WHY A HYPER-INFALTIONARY DEPRESSION SURELY LIES AHEAD
- AN INTERVIEW WITH HOWARD RUFF
John Williams publishes the Shadow Government Statistics newsletter. He is an amazing professional economist with a great grasp of the real economy. Shadow Government Statistics reconstructs published government statistics the accurate way we used to do it that reflects reality, rather than the way these numbers are now manipulated, and comes up with different conclusions about the economy, such as the Consumer Price Index (CPI), and other revealing areas published by government. I trust John's numbers because the government has been manipulating and restating these numbers for purely political purposes.
HJR: John is it necessary to recreate government statistics to show what you feel is reality, and how have you recreated them?
JW: Howard, I've been a consulting economist for about 27 years. Some economists have to make real-world forecasts, as opposed to economists who are employed by Wall Street to come to up with happy stories to encourage people to buy stocks and bonds. Most thought the numbers were very poor quality. Political manipulation tends to increase in election years. I talked to the chief economist for a large retail chain, and he told me that the retail sales reports were absolutely no good, but he thought the money-supply numbers were pretty good.
Over time public perceptions increasingly varied from what the government was reporting because government kept changing methodologies, and usually tended to build an upside bias to the economic statistics of unemployment or the GDP the broad measure of economies and a downside bias in the Consumer Price Index, a popular measure of inflation. There have been different definitions over time. The government itself publishes six levels of unemployment from what they call “U-1” through “U-6.” The popularly followed measure is called “U-3.” The broadest measure published by the government deletes “the discouraged workers” and people who are marginally attached to the economy. The key there is the “discouraged workers,” people who consider themselves to be unemployed. Up until 1994, those discouraged workers wouldn't have to specify how long they had been discouraged. After that, if they were discouraged, the government wouldn't add them. I add them into my numbers, and it totals around 20 percent unemployment. The popular number for the Great Depression is 25 percent unemployment rate and 34 percent among non-farm workers. We are mostly a non-farm economy.
HJR: During the Bush Administration, we heard all the happy talk about how well the economy was doing because of the cuts in tax rates. Is that really just happy talk or was the economy really doing well under Bush?
Near the end of Bush's first term at the time of the re-election race, a senior Commerce Department officer talked with a senior executive in the computer industry and asked him to boost the reporting of computer sales to the Bureau of Economic Analysis, which prepares the GDP report. The average guy has a pretty good sense of reality and knows whether or not economic conditions are good, or if inflation is up or down, which is why people have a difficult time accepting the government's numbers. In terms of the GDP, clearly retail sales and industrial production were showing us a deepening recession long before the government reported it with the GDP. Officially the recession, according to the National Bureau of Economic Research, started back in December, 2007. If the GDP numbers accurately reflected what was happening, it would have at least shown the contraction two or three quarters before that. Other indications show that the recession really began in late 2006.
JW: Cutting taxes is always a good idea. The private sector can do more with the money than the government can. By depression, I mean a ten-percent contraction in overall economic activity. When the government is reasonably solid, it can cut taxes. Right now we have a system where with the money poured into the banking system, and the “stimulus” by way of spending and tax cuts, is on top of record deficits. If you look at the real numbers on the deficits, based on numbers published by the federal government, we really should look at it how it used to be.
HJR: Right now, Obama is spending money – I won't say like a drunken sailor, because a drunken sailor spends his own money – but he is throwing trillions of dollars at the economic downturn, assuming it will stimulate us out. What is the end result of creating all this money and throwing it at the problem?
JW: It will not stimulate the economy. The cost of all this is inflation. Eventually we will see liabilities of $65 trillion – more than four times U.S. GDP, more than global GDP. There will be a hyper inflation where the dollar becomes worthless, where the paper is worth more as wall paper than as currency. How can we protect the value of our assets, assuming that people have some discretionary money? Should they buy growth stocks because they are cheap, assuming “buy low, sell high?”
JW: We are headed into a hyper-inflationary depression that will become a Great Depression. When hyper inflation hits, it will disrupt the normal flow of commerce and turn it into a Great Depression. What about paper assets based on the dollar? You want to get into something like gold or silver –physical gold or silver, not paper. Perhaps get some assets outside the dollar. Over the long term, gold and silver are your best hedges.
As a financial adviser, if I don't have subscribers in the right investments, they will lose money and not renew their subscription to The Ruff Times. The world is littered with worthless dead-paper currencies with an average life span of about 75 years. A subscriber who wrote to me recently asking me that if the government and the bankers can manipulate the price of gold and silver, so couldn't they do that for many years and gold
and silver would go nowhere? History doesn't record a single example when a society inflated the dominant currency even near the quantities we are creating dollars now without destroying its value. Gold and silver, not being anyone's debt or obligation, is where people ought to put their money.
JW: Thank you very much, Howard. I also appreciate your work.
A GLOBAL SYSTEMIC FINANCIAL MELTDOWN AND SEVERE GLOBAL DEPRESSION
You see friend we have been beating these drums since 2000 when gold was $252 an ounce. Now is the time if there ever was a time to protect your money from the ravishes of hyper-inflation, as the government keeps printing money and doling it out as pork. Gold and silver continue to be the only solution to this financial chaos.
How bad is it? We believe three things for sure:
1) The government is taking away all you have ever worked for by gutting the value of you money.
2) Your money will buy less every year and your cost of living will double every 5 years.
3) Congressmen and Senators will always sell out to the Bank Lobbyists that pay for their campaigns.
One egregious example, yesterday 12 congressmen voted against legislation that would allow over 1,000,000 Americans to stay in their foreclosed homes. Now those Americans are guaranteed to LOSE their homes.
THE BANK STRESS TEST IS A FRAUD – THE BANKS ARE BROKE
The U. S. government is perpetrating the greatest fraud in the history of the world. The conspirators are Barack Obama, Timothy Geithner and the Treasury Department, Ben Bernanke and the Federal Reserve, Sheila Baer and the FDIC, and Barney Frank and the Democratic Congress. They have colluded to commit taxpayer funds to enrich bankers that brought down the financial system, without getting Congressional approval. A clear intentional violation of the constitution.
They have delayed foreclosures and have tried to artificially prop up the housing market. They have poured billions of stimulus pork into the states praying for some of it not to be wasted. They have confiscated billions in taxpayer funds, bestowed them on reckless banks and forced them to lend it to anyone with a pulse, again. The outrage from the public during the TARP confiscation made it crystal clear to courageous Congressmen they didn’t want to vote on something requiring fortitude and bravery again. These Bail Outs are the biggest scam ever against Americans.
The U. S. Government has outsourced their obligation to safeguard citizen’s tax dollars to unelected bureaucrats at the Treasury and the Fed. They have already sacrificed their obligation to declare war on the Presidential branch. What is the point of having a Congress? | 
