pay for their operating costs and distribute profits. Chinas Central Bank prints up RMB to buy the USD, and then invests the USD in stocks or Treasuries. It has recently begun loaning to USD to other countries, with no strings, effectively putting the IMF out of business.
The other thing that can be done with USD is to buy other currencies where the interest rates might be higher, especially if that currency is expected to appreciate. This is what destroys currencies and leads to hyperinflation. If there is a mass movement to sell USD for other currencies, this would cause imports to rapidly increase in price. This can only happen if the countries holding large reserves and the financial speculators all jump on board.
We know who the big financial speculators and holders of reserves are, and we have the biggest and baddest army around. China would not want to devalue it's reserves or hurt its largest trading partner. We know much of the speculative activity takes place in the tax havens, London or NY. Speculative attacks on the US currency should be treated as an act of war. The Cayman islands can be wiped out with one missile.
So any such attack leading to hyperinflation would be by design and with the permission of the US government, since they can stop it. The motive would be to get the world and America to accept a World currency, and following the Bilderberger meeting on Saturday the NY Fed President, who attended, made noises in this direction.
With a World Currency controlled by the IMF, the US would then be at the globalist vultures mercy.
The solution to the current crisis is simple. We must go back to a fixed exchange rate system as we had under Bretton Woods where the USD value relative to other major currencies is fixed (Euro, RMB, Yen, USD). We do not need a Gold Standard. The rate can be adjusted as needed, but never more frequently than annually. If one of the countries starts printing too much money, the effect will be on prices and will not devalue the currency. The beauty of this is it takes away the power of the speculators to affect prices in cases where prices are set by competitive market forces. Devaluation means price increases on everything we import.
The other thing that needs to be done is to target those industries in which competitive market forces do not exist (cartels) or where financial speculators have influenced pricing, such as oil and food. Speculation by those who never take delivery of such commodities should be prohibited. If you buy and sell oil, and take or make deliveries, then futures trading is all well and good. Otherwise, it must be banned. WTO restrictions or requirements on food and/or water must be scrapped. This should stabilize food and energy prices. Cartels where they exist, such as agribusiness and Big Oil must be broken up into smaller companies to eliminate collusion and price making practices, as well as manipulation of supplies.
by
pft (0 articles, 0 quicklinks, 0 diaries, 464 comments)
on Monday, June 9, 2008 at 7:52:11 PM
Want to hear something really shocking? You know that paycheck you work so hard for every week? The government borrowed the money to pay you and that money that you worked for must be paid back WITH INTEREST. You are working and slaving your life away not for free, but to put yourself and your fellow workers into the hole because every cent that you are paid must be paid back and more besides. By working for fiat currency you are locking yourself and future generations into a form of slavery only it is more diabolical than slavery because the slave knows he is a slave. The slave also has to be supported by his master so that he can go on working. You are blinded to your slavery by being told over and over that you are free but you are not. You have to provide for your own support. In the system we have now, not only do you have to slave away to keep paying for everything that you own, you are also slaving to pay back the interest, which you can never do because the money for the interest is never created only the principal. In order to pay the interest, your income must continually grow and eventually we all reach our earning peak after which our income stabilizes or declines and we end up swamped with debt. In order for one person to succeed in life, someone else must fail. Example:
person A borrows $100 and spends it into the economy
person B also borrows $100 and spends it into the economy
You now have an economy worth $200
BUT
person A and B must repay the money they owe with interest.
let's assume simple interest of 5% over one year for both
let's also assume person A is a little more efficient at accumulating money than person B so person A manages to pull $105 out of the economy and pays off his debt, so where does that leave person B?
Remember the economy is valued at $200, the amount spent by persons A and B. person A pulled $105 out of the economy and paid his debt leaving $95 in the economy, BUT person B also owes $105 to pay his debt. The $95 left in the economy obviously isn't enough so person B MUST go into default in order for person A to pay his debt.
That is how the system is designed so that a certain percentage of the population is always in default and the bankers are repossessing their homes and goods. They obviously can't repossess the entire world all at once or else people would see the bankers scheme for what it really is and there would be revolution so they play with the economies of the world to keep the defaults as low as possible but it doesn't always work like in the Great Depression when the economy contracted too much and forced more people into default than could be handled. Fiat currency has to be destroyed before it destroys us.
by
Watching (0 articles, 1 quicklinks, 3 diaries, 313 comments)
on Tuesday, June 10, 2008 at 7:30:16 AM
Your basic assumptions are correct in that additional capital (inflation) is necessary to balance any amount of interest charged. Without doing so, we would have the game of monopoly where one player corners all of the money supply.
The monetary system and physical energy/matter must balance to make a fiat based system work long term. That of course is impossible, as one is finite and the other necessarily infinite due to compounding interest and the ability to print endless paper money.
In the very near future the U.S. will have to totally rethink out monetary system.
by
Mike Folkerth (120 articles, 0 quicklinks, 2 diaries, 566 comments)
on Tuesday, June 10, 2008 at 10:00:28 AM
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