John Williams of Shadowstats.com Interview: The Next Crash Will Be A Lot Worse!

By HousingBoom   follow   Mon, 28 Jan 2013, 7:31am PST   ↑ Like (1)   ↓ Dislike (1)   25,677 views   190 comments   Watch (1)   Share   Quote  


Anyone who thinks the U.S. is in recovery should stop listening to the mainstream media and listen to John Williams. He heads up Shadowstats.com, and is one of the few economists who crunches the numbers to give unvarnished true statistics. Adjusted for real inflation of about 7%, Williams says, "GDP has plunged, and we have been bottom bouncing" ever since the financial crisis started. Williams says, "The next crash will be a lot worse (than 2008) because it will push us into the early stages of hyperinflation." He predicts this will happen "by the end of 2014" at the latest....

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yup1   befriend (0)   ignore (2)   Thu, 31 Jan 2013, 7:38am PST   Like   Dislike     Share   Quote   Comment 111

The Professor says

If the crash happens those with property and precious metals will be ok, not
great, ok. Those in paper (401k, stocks, bonds, etc.) are screwed.

If the crash happens all asset prices will get crushed. Cash is king when credit is collapsing.

tatupu70   befriend (3)   ignore (12)   Thu, 31 Jan 2013, 7:41am PST   Like   Dislike     Share   Quote   Comment 112

yup1 says

That is graphing business cycles it is not even showing the 2008 crash, HAHA

Did you look at the x-axis? The chart is a little dated, I'll grant, but it clearly shows underwater was very, very wrong.

HousingBoom   befriend (1)   ignore (0)   Thu, 31 Jan 2013, 7:42am PST   Like   Dislike     Share   Quote   Comment 113

yup1 says

The Professor says

If the crash happens those with property and precious metals will be ok, not

great, ok. Those in paper (401k, stocks, bonds, etc.) are screwed.

If the crash happens all asset prices will get crushed. Cash is king when credit is collapsing.

It's going to be a crash but we don't know if it's a deflationary one (stock market collapse) or inflationary (bond market and/or dollar collapse). The job market is the biggest factor for home prices. All I know is that the job market will be in a world of hurt when this occurs. This will not be a soft landing like most bulls are predicting. The longer it doesn't happen, the bigger the bubble and the bigger the collapse will be

yup1   befriend (0)   ignore (2)   Thu, 31 Jan 2013, 7:56am PST   Like   Dislike     Share   Quote   Comment 114

tatupu70 says

HousingBoom says



Wages are falling so any price increase is not sustainable IMO


http://news.yahoo.com/personal-income-posts-biggest-gain-eight-years-133706758--business.html

That is from early dividend payouts for tax purposes. It will not continue.

The Professor   befriend (4)   ignore (3)   Thu, 31 Jan 2013, 7:57am PST   Like   Dislike     Share   Quote   Comment 115

tatupu70 says

The Professor says

It does not look like the Federal Reserve (established December 23, 1913) helped with smoothing out the business cycle; quite the contrary. I also noticed that our economy booms with war.

Are you looking at the same chart as I am? Certainly, the Federal Reserve didn't instantaneously change things, but clearly the business cycle has been smoother after WWII. To what do you attribute that change?

Not counting the great depression and the dip after ww2 you are correct; the business cycle is smoother.

The 19th century swings were caused by an expanding country.

I do not believe the creation of the Fed was a good thing. I definitely don't think going off the gold standard in 1971 was good. It freed the Fed, a supragovernmental authority, in collusion with our corrupt government, to create as much money as they want.

I am not sure why the business cycle is petering out. Maybe because we are running out of room to grow? Perhaps Govt intervention?

Soon we'll flatline.

tatupu70   befriend (3)   ignore (12)   Thu, 31 Jan 2013, 7:58am PST   Like   Dislike     Share   Quote   Comment 116

yup1 says

That is from early dividend payouts for tax purposes. It will not continue.

Maybe, maybe not. But to say that incomes are falling is not right.

HousingBoom   befriend (1)   ignore (0)   Thu, 31 Jan 2013, 8:01am PST   Like   Dislike     Share   Quote   Comment 117

tatupu70 says

Maybe, maybe not. But to say that incomes are falling is not right.

That payroll tax just killed any hopes of an increase in wages. lol

yup1   befriend (0)   ignore (2)   Thu, 31 Jan 2013, 8:05am PST   Like   Dislike     Share   Quote   Comment 118

tatupu70 says

Maybe, maybe not. But to say that incomes are falling is not right.

