Budget Deficit Exploding Out of Control -John Williams

By Greg Hunter’s USAWatchdog.comWILLIAMS_092_wade.JPG 

Economist John Williams says don’t be fooled by the new highs on the Dow.  Williams contends, “The economy is still in serious trouble.  The banking system is still in serious trouble.  The budget deficit is exploding out of control.”  Williams thinks the ongoing banking crisis in Cyprus has global implications.  Williams says, “You have a precedence set in Cyprus that they can seize the funds.  They will not guarantee all deposits.  If that’s the case, you may have a much worse crisis than you had back in 2008.”  Williams adds, “The big problem is the government is insolvent in the long term.”  Williams says the U.S. dollar could start selling off in May because of a deadlock in Congress on the budget.  Williams predicts, “The global markets are looking for the U.S. to address its long term sovereign solvency issues.  That’s not going to happen. . . .  In response, it’s going to be off to the races with a dollar sell-off.  That could be the trigger for the early stages of hyperinflation.”  Join Greg Hunter as he goes One-on-One with John Williams of Shadowstats.com.      

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  1. WD Denn


    I keep hearing about recovery, where is it? On the news today NPR talked about bump in new truck sales, saying it was due to real estate picking up. But they also said the average age of a truck in US is 15-16 years old. People are buying these items BECAUSE THEY HAVE TO. If one has to hold on to a truck for 15-16 years, they are not flush with cash.

    Am I missing this recovery, my car is 13 y.o. and I cant afford to buy a new one or I would but its about to break down. Am I just missing this big recovery or is it me. I am confused. I dont see it or more importantly feel it.?

    Am I wrong?! Is it just me?


    • Greg

      There is no real recovery in the economy. You are not missing a thing.

  2. justin king

    Williams lays it out nice and neat; whereas Gerald Celente has trust in no one, says the sky is falling and short on remedies other than TAKE COVER.– Therefore, I prefer John Williams and his site too. /// I found it interesting this week that Australia is now setting up a straight money exchange with China that will bypass the U.S. dollar = BIG NEWS. /// New Ludlum-style book title: The Cyprus Paradigm

  3. AndyB

    Greg: thanks for another fine interview with JW. You have to wonder how long TPTB can keep the recovery illusion intact. We’re getting close to the point when the disinformation and propaganda from the MSM will be totally ineffective. Then what?

    • Greg

      Reality with crash into the spin. The world wakes from its money printed induced sleep to an inflationary/deflationary nightmare! Yes, that’s right, both at the same time.

  4. DAVE

    Hi Greg
    They already have a map for bank failings and it’s disturbing.It’s kind of what transpired in Cypress.Bail in…….top down group.It’s a long read but pay special attention to sections 40 through 60.Everyone seems to be in the dark when it’s all laid out right here and although it say’s
    BOE…it’s the FDIC and FED….just READ


    Hope this helps Greg
    Great reporting and thanks ..Dave

    • Greg

      Thank you Dave for adding content to this post!!!

      • jc davis

        Greg/Dave As I read it I am reminded of the complex prudential resolution in 1990,s. The suit big winners were the lawyers. I think the BOE is greatly underestimating the power of GREED.
        Thanks for the post Dave. It really shows the evidence of the unavoidable.

  5. DAVE

    The above explains the 10.8 trillion versus 33 billion

  6. DAVE

    oh and also pay special attention to the foot notes at the bottom of the pages

  7. Chip

    Another informative interview. Thanks Greg…

    • Greg

      Thank you Chip for your comment and support.

  8. Heather

    Thanks for a great interview. It was great to hear it again from another source. I have been following the economics for a while now and I have been trying to tell people how bad it is. I also appreciated how he brought up government pensions. I have been trying to tell my friend who just retired that her pension is not safe, she is still in lala land. I am in Reno and I have seen at least 5-7 businesses close since the beginning of the year. Things seem to keep deteriorating out here and no one is talking about it.

    • Greg

      Nice reporting Heather from the real world!!

  9. KingTut

    I would just like to add, that the $33B that the FDIC “has” is not really there. Just like Social Security, the insurance premiums collected from the banks goes into the general fund and gets spent. The treasury owes the FIDC the balance, which is what the so-called trust fund actually is. So ALL the money necessary to bail out even small banks, adds to the deficit.

    • Greg

      OMG King Tut, it’s even worse than I thought!! Thank you.

  10. Rob

    Hi Greg!

