Female Voice: Welcome to Creating Wealth with Jason Hartman. During this program Jason is going to tell you some really exciting things that you probably haven’t though of before and a new slant on investing fresh new approaches to America’s best investment that will enable you to create more wealth and happiness then you ever thought possible. Jason is a genuine, self made multi-millionaire who not only talks the talk but walks the walk.

He’s been a successful investor for 20 years and currently owns properties in 11 States and 17 Cities. This program will help you follow in Jason’s footsteps on the road to financial freedom. You really can do it. And now, here’s your host, Jason Hartman with the complete solution for real estate investors.

Jason Hartman: Welcome to the Creating Wealth show. Thank you so much for joining me. This is your host, Jason Hartman and this is Episode Number 251. We’ve got a great show for you today. This guest that we have is famous. Many of you have heard of him and he is none other than John Williams of the famous website, Shadowstats.com, which for many, many years now has been debunking government statistics and really telling us the real story behind them. A lot of very credible people use his website and I think you’ll find the interview to be quite interesting. So, a couple of things before we get to that.

First of all, I keep forgetting to mention this so I’m going to mention it on this show. Podcasts are such a great medium for both the producer, the host, yours truly and you, the listener because they are asynchronous. So, I can produce them when it’s convenient for me. You can listen to them when it’s convenient for you. It is a beautiful, beautiful thing. It’s the same as email being asynchronous, text messaging being asynchronous verses the olden days when we used to actually talk on the phone. Remember that? Now there’s asynchronous communication and asynchronous communication, of course, requires both or all parties to be there at the same time, but one of the things that we miss out on with Podcasting because it is asynchronous, is we miss out on the opportunity to take calls like a radio show, and I get a lot of calls from listeners. And our investment counselors, of course, get lots of calls from you listeners and we try to help you as best we can with all of the various issues that are involved in our investment careers and our wealth creation plans, but it would be great to have call ins for the show.

So I thought well, maybe we should do some live shows from time to time and then I thought, that just blows the whole idea of being asynchronous, and the convenience of that for both you and I. So I thought, let’s do this instead. If you want to call and talk to me, we will record the conversation just like on a radio call in show and if you want to have some of it off the air, so to speak, not recorded, we can do that and you don’t have to divulge too much information. Just assume it’s like any live radio show with a financial advisor, whether it be Rick Edelman or Dave Ramsey or whatever where people call in. And I will do the same thing. We’ll record the conversations and then we will play them on a later Podcast.

So, you know, just mention your first name, be somewhat general about the information you give and I’ll be glad to answer your questions and we will play them on the show.

So, what is the number you ask to call in — to call into the show? Well, here it is. Write it down. It’s (949) 200-8009. Again that number is (949) 200-8009. That will be the call in number. You can call in. You can talk to me and we will play your spot on a future show.

One of the great things about questions and you know when we held our Meet The Masters of Income Property Investing event a couple of weeks ago, when you have a question, it’s usually the same question many, many other listeners have. So, you’re actually being a great contributor to the show and the richness of the show and the content for other people when you call and questions and get them answered, because many other people have the exact same questions.

This is different, of course, from posting a question on our Facebook page, where it’s only a one-way conversation and many times you sort of answer the question or you need clarification, etc. So, please use the call in number and we will play it on future shows.

So, a couple of news items before we get to John Williams, our guest today from Shadowstats.com. First of all, you’re going to love this one, folks, Bank of America. Yes, Bank of America may well be your most hated company in America, or at least possibly the most hated bank in America. Well guess what, they just gave their CEO a big fat raise at the shareholders’ expense. Bank of America gave its CEO a pay package worth 7 1/2 million dollars last year. That’s six times larger than in 2010. The raise came — well, the company’s stock lost more than half its value and the bank lost its claim to be the biggest bank in the country.
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So again, remember — you know, in the Creating Wealth home study course or in the Creating Wealth live seminars that I do, the Creating Wealth in Today’s Economy Boot Camp, I share some interesting snippets from Lou Dobbs great book, War on the Middle Class, and we talk about how the shareholders are getting completely burned while the executives, the board of director and the CEO and all the other C-level employees are making out like bandits, as they are basically screwing the shareholders out of their money. So, here’s a great example of that.