Sorry on that point you are incorrect.

http://beschloss.blogs.mydesert.com/2013/01/07/flat-per-capita-incomes-weigh-on-us-employment-sector/

yup1   befriend (0)   ignore (2)   Thu, 31 Jan 2013, 8:09am PST   Like   Dislike     Share   Quote   Comment 119

HousingBoom says

That payroll tax just killed any hopes of an increase in wages. lol

You got that right!

tatupu70   befriend (3)   ignore (12)   Thu, 31 Jan 2013, 8:13am PST   Like   Dislike     Share   Quote   Comment 120

yup1 says

Sorry on that point you are incorrect.

I didn't know your timeframe was a decade. I figured you were referring to present time

yup1   befriend (0)   ignore (2)   Thu, 31 Jan 2013, 8:26am PST   Like   Dislike     Share   Quote   Comment 121

robertoaribas says

54k down to 50K sounds about right for the crisis

I was only linking to show the income drop I did not read his crappy blog :D

yup1   befriend (0)   ignore (2)   Thu, 31 Jan 2013, 8:29am PST   Like   Dislike     Share   Quote   Comment 122

tatupu70 says

I didn't know your timeframe was a decade. I figured you were referring to
present time

Oh yes more long term, short term gains are too volatile. And that is the average which is dragged higher by the high end. A better statisic would be median incomes which are hopelessly low, 26k is the median single wage in the US, DOH!

CDon   befriend (1)   ignore (2)   Thu, 31 Jan 2013, 8:32am PST   Like (1)   Dislike     Share   Quote   Comment 123

HousingBoom says

This will not be a soft landing like most bulls are predicting.

While written today - this could have just have easily been written 3 years ago.

For the last 3 years, despite you continuing to call for a "collapse", it has been the soft landing as each crisis turns into nothingburger after nothingburger. So again, is there any point in the next 0-50 where you decide to re-evaluate your conclusion? Is there any point in the next 0-50 years when you say, "gee, I guess there is not going to be a second collapse after all"?

And if not a date, how bout an event? If the DJIA hits say XYZ then you will change your tune. Or perhaps if unemployment hits ABC then you will reconsider...

BTW - if the answer for you is "I dont know" so be it. It just seems to me that anyone this "certain" of something, despite the some or even any evidence to the contrary, is setting themselves up for a lifetime of disappointment.

yup1   befriend (0)   ignore (2)   Thu, 31 Jan 2013, 8:36am PST   Like (1)   Dislike     Share   Quote   Comment 124

CDon says

For the last 3 years, despite you continuing to call for a "collapse", it has
been the soft landing as each crisis turns into nothingburger after
nothingburger. So again, is there any point in the next 0-50 where you decide to
re-evaluate your conclusion? Is there any point in the next 0-50 years when you
say, "gee, I guess there is not going to be a second collapse after all"?

I guess I would ask why do you believe that 2008 cannot be repeated? What has changed to stop that from happening? Nothing. Do you think that the Fed can bailout everything if everyone decides to sell? When will you get concerned with the Fed balance sheet 5 Trillion, 10 Trillion, 50 Trillion?

HousingBoom   befriend (1)   ignore (0)   Thu, 31 Jan 2013, 8:41am PST   Like (1)   Dislike     Share   Quote   Comment 125

yup1 says

I guess I would ask why do you believe that 2008 cannot be repeated?

Because he's a mental midget!

The Professor   befriend (4)   ignore (3)   Thu, 31 Jan 2013, 8:47am PST   Like (1)   Dislike     Share   Quote   Comment 126

robertoaribas says

The Professor says

I do not believe the creation of the Fed was a good thing. I definitely don't think going off the gold standard in 1971 was good.

you and zero economists agree...

Zero? Oh, you mean Zerohedge economists agree.

http://www.zerohedge.com/contributed/economists-end-or-drastically-downsize-fed

Raw   befriend (0)   ignore (0)   Thu, 31 Jan 2013, 8:53am PST   Like   Dislike (1)     Share   Quote   Comment 127

yup1 says

I guess I would ask why do you believe that 2008 cannot be repeated? What has changed to stop that from happening? Nothing. Do you think that the Fed can bailout everything if everyone decides to sell? When will you get concerned with the Fed balance sheet 5 Trillion, 10 Trillion, 50 Trillion?

Lots of reasons why 2008 can't be repeated anytime soon:
Home prices are not overpriced anymore. They are under priced.
Recent home purchases are not leveraged with zero downs. Many were all cash.
Interest rates are a lot lower.
Economy is not sinking anymore, but making a slow come back.
The worst is over, the future is bright.

yup1   befriend (0)   ignore (2)   Thu, 31 Jan 2013, 9:00am PST   Like (2)   Dislike     Share   Quote   Comment 128

Raw says

Recent home purchases are not leveraged with zero downs.

