“Set by Uncontained
Fiscal Malfeasance, and Exacerbated by Still-Unfolding Effects of the 2008
Systemic Panic and Near-Collapse, U.S. Hyperinflation Looms by End of 2014.
After decades of U.S. government fiscal mismanagement, by 2004, the U.S.
budget deficit was so out of control that it had become both unsustainable
and uncontainable. Using generally accepted accounting principles
(GAAP-accounting), the deficit for just the fiscal-year 2004 exploded to
“Adjusted for distortions from one-time accounting changes, the
actual, or GAAP-based, federal deficit has run roughly $5 trillion per year
since 2004, and it likely topped $7 trillion in 2012, with total federal debt
and the net present value of federal-government obligations approaching $90
trillion (see Table I in Section III). No amount of spending cuts, outside of
the politically-untouchable social programs, and no amount of tax increases,
can bring the GAAP-based annual U.S. budget deficit into balance.
“Faced with structural impairments to individual income growth,
the Federal Reserve (under Chairman Alan Greenspan) actively encouraged the
excessive growth of consumer debt as a way to support economic activity,
continuously borrowing economic growth from the future.
“With an inevitable day of reckoning, the U.S. financial and
banking systems came literally to the brink of collapse in September 2008. To
prevent the unthinkable, the Federal Reserve and the U.S. government created,
spent, loaned, guaranteed, and gave away whatever money was necessary, and
otherwise bailed out or acquired a number of failing large
“Those actions forestalled a systemic collapse, but they did not
resolve the fundamental underlying difficulties. Contrary to official GDP
reporting, there has been no subsequent economic recovery.
“The ultimate costs for saving the system in 2008 and beyond,
comes down to inflation, which will be reflected eventually in the complete
debasement of the U.S. dollar. Accordingly, actions taken during the
crisis-containment of 2008, and later, brought the outside timing for the
hyperinflation forecast of 2018, into 2014.
“…the U.S. dollar, as we know it, is not likely to survive
until the next congressional election in 2014…”
“Special Commentary: Review of Economic, Systemic-Solvency,
Inflation, U.S. Dollar and Gold Circumstances, #485”
John Williams, shadowstats.com, 11/27/2012
Official Data Purveyors would have you
believe that U.S. inflation is “contained,” GDP is growing
healthily, and Sovereign Debt is sustainable. Not true! The U.S. for example
is already Threshold Hyperinflationary at 9.82% and GDP growth is a negative 2.10% and the net present
value of downstream Federal government obligations is nearly $90 trillion.
And other major nations are similarly
afflicted with the Bogus Statistics Disease – see quote regarding
China’s fake GDP below.
But investors who know the Real Numbers
and can distinguish them from the Lies have Substantial Advantages, key ones
which we identify here.
“A fake Libor rate, the scandal involving global benchmark
interest rates that has raised the level of distrust in major banks and
markets, is nothing compared to the damage that could be done if
China’s true economic growth figures were revealed, according to Larry
“Is Chinese GDP the new Libor? …More and more investors
are starting to question the Chinese math on GDP.
“Annual gross domestic product came in at 7.6 percent in the
second quarter, according to China’s government on July 13th.
The report was better than investors expected…
“But slowing imports and industrial production, as well as
harder-to-fudge electricity usage data, points to much slower growth,
according to McDonald and other investors. Barclays believes the number
should have been more like 7.15 percent.
“What worries McDonald… is that lying by governments and
banks — be it Libor rates or GDP statistics
— raises the systemic risk to the markets, which is much worse than
just economic risk.”
“Lying Libor Is Nothing Compared to China’s Fake GDP:
John Melloy, CNBC, 7/22/2012
Indeed, if one considers all the salient
Chinese data together, one concludes that the Barclays estimate of Chinese
GDP at 7.15% is still high.
