On this Flashback Friday episode, Jason Hartman is joined by consulting economist, John Williams. They dissect government statistics and discuss how they don’t give a holistic view of the economy. John talks about how GDP numbers, being faulty, created issues for forecasting models to not work. He discusses how it leads to him researching the nature of government economic reporting. Jason and John also look at the Consumer Price Index and inflation.
Yeah, I still feel like I’m on the path for sure. And there’s a lot more wealth that I want to grow and things I want to do. But I’ll tell you, it’s when I think back to where we were, and what both of us my wife and I both have done to be where we are today. It almost like if you told me this is where we were headed 10 years ago, or what I would have told you, you were nuts, because I could not. I couldn’t have imagined we’d ever be able to buy real estate again or that I’d never want to, you know, here we are with, with several properties later. And we’re still we’re still chugging along.
Welcome to this week’s edition of flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason is handpicked to help you today in the present, and propel you into the future. Enjoy.
Welcome to creating wealth with Jason Hartman. During this program, Jason is going to tell you some really exciting things that you probably haven’t thought of before and a new slant on investing fresh new approaches to America’s best investment that will enable you to create more wealth and happiness than you ever thought possible Jason is a genuine self made multi millionaire who not only talks the talk but walks the walk. He’s been a successful investor for 20 years and currently owns properties in 11 states and 17 cities. This program will help you follow in Jason’s footsteps on the road to financial freedom, you really can do it. And now here’s your host, Jason Hartman with the complete solution for real estate investors.
Jason Hartman 1:35
Welcome to the creating wealth show. Thank you so much for joining me. This is your host Jason Hartman and this is episode number 251. We’ve got a great show for you today. This guest that we have is famous many of you have heard of him and he is none other than john Williams of the famous website shadow stats calm, which for many, many years now has been debunking government statistics and really telling us the real story behind that A lot of very credible people use his website and I think you’ll find the interview to be quite interesting. So a couple things before we get to that. First of all, I keep forgetting to mention this. So I’m going to mention it on this show. podcasts are such a great medium for both the producer and the host, yours truly, and you the listener, because they are asynchronous, so I can produce them when it’s convenient for me, you can listen to them when it’s convenient for you. It is a beautiful, beautiful thing. It’s the same as email being a synchronous text messaging being asynchronous versus the olden days when we used to actually talk on the phone. Remember that? That is a synchronous communication and synchronous communication, of course, requires both or all parties to be there at the same time. But one of the things that we miss out on with podcasting because it is asynchronous, is we miss out on the opportunity to take calls like a radio show, and I get a lot of calls from listeners and our investment counselors Of course, get lots of calls from you listeners, and we try To help you as best we can with all of the various issues that are involved in our investment careers, and our wealth creation plans, but it would be great to have Collins for the show. So I thought, well, maybe we should do some live shows from time to time. And then I thought, that just blows the whole idea of being a synchronous and the convenience of that for both you and I. So I thought, let’s do this. Instead, if you want to call and talk to me, we will record the conversation just like on a radio call in show. And if you want to have some of that off the air, so to speak, not recorded, we can do that. And you don’t have to divulge too much information, just assume it’s like any live radio show with a financial advisor, whether it be Rick Adelman, or Dave Ramsey, or whatever, where people call in and I will do the same thing. We’ll record the conversations and then we will play them on a later podcast. So you know just mentioned your first name be somewhat general about the information you give, and I’ll be glad to answer your questions and we will play them on the show. So what is the number you asked to call in to call into the show? Well, here it is write it down. It’s 949-200-8009. Again, that number is 949-200-8009. That will be the call in number you can call in. You can talk to me and we will play your spot on a future show. One of the great things about questions and you know, when we held our meet the masters of income property investing event a couple weeks ago, when you have a question, it’s usually the same question many, many other listeners have. So you’re actually being a great contributor to the show and the richness of the show and the content for other people when you call and ask questions and get them answered, because many other people have the exact same questions. This is different of course from posting a question on our Facebook page, where it’s only a one way conversation and many times you sort of answer the question or you need clarification, etc. So please use the call in number and we will play it on future shows. So Couple of news items before we get to john Williams, our guest today from shadow stats calm. First of all, you’re gonna love this one, folks. Bank of America Yes, Bank of America may well be the most hated company in America, or at least possibly the most hated bank in America. Well, guess what? They just gave their CEO a big fat raise at shareholders expense. Bank of America gave its CEO a pay package worth seven and a half million dollars last year, that’s six times larger than in 2010. The raise came while the company’s stock lost more than half its value and the bank lost its claim to be the biggest bank in the country. So again, remember, you know in the creating wealth home study course or in the creating wealth live seminars that I do the creating wealth. In today’s economy Bootcamp, I share some interesting snippets from lou dobbs great book war on the middle class, and we talked about how the shareholders are getting completely burned. Well, the executives the board of directors The CEO and all the other C level employees are making out like bandits, as they are basically screwing the shareholders out of their money. So here’s a great example of that. Bank of America, the the CEO gets a huge raise, and I’m sure the board of directors and all of the C level employees, the CEO, all the other C level people, all the other execs got big fat raises. Well, the company’s stock lost half its value. So Brian Moynihan, okay, his pay package included a $950,000 salary $6.1 million in stock and $420,000 in use of the company’s private jet, and tax and financial advice. Again, what a total scam in this economy, six times larger than in 2010 as the company’s stock lost half its value. Now listen, I’m a capitalist, I wouldn’t mind if Moynahan got a big raise if the shareholders were getting a commission. For a return on their investment, and also the taxpayers because of course, B, they took lots of bailout money. And don’t be fooled by when you hear that this bailout money has been paid back, folks, it’s never that simple. There are so many little dealings under the table that are going on with that. I’ve read lots of articles about that. They may pay back the bailout money from tarp and the other Omnibus bailouts. But at the same time, what they do is their various counterparties the people who are in business with them, they get bailout money, and they don’t pay it back. This is like the way Enron it’s basically similar to the way Enron remember good old Enron the way they use those spvs. remember hearing that term during the Enron debacle days spvs or special purpose vehicles, they would set up other entities just to hide and bury losses, so they could lie about their income and this whole bailout payback stuff. It’s the same basic scam is that from what I’ve read and understood Okay, john burns, the real estate consultant. We had him on the show, I believe, if memory serves me correctly, that was like show number Episode Number 133, or something john burns is out with interesting things. He has a burns home value index. And his latest newsletter said, home prices have been rising for three months. But nobody has been telling you, but it says that over the last three months, prices are up in 90 of 97 markets. they analyze the average price increase over the last three months was 1.1% or a 4.5% annual rate. Now, you know what’s interesting about that just right there, folks, is that s&p Case Shiller the most widely used index, ridiculous, s&p. I don’t like SMP, okay, I really need to get someone on the