Bank of America, the — the CEO gets a huge raise, and I’m sure the Board of Directors and all of the C-level employees, the COO, all — all the other C-level people, all the other execs got big, fat raises. Well, the company’s stock lost half its value.

So, Brian Moynihan, okay, his pay package included a $950.000 salary, 6.1 million dollars in stock and $420,000 in use of the company’s private jet and tax and financial advice. Again, what a total scam in this economy, six times larger than in 2010 as the company’s stock lost half its value.

Now listen, I’m a Capitalist. I wouldn’t mind if Moynihan got a big raise if the shareholders were getting a commencement return on their investment and also the tax payers because of course they took lots of bail out money. And don’t be fooled by when you hear that this bail out money has been paid back folks. It’s never that simple. There are so many little dealings under the table that are going on with that. I’ve read lots of articles about that. Be it may, they may pay back the bail out money from Tarp and any other Omnibus bail outs, but at the same time, what they do is their various counter parties, the people that are in business with them, they get bail out money and they don’t pay it back. This is like the way Enron — it’s basically similar to the way Enron — remember good old Enron, the way it — they use those SPVs. Remember hearing that term during the Enron debacle days. SPVs are special purpose vehicles. They would set up other entities just to hide buried losses so they could lie about their income. And this — this whole bail out payback stuff, it’s the same basic scam as that from what I’ve read and understood.

Okay. John Burns, the Real Estate Consultant, we had him on the show I believe if my memory serves me correctly, that was like Show Number — Episode Number 133 or something. John Burns is out with interesting things. He has a Burns Home Value index and his latest news letter said, home prices have been rising for three months but nobody has been telling you that it says that, over the last three months, prices are up in 90 of 97 markets. They analyze the average price increase over the last three months was 1.1 percent or a 4.5 percent annual rate.

Now, you know what’s interesting about that, just right there folks, is that S&P case show the most widely used index ridiculous. S&P — I don’t like S&P. Okay. I — I really need to get someone on the show so I can debate the whole subject with them, but they only do 20 markets and this is only 90 or 97 markets they analyze in a given where — in a country where we’ve got 400 markets. All real estate is local. So again, much more comprehensive right here than (inaudible) in a factor of five. So right there it tells you a reason that it’s so important. But one of the interesting things here is when you look at these statistics, they’re — they’re always lagging so much, and really Burns goes on to explain it. I’ve talked about it on the show previously, but he says, “Why are prices of other indexes so far behind?” Well, the Burns Home Value Index calculates home devalues based on prices as they are set. And remember, what they mean there is — and this is my commentary, they’re set because the ultimate appraisal on a property is what is known as a meeting of the minds. When a buyer and a seller come together and form an agreement in a free market capitalist system, that is the real value right there. That is the most accurate appraisal you’ll ever have. You can have 10 different appraisers go out there and give a completely different opinion, but a knowledgeable buyer who shops around and a knowledgeable seller who wants to sell their property and understands the competitive forces going on in a free, open, capitalist market place, those two parties, when they come together and have a meeting of the minds, that is the holy grail of appraisals, folks, right there.

So, what he talks about here is nearly all other indexes are based on purchase transactions when they close, which is typically about two months after the purchase contract was negotiated, then it takes one or two months for that closing price data to be reported or compiled and reported. And the — the slowest index of them all is good old S&P Case Shower, which is about four to six months behind the A ball.

So, when you read those statistics in the widely quoted media, the Wall Street Journal, wherever, you’re — you’re basically looking at stuff that happened four to six months ago. Usually at least five or six months ago, usually. So, you got a half a year old data. And again, S&P only cities. I mean, ridiculous, totally incomplete. Only five percent of the overall market in the United States of America, totally ridiculous.

