- Published on Jun 30, 2014
Ask the Expert – John Williams (June 2014)
In this exclusive interview, John Williams answers questions from our followers regarding hyperinflation, gold prices, and the gold standard.
*Recorded June 24, 2014
Sprott Money News: Hello and welcome to this week’s Ask the Expert here on Smart Money News. I’m your host Geoff Rutherford and on the line with me today we have Mr. John Williams. John Williams is an economic consultant with over 30 years’ worth of experience in private consulting and government economic reporting. His website, ShadowStats.com, is an electronic newsletter service dedicated to exposing and analyzing flaws in current U.S. government economic data and provides an assessment of underlying economic and financial conditions, net of financial, market and political hype. So with that we’d like to welcome our guest today on Ask the Expert, John Williams. Hello John.
John: Hello Geoff. Thank you for having me.
SMN: Thank you very much for joining us. We really appreciate that today. So John, we’ve had a number of questions being sent in from our listeners. A lot obviously pertaining to what’s been happening as far as inflation, likewise as far as what’s been happening with current economic policies so let’s try and see if we can get into this.
SMN: John, so while the USA is having much higher unemployment and bigger deficits than before, the rest of the world when we look at China, Japan, or even Europe, are doing much worse. So as long as the rest of the world continues to be much worse than the USA, the status quo can continue. So in other words, what is it that can change this so that it’s not necessarily detrimentally affecting the U.S. dollar and economy?
John: OK. Well, I’d argue with some of the premises that you put forth in terms of the relative strength of the U.S. economic and financial conditions. In fact, I think the U.S. particularly when you consider that it’s still the dominant economy certainly from a financial standpoint in the world. We never recovered from the so called recession of 2007. We just had a plunge in protection in that economy is so weak that a renewed downturn is showing up even in official reporting. One thing that I work with is the estimation of the government statistics. The way they used to be reported before various changes were made by the government in methodology that generally put upside economic biases into the economic reporting and downside biases into inflation.
John: And I’ll contend that reality of common experience would show a much weaker economy, much higher unemployment, much higher inflation. But separate from those factors, all of which on a relative basis are very important in terms of the value of the dollar. You have some other factors as well such as the relative political stability. I always found when I was involved in trading currency, if you looked at the positive rating of the U.S. president by the American people, that’s a pretty good indicator as to how the political system was viewed domestically and in the rest of the world and right now we have something close to a dysfunctional government in being able to get things done. People are very upset with the government. That’s a big negative against the rest of the world. If you look at our fiscal conditions, officially the numbers are getting better but if you look at it on a gap basis, using generally accepted accounting principles, the way a corporation would report its financial statements, we’re seeing annual deficits order of magnitude 6 trillion dollars.
That’s a third of the GDP and if you looked at the aggregate obligations, again using gap accounting, we’re looking at something that’s over 90 trillion dollars. It’s 15 times the level of GDP. It’s the type of the thing the United States can never resolve with normal economic and financial policies. The government has to address its long term solvency issues if it’s going to survive, if it’s going to have any credibility in the rest of the world. The global markets look at the U.S. and there’s the big question of the sovereign solvency. We saw the concerns of that come to a head back in August of 2011 when S&P downgraded the U.S. treasuries, and you had a brief dollar panic before there was massive intervention and a variety of things were done by central banks to try and calm things down.