show. So I can debate the whole subject with them, but they only do 20 markets. And this is only 90 of 97 markets they analyzed. And again, we’re in a country where we’ve got 400 markets, all real estate is local. So again, much more commonly prehensive right here then Case Shiller by a factor of five. So right there, it tells you a reason that it’s so important. But one of the interesting things here is when you look at these statistics, they’re they’re always lagging so much and really burns goes on to explain it. I’ve talked about it on the show previously, but he says, Why are prices of other indexes so far behind? Well, the burns home value index calculates home to values based on prices, as they are set and remember what they mean there is in this my commentary, they are set because the ultimate appraisal on a property is what is known as a meeting of the minds when a buyer and a seller come together and form an agreement in a free market capitalist system. That is the real value right there. That is the most accurate appraisal you’ll ever have. You can have 10 different appraisers go out there and give a completely different opinion but a knowledgeable buyer who shops around and a knowledgeable seller who will wants to sell their property and understands the competitive forces going on in a free, open capitalist marketplace. Those two parties when they come together and have a meeting of the minds, that is the holy grail of appraisals, folks right there. So what he talks about here is nearly all other indexes are based on purchase transactions when they close, which is typically about two months after the purchase contract was negotiated. Then it takes one or two months for that closing price data to be reported or compiled and reported. And the the slowest index of the mall is good old s&p Case Shiller, which is about four to six months behind the eight ball. So when you read those statistics, in the widely quoted media and the Wall Street Journal wherever you’re you’re basically looking at stuff that happened four to six months ago, usually at least five or six months ago usually. So you got half year old data and again SMP, only 20 cities I mean, ridiculous. Totally incomplete. Only 5% of the overall market in the United States of America. totally ridiculous, folks, you know, I’ve been talking about how we have been struggling, struggling, struggling. The biggest problem in my business the last several months has been lack of inventory, lack of inventory. Well, I am so happy to report that we have had a slight break in inventory. We’ve got some good inventory again on our website that’s just happened in the last five or six days really a couple of my favorite markets. Now Atlanta St. Louis, if you look in those markets, you go to Jason hartman.com. You look at the property section, you will see right now, in say Atlanta, for example, and I’m going to sort these properties just based on the status of the property and what do I mean by status while I mean what is for sale, what is in escrow what is closed, what is sold, etc. And if you see we have got 1234567 properties, that’s again, not much. Okay, but seven points properties right now in the greater Atlanta market where we have got good ROI projections on these properties where you can get 20% plus in many cases on ROI, in some cases 30% plus annual projections, you’ll see these are very conservative assumptions we use. And I talked about that on prior shows. So again, go to the website, talk to your investment counselor at my company, and we will be happy to help you, folks. It’s the curse we as as middlemen, brokers have our referral network, we either have too many buyers and not enough inventory. That’s the problem we have nowadays, or the most common problem over the past couple of years has really been, you know, we’d like more clients, more buyers, and we’ve had nice supply of inventory. So again, it’s never just right. It’s never a perfectly balanced thing. But right now in the past just five or six days, I am very happy to report we have had some good increases of inventory. And many of those a lot of this inventory is exclusive to us. You won’t find it anywhere else because I am financing the deals and other clients of ours are financing the deals for our providers to go and buy and rehab those properties so that they can provide them to you. I’ve been on our local market specialists in every market, you know, we deal in many markets across the country to really, really provide inventory. It’s been our biggest challenge over the last few months. Okay, interesting article here on poor Richard’s blog. Poor Richard, of course, that refers to Benjamin Franklin, right, if you remember, well, talking about economic collapse, and really collapse, the dollar collapse of the dollar really, would be in many ways good for us as investors if we’re following the plan that I’ve outlined on prior shows, because what does that mean? Well, what it means to us, of course, is that we wanted to nominate all our liabilities in dollars or in any currency that is being debased or that is deteriorating in value, and the dollar is one of those. Now, one of the important things to understand is that because the US dollar is the reserve currency of the world. There’s certainly a movement away from that. And I’m going to share a couple of those points in this article here. But because it is the reserve currency, when transactions occur in international trade around the world, they need to be denominated in dollars because we are the reserve currency. And what that does is it It causes the dollar to be artificially strong. Well, why is that? Well think about what happens here. If you’re trading oil, if say Brazil is trading oil with cash, give me an example. France. So Brazil is trading oil with France, for example. And they both have currencies that are not the dollar obviously, but they need to exchange that transaction into dollars in order to conduct international trade. And when they do that, what does that do? It sucks up dollars. dollars are always in demand and currency, just like any other commodity is governed by the laws of supply and demand the most basic fundamental laws of economics supply and demand if you don’t think Just knows supply and demand because that tells you most of the story. There’s more to it, of course, but supply and demand is the most fundamental rule of economics, obviously. So as these dollars are soaked up for international trade to occur, it artificially strengthens the dollar, more so than it would be strengthened if it were not the reserve currency of the entire planet. So what does this mean to us? Well, we’ve got this artificially strong dollar, right. And there are many people in the US who think that it would be good to see the dollar decline in value, not just us investors who pile up long term fixed rate investment grade debt, against packaged commodities, of course, my term because then we we take advantage of what I call inflation and do step destruction. And we’ve got the commodities that are traded globally, okay, the supplies, the building materials that build houses and apartment buildings, the sticks and the bricks, so to speak. And then we’ve got the dollar that is depreciating in value, and we financed it 30 year fixed rate that we won’t pay off until 2042. If we borrow it today, and this is a beautiful thing, because our debt is constantly being attacked by the devaluation of the dollar or by inflation, whichever way you want to look at it. So in this article, it talks about 10 reasons why the reign of the dollar as the world’s reserve currency is about to come to an end. And I’ll just share with you a few of these 10 points, or maybe all of them, depending on how quickly I do this. Okay, number one, China and Japan are dumping the US dollar in bilateral trade. Well, they’re not the only ones, folks, there’s a lot of movement of other countries and why would they do this? Well, in one way, it’s a way to, you know, sort of stick to the man then when I say the man I mean, in this case being America right the US and it’s also a way to protect oneself as other countries protect themselves against the radically ridiculous irresponsible spending that the US the US government engages in, you know, Ronald Reagan said to say The the US government spends money like a drunken sailor would be an insult to drunken sailors. Reagan was so great and his humor and his wet right. But but he’s right. I mean, just in the past, what three years since Obama has been president, we’ve racked up what another $4 trillion in debt. I mean, this is insanity folks. It’s completely insane. It’s ridiculous. But again, as we talked about on the show, we can exploit the heck out of this as investors Okay, so it’s not all bad philosophically, it’s bad. But with our plan, we’re gonna make it work for us. It’s gonna hurt most people, but it’s going to help us number two reason. The bricks what are the BRICS, Brazil, Russia, India, China, South Africa, okay, the BRICS plan to start using their own currencies when trading with each other. So