Folks, you know, I’ve been talking about how we have been struggling, struggling, struggling. The biggest problem in my business the last several months has been lack of inventory, lack of inventory. Well, I am so happy to report that we have had a slight break in inventory. We’ve got some good inventory again on our website. This just happened in the last five or six days, really. A couple of my favorite markets now, Atlanta, St. Louis, if you look in those markets, you go to JasonHartman.com, you look at the property section, you will see right now in say Atlanta for example, and I’m going to sort these properties just based on a status of the property. And what do I mean by status? Well, I mean, what is for sale? What is in escrow? What is closed? What is sold, etc., and if yo9u see — we have got one, two, three, four, five, six, seven properties, that’s again not much, okay, but seven properties right now in the greater Atlanta market where we have got good ROI projections on these properties where you can get 20 percent plus in many cases on ROI. In some cases, 30 percent plus annual projections. You’ll see these are very conservative assumptions we use and I talked about that on prior shows. So again, go to the website, talk to your investment counselor at my company and we will be happy to help you.

Folks, it’s the curse we as — as middlemen, brokers, have. Our referral network we either have too many buyers and not enough inventory. That’s the problem we have now a days, or the most common problem over the past couple of years has really been you know, we’d like more clients, more buyers and we’ve had a nice supply of inventory. So again, it’s never just right. It’s never a perfectly balanced thing, but right now in the past just five or six days, I am very happy to report we have had some good increases of inventory and many of this — a lot of this inventory is exclusive to us. You won’t find it anywhere else, because I am financing the deals and other clients of ours are financing the deals for our providers to go and buy and we have those properties so that they can provide them to you.

I’ve — I’ve been on our local market specialists in every market. You know, we deal in many markets across the Country to really, really provide inventory. It’s been our biggest challenge over the last few months.

Okay. An interesting article here on Poor Richards Blog, Poor Richard of course that refers to Benjamin Franklin, right, if you remember? Well, talking about economic collapse and really collapse of the dollar. Collapse of the dollar really would be in many ways good for us as investors if we’re following the plan that I’ve outlined on prior shows because what does that mean? Well, what it means to us, of course, is that we want to denominate all our liabilities in dollars or in any currency that is being debased or that is deteriorating in value and the dollar is one of those.

Now, one of the important things to understand is that because the U.S. dollar is the reserve currency of the world, there’s certainly a movement away from that and I’m going to share a couple of those points in — in this article here. But because it is the reserve currency, when transactions occur in international trade around the world, they need to be denominated in dollars because we are the reserve currency. And what that does, is it causes the dollar to be artificially strong. Well, why is that? Well, think about what happens here. If you’re trading oil — if say, Brazil is trading oil with — I’ll give you an example, France. So, Brazil is trading oil with France for example, and they both have currencies that are not the dollar, obviously, but they need to exchange that transaction into dollars in order to conduct international trade. And when they do that, what does that do? It sucks up dollars. Dollars are always in demand and currency, just like any other commodity, is governed by the laws of supply and demand, the most basic fundamental laws of economics, supply and demand.

If you know nothing else, just know supply and demand because that tells you most of the story. Although there’s more to it, of course, but supply and demand is the most fundamental rule of economics, obviously.

So, as these dollars are soaked up for international trade to occur, it artificially strengthens the dollar more so than it would be strengthened if it were not the reserve currency of the entire planet. So, what does this mean to us? Well, we got this artificially strong dollar, right? And there are many people in the U.S. who think that it would be good to see the dollar decline in value. Not just us investors, who pile up long term fixed rated that’s been great debt against packaged commodities, but of course, my term, because we — we take advantage of what I call inflation induced debt destruction, and we’ve got the commodities that are traded globally. Okay, the supplies, the building materials that build houses and apartment buildings, the sticks and the bricks so to speak, and then we’ve got the dollar that has depreciating in value and we financed it at 30 year fixed rates that we won’t pay off until 2042, if we borrow it today, and this is a beautiful thing because our debt is constantly being attacked by the devaluation of the dollar or by inflation, which ever way you want to look at it.

