Following my post on Weimar and the downfall of money – this was received this morning. It’s from a daily financial newsletter called The Daily Reckoning, dated November 18th, forwarded by my brother Michael in England.
Last week, Janet Yellen told the senate what everyone wanted to hear – the Fed will support the economy… which means, the Fed will support asset prices. With this option in their pockets, investors bid up the Dow to nearly 16,000 by the end of the week.
What to make of it?
We’re down at a conference sponsored by the Bonner Family Office. And we’re thinking. Thinking is the last resort. You only do it when you’re desperate. When your opinions, predictions and guesses don’t seem to be working out, you’re forced to consider alternatives.
While we have no doubt that current Fed policies will prove disastrous, we have nothing but doubts about what form the disaster will take. John Williams, who recalculates basic indicators – CPI, unemployment, GDP – based on what he believes are more honest data. What he discovers is that the CPI is higher, unemployment is higher, and the GDP is lower than the feds tell us.
He believes that there is only one outcome possible – hyperinflation. A year ago, he expected it in 2019. Now, he’s moved up the schedule. Expect hyperinflation to begin next year, he says – in 2014.
Why? Because the Fed is more aggressive than expected… and because the rest of the world is losing confidence in the dollar and its guardians. The overseas portion of the US money supply is huge – with dollars in every central banker’s vault as well as in the private accounts and hidey-holes of millions of people all over the globe. When these people lose faith, which he expects next year, the trickle of these dollars returning to the US will increase. Prices will begin to rise… slowly at first, then suddenly, in a flood.
Will John Williams be proven right? We’ll have to wait to find out!
The Daily Reckoning
Further . . . from the WSJ today
The uncertain future of U.S. fiscal and central bank policies poses a growing risk to the global economic recovery, the Organization for Economic Co-operation and Development said Tuesday.
In its twice-yearly Economic Outlook report, the Paris-based research body said the U.S. debt ceiling should be abolished, and replaced by “a credible long-term budgetary consolidation plan with solid political support.”
The report marks a significant shift in the OECD’s focus of concern, which in recent years has been centered on the euro zone’s attempts to tackle its fiscal and banking crises.