the five major emerging economies of the BRICS, okay, they are going to use their own currency and they are going to see a lot of pressure from the US government because Think about it. The US government wants to perpetuate its irresponsible scam, right? Or I’ll be nicer and I’ll say scheme, or its be nicer than that’ll say plans. How’s that? So they don’t like this The US government does not want countries to trade outside the US dollar. And so they’re going to pressure these countries through economic hitmen, military pressure, maybe trade pressure, etc, etc. To use the dollar but the fact is, we will see who wins the game. It’s it’s going to be an ongoing battle, in my opinion, okay. It’s not going to be like these countries are going to suddenly be able to trade in other currencies, the US throws its weight around, it’s going to exert a lot of pressure over them. However, the movement is a way there’s a lot of pressure on the US to correct it’s it’s bad, irresponsible ways, and to get more responsible, and one of the ways to pressure the US is to trade outside the dollar as the reserve currency. Number three, Russia and China have a currency agreement. They have been using their own national currencies when trading with each other for more than a year now, leaders from both Russia and China have been strongly advocating for a new global reserve currency for several years. And both nations seem determined to break the power that the US dollar has over international trade. Number four, the growing use of Chinese currency in Africa, who do you think is Africa’s biggest trading partner? It isn’t the United States. It’s China. In 2009, China became Africa’s biggest trading partner, and China is now aggressively seeking to expand the use of Chinese currency on the African continent. Okay, so this is happening all around the world, folks, as people watch the drunken sailor called the US government, especially the leftist liberal side of the US government being the the drunkest of all okay, but hey, the conservative Republican side ain’t much better nowadays either. Okay. I always say people talk about the past. They talk about democrats of the past like john F. Kennedy, john F. Kennedy by today’s standards would look like a total conservative at least fiscally, in fact, the conspiracy theorists, many of them believe that, you know, one of the reasons he was assassinated is because he wanted to get rid of the Federal Reserve. Okay, so there’s one for you to ponder. Number five, the China slash United Arab Emirates steel, China and the United Arab Emirates have agreed to ditch the US dollar and use their own currencies and oil transactions with each other. The UAE is a fairly small player, but it is definitely a threat to the Petro dollar system. Number six. Now, this isn’t going to surprise anybody. Iran, Iran has been one of the most aggressive nations when it comes to moving away from the new US dollar international trade. Obviously, that’s not going to surprise anybody. Number seven, the China’s Saudi Arabia relationship who imports the most oil from Saudi Arabia. It’s not the United States rather, it’s China. So again, they’re trading outside of US dollar number eight, the United Nations has been pushing for a new world reserve currency. The United Nations has been issued reports that openly call for an alternative the US dollar as the reserve currency of the world. So again, look at all this pressure, folks. 10 points here, I got two more for you. Number nine, the IMF, the International Monetary Fund, has been pushing for a new world reserve currency. The IMF has also published a series of reports calling for the US dollar to be replaced as the reserve currency of the world number 10. And finally, most of the rest of the world hates the United States. Okay. And unfortunately, I agree with this with my own caveat on it. And he and here’s my statement on that before I just share a couple points of the article, if they hate us so much. Why do so many of them want to come here? And why do so many of them want to be us? It’s not really hate. It’s more and the baby and the US is in a very powerful position to be able to spend irresponsibly, and listen, I don’t like it. I don’t think it’s fair. I don’t think it’s fair to its citizens, it’s taxpayers or other countries around the world. I think the us is basically using its bully pulpit a lot and taking advantage of other countries with its its spending. It’s ridiculous. But listen, it’s the way it is. I’m not gonna do anything to change it, I can’t do anything to change it. The only question I have, the only question you have is how do you invest to protect yourself. And to make this work for you, you do it with proven income properties denominating, your liabilities in dollars in a depreciating currency and your assets in things things matter. Currency matters a lot less as inflation hits, global sentiment toward the United States dramatically shifted. And this should not be underestimated. Decades ago, we were one of the most loved nations on Earth. Now we are one of the most hated I guess it’s kind of like the Bank of America that I mentioned a moment ago. Okay, if you doubt this, just do some international traveling and having been to 64 countries myself. I tell you last time I was in France, they were not very nice. Last thing we’ve got to get to our guests, but I thought this was interesting, if not all little depressing. There was a wall street journal article that talked about gray divorces, well, gray divorces, what is that? That is an article talking about how people over age 50 are seeing a massive increase in their divorce rate. Now this is this is kind of sad, frankly. But it’s a fact of life. And in a positive way, you know, I guess what this means is people are living longer, but not just it’s not just about the length of life, it’s about the quality of that life. I mean, people who are 50 6070 years old, 80 years old, are enjoying tremendous health, wellness, feelings of optimism, feelings, that they can do things and they can be active, and they have the world is their oyster. It really is. You know, I read a really interesting article a couple days ago that said that ski resorts are increasing the age at which they will give senior discounts and senior ski passes and the world reason they’re doing this is that the senior scares are too healthy. In other words, they were issuing This is what the article really was saying, Okay, this is reading between the lines, here’s the subtext is that they would sell passes to senior scares people over a certain age. Maybe it was 60 or 65, or whatever it was, maybe it was 55. I don’t know. But the senior skiers thinking they wouldn’t use them very much. And they wouldn’t ski that often. But the reality was, they were skiing a whole heck of a lot because they’re healthy, and they’re active. So the world is changing right before us, folks, and it has huge implications to the way we invest. And it has huge implications on the housing market. Why do I share this article by grade divorces? Well, the divorce rate of people over 50 has more than doubled in the past two decades. And what does this mean? If it’s more than doubled in the past two decades, it means instead of needing one residence, they need to the household size is getting smaller, but the number of houses consumed doubles, because you have two parties living separately, rather than two parties living together. And in 2009, more than 600,000 people over the age of 50 got divorced. And you know, there’s an interesting chart here and it just shows in 1990, how many people over 50 got divorced in 2009. And the projection for 2030 is it will almost double again. So tremendous, tremendous implications on the housing market. Tremendous implications for the price of all those building materials, those packaged commodities that I’m always talking about, and the tremendous implications on demand for those materials. And for the finished product, and housing. It’s just an amazing, amazing time for real estate investors. Okay, folks, Listen, I’ve talked too long. I’ve got to get to john Williams, our guest today shadow stats calm and we will Be right back with his interview in just a moment, be sure to visit Jason Hartman calm. Take a look at the properties. Take a look at the products there. Oh, hey, one more thing. And we will have this on the website soon. But many of you like physical products and we’ve always sold our products digitally. But we have physical products that were debuted at the last meet the Masters event of two of our best selling products, the creating wealth home study course, and the meet the masters of income property investing event. And those will be on the website soon in a physical product format will actually send you a big box with the CDs and the cases and the workbooks all printed out beautifully illustrated. And you’ll have those in hardcopy if you want so those will soon be available, in addition to the digital versions that are available today on Jason hartman.com. Anyway, we’ll be back with john Williams in just a moment.