So, in this article, it talks about 10 reasons why the rain of the dollar is the world’s reserve currency is about to come to an end. And I’ll just share with you a few of these 10 points, or maybe all of them, depending on how quickly I do this.

Okay. Number one, China and Japan are dumping the U.S. dollar in bilateral trade. So, they’re not the only ones, folks. There’s a lot of movement of other countries and why would they do this? Well, in — in one way, it’s a way to you know, sort of stick it to the man and when I say, “The man”, I mean in this case being America, right, the U.S., and it’s also a way to protect ones self as other countries protect themselves against the radically, ridiculous, irresponsible spending that the U.S. — the U.S. Government engages in. You know, Ronald Regan said, to say that the — the U.S. Government spends money like a drunken sailor would be an insult to drunken sailors. Regan was so great in his humor and his wit, right, but — but he’s right. I mean, just in the past, what, three years since Obama has been President, we’ve racked up what, another four trillion dollars in debt. I mean, this is insanity, folks. It’s completely insane. It’s ridiculous, but again, as we talk about on the show, we can exploit the heck out of these investors, okay. So, it’s not all bad. Philosophically, it’s bad, but with our plan, we’re going to make it work for us. It’s going to hurt most people, but it’s going to help us.

Number two reason, the bricks. What are the bricks? Brazil, Russia, India, China, South Africa, okay. The bricks, plan to start using their own currencies when trading with each other. So the five major emerging economies of the bricks, okay, they are going to use their own currency and they’re going to see a lot of pressure from the U.S. Government because think about it, the U.S. Government wants to perpetuate its irresponsible scam right, or I’ll be nicer and I’ll say “scheme”. Or it’s — be nicer than that, I’ll say, “plans”. How’s that? So, they don’t like this. The U.S. Government does not want countries to trade outside the U.S. dollar. And so, they’re going to pressure these countries through economic hit men, military pressure, maybe trade pressure or etc., etc., to use the dollar. But the fact is, we will see who wins the game. It’s — it’s going to be an ongoing battle, in my opinion, okay. It’s not going to be like these countries are going to suddenly be able to trade in other currencies. The U.S. throws its weight around. It’s going to exert a lot of pressure over them. However, the movement is the way. There’s a lot of pressure on the U.S. to correct its — it’s bad, irresponsible ways and to get more responsible, and one of the ways to pressure the U.S. is to trade outside the dollar as the reserve currency.

Number three, Russia and China have a currency agreement. They have been using their own national currencies when trading with each other for more than a year now. Leaders from both Russia and China have been strongly advocating for a new global re — reserve currency for several years, and both nations seem determined to break the power that the U.S. dollar has over international trade.

Number four, the growing use of Chinese currency in Africa. Who do you think is Africa’s biggest trading partner? It isn’t the United States. It’s China. In 2009, China became Africa’s biggest trading partner and China is now aggressively seeking to expand the use of Chinese currency on the African continent. Okay, so this is happening all around the world, folks as people watch the drunken sailor call the U.S. Government, especially the leftist liberal side of the U.S. Government being the — the drunkest of all. Okay but hey, the conservative republican side ain’t much better now a days either, okay. I — I always say, “People talk about the past”. They talk about democrats of the past like John F. Kennedy”. John F. Kennedy, by today’s standards would look like a total conservative, at least fiscally. In fact, the conspiracy theorists many of them believe that, you know, one of the reasons he was assassinated is because he wanted to get rid of the Federal Reserve. Okay so, there’s one for you to ponder.

Number five, the China/United Air (inaudible) and Steel. China in the United Arab emerance have agreed to ditch the U.S. dollar and use their own currencies in oil transactions with each other. The UAE is a fairly small player, but it is definitely a threat to the petro dollar system.