In order to obtain a realistic view of
economic performance it is necessary to look beyond the Official Data to data
that are more difficult to manipulate. For China, for example, consider:
China’s shipbuilding industry has
suffered a 60% decline in gross tonnage of orders; some builders may go
bankrupt. China has vast stockpiles of as-of-yet-unused coal, iron ore, and
copper. In the first half of 2012, Shanghai land sales fell close to 60%. The
June 2012 Chinese electrical grid usage was flat. Prices in some Asian
sectors sank an incredible 25% in June because of collapsing demand.
China’s neighbor Singapore reported that its GDP growth fell 1.1%
during the second quarter of 2012 following a 9.4% gain during the first
Similarly in the Eurozone, the Spanish
and Greeks for example are suffering with 25% unemployment rates.
Switching focus back to the U.S. we
recently see that some Mainstream Media are claiming that the Housing Market
has bottomed and is recovering. It is not.
“The headline 3.6% monthly gain in October 2012 housing starts
was not statistically-significant and was in the context of downside
revisions to August and September reporting. As shown in the accompanying
graphs, October activity was at the highest level since July 2008, when the
market was in free-fall, but it still was 61% off the 2006 peak in housing
“Hurricane Sandy appears to have had minimal impact on
October’s activity, but disruptions from the storm should have
meaningful impact on November reporting, with subsequent rebuilding certain
to provide a temporary boost to building-permit and housing-starts activity
in December and into first-quarter 2013. Nonetheless, given the underlying
economic fundamentals, there is no longer-term recovery or relief in sight,
and the relatively strong reports of September and October likely will revise
sharply lower or be balanced in later reporting by offsetting seasonal
“Preview of Special Commentary, Housing Starts, #484”
John Williams, shadowstats.com, 11/20/2012
Yet Real U.S.
Inflation is (already!) Threshold Hyperinflationary and reflects the effects
of excessive Fed and ECB Fiat Money and Credit Creation. Indeed,
Bogus Official Statistics mask a wide variety of Negative Effects of ongoing
Q.E. and related Actions. Shadowstats.com calculates Key Statistics the way
they were calculated in the 1980s and 1990s before Official Data Manipulation
began in earnest. Consider:
Bogus Official Numbers vs. Real Numbers (per Shadowstats.com)
Annual U.S. Consumer Price Inflation reported November
2.16% / 9.82%
U.S. Unemployment reported
November 2, 2012
7.9% / 22.9%
U.S. GDP Annual Growth/Decline reported November
2.49% / -2.10%
U.S. M3 reported
November 17, 2012 (Month of October, Y.O.Y.)
No Official Report / 3.56%
Shadowstats Forecast of
Impending Hyperinflation beginning no later than the end of 2014, is quite
Of Great Significance also is the fact
that the consequent degradation of the U.S. Dollar’s status as World
Reserve Currency (and the ascending of a Gold-backed Chinese Yuan as the
World’s Reserve Currency) is already well under way.
China has already entered into bilateral
Currency Deals with several nations including Russia, Iran, Brazil, and (soon
to be former) financial allies Japan and Australia. Consequently the
Purchasing Power of the $US will suffer a huge hit in the next very few
Given the Real Numbers (per Shadowstats and Deepcaster, et
al.) it is no wonder Economist Nouriel Roubini characterizes U.S. Recovery as a “Fairy
“…the first-half growth rate looks set to come in closer
to 1.5 percent at best, even below 2011’s dismal 1.7 percent. And now,
after getting the first half of 2012 wrong, many are repeating the fairy tale
that a combination of lower oil prices, rising auto sales, recovering house
prices and a resurgence of U.S. manufacturing will boost growth in the second
half of the year and fuel above-potential growth by 2013.
