Is hyperinflation about to strike the USA?

I have great respect for John Williams, the economist behind Shadowstats. He's been pointing out for years that the US government has been deliberately understating inflation, and has highlighted many aspects of official fiscal irresponsibility.

Now he's released a revised version of his Hyperinflation Special Report (2011). It's frightening reading. Here's a brief series of extracts about what he foresees.

The U.S. economic and systemic-solvency crises of the last four years only have been precursors to the coming Great Collapse: a hyperinflationary great depression. Such will encompass a complete collapse in the purchasing power of the U.S. dollar; a collapse in the normal stream of U.S. commercial and economic activity; a collapse in the U.S. financial system as we know it; and a likely realignment of the U.S. political environment. Outside timing on the hyperinflation remains 2014, but there is strong risk of the currency catastrophe beginning to unfold in the months ahead. It may be starting to unfold as we go to press in March 2011, but moving into a full blown hyperinflation could take months to a year, beyond the onset, depending on the developing global view of the dollar and reactions of the U.S. government and the Federal Reserve.

. . .

As the advance squalls from this great financial tempest come ashore, the government could be expected to launch a variety of efforts at forestalling the hyperinflation’s landfall, but such efforts will buy little time and ultimately will fail in preventing the dollar’s collapse. The timing of the onset of full blown hyperinflation likely will be coincident with a broad global rejection/repudiation of the U.S. dollar.

With no viable or politically-practical way of balancing U.S. fiscal conditions and avoiding this financial economic Armageddon, the best that individuals can do at this point is to protect themselves, both as to meeting short-range survival needs as well as to preserving current wealth and assets over the longer term. Efforts there, respectively, would encompass building a store of key consumables, such as food and water, and moving assets into physical precious metals and outside of the U.S. dollar.

. . .

As the federal budget deficit spirals well beyond sustainability and containment at an accelerating pace, and as the Fed moves with great deliberation to debase and to impair the purchasing power of the U.S. dollar, to generate rising consumer inflation, the day of ultimate financial reckoning appears to be breaking.

. . .

Efforts to save the system at any cost likely will continue as long as possible, with the government spending whatever money it and the Federal Reserve need to create, until such time as the global financial markets rebel. The ultimate cost here, though, will be in inflation and the increasing debasement of the purchasing power of the U.S. Dollar, and an eventual dollar collapse beyond any government or Federal Reserve control.

There's much more at the link. Highly recommended reading.

I take John Williams seriously. He's been accurate far too many times in the past for me to dismiss him as an alarmist. I hope and pray he's wrong this time . . . but too many other commentators whom I respect, such as Karl Denninger, the good people at Seeking Alpha, Mike Shedlock ("Mish"), and others, all line up on his side of the fence. I don't think that all of them can be wrong. Even so liberal an economist as Paul Krugman wrote yesterday that he fears we're on the brink of a 'third depression'.

With that much evidence and expert opinion lining up in agreement, I think it's time to get worried!

Peter