Number six, now this isn’t going to surprise anybody, Iran. Iran has been one of the most aggressive nations when it comes to moving away from the new — U.S. dollar in international trade. Obviously, that’s not going to surprise anybody.

Number seven, the China/Saudi Arabia relationship. Who — what’s the most oil from Saudi Arabia? It’s not the United States, rather it’s China. So again, they’re trading outside of the U.S. dollar.

Number eight, the United Nations has been pushing for a new world reserve currency. The United Nations has been issuing reports that openly call for an alternative to the U.S. dollar as the reserve currency of the world. So again, look at all this pressure folks. Ten points here. I’ve got two more for you.

Number nine, the IMF, the International Monetary Fund has been pushing for a new world reserve currency. The IMF has also published a series of reports call for the U.S. dollar to be replaced as the reserve currency of the world.

Number ten, and finally, most of the rest of the world hates the United States, okay. And unfortunately, I agree with this with my own caveat on it and here is my statement before I just share a couple of points of the article. If they hate us so much, why do so many of them want to come here and why do so many of them want to be us? It’s not really hate, it’s more envy, maybe. And the U.S. is in a very powerful position to be able to spend irresponsibly. And listen, I don’t like it. I don’t think it’s fair. I — I don’t think it’s fair to its citizens, its tax payers or other countries that — around the world. I think the U.S. is basically using its bully pulpit a lot and — and — and taking advantage of other countries with its — its spending. It’s ridiculous, but listen, it’s the way it is. I’m not going to do anything to change it. I can’t do anything to change it.

The only question I have — the only question you have is, how do you invest to protect yourself and to make this work for you? You do it with prudent income properties, denominating your liabilities in — in dollars and a depreciating currency in your assets in things. Things matter. Currency matters a lot less as inflation hits. Global sentiment toward the United States, dramatically shifted, and this should not be underestimated. Decades ago, we were one of the loved nations on earth. Now we are one of the most hated. I guess it’s kind of like being the Bank of America that I mentioned a moment ago, okay. If you doubt this, just do some international traveling, and having been to 64 countries myself, I tell you the last time I was in France they were not very nice. The last thing, we’ve got to get to our guest, but I thought this was interesting, if not a little depressing.

There was a Wall Street Journal article that talked about gray divorces. Well, grey divorces what is that? That is an article talking about how people over age 50 are seeing a massive increase in their divorce rate. Now, this is — this is kind of sad, frankly, but it’s a fact of life. And in a positive way, you know, I guess what this means is people are living longer, but not just — it’s not just about the length of life, it’s about the quality of that life. I mean, people who are 50, 60, 70 years, 80 years old, are enjoying tremendous health, wellness, feelings of optimism, feelings that they can do things of — and they can be active and they have — the world is their oyster, it really is.

You know, I read a really interesting article a couple of days ago. It said that ski resorts are increasing the age at which they will give senior discounts and senior ski passes. And the reason they’re doing this is that the senior skiers are too healthy. In other words, they were issuing — this is what the article really was saying, okay. This is reading between the lines. Here’s the subtext is that they would sell passes to senior skiers, people over a certain age. Maybe it was 60 or 65 or whatever it was. Maybe it was 55. I don’t know, but the senior skiers thinking they wouldn’t use them very much and they wouldn’t ski that often, but the — the reality was they were skiing a whole heck of a lot because they’re healthy and they’re active. So, the world is changing right before us, folks and it has huge implications to the way we invest, and it has huge implications on the housing market. Why do I share this article about grey divorces? Well, the divorce rate of people over 50 has more than doubled in the past two decades and what does this mean? If it’s more than doubled in the past two decades, it means instead of needing one residence, they need two. The household size is getting smaller but the number of houses consumed, doubles because you have two parties living separately, rather than two parties living together. And in 2009, more than 600,000 people over the age of 50, got divorced.

