Posted on 12/24/2009 7:26:31 AM PST by FromLori
Do you believe everything the government tells you? Economist and statistician John Williams sure doesn't. Williams, who has consulted for individuals and Fortune 500 companies, now uncovers the truth behind the U.S. government's economic numbers on his Web site at ShadowStats.com. Williams says, over the last several decades, the feds have been infusing their data with optimistic biases to make the economy seem far rosier than it really is. His site reruns the numbers using the original methodology. What he found was not good.
Maymin: So we are technically bankrupt?
Williams: Yes, and when countries are in that state, what they usually do is rev up the printing presses and print the money they need to meet their obligations. And that creates inflation, hyperinflation, and makes the currency worthless.
Obama says America will go bankrupt if Congress doesn't pass the health care bill.
Well, it's going to go bankrupt if they do pass the health care bill, too, but at least he's thinking about it. He talks about it publicly, which is one thing prior administrations refused to do. Give him credit for that. But what he's setting up with this health care system will just accelerate the process.
Where are we right now?
In terms of the GDP, we are about halfway to depression level. If you look at retail sales, industrial production, we are already well into depressionary. If you look at things such as the housing industry, the new orders for durable goods we are in Great Depression territory. If we have hyperinflation, which I see coming not too far down the road, that would be so disruptive to our system that it would result in the cessation of many levels of normal economic commerce, and that would throw us into a great depression, and one worse than was seen in the 1930s.
What kind of hyperinflation are we talking about?
I am talking something like you saw with the Weimar Republic of the 1930s. There the currency became worthless enough that people used it actually as toilet paper or wallpaper. You could go to a fine restaurant and have an expensive dinner and order an expensive bottle of wine. The next morning that empty bottle of wine is worth more as scrap glass than it had been the night before filled with expensive wine.
We just saw an extreme example in Zimbabwe. ... Probably the most extreme hyperinflation that anyone has ever seen. At the same time, you still had a functioning, albeit troubled, Zimbabwe economy. How could that be? They had a workable backup system of a black market in U.S. dollars. We don't have a backup system of anything. Our system, with its heavy dependence on electronic currency, in a hyperinflation would not do well. It would probably cease to function very quickly. You could have disruptions in supply chains to food stores. The economy would devolve into something like a barter system until they came up with a replacement global currency.
What can we do to avoid hyperinflation? What if we just shut down the Fed or something like that?
We can't. The actions have already been taken to put us in it. It's beyond control. The government does put out financial statements usually in December using generally accepted accounting principles, where unfunded liabilities like Medicare and Social Security are included in the same way as corporations account for their employee pension liabilities. And in 2008, for example, the one-year deficit was $5.1 trillion dollars. And that's instead of the $450 billion, plus or minus, that was officially reported.
Wow.
These numbers are beyond containment. Even the 2008 numbers, you can take 100 percent of people's income and corporate profit and you'd still be in deficit. There's no way you can raise enough money in taxes.
What about spending?
If you eliminated all federal expenditures except for Medicare and Social Security, you'd still be in deficit. You have to slash Social Security and Medicare. But I don't see any political will to rein in the costs the way they have to be reined in. There's just no way it can be contained. The total federal debt and net present value of the unfunded liabilities right now totals about $75 trillion. That's five times the level of GDP.
What can we, the people, do to stop the government from, you know, taking all our money?
We should have acted 20 years ago. There's not much you can do at this point to prevent the eventual debasement of the dollar. This involves both sides of the political spectrum. It's not limited to the Republicans or the Democrats. They've both been very active in setting this up.
What can individuals do?
The only thing individuals can do now is look to protect themselves. I wish I could see a way, but shy of severe slashing of the social programs that is so politically reprehensible and would create such problems and social unrest, I don't see that as a practical solution.
If you're a young 20- or 25-year-old guy or gal, would you move to another country? What would you do?
We still have a great country. We're going through a period of economic pain. It's happened before. This is the kind of thing that's taken us decades to get into and it will take us decades to get out. Although the hyperinflation is going to be limited largely to the U.S., the economic downturn will affect things globally. I can't tell you how things will go with a hyperinflationary Great Depression, which is where I see things going.
It's the type of thing that will tend to lead to significant political change. People tend to vote their pocketbooks. You could have the rise of a third party. You could even have rioting in the streets. I'm not formally predicting that — anyone can run these different scenarios. For the individual, what you need to do, from an investment standpoint, look to preserve your wealth and assets. Don't worry about the day-to-day fluctuations in the markets. What I'm talking about here is over the long haul...