Now you can get Jason’s creating wealth in today’s economy home study course. All the knowledge and education revealed in a nine hour day of the creating wealth boot camp. Created in a home study course for you to dive into at your convenience. For more details go to Jason hartman.com.
Jason Hartman 27:13
My pleasure to welcome Walter john Williams to the show otherwise known as john Williams commonly, and I’ve been wanting to get him on the show for a long time. I’m a big fan of his website, Shadow stats calm, where he really looks at the the truth behind the government statistics. There’s an old book entitled How to lie with statistics. And I think the government does a pretty good job at that for many reasons, and many of the motivations they have for doing so. And today, john and I are going to talk about unemployment, real unemployment rate, we’re going to talk about the real inflation rate. And then a fantastic report he just finished entitled hyperinflation 2012. john, welcome. How are you?
John Williams 27:52
Fine. Thanks, Jason. Thank you for having me.
Jason Hartman 27:53
Well, it’s great to have you on the show and you’re coming to us from beautiful San Francisco today. I guess the People’s Republic of San Francisco. Well, good, what’s going on out there? What is your focus at shadow stats calm nowadays?
John Williams 28:06
Well, I’ve been a consulting economist for 3030 years or so and found early on that I had to have a pretty good understanding of what was actually being reported in the government statistics, some terrible quality problems that were popping up in some of my early early work quality in terms of the government’s numbers. And I got to know the series pretty closely talked with people in the industry, looked at the history, all sorts of issues with how the numbers have been adjusted over time. Basically, you had to two types of manipulation and the government data that were the popular numbers that were introduced after World War Two, very quickly found themselves being manipulated occasionally with the game is being played by the politicians. But more frequently with methodological changes being put into place which tended to increase the level of economic members and reduce the level of inflation. quick examples of both factors back in Lyndon Johnson, Johnson is noted for reviewing the GNP numbers in what’s called the GDP today the broadest measure of the economy. If you didn’t like the numbers that were prepared by the Commerce Department, he’d send them back and keep sending the back until they got them right. In the first Bush administration. George Bush was up for reelection the Academy was in trouble. senior person at the Commerce Department went to senior person in the computer industry as the computer sales be boosted nation in terms of reporting to the Bureau of Economic Analysis which prepared the The GDP reporting, the numbers were so altered, the GDP improved. George Bush look is always out of touch with reality. And there’s an important important point there because I find that the average person has a pretty good sense of what’s really happening in the economy, irrespective of the numbers out of Washington. And that’s always a good thing to think about. If it doesn’t make much sense. doesn’t sound right to you. And that’s coming out of Washington. It probably is not. Right. So the, on the other side, you go back to when those various series were introduced, people really didn’t have too much trouble with them. But increasingly, what’s been been reported by the government seems to be moving away from the common experience. Most people think that inflation is higher. Most people think that unemployment is higher, and there’s a reason for that. And again, this has to do with the methodological changes. You take on employment for example, if you went around the country and asked every person whether he or she was unemployed. The person doesn’t have to think he’ll say yes or no. And if you work at an unemployment rate based on that, you get a much higher number than what the government reports. What the government reports in terms of a headline, unemployment number is one of six levels of unemployment that the government publishes. They call it view three, in order to be in the headline, unemployment number. You have to be unemployed, you have to be actively looking for work, having looked for work in the last four weeks, and of course, willing, able, willing and able to take a job. If you haven’t looked in the last four weeks. The government came through as a discouraged worker, if you as long as you look for work in the last year.
Jason Hartman 31:42
So those people what you’re saying, john, is that they fall off the rolls, they fall off the statistics, they’re not counted anymore. There can be millions of people unemployed that just aren’t being tabulated right.
John Williams 31:56
That’s correct. Well, that they are tough or challenging. To a certain extent, but not in the headline, unemployment number. It’s not in the headline, unemployment number you’re also not counted in the labor force, which is noted is declining, regional labor force is declining is that people indeed have been giving up looking for work because they can’t find jobs or what the government historically has called a discouraged workers back in 1994. They changed the definition of a discouraged worker to that, being someone who had been discouraged for less than a year. If you’d been discouraged for more than a year after 1994 you will no longer attracted off and the narrower measure of discouraged work Lenovo, the short term discouraged work. The government publishes in its current broadest measure, which includes the headline unemployed. It includes marginally typical a marginally attached workers such as the short term discouraged workers and those who are working part time for economic reasons, they can’t, they’re not a full time job, but they, they can’t find a full time job. So that where the ad employment rate is running somewhere around eight and a half 9% and a headline basis, it’s in the 15 16% range would be the level of you six, the government’s broadest measure. If you add back in those people who are no longer being counted as long term discouraged worker, and I estimate that it’s my it’s my number, it’s not the government’s number, you get up to 22%. And not surprisingly, that pretty much accounts for the decline in the labor force for the decline in the labor force as a percentage of population again, people are the reason that the headline number has been declining to certain extent, has been because people are just moving off to the world. What would normally be candidate because they can’t find a job, but they’re still on employers words are concerned, they want a job, they’re willing and able to take it, but they’ve given up looking for it, because you’re no jobs to be had.
Jason Hartman 34:11
That is a very sad situation now. So are you saying that the real unemployment rate then john is about 22%? Is that the number I should pick?
John Williams 34:21
As a matter of definition, right? Sure. Maybe the government’s definition for you three, if they do survey it, and have a reasonable estimate of it. I’ll contend The 22% is a lot closer to what you’d get if you went around and just ask people if they were unemployed. And that’s pretty much the way unemployment was viewed back in the days when I put together the estimates for the Great Depression. And I put I put out a number say 20 to 23% unemployment right now. It varies depending on the month.