“…the gravity of weaker growth will most likely overcome
the levitational effect on equity prices from more
quantitative easing, particularly given that equity valuations today are not
as depressed as they were in 2009 or 2010. Indeed, growth in earnings and
profits is now running out of steam…”
“We’re Not Even Close to a Robust Recovery”
Project Syndicate, 7/22/2012
And it is not just Doctor Doom Roubini who sees beyond the Bogus Official Data. Former
Reagan Budget Director, David Stockman sees the Real Data, the Consequences,
and the Challenges clearly.
“I don't think we are at the beginning of the recovery. I think
we are at the end of a disastrous debt supercycle
that has gone on for the last thirty or forty years, really. It started when
Nixon defaulted on our obligations under Bretton Woods and closed the gold
window. Incrementally, year after year since then, we have been going in a
direction of extremely unsound money, of massive borrowing in both the
private and the public sector. We now have an economy that is saturated with
debt: $54 trillion or $53 trillion – 3.5 times the GDP – way off
the charts from where it was for a hundred years prior to the beginning of
this. The idea that somehow all of that debt is irrelevant, as the Keynesians
would tell us, is fundamentally wrong – and the reason
why the economy can't get up off the mat.
“We're doing all the wrong things. We're adding to the problem,
not subtracting. We are not allowing the debt to be worked down and
liquidated. We're not asking people to save more and consume less, which is
what we really need to do. And so therefore I think policy is just making it
worse, and any day now we will have another recurrence of the kind of
economic crisis we had a few years ago.”
“Austerity Is Not Discretionary,” Interviewed by Alex
Daley, Casey Research
David Stockman, Congressman and former Reagan Budget Director,
Official data sources have Powerful
Interests to protect and Truth is often sacrificed. Thus it is essential to
rely on other entities and persons such as Shadowstats,
Deepcaster, Stockman, and Roubini
for Genuine Data and Honest Analyses, prior to making Investment Decisions.
Nonetheless, amid all the uncertainty in the Markets and Economy there are three
“Fortress Asset” Sectors which will likely return profits
regardless of Boom or Bust, Inflation or Deflation. To understand why we
select just these three Sectors first consider:
“The Bureau of Labor statistics
reported the increase/decrease in non-farm payrolls and the unemployment rate
for June 2012 on Friday, July 6th. Stocks plunged on the news. Why? The BLS
reported that non-farm payrolls increased by 80,000 new jobs in June.
Isn’t that good? Well first of all, it is a false figure. The true
figure is there was a net loss of 44,000 jobs in June. The BLS decided in
their infinite wisdom that they think, they guess, they pretended that new
businesses that started up in June created 126,000 new jobs. They have no
idea what new businesses started, nor did they count new jobs in these
phantom new businesses. This 126,000 phony figure was added to the loss of
44,000 jobs to fudge a positive number for the release of the June jobs
report. This phony figure is called the CESBD adjustment, or the Birth/Death
adjustment. Birth/Death refers to businesses, not people. The truth is the
economy lost 44,000 jobs in June. This is abysmal. This is recession. This is
an indictment of government fiscal policy, of Fed monetary policy, of tax
policy and regulation of businesses. We need a true increase of 150,000 new
jobs each month just to break even with population growth, and need millions
more to put displaced workers back in a job.
“The truth is, the economy is falling
off a cliff, housing transactions are essentially non-existent, jobs are
declining, growth is shrinking.”
“Current Weekend Report”
Robert McHugh, Ph.D., Main Line Investors, 7/7/12
There is a War going on between the
forces of Inflation (e.g. Central Bank Money Printing) and the forces of
Deflation (e.g. several contracting Economies around the world resulting in
increasing Unemployment and a slowing Velocity of Money). That war is
disguised by Bogus Official Numbers which conceal, for example, the
USA’s 9.82% Real Inflation rate and 22.9% Unemployment rate.
The Central banks will ultimately
“Win” via QE-to-Infinity but that “Win” will be a
Pyrrhic victory because it will bring full-blown Hyperinflation. In sum, the
Real Numbers are being Masked by the Bogus Official Ones.
