ShadowStats: USA Hyperinflation, 2014 Outside Date for Economic Collapse

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SPECIAL COMMENTARY NUMBER 414

January 25, 2012

U.S. Hyperinflationary Great Depression Moves Ever Closer

U.S. Government and the Federal Reserve Effectively Have Destroyed
Global Confidence in the U.S. Dollar

Systemic-Solvency and Economic Crises Have Not Abated

Precursors to Ultimate Dollar Disaster Are in Place;
2014 Remains the Outside Timing for Same

Hyperinflation 2012 is the fifth in a series of related writings going back to 2006.  It updates and replaces the Hyperinflation Special Report (2011) of March 15, 2011, which preceded: the U.S. government’s demonstration of a lack of political will to address the country’s long-range insolvency; the downgrade of the “AAA” rating of U.S. Treasury securities; an ensuing U.S. dollar panic, dollar support operations and extremely unstable U.S. and global financial markets; a temporary shift in market focus to Euro-era issues; and growing recognition of the ongoing and deepening economic and systemic-solvency crises.  Nonetheless, the outlook has changed little.  With the passage of 10 months since the last report (updated circumstances have been covered regularly in weekly Commentaries), events just have continued to move this pending ultimate financial crisis into much closer time proximity.    

In turn, the 2011 report updated and replaced the Hyperinflation Special Report (2010 Update) of December 2, 2009, which preceded: the Fed’s formal monetization of U.S. Treasury debt aimed at debasing the U.S. dollar; the sharpest post-World War II annual decline in broad money growth; the pronouncement of an official end to the 2007 recession despite no meaningful recovery; passage of the Administration’s health insurance legislation; and the mid-term election.  Yet, the outlook had changed little.  With the passage of 15 months since the prior report (updated circumstances were covered regularly in weekly Commentaries), again, events just had moved the hyperinflation crisis into closer time proximity.    

In turn, the 2010 report updated and replaced the Hyperinflation Special Report version of April 8, 2008, which was published post-Bear Stearns, but pre-Lehman, pre-TARP, pre-recession recognition and pre-2008 presidential election.  The April 2008 report updated and expanded upon the three-part Hyperinflation Series that began with the December 2006 SGS Newsletter, which predated public recognition of the 2007 economic and systemic-solvency crises.

This missive includes significant new material in addition to much of the same basic text that was in the 2011 edition, along with revisions and updates reflecting the still-unfolding economic and systemic-solvency crises.

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Contents

 

Chapter 1—Overview and Executive Summary

Events Moving at an Accelerating Pace Towards the Great Collapse

Graph 1: Federal Reserve Notes per Ounce of Gold

Background

Has the Euro Been Used as a Foil Against the Dollar?

Impact of Fed Monetization of U.S. Treasuries in QE2

Graph 2: Fed Monetization of Treasury Debt

Graph 3: Core Inflation from QE2

Crises Brewed by Federal Government and Federal Reserve Malfeasance

Saving the System at Any Cost

U.S. Economy Is Not Recovering

Hyperinflation Nears

Chapter 2—Defining the Components of a Hyperinflationary Great Depression

Deflation, Inflation and Hyperinflation

Recession, Depression and Great Depression

Chapter 3—Two Examples of Hyperinflation

Some Lessons from History

Weimar Republic

Graph 4: German Paper Marks per U.S. Dollar 1922 to 1923

Graph 5: Log Scale, German Paper Marks per U.S. Dollar 1922 to 1923

Zimbabwe

Chapter 4—Current Economic and Inflation Conditions in the United States

Economic Reality

Structural Consumer Liquidity Problems

Graph 6: Merchandise Trade Balance

Graph 7: Household Income Dispersion

Graph 8: Average Weekly Earnings (1967 CPI-W Dollars)

Graph 9: Annual Median Household Income (1967 Dollars)

Graph 10: Median Household Income Index (Monthly)

CPI No Longer Reflects Costs of Maintaining Constant Standard of Living.

Graph 11: Annual Consumer Inflation, CPI versus SGS Alternate.

Early Impact of Dollar Debasement

Graph 12: Gold versus Swiss Franc

Graph 13: Gold versus Oil

Graph 14: Gold versus Silver

Income, Credit and Willingness to Spend

Consumer Credit Still Shrinking Net of Student Loan Surge

Graph 15:  Consumer Credit Outstanding

Markets Are Flying Blind with Distorted Economic Reporting

Already in Depression, Economy Continues to Bottom Bounce

Graph 16: Real M3 versus Formal Recessions

Historical Perspective on the Economic Data

Graph 17: Year-to-Year Change Monthly Payroll Employment

Graph 18: Year-to-Year Change Quarterly Real GDP

Graph 19: Year-to-Year Change Annual Real GDP

Chapter 5—Key Economic Reporting Varies by Inflation Assumptions

Economic Reporting Free of Inflation And Inflation Corrected

Graph 20: Payroll Employment Level

Graph 21: Consumer Confidence

Graph 22: Housing Starts Beginning 2000

Graph 23: Housing Starts Post-World War II

Graph 24: Real GDP Level, Official Version

Graph 25: Inflation-Corrected Real GDP Level

Graph 26: Headline Real Retail Sales

Graph 27: Inflation Corrected Headline Real Retail Sales

Graph 28: Headline Industrial Production Level

Graph 29: Inflation-Corrected Industrial Production

Chapter 6—Historical U.S. Inflation and U.S. Dollar Debasement

Graph 30: Consumer Inflation 1665 to 2011

Graph 31: Log-Scale Consumer Inflation 1665 to 2011

Table I: Loss of U.S. Dollar Purchasing Power

Chapter 7—Federal Reserve, Systemic Solvency and Inflation versus Deflation

Preventing Systemic Collapse at All Costs

“Helicopter Ben” on Preventing Deflation

Monetary Base and Money Supply Growth

Graph 32: Monetary Base, Leve

Graph 33: Monetary Base, Year-to-Year Change

Graph 34: M3, Monthly Year-to-Year Change

Graph 35: Year-to-Year U.S. Money Supply Growth with SGS M3 Continuation

Banks Not Increasing Lending into the Regular Flow of Commerce

Graph 36: Commercial and Industrial Loans

Graph 37: Commercial Paper Outstanding

Inflation and Money Growth

Chapter 8—U.S. Government Cannot Cover Existing Obligations

Annual GAAP-Based Federal Deficits at $5 Trillion

Federal Debt and Net Present Value of Unfunded Liabilities Exceed $80 Trillion

Graph 38: Total Federal Obligations as Percent of GDP

Annual Deficits of $5 Trillion Are Not Sustainable

Table II: U.S. Government GAAP Accounting, Deficits and Obligations

Chapter 9—Hyperinflationary Great Depression

Move Towards Hyperinflation Accelerated by Current Fed and Government Actions

Lack of Physical Cash

Possible Short-Term Electronic Relief for Individuals

Barter System

Financial Hedges and Investments

Graph 39: Year-End DJIA, Current versus Constant Dollar

Graph 40: Log-Based, Year-End DJIA, Current versus Constant Dollar

Possible Official Actions and Responses/External Risks

Closing Comments—Other Issues

Political Considerations

Common Sense

Recommended Further Reading

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