    Argentina could very well default soon:


    Just like Cyprus the dominoes are beginning to fall toward the New World currency:


    This will bring the US domino falling by May that could bring a global covenant by this fall for the NWO that will unseat the US petro dollar/world reserve currency and install seven regional reserve currencies comprising of:

    1)the Euro for Europe
    2)the Ruble for the USSR territories
    3)the Yuan for the Asians
    4)the Aussie dollar for the south Pacific Australia and Southern Africa
    5)the Iraqi dinar for the Middle East and Northern Africa
    6)the Brazilian Real for South America
    7)the US dollar for North America

    This was all prophesied thousands of years ago.

    In CHRIST! Rob

    • Greg

      Thank you Rob for this perspective!

    • Billy Bob

      Christ! What have you been smokin’?


    • Robert

      Canada would NEVER use the USD…not in a million years.

  11. Serge

    In my opinion the Military backed US dollar is looking stronger these days with all the posturing going on around North Korea.

    • Greg

      Short term the buck could gain and gold and silver could be sold but there is nothing healthy about the prospects of the U.S. dollar. There is just too much debt. Thank you man!!!

  12. Ulysses

    All this talk about economy and its recovery or absence thereof is meaningless unless one defines what economy is.

    We all consume products and services to survive. We can either produce them ourselves or trade with others. This process of production and consumption is called the economy. Money is a temporary storage of the value of our own products to be exchanged later for other peoples’ products and nothing more. Academic economists fail to understand this simple fact and think of money (and fiat currency, to boot) itself as the source of wealth, which it is not and Bernanke’s endless money printing is an exercise in futility as has already been demonstrated in Zimbabwe.

    These products must meet contemporary standards of quality and price to be acceptable in the marketplace. In order to make such products, one needs contemporary levels of education and skills.

    Education in America is a disaster and constant interference from the conservatives are not helping matters any. When the Asian kids are literally killing themselves to excel in math, science and other subjects in their murderously competitive educational system and know three languages while American schools are mere factories to churn out football players and the average teenager is functionally illiterate, can not point out New York city on a map and can not even write a paragraph in English, how on earth can they compete with their Asian counterparts in the world of the 21st Century and is it any wonder that the jobs are going there?

    Interestingly enough, American parents are usually much more informed than their children which should tell us something.

    Respect for education and willingness to learn is the fundamental requisite for success in today’s world and unless America can give its children proper education, economic recovery will remain a myth.

  13. Blob Man

    Of all of the things Williams gets wrong, perhaps his most sensational statement is his estimate of the pace of his hyperinflationary scenario, implying that it will be worse than the hyperinflation faced by Zimbabwe. Williams is basically saying is that the dollar will become worthless within a year. His argument is as follows. Zimbabwe ran a black market for U.S. dollars which cushioned the effects of its hyperinflation to some extent. Well sure it did because the dollar is not truly a fiat currency; again, it’s linked to oil and commodities.

    “What helped to enable the evolution of the Zimbabwe monetary excesses over the years, while still having something of a functioning economy, was the back-up of a well functioning black market in U.S. dollars. The United States has no such backup system, however, with implications for a more rapid and disruptive hyperinflation than seen in Zimbabwe, when it hits.

    Does this comparison with Zimbabwe sound familiar? Perhaps you have heard others (Peter Schiff and Marc Faber) make similar comparisons.

    Williams goes on to mention the fact that oil prices are denominated in U.S. dollars. While he explains that the debasement of the dollar has led to rising oil prices, he does not carry this argument forward. For instance, if the U.S. were to experience hyperinflation, oil would the absolute best asset class to protect against the collapsing dollar. Instead, Williams positions gold as a good hedge against a worthless dollar despite the fact that gold has no economic relationship to the dollar.

    “Inflationary pressures have started to surface from the Fed’s efforts at dollar debasement. A weakening U.S. dollar has placed upside pressure on dollar-denominated oil prices, which in turn have begun pushing annual inflation higher. This is not inflation generated by strong economic demand, but rather inflation driven by Federal Reserve efforts to weaken the dollar.” (p.16, paragraph 3)

    Williams goes on to discuss how the dollar has lost the vast majority of its buying power over the past several decades due to the effect of compounding inflation. But he fails to mention the same thing all gold bugs never discuss. While inflation has increased, wages have also increased. Certainly, median incomes have not kept up with the rate of inflation for a few decades now. However, Williams has greatly exaggerated this disparity. To highlight his misguided view of inflation, it would appear that he intentionally left out data on rising median incomes over his selected time frame.

    • Greg

      If you would like to be this granular criticism ten please use a real verifiable name Blob Man. Also give us some credentials.

      • Robert

        May I suggest that you look at facts rather than ask who I am? You have guests on that give you information and I wonder if you actually vent this information or just present it to the public because it suites your world view.