Consider Adrian Douglas’ point:
“There are frequent claims that the U.S. economy has entered a
period of “deflation.” These claims are totally unfounded and are
false. Deflation can only be a persistent state of general price decline. In
fact, in examining price trends, the U.S. is experiencing shocking price
increases of over 15% per annum. To illustrate this,
…the Continuous Commodities Index, CCI over the past ten
“Deflation – Nowhere to be Seen”
Adrian Douglas, Market Force Analysis, 7/7/12
Fortunately three “Fortress Profit
Sectors” should suffice to Protect and Profit. We identify these,
including a Mini-Sector with Spectacular Profit Potential in our recent
Letters and Alerts.
specific recommendations (in the three Fortress Profit Sectors) aimed at
Profit and Protection despite Bogus Official data and Impending
Hyperinflation see Notes 1, 2, 3, and 4 below.
Necessary also, is having Courage to see
the Truth, because the Truth is not always Pretty; but seeing it is essential
for Profit and Protection.
Finally, important to note is the fact
that, absent manipulation, Gold and Silver would be the monetary “Canaries”
of the Financial World, whose prices would warn of Excessive Monetary and
Credit Creation even more than they have in the past decade.
Indeed, in the past decade their price
appreciation (well in excess of any
other Asset classes) certainly has “warned” of that, but not in
the past few months. Gold and Silver prices are subject of ongoing Price
Suppression by a Fed-led Cartel as described in Note 5 below. But with the
Physical Supply situation increasingly tightening, Gold and Silver Price
Suppression cannot last forever.
December 07, 2012
Note 1: *Shadowstats.com
calculates Key Statistics the way they were calculated in the 1980s and 1990s
before Official Data Manipulation began in earnest. Consider
Bogus Official Numbers vs. Real Numbers (per Shadowstats.com)
Annual U.S. Consumer
Price Inflation reported October 16,
1.41% / 9.64%
U.S. Unemployment reported October
8.3% / 22.8%
U.S. GDP Annual Growth/Decline
reported September 27, 2012
2.21% / -2.15%
U.S. M3 reported October 16, 2012
(Month of September, Y.O.Y.)
No Official Report / 3.32%
Note 2: The $US dropped nearly
200 basis points at one point in the last three weeks. No surprise since the
Fed’s U.S. Dollar-Destructive Q.E. to Infinity Action, coupled with the
ECB’s Similar Action the week before, boosted the Euro vis-à-vis
the Dollar, as we earlier Forecast. The very recent $US bounce does not
change its weakening Trend.
This Debauchery of the
$US weakens its Purchasing Power and thus increases Burdens on the agonized
disappearing Middle Class.
The Bernanke claim that
buying $40 billion per month in Mortgage Backed Securities would Stimulate
the Economy and help the Housing Market is just a Fictitious Cover Story. In
fact, it is just another Gift to the Mega-Banks who hold Underwater Paper,
and to Wall Street which proceeded to rally on The Fed-sugared High.
Both the Continuous
Commodities Index which show Average Annual Price
Inflation of 15% and the Real Inflation Number (9.3% per year from
shadowstats.com) reveal Serious Inflation is with us and it Intensifying.
And Especially Food
To increase Yields,
Farmers increasingly employ Fertilizer.
And a recent Reco – a Fertilizer Producer – was trading
near its 52 week low at under 40¢ per share when we first recommended
it. It has moved up nicely since we recommended you buy in. But it has such
great potential that we raise our original “buy under” price to
45¢ per share.
To see our recent Buy Reco aimed at Profiting from the Fed’s Inflation
Rocket, read Deepcaster’s recent Alert,
“Buy Reco (under 40¢/share) to Ride
Inflation Rocket; Forecasts: U.S. Dollar/Euro, U.S. T-Notes, T- Bonds, &
Interest Rates, Gold, Silver, Crude Oil, & Equities,” recently
posted in ‘Alerts Cache’, on deepcaster.com.