And you know, there’s an interesting chart here and it just shows in 1990 how many people over 50 got divorced. In 2009 — in the projection for 2030, is that we’re almost double again. So tremendous, tremendous, tremendous implications on the housing market. Tremendous implications for the price of all those building materials, those packaged commodities that I’m always talking about, and the tremendous implications on demand for those materials and for the finished product in housing. It’s just an amazing, amazing time for real estate investors.

Okay folks, listen I’ve talked too long. I’ve got to get to John Williams, our guest today. Shadowstats.com, and we will be right back with his interview in just a moment. Be sure to visit Jasonhartman.com. Take a look at the properties, take a look at the products there. Oh hey, one more thing, and we will have this on the website soon, but many of you like physical products and we’ve always sold our products digitally, but we have physical products that were debited at the last Week of Answers event of two of our best selling products, the Creating Wealth Home Study Course and the Meet the Masters of Income Property Investing event, and those will be on the website soon in a physical product format where we’ll actually send you a big box with the CDs and the cases and the work books all printed out, beautifully illustrated, and you’ll have those in hard copy, if you want. So, those will soon be available in addition the digital versions that are available today on Jasonhartman.com. Anyway, we’ll be back with John Williams in just a moment.

Female Voice: Now, you can get Jason’s Creating Wealth in Today’s Economy Home Study Course. All the knowledge and education revealed in a nine hour day of the Creating Wealth Boot Camp, created in a home study course for you to dive into at your convenience. For more details, go to Jasonhartman.com.

Jason Hartman: My pleasure to welcome Walter John Williams to the show, otherwise known as John Williams, commonly, and I’ve been wanting to get him on the show for a long time. I’m a big fan of his website, Shadowstats.com, where he really looks at the — the truth behind the Government’s statistics. There’s an old book entitled How To Lie With Statistics and I think the Government does a pretty good job at that for many reasons, and many of the motivations they have for doing so. And today, John and I are going to talk about unemployment, the real unemployment rate. We’re going to talk about the real inflation rate and then a fantastic report he just finished entitled Hyper Inflation 2012. John welcome. How are you?

John Williams: Fine thanks, Jason. Thank you for having me.

Jason Hartman: Well, it’s great to have you on the show and you’re coming to us from beautiful San Francisco today, I guess, the People’s Republic of San Francisco.

John Williams: That it is.

Jason Hartman: Well good. What’s going on out there? What is your focus at Shadowstats.com, now a days?

John Williams: Well, I’ve had — I’ve been a consulting academism for 30 — 30 years or so and I found out early on that I had to have a pretty good understanding of what was actually being reported in the government statistics. Some terrible quality problems that they’re popping up in some of my early — early quality in terms of the government’s numbers and I got to know the series pretty closely, talked with people in the industry, looked at the history, all sorts of issues of how the numbers have been adjusted over time. Basically, it had two — two types of minip — manipulation in the Government data that were popular the numbers that were introduced after World War II, very quickly found themselves being manipulated occasionally with direct games being played by the politicians, but more frequently with mythological changes being put into place which tended to increase the level of economic numbers and to reduce the level of inflation with examples of both factors so back in the Linden Johnson era, Johnson was noted for — for reviewing the GMP numbers. It’s called the GDP today, the broadest measure of economy.

If he didn’t like the numbers that were prepared by the Commerce Department he’s send them back and keep sending them back until they got them right. In the first Bush Administration, George Bush was up for re-election. The economy was in trouble. Senior person at the Commerce Department went to a senior person in the computer industry, asked that the computer sales be boosted in terms of reporting to the Bureau of Economic Analysis, which are prepared the GDP reporting. The numbers were so altered but GDP approved. George Bush which was always out of touch with reality, and there’s an important part there, because I find that the average person has a pretty good sense of what’s really happening in the economy, irrespective of the numbers out of Washington and that’s always a good thing to think about. If it doesn’t make much sense, it doesn’t sound right to you and it’s coming out of Washington, it probably is not right.