Jason Hartman 34:52
Well, that right there is exactly the reason I was asking you because as a point of comparison, you hear stats That’s a you know, things are much better. Now, this is not a depression because during the Great Depression, the unemployment rate was around 26%. But back then, you know, we didn’t have a world full of independent contractors like we do now. And even before I became familiar with you, I just intuitively knew this, because my current businesses employ lots of contractors. But an old business that I sold back in 2005, had lots and lots of independent contractors as real estate agents. And john, I can tell you that a lot of those people, we do the 1099 and they would go a year, earning very little sometimes no money at all, at least from my company. They were doing other things on the side at times, but and they weren’t even counted as unemployed. I couldn’t believe that. So what is the comparison number than when you compare unemployment today to back in the Great Depression is that are we about the same
John Williams 35:58
or a little better? But we’re not we’re not there yet, as I view it, first of all, I mean, the 26 25% estimate, which is supposed to be the worst that was head year being 1933. That was estimated well after the fact, the government didn’t start serving unemployment until 1940. It was constructed from all sorts of surveys, including the US Census of 1930. people applying from applying for Social Security, and it’s a guess, but that number at that time 27% of the population worked on on farms, and we’d go out in a country and you’d look at Naval and you’d work on the farm and at least eight survival is a very difficult time. Today, less than 2% of the population. working population lives on farms. So you look at the non farm unemployment rate from the Great Depression which is also estimated that’s estimated at around 35. Present. I think that’s probably more of a comparable number for what I’m looking at here. But this is certainly the worst we’ve seen. It’s the post World War Two era. And there are also all sorts of measures that indicate this is in many ways, developing as a worse downturn when the Great Depression, I contend majority going on longer than the first leg of the Great Depression. We’ve been, we’ve been in an economic contraction for almost five years now. If you take the initial downturn in the economy, the plunge and then I’ll contend we’ve been bought and bouncing ever since. But we haven’t had an economic recovery. That’s all a game that’s played with inflation. And that’s another very important area probably more important from an industry standpoint, that is, in terms of economic growth, usually it’s adjusted for inflation. You don’t you don’t want to reflect and growth, rather than something that’s just tied to rising price. You want to reflect physical
Jason Hartman 38:01
volume, right? So So what you’re probably going to lead into there is that when inflation’s statistics are misrepresented, so is the GDP,
John Williams 38:11
right? Yes. Yeah. Yeah. Very, very another a number of other measures as well. Right.
Jason Hartman 38:16
JOHN? JOHN, before we get to that, I just want to ask you one more thing about the unemployment situation. And this is one that I think is incredibly hard to count. And to just even get ones maybe it’s impossible to get one’s head around it. But that is the underemployed where you see highly qualified people with education’s even advanced degrees, working it. I don’t mean this in any kind of condescending way, but working in sort of menial jobs, like they’re just underemployed. I mean, they’re working at Starbucks, when they’ve got expensive student loans and a big education credential, but they can’t get a real job in in their field. Old in a corporate setting because the jobs just aren’t there anymore.
John Williams 39:04
What about the underemployed, that’s a random circumstance, you’re not going to get any actual employment numbers on that. But as a guide, I’d look at something like that there are numbers that are published by the Census Bureau each year tied to the poverty report on household income. And if you look at median household income, as its was reported for 2010, and adjusted by the consumer price index, the official CPI, median household income in 2010, was not only below the level of household income coming into the 2007 recession, it’s below where median household income was in 1969. This is this is your rubbish. And that’s why it’s one reason that we’re in such a deep and protracted recession.
Jason Hartman 39:55
Well, the other thing to understand about that is that in 1969 That household was probably only the male was working and then and mom was home with the kids. And the kids weren’t growing up as juvenile delinquents. So you know, you, you you had a better quality of life. It wasn’t just quantitative. It was qualitative.
John Williams 40:16
Right? Yeah, very, very much. And that’s what the government’s numbers so the household incomes are not still aren’t despite more people working the family, the household still is not keeping up with inflation. On average. They used to make up the difference with debt expansion, but that’s no longer available as it was. And again, until those issues are addressed you you’re not going to have an economic recovery because your consumer, the consumer is the driving force behind our GDP. The weakness in the income, there reflects the underemployment that you refer to. One other number that I can toss at you is in terms of payroll employment. This is the two big numbers that come out each month. From the government once again employment like the others, how much payroll employment has changed. And this is what companies report to the government in terms of the number of people that are writing employment checks to wages, salaries and such payroll employment today. Again, it hasn’t recovered. I mean, the economy’s not recovered based on that your your blower was going into the collapse. It started in late 2006, or into 2007. But again, it’s below where you were in the at the beginning of the 2001. recession, payrolls today are lower than they were 10 years ago. That’s total payroll employment in the United States. Yeah, the population is growing by 10% in the same
Jason Hartman 41:44
timeframe, right. So really, it’s a double whammy, that the payroll numbers are lower, but the population is higher. So you’ve got a double differential there, right?
John Williams 41:55
Well, it’s just another measure of how severe this down Turned out, there’s no recovery, nothing the government’s gonna do
Jason Hartman 42:05
nothing the government’s done, and certainly nothing that it’s talking about is going to have major impact, or it’s going to take decades early for this to work around or get back into that a little bit later. Right, right, in the decades coming, have huge entitlement obligations that the government simply cannot afford to pay. So well, we’ll get into that. But, you know, john, I gotta say is grim is all this news is, it’s kind of odd and see, I don’t have the perspective of living in the 30s, or the 50s, or the realizing what it was like in the 60s or even the 70s. But it’s just I don’t know, it’s hard for me to equate this because when I look at old movies, and I look at old TV shows, you know, I try to think it’s not really representative but it is somewhat representative of how life was back then. And then I look around today and I have friends and associates and acquaintances of all ages of all economic social to economic levels, and this is just very anecdotal. And I know it’s maybe not your thing, but I just wanted to run it by real quickly people that are unemployed or underemployed. I see nowadays, they have a house full of gadgets, they go on vacations, they go get massages at the spa. They have a closet full of nice clothing. And they drive a reasonably nice car. I just it’s hard for me to equate that things are so bad. And yes, I know there are tent cities. I know that there are homeless people. I completely understand that. But I don’t know. I just I have trouble kind of reconciling that in my mind. I agree with you statistically. Certainly.
John Williams 43:44
There are people who are doing well. That’s
Jason Hartman 43:48
what those aren’t people doing well.
John Williams 43:52
You’ll always have people who do well I don’t always have people we’re we’re suffering problem as the numbers are shifting towards zero. We’re suffering, and rather rather markedly so. And then you’ve got to watch out for those who are really enjoying themselves but nothing of substance behind them.
Jason Hartman 44:12
Yeah. Did Well, that’s we’re going to be
John Williams 44:17
very quickly as soon as you continue to
Jason Hartman 44:20
yeah hurt that hurt the most no savings, no assets, no investments. The other thing I didn’t mention is those same people unemployed, underemployed, they’re going out to dinner and well, from from that standpoint, I made a couple of one of the most important ones is the, what they call income, variance or dispersion. And
John Williams 44:41
the idea is that if you look at how income is distributed, when it’s strong in the middle, you tend to have a strong economy. Reason being that the middle class consumes consumer structure and consumers, right.
Jason Hartman 44:55
Well, they consume they consume, you know, like 70% of the s&p 500. So it’s a big deal. Now, middle class is so important.
John Williams 45:02
But you have the what we’ve seen now is a chain a continual divergence here set a record I’m no one’s ever seen anything this extreme in the United States where you have a concentration at the top of the concentration at the bottom, and the middle class is being squeezed. And that is actually bad for the economy and that the middle class is the powerhouse of consumption. What usually happens with that as you get into the markets are and so some just left to itself, the extreme divergence will lead to very speculative financial markets, the markets crash, the economy, falls, incomes get redistributed, and the middle class builds up again, I don’t know whether way the government’s will be in which taxation how easily that’ll be done. But the problem is that those who are currently enjoying the fruits at the top of of the ladder have to keep in mind that unless the middle class resumes its consumption, you’re not going to have positive economic growth going forward. You’re not going to have a positive financial markets, you’re not going to have a government that can continue to support society. And unfortunately, what ends up here is that we end up with a actually a hyperinflationary Great Depression which destroys most of what the average guy even the wealthy have, if they’re if they’re not well protected.