        A great journalists checks facts. Is there a possibility that what you believe and its out come is wrong, why do you believe the people you have on?

        Maybe its time you challenge your own beliefs instead of being hostile to questions that challenge your guests…that is what MSM does.

        My credentials do not matter but what you present as fact does….

        • Greg

          You were heaping criticism on my guests and you are giving trading advice. Who you are is an important “fact.” You can at least man-up and own your comments and not do it anonymously. I don’t post anonymously and my guests don’t comment anonymously. Are you Robert Burke or Robert Chapman. Real first and last name from here on out. Something I can verify. You know–vet. No exceptions. By the way, here are some facts: The Fed is printing $85 billion a month. Interest rates are set to 0% until 2015. Mark-to-market accounting was suspended in 2009 and it still is. Do you think they can simply stop this without the economy imploding?

  14. Blob Man

    Williams also fails to point out that during the Great Depression nations that left the gold standard recovered from the depression more rapidly than nations that continued to use gold to back their currency. It is likely that the reason for this was due to the fact that when severe economic conditions materialize, printing more money than dictated by gold reserves can help restore the economy.

    However, if excessive amounts are printed and not withdrawn in a timely manner, instead of a deflationary depression, a hyperinflationary depression is a possibility, although not necessarily a certainty. Excessive currency printing can also lead to another asset bubble. While hyperinflation is a possibility, it can only occur when additional elements of economic and/or political destabilization are present. Such elements are only seen in destabilized second or third world nations. And it certainly cannot occur with a currency that is linked to oil and other commodities.

    In making these comparisons without factoring the uniqueness of the dollar is inaccurate and irresponsible in my opinion. Even with elements of severe economic destabilization, hyperinflation is highly unlikely to materialize in the U.S. due to the unique advantages offered by the dollar-oil link. However, certain politically destabilizing events could lead to hyperinflation, namely events that severe the dollar-oil link, but only if the U.S. did not have a means to definitively combat these actions with its military.

    Ultimately, it’s not whether the dollar is backed by gold or anything else. What matters most are those who control the printing. Sure, the Fed has been criminally irresponsible. Sure, I would prefer a currency backed by something, although I’m not sure gold is the solution. But anyone who feels the Federal Reserve would willingly give up its control over monetary policy or impose activities that threaten to dissolve its power simply isn’t thinking straight.

    In conclusion, the U.S. is likely to experience a significant amount of inflation in coming years. However, due to the dollar-oil link much of the globe is likely to experience a greater amount of inflation. We are seeing the early stages of this inflationary trend today. Regardless whether you believe the U.S. will experience massive inflation or even hyperinflation, the best protection is oil and other commodities, not gold. But even oil and commodities will not keep rising forever, as many believe. These are facts that all credible investment professionals realize. The problem is that one rarely hears credible investment professionals pitching gold; the ones that do work for firms which deal in gold.

  15. Digby Geen

    I’d like to see the USA and Europe and Japan to start lowing their debt slowing but steadily.

    I’d also like to see the USA and Europe start making real stuff again and get away from service economies that have nothing to service.

  16. Mike R

    With all the so called negative incidents, what is amazing is how gold is getting hammered. Its now down to $1544 and looks like its going to tumble much lower.

    Hard to understand how it continues to tumble if as John says we are seeing the dollar debased, future hyperinflation and by mid summer a major drop in the dollar. We seem to be in the early stages of an oil and natural gas energy boom. Drivers are consuming less fuel, and so fuel prices should be dropping by summer. Food costs should be dropping soon. And now the fed is talking about dropping purchases of bonds by this summer and ending by year end.

    Somebody out there is seeing signs of a recovery and certainly the stock market keeps rolling ahead.

    I guess what I’m saying is that we’ve been hearing from all these doom and gloomers for at least since 2008, if not longer before that, and yet we are seeing a dollar that keeps getting support, while all this Flood of QE keeps on going.

    gold is lower than before cyprus. Nk is screaming “war”. Eurozone looks to be falling apart, at least from what’s stated on the Internet, over numerous non mainstream websites. I would think gold would be well over $2000 an ounce by now.

    I don’t know Greg. This inflationary story is getting long in the tooth.

    • Robert

      Notice Greg does not reply to your view because it conflicts to his views….journalist present facts not just ones that that suit their views

    • Greg

      All I can say Mike R is that this is a protection play. If you think you no longer need protection then go long the dollar and take Roberts path and short gold. That is trading advise and I simply do not give it. If you are looking at this as a trade you are in the wrong frame of mind to be long gold.

    • Charles H.

