On the John Williams Quote on Hyperinflation

Hat tip to Bayou Renaissance Man for a link to an article I didn't catch, an interview with John Williams of Shadowstats about what he sees coming.  I've been following Shadowstats for far longer than I can remember but never subscribed because the rates always struck me as for a business, not an individual.  While I think very highly of their work, let me jump to the point I think most of us noticed and related to:

So, is the choice inflation or implosion?  Williams says, “That’s the choice, and I think we are going to have a combination of both of them.  I think we are eventually headed into a hyperinflationary economic collapse.   It’s not that we haven’t been in an economic collapse already, we are coming back some now. . . . The Fed has been creating money at a pace that has never been seen before.  You are basically up 75% (in money creation) year over year.  This is unprecedented.  Normally, it might be up 1% or 2% year over year.  The exploding money supply will lead to inflation.  I am not saying we are going to get to 75% inflation—yet, but you are getting up to the 4% or 5% range, and you are soon going to be seeing 10% range year over year. . . . The Fed has lost control of inflation.”

....

When will the worst inflation be hitting America?  Williams predicts, “I am looking down the road, and in early 2022, I am looking for something close to a hyperinflationary circumstance and effectively a collapsed economy.”

One of the things that I read about hyperinflation long ago, in the first year of this blog, was a quote by Gonzalo Lira, writing on his own blog which is apparently now gone. 

If we think that hyperinflation is simply inflation on steroids—inflation-plus—inflation with balls—then it would seem to be the case that, in our current deflationary economic environment, hyperinflation is not simply a long way off, but flat-out ridiculous.

But hyperinflation is not an extension or amplification of inflation. Inflation and hyperinflation are two very distinct animals. They look the same—because in both cases, the currency loses its purchasing power—but they are not the same.

Scratch everything after, "inflation with balls" in that first sentence.  This was written in the phase of the 2008 "Great Recession" that was economic contraction, and that certainly isn't the case now. 

The important part is that last couple of sentences.  Hyperinflation isn't just bad inflation.  It looks like it, but in reality, hyperinflation is economic collapse.  It's the complete loss in confidence in the ability of the currency to maintain any semblance of value.  It's when the holder of currency believes that it will be worth less at any time in the future, so anything they need will be more expensive later - whether that's minutes or days later doesn't mean much.  

Inflation factoid, totally removed from any context for 99.9% of you.  In Central Florida, under normal circumstances, most of us would be running our air conditioning full time, probably since early May.  I just received my electric bill and was stunned to find it 42% higher than the previous month's bill.  My first thought was that it must have been a minor change in the temperature I set the thermostat to overnight, but that didn't make sense and I looked closer.  We actually used less electric power than the same billing period last year.  Why was my bill up 42% month to month?  It seems to be fuel surcharges for how much higher the utility's fuel bill went up.  

I can't stand many months of up 42% month over month as the fuel prices escalate.  I don't think they will, but as I'm fond of saying, "prediction is difficult; especially about the future."  While air conditioning is pretty close to life or death around here, thankfully we're not seeing 42% month over month in our food bills and other essentials.  If that happens, it's the collapse John Williams is talking about.

Shadowstats gives us teaser headlines of what appears in the subscriber-only version of the site.  I happened to notice this one:

Pandemic-Driven U.S. Economic Collapse Continues to Harden in a Protracted “L”-Shaped Non-Recovery

It made me wonder.  When he says L-shaped Non-Recovery, exactly which shape is he thinking of?

I should note that while I think John Williams is a reasonable guy and the website he provides is quite worth bookmarking, I'm reluctant to predict an economic collapse by the start of next year.  I've just seen so many such predictions in the last decade that just about any few months you can mention have been predicted to be the collapse.  I am, however, still trying to be prepared for a collapse at any time.