So 3% FHA loans do not happen?

yup1   befriend (0)   ignore (2)   Thu, 31 Jan 2013, 9:03am PST   Like (2)   Dislike     Share   Quote   Comment 129

Raw says

Home prices are not overpriced anymore.

So says those that own, those that rent believe the opposite, some of those that own (me) still believe the opposite. Home prices are being supported by low interest rates. What happens if rates rise?

yup1   befriend (0)   ignore (2)   Thu, 31 Jan 2013, 9:07am PST   Like (2)   Dislike     Share   Quote   Comment 130

Raw says

Lots of reasons why 2008 can't be repeated anytime soon:

You saying it can't be repeated shows your ignorance. Lehman, Bear, Wachovia, WAMU, Countrywide, Merril, have been absorbed by the remaining big 5 banks. They are now much bigger than before the last crisis when Lehman ALONE destroyed the credit markets. You keep smoking that it can't happen again crack pipe.

tatupu70   befriend (3)   ignore (12)   Thu, 31 Jan 2013, 9:08am PST   Like   Dislike     Share   Quote   Comment 131

yup1 says

Raw says

Home prices are not overpriced anymore.

So says those that own, those that rent believe the opposite, some of those that own (me) still believe the opposite. Home prices are being supported by low interest rates. What happens if rates rise?

If rates rise, that means unemployment will certainly have fallen and incomes will be up. So house prices will probably be rising as well.

yup1   befriend (0)   ignore (2)   Thu, 31 Jan 2013, 9:14am PST   Like   Dislike     Share   Quote   Comment 132

tatupu70 says

If rates rise, that means unemployment will certainly have fallen and incomes
will be up. So house prices will probably be rising as well.

The last housing bubble was caused by what? Artificially low payments with crazy subprime loans. Interest only, pick a pay, you name it. Rising rates do not lead to higher home prices.

Ironman   befriend (0)   ignore (13)   Thu, 31 Jan 2013, 9:25am PST   Like   Dislike (2)     Share   Quote   Comment 133

tatupu70 says

If rates rise, that means unemployment will certainly have fallen and incomes will be up. So house prices will probably be rising as well.

CDon   befriend (1)   ignore (2)   Thu, 31 Jan 2013, 9:31am PST   Like   Dislike     Share   Quote   Comment 134

yup1 says

CDon says




For the last 3 years, despite you continuing to call for a "collapse", it has
been the soft landing as each crisis turns into nothingburger after
nothingburger. So again, is there any point in the next 0-50 where you decide to
re-evaluate your conclusion? Is there any point in the next 0-50 years when you
say, "gee, I guess there is not going to be a second collapse after all"?



I guess I would ask why do you believe that 2008 cannot be repeated?

No absolutely, it can be repeated. I continue to look for risk pricing in the bond market, or in the a1/p2. As they both sit there, while we print with wild abandon, I dont think twice about it. If they start to rise, like we saw in 2007 - absolutely I will be changing my tune - and fast.


Yup1 says..."Do you think that the Fed can bailout everything if everyone decides to sell? When will you get concerned with the Fed balance sheet 5 Trillion, 10 Trillion, 50 Trillion?"

Yes. Unequivocably. Again, I am operating on the assumption that they realize how serious this is - and if push comes to shove, they would much rather risk a global conflict with our creditors than they would see rioting, tanks in the streets, and the risk they could be dragged thru the streets, mogadishu style.

And therein lies the risk with changing course. There is so so so much debt out there - if called simultaneously, like we almost had in 2008, some very very very powerful players on the worlds stage will be very very screwed. And everyone knows this. Hence, no one is willing to pull the trigger - instead they wail, and shout, and then readily gobble down more of our debt.

So in that regard, honestly, there is no notational limit that we cannot exceed. Its kinda like the 500 billion dollar bill (zimbabwe dollars) I got as a gift. The guy got it for $4USD on ebay. Mugabe would rather destroy his country's ability to be a member of the worlds stage than risk dying at the hands of his countrymen. When push comes to shove, I am pretty sure which way our PTB will decide too.

tatupu70   befriend (3)   ignore (12)   Thu, 31 Jan 2013, 9:57am PST   Like   Dislike     Share   Quote   Comment 135

yup1 says

Rising rates do not lead to higher home prices.

Of course not. It's not cause and effect. But rates also don't rise and fall randomly. They rise when there is an expectation of inflation and fall when there is an expectation of deflation.