      Mike R,

      The Fed and Gold Banks are suppressing the price of both silver AND gold in order to protect the dollar. Since the Fed is de facto operating for the government – no prosecution will go forth on this patently illegal activity. So whatever the Fed SAYS it MAY do must be taken with a grain of salt. Inflation is absorbed by liquidity on one end – and punishes the other by the excess money-prnting in diluting value; then disguised by Main Street Media through ‘imaginative accounting principles’. Real inflation is in everyday costs – food, gasoline, durable goods – all more money. Anyway, this round of musical chairs is enjoying a long musical drama. And forecasts are difficult due to lack of crystal balls. But I say this: nobody ‘sees’ depressions coming – they just show up. All the signs are out there – but there must be a willingness to “see” them. So the question to ask is : are you seeing what you want; or are you seeing what there is??? I’d rather all these “Doom and Gloomers” were wrong; but conscientiousness tells me I must prepare in case they are right. Time will tell.

  17. SilverHawk

    Ah, the FED will just instantly print up 10 more Trillion. “Magic Money Funny Number”. That’s what I tell people.

    Got Silver?

  18. Fraser

    Steve Hanke (John Hopkins University, Cato Institute), who has advised many Governments on how to stop hyper-inflation, disagrees with your US hyper-inflation scenario:
    If you have an hour, it is fascinating. In brief, broad money includes State Money (15%) and Bank Money (85%). While “helicopter Ben” is expanding state money quickly, the larger proportion (bank money) is actually contracting due to Dodd-Frank & Basel III; with net result that broad money supply is weaker than trend, which is not going to produce hyper-inflation.

    • Greg

      Mr. Hanke does not account for the $12 liquid dollar assets held outside the country. What kind of analysis omits the implications enormous fact?

      • Fraser

        Thank you Greg, my mistake.

        I can see high inflation (10% to 30%) which will cause interest rates to rise and assets to fall (resulting in deflation like the 1930s depression and Greece today). But I can’t see “hyperinflation” which is defined as 50% per month (or over 1,000% per year). For this to occur you will need all industry destroyed by war, mass unemployment and famine and international sanctions (like America imposes so freely on so many other countries).

        If we use your numbers, we currently have (approximately) State Money (10%), Bank Money (55%) and Overseas Money (35%). Which means that the Fed’s actions are having less effect than even Hanke suggests and if all overseas money dumps (and the Feb buys it all) we will have State Money (45%) and Bank Money (55%); which is probably still manageable.

        I agree that the situation is bad and there are no happy endings, but I think “hyper-inflation by 2014” is alarmist and makes me question the commentator.

        • Greg

          Some background on John Williams. He currently sells his research to some of the biggest hedge funds and money people around. Past clients include Chevron and Boeing. His current client list is secret. He was first to say the real GAAP deficit more than a year or two ago. He said it was not $1 trillion but nearly $5 trillion if you count everything USA Today backed him up several months later. Now Williams says the real GAAP deficit is nearly $7 trillion. The Chinese say it’s $6.4 trillion. Whatever the number, it is way more then $1 trillion. Any of those CATO sources saying that? No. If Williams is half right, it will be a disaster. I’m betting he’s more than half right. I would not bet against him, but that’s me. By the way, when you say “bank money” are you factoring in FASB’s suspension of “mark to market” accounting back in April of 2009? And, what about the derivative exposure? The FDIC says it’s North of $200 trillion for the big banks. There are lots of very big numbers out there and it’s not true equity and clean assets. Be careful with your positions. Thank you for your comment.

          • Fraser

            I am a huge fan of John Williams and agree with 99% of what he says. However, John has predicted hyper-inflation for a few years now and I am worried that he is unnecessarily putting at risk his good reputation.

            Cyprus, Greece, Spain, Italy, Ireland, Portugal, Japan, Argentina, Iran, Iraq, Syria, Korea – you name it – the whole world is going to hell (NOT JUST America). So why is any country (let alone the whole world simultaneously) going to dump the USD? Indeed the exact opposite is occurring; because in the current “flight to safety” the USD is going UP not down.

            Furthermore, with the amount of manipulation going on and still available, this trend will not reverse quickly and so I think that the call of “immediate dollar collapse followed by 1,000% plus annual inflation by the end of 2014” is a low probability event.

            On the other hand, time will tell !

  19. Robert

    I have been buying and selling gold for about 8 years and I loath to write this, but if Gold breaks below 1520.00 this week then then we have entered a bear market for gold.

    The charts are clearing indicating that there is no conviction in gold and as further technical sell triggers starting pushing the momentum to the downside. Breaking the 1520.00 level is the time to get out.