Jason Hartman 46:37
Yeah, and I think what we’re moving into is we’re moving toward society that is more and more of a banana republic. I hate to say it but you see it in California for certain a you see it in many areas where, you know, you’ve got this concentration of wealth, and then more and more on the on the lower economic scale. And it’s it’s very sad because what has made America is so stable and so great for so long as is this large middle class. That’s true.
John Williams 47:06
Now, let me suggest something here. Let me quickly get into the problem with inflation and then move into hyperinflation. I would love to talk about that. Absolutely
Jason Hartman 47:15
John Williams 47:16
Yes. There’s some key points of inflation that’s helpful to the other. So getting back to starting again, the big, big factor that the average guy has to look at here in terms of what’s been reported by the government and and where most people recognize that there’s a problem is reporting of inflation. The Consumer Price Index is the most popularly followed series. It’s a big measure of consumer inflation, consumer goods and services, what it was, and it has a long history, but when it was first used as a cost of living indicator with the auto union contracts, really its first very large usage. The concept simply was that the CPI was a measure of Cost of living and maintaining a constant standard of living. That makes some sense. If you’re going to use this as a way to adjust your wages or your salary, you at least want to stay ahead of inflation. Or at least keep up with inflation. So if you had a measure that would reflect your kind of standard of living, this would give you the the inflation that you needed in order to maintain your standard of living the quality of the standard of living. And very simply the way it was done, they had a fixed basket of goods. simplistically, they didn’t really mention, let’s say, the cost of a pound of beef, a gallon of gas, a loaf of bread, and then they measure that same basket of goods The next year, and how much the basket of goods should changed. That’s what your salary had to have changed by in order to have been able to continue to buy the way you had the year before. went along that way for decades, into the early 90s. And at that time, Alan Greenspan started making noises along with some others about how the CPI was overstating inflation. overstated. That’s amazing. Over over stick, right? As I said, Well, what do you mean? Well, steak gets too expensive people will buy more hamburger, they buy more hamburger, the cost of living was actually reduced substitution account collected in the CPI. Well, of course, that’s not the concept of influence the level of inflation that you need to cover in order to maintain a constant standard of living they did away with the concept of maintaining a constant standard of living. They changed they made effort, very significant efforts and changes to the CPI series to make it a substitution based series as opposed to fixed basket of goods that didn’t go all the way with it. They have a look they did the best they could within the existing system to change CPI, they have a new CPI that’s been being touted as the one thing that will be used to help slash the budget deficit, it reduces inflation lower artificially reduces the reported inflation even more. The whole concept here, the reason for pushing this was to find a way of reducing the cost of living adjustments for Social Security recipients. And the effect was that if these changes have not been met, mid made, Social Security checks would be effectively double what they are today. And the numbers that are put out are well shy of reality and I’ve used that is criminal for a number of angles. Number one, I mean, beyond what’s being done to the Social Security precepting. A lot of people in the private sector rely on these numbers. If you’re receiving money that’s being based on CPI, if you’re the guy receiving the payment, you’re being underpaid, and if you’re you guys making the payment you’re getting away with an awful lot. It’s if you’re An investor and you’re looking to find a rate of return that’s going to keep your head up inflation, you use the CPI, you’re not going to say, even with inflation, you’re going to fall well short, not only have they changed their lighting, they’ve also changed actually reporting the full out of pocket expenses of goods and what are called hedonic adjustments really, like quality adjustments. You can’t measure, in a normal sense, the nebulous factors that they come up with they’re very fancy statistical calculations, but nothing that the average guy recognize. Right, right. Well,
Jason Hartman 51:34
you know, what the hedonic, the interesting thing about hedonic stron, is that it has sort of, I can see some rationale to it. But what it basically says is that if you’re going to make hedonic adjustments to the consumer price index, it says to us, that we are not entitled to the benefits of progress, the index is rather than us. So hopefully as things progress Some society becomes more advanced and technology becomes more advanced. We benefit from the power of a processor increasing and things becoming better and less expensive at the same time, and smaller and more portable and having more features, but the hedonic index would say we’re not entitled to that progress. We
John Williams 52:20
don’t get that your point is well taken. I haven’t heard it expressed that way before. But that is that’s a very valid, very valid point. And the average guy doesn’t understand this is happening to them. very simplistic example, extreme example. And one that they actually reversed, which means they recognized they didn’t reverse it’s like stopped it, but it gives you the intent because it continues in many other areas. Some years back. The government government mandated a particular gasoline gasoline formula that would improve air quality. It added 10 cents per gallon to the course of Kessler.
Jason Hartman 52:58
Yeah, that’s why California is so much more expensive.
John Williams 53:01
Yeah. But the was not added into the CPI, because it was deemed a quality adjustment. And the average guy filling his tank for gas isn’t standing around thinking, oh my goodness, I’m spending 10 cents per gallon here to get better quality years and that wonderful. He’s moaning and groaning that he’s out of pocket an extra 10 cents per gallon of gas, but he doesn’t see it reflected in the inflation numbers or his paycheck. And it’s because of things such as that that the CPI has moved far away from common experience. If you look at all the changes at the Bureau of Labor Statistics has made since 1980. And they estimate the effect it has on the reported annual consumer price index differential and they’re another couple of percent that they haven’t published estimates on. It’s about seven percentage points. So that whether you’re seeing inflation of around 3% now take it up to about 10%. If you were Getting full reporting out of pocket expenses and something that was reflective of maintaining a constant standard of living.
Jason Hartman 54:07
Okay, so so say that again, just I just want to make sure that’s not lost in any complexity. What do you think we should add to the government reported, quote unquote, official statistics of the CPI? To get a more accurate picture of inflation, I add seven percentage points. But you can, depending upon where you want to look at it since 1990, that changes a little over 3%. To be safe, I’d put in seven, but
John Williams 54:37
there are people looking at lower amounts, somewhere in the three to 7% range, maybe
Jason Hartman 54:42
5%. Okay, so so then that means the real rate of inflation now is what I’m figuring out at about 10%. Okay, about 10%. And I couldn’t agree with you more. Let me take a brief pause. We’ll be back in just a minute.