So the — on the other side, we can go back to when the very series were introduced, people really didn’t have too much trouble with them, but increasingly what’s been reported by the Government, seems to be moving away from the common experience. Most people think that inflation is higher. Most people think that unemployment is higher and there’s a reason for that. And again, this has to do with the methodological changes.

You take unemployment — for example, if you went around the country and asked every person whether he or she was unemployed, that person doesn’t have to think. He’ll say yes or no. And — and if you worked out an unemployment rate based on that, you’d get a much higher number than what the Government reports. What the Government reports in terms of its headline unemployment number, is — is one of six levels of unemployment that the Government publishes. They call it U3. In order to be in the headline unemployment number, you have to be unemployed, you have to be actively looking for work, having looked for work in the last four weeks, and — and of course, willing — willing and able to take a job.

If you haven’t looked in the last four weeks, the Government counts you as a discouraged worker, if you had — as long as you’ve looked for work in the last year.

Jason Hartman: So — so, those people — what you’re saying, John, is that they fall off the rolls, they fall off the statistics. They’re not counted anymore. There can be millions of people unemployed that just aren’t being tabulated, right?

John Williams: That’s correct. They — they are calculated — they’re calibrating it to a certain extent, but not in the headline unemployment number. It’s not in the headline unemployment number, you’re also not counted in — in the labor force which has also been noted as declining. The reason the labor force is declining is that people indeed have been giving up looking for work because they can’t find jobs. And what the Government historically has called discouraged workers, but back in 1994, they changed the definition of a discouraged worker to that being someone who had been discouraged for less than a year. If you’ve been discouraged for more than a year after 1994, you were no longer tracked at all, and the narrower measure of discouraged workers, which I’ll call the short term discouraged worker. The Government publishes in its current broadest measure, which includes the — the headline unemployed. It includes marginally attached — which they call marginally attached workers such as the short term discouraged workers, and those who are working part time for economic reasons. They can’t find — they want a full time job, but they — they can’t find a full time job. So that where the unemployment rate is running somewhere around eight and a half, nine percent, and the headline basis which is the 15 — 16 percent range, would — at the level of (inaudible) the Government’s broadest measure.

If you had back then those people who are no longer being counted as long term discouraged workers, and I estimate that — it’s my — it’s my number. It’s not the Government’s number, you get up to 22 percent. And so not surprisingly, that pretty much accounts for the decline and the — the labor force for the decline and the what labor force’s percent of the population. Again, people are — the reason that the headline number has been declining to a certain extent, has been because people are just moving off of the rolls of what would normally be counted because they can’t find a job, but they’re still unemployed as far as they’re concerned. They want a job. They’re willing and able to take it but they’ve given up looking for it because there are no jobs to be had.

Jason Hartman: That is a very sad situation. Now — so, are you saying that the real unemployment rate then John, is about 22 percent? Is that the number I should pick (inaudible)?

John Williams: Well, real — it’s a matter of definition.

Jason Hartman: Right. Sure.

John Williams: I mean, the Government’s definition for you, they do survey it and — and have a reasonable estimate of it. I’ll contend the 22 percent is a lot closer to what you get if you went around and just asked people if they were unemployed. And that’s pretty much the way unemployment was viewed back in the days when they put together the estimates for the great depression. I put — I put out a number of say 22 — 23 percent unemployment. Right now it varies depending on the month.

Jason Hartman: Well — well, that right there is exactly the reason I was asking you, because as a point of comparison, you hear stats that say, you know, things are much better now. This is not a depression because, during the great depression the unemployment rate was around 26 percent. But back then, you know we didn’t have a world full of independent contractors like we do now and even before I became familiar with you, I just need intuitively knew this because my — my current business is employee — lots of contractors, but an old business that I — I sold back in 2005, had lots and lots of independent contractors as real estate agents, and John, I can tell you that a lot of those people, we do the 1099s and they would go a year earning very little, sometimes no money at all, at least from my company. They — they were doing other things on the side at times, but they weren’t even counted as unemployed. I couldn’t believe it.