[Gold is] going to be highly volatile, as will the dollar, over the near term, but longer term, physical gold I would look at as a primary hedge for preserving the purchasing power of your wealth and assets. Maybe some physical silver. Get some assets outside the U.S. dollar. I might even look to move some assets physically outside the United States. The key here is to look at a longer range survival package, battening down the hatches, and preserving your wealth and assets during a very difficult time. Once you're through that, you'll have some extraordinary investment opportunities, and I can't tell you what it's going to be like on the other side of this crisis.
When America was first created, it was a completely new experiment; nothing like it had ever existed. If the Founding Fathers can start from scratch, I don’t see how those of use who have the benefit of hindsight can’t do it again.
It may be only a few states, it may only be a few towns, but there are enough people with the logic, intelligence, and willingess to defend it to start it again.
Thank you for the information, I do take multi-vitamins every day, so I’ll keep stocked up on those. I’ve got lots of rice & beans put back too!
I read economic blogs all of the time and I’ve never heard of him. What econ blogs are you talking about?
You’re welcome. I’ll get ask them to put up some good pictures of the unit and the contents.
Rolfe Winkler Reuters uses them, Zero Hedge, The Market Ticker, Naked Capitalism, the business insider and tons of others.
Layter
Lehmans (no, not those guys) has their Non-electric catalog with all kinds of hand pumps, well pumps, cisterns, water purification stuff, you name it. If you want to live like it’s 1880, you can buy it through Lehmans. Cool catalog too. There are limitations on how deep you can pump water by hand, (it gets pretty tough around 200’ or so, apparently, but it’s doable.)
Yes, it happened. And worse. There isn’t any warning by the authorities. “Yes, tomorrow your bank deposits will be worth nothing.” Doesn’t work that way. “We are well capitalized” is the song, till it’s over.
“It was horrible.. horrible! Like lightning it struck..”
“Because hopefully the higher prices stay here, where workers have more disposable income and increase the demand.”
Why should I pay more money to buy the things that I need? Why is it right for me to pay more for bread, just because you want a higher wage?
What people benefit from is an increase in productivity, in making more for less, or from time-saving, in being able to do more in the same span of time.
Protectionism circumvents the normal operation of the market to find the best way to do things.
There are many things that the US does poorly compared with other countries, simply because of her natural resources. The best way is not to prevent the import of cheaper products, but rather to use these products to build other things.
Why are American workers idle? Unions, hostile work environments make them inefficient.
Get rid of the unions, lower business taxes, and watch America be the factories for the world.
Libertarian economic philosophy is killing us:
http://globalresearch.ca/index.php?context=va&aid=16639
parsy, who thinks we need to reinvent America
“the quality of products and services delivered by American companies had been outstripped by foreign competitors.”
Why do you think this is so? Could it have something to do with the fact that there were no incentives to improve the quality? Look at Detroit. Why is it that Detroit did so poorly for so many years, and let the Japanese automakers eat their lunch? Because they had inefficient, high-cost workers, they had terrible, unresponsive management and they committed the cardinal sin of the free market, by failing to deliver what their customers wanted.
The world of global competition is a reality. If the American worker is unwilling to adapt to the new reality, than he will be left behind. We can attempt to shutter ourselves behind the wall of tariffs, but what will that acheive?
I’m going to tell you a story, that has to do with an industry near and dear to my heart, the forestry industry. Up here, Forestry is one of the cash-cows of the governments, such that they charge high prices and taxes. Now, due to economic downturns, it has forced the remaining producers to become the most productive in the entire world.
My father worked with an engineering firm to do upgrades of these mills. They often received business from american firms as well. Now, their stated policy was to provide high quality services to Canadian firms, and less high quality services to American firms. Why? Because the American mills were 20 years behind ours. They would be satisfied with the incremental improvments, and they were unaware as to what their true competition has acheived.
America has massive lumber tariffs on our wood. The only thing this has achieved is to make our producers compete not only with your local businesses, but with a handicap of the tariff. This has forced them to become even more efficient in order to be competitive.
The end result is that the American mills have been left behind. If you are an American mill owner, the answer isn’t to hide behind a tariff, but it is to come up here and see for yourself, why we are eating your lunch.
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