Tuesday, May 25, 2021

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.


  1. SiG, Maybe time to take a call from one of the solar scammers and get a system installed just to run the A/C...

    I'm thinking of homebrewing one just to run the A/C in the garage, since that's an unthinkable luxury otherwise, but maybe spending today's dollars on a solar system is a good idea if fuel prices are likely to increase like that.


    1. I've read recently that solar power systems have come down in price, although the solar power exec who said that specifically said it was more for the big users than the small. Still, I should look into that.

      The last time I compared was around 15 years ago. The solar system even with "tax incentives" (AKA other people's money) was more than 10x the price of a whole house backup generator.

    2. "The solar system even with "tax incentives" (AKA other people's money) was more than 10x the price of a whole house backup generator."

      Just curious, but was that 10x value calculated with or without adding the cost of running the backup gennie for 10-20 years non-stop, plus spares, maintenance, and losses during downtime, and/or the normal utility bills when it's off?

      IOW, a 9mpg pickup at $20K isn't a bargain compared to a 40mpg coupe at $30K, if you're planning on actually driving it for 10 years.

      Apples to apples has to include the whole bushel. ;)

    3. Excellent point and the answer is "no." Not at the time, and I still can't answer that because while I have a natural gas line piped in for the generator we also use gas for other things, so I have no way of isolating the generator's usage from the rest of the house.

      It runs itself for 10 minutes once a week, and without a meter for the generator, I can't know how much of my gas bill goes to that once a week, "keep the parts moving" exercise. It's a backup generator for when the power goes down (mostly hurricanes), and we've lived on it for less than a week in the roughly 15 years we've had it. One of those times was six months out of hurricane season and we were on the generator for 12 hours. I do recall that month's gas bill was many times our usual bill.

      Spares and maintenance have been essentially free, under $100/yr. But, again, it isn't an alternative to the grid, it's backup for after hurricanes, better than the portable "window shaker" generators that people around here store in their garage. Comparing it to a whole house solar power back up is somewhat apples and oranges.

    4. Photovoltaic solar panels can’t generate enough power to run your a/c unit. They’re great for generating 12v power to charge your phone or run an LED light, but a 220v compressor is gonna need waaaaay more juice. Real solar power plants use mirrors to focus the sun on a pipe filled with a toxic heat transfer oil in order to heat it to 900F, and use it to create steam to turn a turbine in order to generate 3-phase power.

      Photovoltaic panels still suck. And there’s no guarantee that they’ll ever get much better. Maybe, but maybe not.

  2. don't know abt the A/C bill yet, but on the west coast of Florida, with no meat or expensive goodies, the wife spent a just bit under $75 per bag at Publix yesterday; quite a bit higher than last month and most of the 3-month tourists have left already; told her that transport costs ++ are way up.

  3. errr, read “When Money Dies” there is a pdf out there required reading
    “L” shaped recovery means just that from top of capital L to economic flat line see the book
    Heard tales from neighbors in Germany growing up of not being able to find ‘X’ for any ammount of Reichmarks but could get meds/flour etc for gold rings/silver flatware/whole coffee/tea service could get all sorts of stuff... eg the ‘money’ was ‘worthless’ not worth less there was no time value of money

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    2. Oh, yeah, read that book back in '10 when it came out. Still have it on my phone, although I haven't looked at it lately.

      The picture was a lame attempt at humor, poking fun at Williams saying we're in an "L-shaped non-recovery." That is, is recovery flat until one day it takes off again, or is it flat until one day it completely craters.

  4. I opened up a new business because of inflation fears. I didn't want to, but at some point, you simply have to accept that Jo/Ho and cronies printing money with wild abandon will crash the economy.

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