So, if you are saying that rates are rising, that means there is an expectation of inflation, which implies higher incomes and lower unemployment.

yup1   befriend (0)   ignore (2)   Thu, 31 Jan 2013, 10:00am PST   Like   Dislike     Share   Quote   Comment 136

CDon says

Its kinda like the 500 billion dollar bill (zimbabwe dollars) I got as a gift.
The guy got it for $4USD on ebay.

Dude whoever bought that got robbed my buddy got me a 100 Trillion dollar one for 4 bucks, ROFLMFAO!

yup1   befriend (0)   ignore (2)   Thu, 31 Jan 2013, 10:07am PST   Like   Dislike     Share   Quote   Comment 137

CDon says

Hence, no one is willing to pull the trigger - instead they wail, and shout,
and then readily gobble down more of our debt.


So in that regard, honestly, there is no notational limit that we cannot
exceed.

At some point mathematics takes over and the amounts of debt cannot even be serviced, then what? If you are just printing money to make fake reserves you are doing nothing. If that money does not get into the real economy the increased debts will eventually default. I guess you could go with a 0 interest rate, all of that money is fake anyway.

I guess that is the point, do we all not understand at this point that it is all fake. A large group of people being "poor" while an individual person is "rich" when ALL of the credit money ever created is fake is pretty rediculous.

If the population in general ever comes to truely understand the nature of credit money, no one will ever pay back another debt again, EVER!

yup1   befriend (0)   ignore (2)   Thu, 31 Jan 2013, 10:09am PST   Like   Dislike     Share   Quote   Comment 138

tatupu70 says

But rates also don't rise and fall randomly. They rise when there is an
expectation of inflation and fall when there is an expectation of deflation.

That is what they used to mean, I agree. If you think that is what rates mean in todays ZIRP environment I believe you are wrong.

yup1   befriend (0)   ignore (2)   Thu, 31 Jan 2013, 10:30am PST   Like   Dislike     Share   Quote   Comment 139

tatupu70 says

Of course not. It's not cause and effect. But rates also don't rise and fall
randomly. They rise when there is an expectation of inflation and fall when
there is an expectation of deflation.


So, if you are saying that rates are rising, that means there is an
expectation of inflation, which implies higher incomes and lower
unemployment.

Bill Gross from PIMCO said in 2010 that without Uncle Sam backing mortgages rates would climb by 3 to 4 %. I wonder what home prices would be with 7-9% mortgages?

Kevin   befriend (0)   ignore (3)   Thu, 31 Jan 2013, 10:31am PST   Like (1)   Dislike     Share   Quote   Comment 140

You guys understand that Zimbabwe was never a stable global superpower with reserve currency status right?

CDon   befriend (1)   ignore (2)   Thu, 31 Jan 2013, 10:39am PST   Like   Dislike     Share   Quote   Comment 141

yup1 says

Dude whoever bought that got robbed my buddy got me a 100 Trillion dollar one
for 4 bucks, ROFLMFAO!

LOL - I stand corrected it was actually a 500 trillion note. Is yours the one with the 2010 redemption date?

yup1 says

I guess that is the point, do we all not understand at this point that it is all
fake.

Yeah , pretty much. If there was any doubt, the world realizes it is all a big ponzi scheme right now. But like all ponzis, once you recognze its a ponzi and all of you will lose, it behooves you to pawn it off on someone else - in this case the next generation (who will then have their own 2008 minute whereupon [unless someone calls their bluff] they will pawn that ponzi on to the next generation.

yup1 says

A large group of people being "poor" while an individual person is "rich" when
ALL of the credit money ever created is fake is pretty rediculous.

At the end of the day, money is just a representation of resources, (be them natural, political, or otherwise). In 2008, the worlds pool of bullshit was drained, and we were all exposed as swimming naked. Still, we, here in the US were still recognized as being the biggest, strongest, pack of grenades across its chest... So when we said "why dont we re-fill this pool, and lets all pretend it didnt happen" everyone else, recognized how powerless they were they nodded in agreement.

It wont always be this way. Eventually China or someone else will be big enough to call the shots. Im just not so sure that is going to happen while I happen to be on this planet.

Ironman   befriend (0)   ignore (13)   Thu, 31 Jan 2013, 10:42am PST   Like (1)   Dislike (2)     Share   Quote   Comment 142

yup1 says

Bill Gross from PIMCO said in 2010 that without Uncle Sam backing mortgages rates would climb by 3 to 4 %. I wonder what home prices would be with 7-9% mortgages?

According to Tat's theory, if rates were 7% or higher, house prices would be double what they are now and we would all be making a lot more in wages!