John Williams 54:58
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John Williams 55:05
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John Williams 55:25
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John Williams 56:39
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Jason Hartman 56:57
Now what’s interesting is is you You did a report on hyperinflation. JOHN, tell us about that, because that’s the prediction for the future. And I just don’t see how I mean, there are very few of them out there, but there are a few deflation out there and I just don’t get their argument. You know, they say crazy things like this deleveraging issue is so big and so massive that the government can’t print enough money to cause inflation. And I’m thinking like, What are you talking about? The government can print as much money as they want, you know, and they don’t even have to print it anymore. It’s electronically just click a mouse and, and money is put into the system. It’s crazy the amount of money being created right
John Williams 57:36
now. They can create anything they want and and do they have. And the thing is that when people talk deflation, you have to make sure that you’re talking the right or the same terms. When I talk inflation and deflation. I’m talking about price changes for for consumers terms of consumer goods and services. I’m not looking at asset prices. A lot of people look at the stock market so stock markets going to crash that’s that’s deflationary most certainly deflationary in terms of stock prices. But it doesn’t necessarily mean that consumer prices are going to go down. So it’s other, the credit collapse by itself does not collapse, money supply, if the bank lends money that will tend to create money supply. If a bank lends a million dollars to a company, the way the system used to work and we’re not seeing much bank lending, but that would get repeated in the event up with about 10 years the funds were deposited or the banks you’d end up with about 1010 $10 million from the million dollars that was originally left but then the company goes under can’t can’t pay its loan. The bank can’t pull that $10 million has been created in the money supply out of the money supply doesn’t happen. So the having a debt collapse does not contract the money supply. What it does do it it impairs the balance sheets of the banks and then they can’t lend money the way they used to. If I don’t lend money to whether you’re sure you see a slowing of bank bank lending that can that can slow the slow money growth. And that’s what happened. It actually turned negative for wildstyle. Now going up again, and I still tracked the government’s m three measure, which is or broughtest. One, but there’s more more than just the, the level of the money supply chain matter how willing people are to hold it. And people don’t want to hold it, which is where you get into the issue called velocity, how quickly the money to inch over that can be as devastating as the actual printing of the money in the velocity has
Jason Hartman 59:37
slowed pretty dramatically, hasn’t it?
John Williams 59:39
Well, yes or no. I’ll contend to actually rising out in that circumstance. The average is when the average person cannot get a safe return on his money that is better than the government’s official rate of inflation. That’s your current circumstance. Those that are going out buying the goods and services that are inflating we go out and buy canned goods. Right, right. better investment now than a T bill
Jason Hartman 1:00:06
that Well, that’s a good point in that sense. Yes. I couldn’t agree with you more it’s it’s causing the current economic situation is causing in appropriate behavior. That’s not necessarily prudent behavior. So yes, you have people stocking up on on stuff because they know their money is going to be worth less in the future. And so that’s exactly what they did in in why Mr. And, and so forth. They couldn’t wait to spend,
John Williams 1:00:32
not necessarily a reflection turnover as an increase in turnover as the currency. The big problem here right now is the US dollar. And the feds put out enough money that if it ever got into the money supply in a normal manner, the banks are not lending. Let me back off. Let me get back to square one here. You go back to 2004 government’s overhaul of Medicare. They put prescription prescription plan in place at that point in time, they added about a trillion dollars in unfunded liabilities to the government’s balance sheet. That’s net present value. In other words, how much money do you need in place today to cover that, but they knew that they’re doing at the time was bankrupting the country’s shuttle. a trillion dollars in perspective at the time was the total level of gross federal debt. I talked to people in the bush administration at the time say, hey, look, you’re dooming the system to hyperinflation here. And I there’s not just push administration, this is something that’s been building up over time over a number of administrations. This is when I, I started taking this system to task and response I got was, Oh, it’s too far into the future to worry about back in the 70s. The big 10 accounting firms got together with Congress said look, running the largest business on the face of the planet, you really should have modern accounting the same time from Canada alert large corporation does, and it took them 30 years. But earlier this decade, the Treasury started publishing financial statements on the federal government based on generally accepted accounting principles, as you get much publicity, but it is published each year. And if you include the year to year change in the net present value of the unfunded liabilities, you’ll find that we’re running deficits year after year, but that $5 trillion will total that’s an obligation right now about $80 trillion dollars. Again, that includes the unfunded liabilities for Medicare, Social Security in Section $5 trillion is beyond containment, containment. It’s beyond sustainability put into perspective. You wanted to bring that into balance in a year, for a year, you couldn’t do it. At least you couldn’t do it by raising taxes. You can’t raise taxes enough to cover that shortfall. You could take 100% of everyone’s Wages And Salaries, and you’d still be in deficit
Jason Hartman 1:03:03
and raising taxes. Of course, we all know suppresses economic activity anyway. So no, it’s a terrible idea.
John Williams 1:03:09
Now, if you cut every penny of government spending, except for Social Security and Medicare, you’d still be in deficit, the system’s bankrupt. There’s no way this can be sustained and left to its own devices. By the end of this decade, we would have been at a point where the only way the government can find the obligations would be by by printing it, printing the money, which what would you give your hyperinflation?
Jason Hartman 1:03:34
Right, right. So what are your predictions for hyperinflation?
John Williams 1:03:38
Well, it’s originally I was looking in that timeframe. As the financial crisis broke, he saw a circumstance where the system was on the brink of collapse. They weren’t kidding back in September of 2008. When they said look, we don’t get our funding in place here. We’re going to show you the system collapsing, banking system collapsing ever run on the bank. So they were having a run on the bank. It was globally, money was being taken out of the US, they had to stabilize your system, or the system would collapse. systemic failure is not an acceptable option to the Fed or to this federal government. The feds primary function is to keep the banking system solid. So they spent guaranteed, loaned and printed, made whatever they had to do, they created whatever money they had to create, in order to keep the system from failure. The best they did was they stabilized it a little bit. They did nothing to significantly resolve the solvency crisis in the banking system. They did nothing to significantly correct the economy. economy continues to be outside bad and bouncing. After a collapse. It’s beginning to trend even lower. Big problem there is that the all the happy forecasts on the deficits going forward. The Treasury funding going forward but they’re all based on positive economic growth. That’s not gonna happen much worse deficits unexpected much worse Treasury findings. The Fed has gone so far as to last year with quantitative easing to to effectively monetize the bulk of new debt issuance by the US Treasury. That in turn, gave a first real serious blow to the dollar. By early 2011. You were the dollar have lost it so safe haven status. You saw the upheaval in North Africa. Middle East in search of dollars are the local currencies were flowing into the Swiss franc gold, not the US dollar, then you had all the all the problems in Washington over the debt ceiling, and a very clear expression of lack of any political will whatsoever to address the long term solvency issues of the US government which unfortunately requires restructuring. During the social programs, and it’s just not going to happen, but when I was at little park, you they destroyed the global confidence in the dollar the dollar, he started to see $1 panic against Swiss franc against gold, then the the euro crisis popped up again and the Euro acted effectively as a foil to try and distract the world from the dollar and I think that was delivered. But the Euro situation will get resolved and what lies ahead here the fundamentals just could not be worse, you’re going to have heavy dumping at some point numbers that happens that in turn will become very inflationary. As as the little bit of easing that we got by the Fed. You saw the dollar so out there that spiked oil prices, spiked gasoline prices, you can have inflation. With a weak economy. That’s what we’ve been happening. We’re seeing higher inflation now than we have had. Since the After after the crisis broke. And that’s not because of a strong economy. It’s because of monetary distortions that have spiked commodity prices that are affecting us in the United States has nothing to do with economic demand.
