Dollar on the Brink of Disaster-John Williams

Sunday, May 18, 2014
By Paul Martin

By Greg Hunter
May 18, 2014

Economist John Williams has a dire prediction for the U.S. dollar. Williams says, “I don’t see what will save it at this point. . . . Now we are to the point that the dollar has been ignored for years. The federal deficit has been ignored for years. . . . That’s what we are on the brink of disaster with, and that is what has to be addressed now, and that’s not happening.” Williams also contends, “The way I see it, the dollar could go to zero in terms of its purchasing power. You don’t want to have your assets in U.S. dollars.” How are we going to get there? Look no further that the dismal first quarter gross domestic product (GDP) numbers that officially only eked out .1% growth. This is one of the reasons why Williams thinks a “renewed broad economic downturn continues to unfold.” Williams goes on to say, “We’re turning down a new. The first quarter should be revised to negative territory, and I believe the second quarter will be reported negative as well. That will happen by July 30 when you have the annual revisions to the GDP. In reality, the economy is much weaker than that . . . . Generally, when you adjust for inflation and you use too low of a rate for inflation, that overstates the economic growth.”

Williams says the government rigs the economic numbers, and it gives a false impression of recovery. When you remove all the accounting gimmicks, Williams says, “Starting with the recession that started with the end of 2007. . . . in reality, it was more of a plunge and then stagnation. . . . What we’re seeing is we’ve been stagnant and bottom bouncing and maybe a little bit higher, but we are turning down again. The reason for this is the consumer is strapped and doesn’t have the liquidity to fuel growth in consumption. Median household income, net of inflation, is as low as it was in 1967. The average guy is not staying ahead of inflation. For decades, you could get consumption from the future by borrowing more money and expanding your debt. That all blew apart in 2007 and 2008. Now, you don’t have the ability to borrow money the way you used to, and without that, there is no way consumption can grow faster than the rate of inflation. . . . There is no way you can have positive sustainable growth in the economy without the consumer being healthy. It’s just not going to happen.”

So, with another “plunge” in the economy coming, how’s the dollar going to hold up? Williams explains, “You are not seeing an annual deficit of $400 or $500 billion dollars. You are really seeing something close to $6 trillion. That is beyond control, and it raises the question of long term solvency of the U.S. It is a big concern for the global markets. It’s really the reason why nobody outside the United States wants to hold the dollar. Now, look at the U.S. economy, it is turning down. Economic strength is a big factor in the value of a currency. As the renewed downturn gains wider acceptance or wider recognition, that will intensify the selling pressure. When someone starts selling, it’s going to be a race for the door, and I am looking for a dollar selling panic to be the trigger for the onset of hyperinflation.” What we are seeing in inflation now is a pickup in inflation, but it’s not a hyperinflation. Massive dollar selling–that will be the trigger for the hyperinflation.”

On the budget deficit, Williams predicts an explosion of U.S. debt. He says, “All the projections on the budget deficit are based on positive economic growth going forward. With the ongoing contraction, you’ll see a much worse budget deficit. It’s going to do bad things to the banking system. The Fed is going to be easing, and they’ll say they are easing to stimulate the economy; but in reality, they’ll be doing this to prop up the banking system. The rest of the world sees this and they don’t want to hold the dollar, and they will sell off the dollar. The Fed is going to have to come in and prop up the system until it falls apart.”

Join Greg Hunter as he goes One-on-One with economist John Williams, founder of

(There is much, much more in the video interview.)

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