    I am then going to shorting gold…sorry to say but its over.

    • Charles H.


      By all means follow your convictions, or judgment. I say, however, that the “market” is not a true market: it is manipulated. If you take decisions on face value of the market, and the “powers that be” are driving the weak hands to sell their physical: then you are falling into their hands. Consider your sources. Gold is for long-term security. If your view is purely profit, then I think you are not doing enough homework.

    • Shadow of Doubt

      In a rigged market why would anyone buy into the charts! You honestly believe that the numbers can’t be shaped, spun or mutilated to create something other than what actually exists. Some might call this a buying opportunity.

  20. Chuck

    Greg; It is almost unbelievable! All of this going on in Cyprus, every body leaving the US dollar for trade, & now threats from North Korea,with all major central banks buying gold, & the price of gold & silver falling through the floor, but there is NO manipulation?? How is this even possible?? Chucl L.


    Hi!, Patrons Of USAWatchdog.com Et Al:

    It would be interesting for Greg Hunter of USAWAtchdog.com to have an interview with Dr. Marc Faber of the Boom, Gloom & Doom Report featured appraising what Dr. Faber means in the film, MELTUP, @ The National Inflation Association, when Dr. Faber towards the end of this documentary video explains that dividing the number of troy ozs. of gold supposedly held by the US Treasury Dept. divided into the money stock equals a gold price of $1,000,000 per troy oz. Dr. Faber stated this around 2009 and sense then we have had and continue to have additional QE by the trillions of US $’s which would equal an appraised present day price by Dr. Faber as being ? However, the price of gold is being manipulated in my view by geopolitical events filtered through the Futures Market whereby the price of gold is being manipulated and not fixed like it was @ Bretton Woods. By keeping the price of gold locked up within the confines of the elitists Futures Market, Americans holding gold today have lost most of the buying power of their gold haven’t they, when their gold price from the Futures Market is compared to the price mentioned by Dr. Faber in MELTUP? Which price is the RIGHT price? Perhaps Mr. Hunter can get Dr. Faber to answer that question in one of his one on one interviews with Dr. Faber? Please don’t tell me my gold is worth a million $’s per troy oz. and then try to buy it off me @ a mere $1,550 per troy oz. OK? If gold’s price was set at the price quoted by Dr. Faber in MELTUP, how many gold eagles would the US Mint sell etc.? If the gold in Fort Knox etc. was minted for FREE into gold coins as mandated by OUR US Constitution in Article 1; Section 10 and then distributed to all the American People at Dr. Fabers’ price, wouldn’t the American People immediately set the stage of an economic recovery on their own wthout outside help from the FED or any of OUR elected professional politicians? As I see it eventually we all have to face reality and there’s no way we can do that economically etc. without coming face to face with responsibly responding to the demands placed upon each of US by OUR US Constitution is there? If Mr. Hunter can not create such a one on one interview with Dr. Faber, we can each at lest use the food for thought presented here to contemplate what OUR collective, National Future holds for us, by allowing outselves and OUR fellow citizens to stray from the common sense economics taught us by OUR Founders who constructed the US Constitution for the benefit of all of US can’t we?

    RUSS SMITH, CA. (One Of Our Broke Fiat Money States)
    [email protected]

  22. jc davis

    Greg: I find myself amazed at how many gold holding stock minded people get fearful when gold drops, and stocks rise. I find street silver to be a great trade these days…no matter how many fake trash paper dollars I THINK I lost. ..Amazing . LOL
    Can someone say EMP (electro magnetic pulse) bomb?
    Never underestimate the power of GREED.

    • DAVE

      Yea i think so too.The govt. needs to pull another(911) rabbit out of the hat.This probably would wipe out a lot of derivatives and digital debt.I expect something on a grand scale

  23. M.Smith

    Greg, those in Cyprus who had gold or silver coins did not stand in lines or lose their saving or check accts! That is the story not told or will be told! Why? The Power block filters what they want! The US is the same! Let those who know all find their own way when the SHTF & it’s coming to the world soon, most of the world is in it now, wait till it hits the States like Russian Hammer!

    I think the US will start this war that never ended to cover their ass for their failures as Americans Leaders sworn to UPHOLD the U.S. CONSTITUTION as we have seen by their actions ,NDAA!

    • Greg

      Your correct sir. Think Cyprus when you think of gold and silver.

  24. DAVE

    Hi Greg
    Everyone is looking for the next trigger the ignite collapse and most are looking to Europe and here but i believe if you follow the money ,it points to a clear picture.Don’t be surprised to find the pin that pricks the balloon here.


    • Greg

      Thank you for the comment and the link.

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