Ironman   befriend (0)   ignore (13)   Thu, 31 Jan 2013, 10:45am PST   Like (1)   Dislike (3)     Share   Quote   Comment 143

yup1 says

CDon says

Its kinda like the 500 billion dollar bill (zimbabwe dollars) I got as a gift.

The guy got it for $4USD on ebay.

Dude whoever bought that got robbed my buddy got me a 100 Trillion dollar one for 4 bucks, ROFLMFAO!

Here, I have one I'll sell you real cheap!!

*

CDon   befriend (1)   ignore (2)   Thu, 31 Jan 2013, 10:47am PST   Like   Dislike     Share   Quote   Comment 144

yup1 says

Rising rates do not lead to higher home prices.

Real or nominal? In nominal terms, the record is not as clear as you think it is.

I dont have a graph for the US, but I do have tabular data, if you want to confirm it for the whole US. Either way, Im sure the people back in the 80s who decided to wait as interest rates hit 14-15-16 percent, watched in horror as nominal prices continued to slowly lurch upward.

Ironman   befriend (0)   ignore (13)   Thu, 31 Jan 2013, 11:34am PST   Like (2)   Dislike (3)     Share   Quote   Comment 145

robertoaribas says

it isn't as simple as busting out your finance calculator, keeping the payment the same, changing the interest rate and seeing the equivalent home price.

I believe it IS that simple, for one main reason....

The majority of people buy "payments", they don't buy "houses". The "sheep" listen to their realtor to see what maximum payment they qualify for, then they go shopping for houses that fit that "payment".

It's tough for house prices to rise as interest rates rise, as it puts them out of range of certain buyer pools.... The only way house prices can rise with rising interest rates is if wages rise accordingly.... and we know where wages have been all these past years.

HousingBoom   befriend (1)   ignore (0)   Thu, 31 Jan 2013, 12:52pm PST   Like (1)   Dislike     Share   Quote   Comment 146

underwaterman says

yup1 says

I wonder what home prices would be with 7-9% mortgages?

The market would collapse. Removing govt supporting 90% of all new mortgages underwriting or increasing interest rates or dumping shadow inventory at once will dramatically impact the housing market to the downside. We saw how quickly it dried up once the home buyer credit expired. It needs govt support to survive at all.

Yup! Watch the bond market. It's in the largest bubble in over 200 years and WILL burst because ALL economic bubbles bursts. The sheep won't know what hit them. Bonds have an inverse relationship with rates so you know what that means

JodyChunder   befriend (2)   ignore (5)   Thu, 31 Jan 2013, 2:31pm PST   Like   Dislike     Share   Quote   Comment 147

Contrarian conjecture aside -- you're right, YUP1.

There will be no middle class income growth in America in the next decade. (Why would there be?)

tatupu70 says

yup1 says

Raw says

Home prices are not overpriced anymore.

So says those that own, those that rent believe the opposite, some of those that own (me) still believe the opposite. Home prices are being supported by low interest rates. What happens if rates rise?

If rates rise, that means unemployment will certainly have fallen and incomes will be up. So house prices will probably be rising as well.

tatupu70   befriend (3)   ignore (12)   Thu, 31 Jan 2013, 11:11pm PST   Like   Dislike     Share   Quote   Comment 148

Call it Crazy says

The only way house prices can rise with rising interest rates is if wages rise
accordingly.... and we know where wages have been all these past years.

Yep, and we know where interest rates have been all these past years. That's the point.

If you are betting that interest rates will rise sifnificantly while wages stay stagnant, then you are betting on a very unusual event occurring.

Just so you understand that you are the one predicting against history.

tatupu70   befriend (3)   ignore (12)   Thu, 31 Jan 2013, 11:13pm PST   Like (1)   Dislike     Share   Quote   Comment 149

JodyChunder says

There will be no middle class income growth in America in the next decade.
(Why would there be?)

lol. US productivity continues to rise. The only reason there is no median income growth is because it's all going to the 1%. If Obama continues to make taxes more progressive, median income growth will return.

lostand confused   befriend (9)   ignore (2)   Thu, 31 Jan 2013, 11:15pm PST   Like   Dislike     Share   Quote   Comment 150

The FED has pretty much admitted that they will keep rates low until things/unemployment gets better. The current QE, they didn't even set a time limit-they can buy junk for all of eternity. There is no risk in the market for the big players.

The only thing that can happen, is if the dam breaks and the flood is large enough to bury even the FED. While unlikely, it may happen-but chances are slim. I think we are stuck at these low rates for a long time.

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