Jason Hartman 1:07:13
Yeah, yeah. Well, they did. The government and central banks distort the heck out of everything for sure. So john, you’re predicting hyperinflation by 2018?
John Williams 1:07:23
No, I’ve moved my forecast into an upside timing of 2014 2020. And there’s a we may be and we, we have, we’ve crossed through the various prerequisites to it. I mean, we’re at a point where the dollar has lost its luster. It’s safe haven status, it’s lost. It’s, it’s lost the confidence of the rest of the world. It’s, it’s the next blow may be the fatal one. It may be the one that pushes us out of out of reserve currency status. Maybe the one that results in oil being priced in something other than US dollars. And as that happens, the inflation will just pick up very rapidly.
Jason Hartman 1:08:08
So so there’s no academic definition of hyperinflation. But you’re saying 2014 that’s only two years away? What type of inflation rate are you talking about? When you say hyperinflation? Is that 25% annually? Is it 100% annually? Is that 1,000%? I mean, you look historically hyperinflation around the world, and it’s just Hungary, Zimbabwe, Argentina, those numbers I’m saying,
John Williams 1:08:32
I’m talking Weimar Republic, where the definition I use and again, as you pointed out, there’s no formal definition. That is when the largest denomination currency before the inflation, this case $100 bill becomes worth more toilet paper wallpaper, you have hyperinflation. That’s the type of thing I’m looking at. And it’s a type of circumstance. We’re number one. I don’t see any way of avoiding it. We’re sure Were I mean, I’d be it would take a big political shift in our government. If the government could move rapidly to restore the long term solvency of itself and put in discipline to the rest of the world goodbye. They might be able to save the situation but that doesn’t help them too much because they so they need to bail out the bank say they need to boost the economy there’s they’re really in a No, no no when circumstance with very, very few options and the options that they have are not not politically feasible. So that the the end result of this is that you’ve got to look at it from a personal standpoint, how do you protect yourself and and there there are several things one, in terms of your wealth and assets, it’s a time to batten down the hatches look to preserve wealth, buying a hedge against with things such as physical gold. I personally prefer sovereign coins gold silver precious metals are basic hedges getting some dollars outside the US dollar Australian dollar Canadian dollar Swiss franc I like despite the intervention there at the moment with a tied to the Euro that’s not that’s not going to last and once you’ve been able to hedge your at least your core assets and leave other money want to play around with and gambling casino the stock market that’s all fine and dandy but you want you want to get your
Jason Hartman 1:10:29
I love the stock market a gambling casino it is you couldn’t be more accurate on that one.
John Williams 1:10:35
Well, I I’m looking at survival here and so you need to need to preserve the purchasing power of your your assets. If you can ride through the storm and maintain the liquidity and the purchasing power of your assets. You’ll have some of the most extraordinary investment opportunities anyone we’ve ever seen on the other side, and at least you’ll be in a better position to survive. But survival involves more than just the finances. And the United States is the most powerful country on Earth. It’s, it’s got the world’s largest economy, and it has no backup system like Zimbabwe, Zimbabwe had the worst hyperinflation anyone’s ever seen stretched over a period of time. The economy continued to function. people continue to work. The reason they did was that they had a backup and backup system of a black market in US dollars. We don’t have a backup system here, but hyperinflation hits the United States. It’ll be extraordinarily disruptive to our economy or way of life. And I would urge anyone to basically look at preparing a store visit as you would for a natural disaster. I’m sitting on the Hayward Fault out here in California and people out here know they have a Have a store of food and water and maybe diapers, whatever they need to get through at least a couple of weeks. Here you need something maybe we’ll carry through a couple of months. He got things that you can rotate, so it really doesn’t cost you anything. And you might look at goods that would be usable in a barter circumstance. Gold Coins are the big probably big item to go trade against a loaf of bread. I talked with one follow them through hyperinflation. He said they found the perfect small change was a an airline sized bottle of a high quality scotch.
Jason Hartman 1:12:38
Yeah, yeah, vodka, vodka and cigarettes probably wouldn’t be bad either.
John Williams 1:12:42
But the key thing is to use common sense. Right, right.
Jason Hartman 1:12:45
You know what I say overall, john, and you just want to run this investment strategy by you denominate your assets in things in commodities that are useful to people whether they be hedging with physical metals or Or owning construction materials or food products or food resources, and then denominate your liabilities in depreciating, ever more debased fiat currencies like the dollar debt will just be wiped out when we have this inflation. But it’s got to be long term fixed rate debt attached to things of real use that you control. So,
John Williams 1:13:24
I mean, you’re what you’re saying is fine. And in theory, where I would raise questions is that this is something that will be extraordinarily disruptive, if I’m not advocating people take on debt, for example, to take advantage of this. I can’t tell you exactly how it’s gonna break and what the political circumstances going to be need to be able to take on the debt you need to be able to cover the debt. Even if you’re suffering a period of unemployment and perhaps before the full hyperinflation kicks in. You don’t know what the government’s going to do here. Looking at it and playing with mortgage Maybe they’ll step into save the action. So now we’re going to design and redesign the nature luxury and some kind of a quiz. I knew dollar who does way I’m looking at I’m just ultra conservative here primarily looking to hedge the basics. And what you what you say is right in principle, and is well worth looking at and thinking through in terms of your own circumstance. But it’s, again, it’s the type of thing that requires
Jason Hartman 1:14:32
good financial advice and common sense. Absolutely. Well, good points. Well, john, your website is shadow stats, calm, anything in particular, you want people to see on the website, you’ve just got a wealth of data there and I just love I constantly refer to it as a resource to find out the reality behind the statistics and you’ve done some great work there. And then we all appreciate that. Anything in particular you’d like people look at maybe the hyperinflation 2012
John Williams 1:15:00
Where the hyperinflation 2012 report is, is for our subscribers, we will make that available to the public. in the not too distant future, the prior hyperinflation report for 2011 is available now on the website. It gives you a lot of the basics as the background information on the different government series. Anyone interested in subscribing Of course, will put out a a, an electronic newsletter that is at least weekly in frequency depends on what the government’s statistics are released. And we update the hyperinflation outlook and other things that are happening there on a regular basis.
Jason Hartman 1:15:45
Fantastic. Well, Shadow stats, calm everybody go check it out. And john Williams, thanks for joining us today.
John Williams 1:15:50
Again, Jason. Thank you for having me.
Jason Hartman 1:15:57
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