So, what is the comparison number then when you compare unemployment today to back in the great depression? Is it — are we about the same or a little better off?

John Williams: We’re — we’re not there yet as — as I view it. First — first of all, I mean the 26 — 25 percent estimate, which is supposed to be the worst that was said being the year 1933, that was estimated well after the fact. The Government didn’t start serving unemployment until 1940. It was constructed from all sorts of surveys, including the U.S. Census of 1930 and people applying for social security and it — it’s — it’s a — it’s a guess, but the — that number at that time, 27 percent of the population worked on — on farms, and you’d go out in the country and you’d live with Aunt Mabel and you know, you’d work on the farm. At least you ate and you survived, but it was a very difficult time. Now today, less than two percent of the population — working population, lives — lives on farms.

So, you look at the non-farm unemployment rate from the great depression, which is also estimated, and that’s estimated up around 35 percent. I think that’s probably more of a comprisable number for that — what I’m looking at here, but this is certainly the worst we’ve seen in the post World War II error, and they’re are also — all sorts of measures that indicate this is in many ways developing a worst end from the great depression. I’ll contend it’s already going on longer than the first — (inaudible) the great depression. We’ve been — we’ve been in an economic contraption for almost five years, now. If — if you take the initial (inaudible) economy to plunge and that often tend to be (inaudible) bouncing ever since, but we haven’t had an economic recovery. That’s a little game that’s played with inflation and which is another very important area, probably more important from an investor’s stand point, that is in terms of economic — well, usually it’s adjusted for inflation, but you don’t want to reflect a grown — grown in something that’s just tied to rising prices. You want it to reflect physical volume.

Jason Hartman: Right. So — so, what you’re probably going to lead into there is that, when inflation statistics are misrepresented, so is the GDP, right?

John Williams: Yes, it is.

Jason Hartman: Yeah. Yeah. Very —

John Williams: And — and there are a number of other measures, as well.

Jason Hartman: Right. Right. John — John, before we get to that, I just want to ask you one more thing about the unemployment situation, and this is one that I think is incredibly hard to count and to just even get one’s — maybe it’s i8mpossible to get one’s head around it, but that is the underemployed where you see highly qualified people with educations, even advanced degrees, working at — I — I don’t mean this in any kind of condescending way, but working at sort of menial jobs. Like, they’re just underemployed. I mean, they’re working at Starbucks when — when they’ve got expensive student loans and — and a big education credential. But they — they can’t get a real job it — in — in their field, in a — in a corporate setting because the jobs are just not there anymore. What about the underemployed?

John Williams: That’s a horrendous circumstance. You’re not going to get any actual employment numbers on that, but as a guide, I’d look at something like there are numbers that are published by the Census Bureau, each year typed up as a poverty report on household income. And if you look at medium household income, as was reported for 2010, and adjusted by the Consumer Price Index, the official GPI, a medium’s household’s income in 2010 was not only below the — the level of household income coming into the 2007 recession, it’s be4low — the medium household’s income was in 1969. This is — this is horrendous and it’s — it’s one reason that we’re in such a deep and protracted recession.

Jason Hartman: Well, the — the other thing that understand is that in 1969 it — that household was probably only the male was working and — and the — and Mom was home with the kids and the kids weren’t growing up as juvenile delinquents. So you know, you — you had a — a better quality of life. It wasn’t just quantitative, it was qualitative, right?

John Williams: Yes, very — very — very much so and that’s with the Government’s numbers. So, household incomes were not — still — despite more people working in the family, the household still is not keeping up with inflation on average. They used to make up the difference with debt expansion but that’s no longer available as it was, and again, until those issues are addressed you’re — you’re not going to have an economic recovery, as the consumer — the consumers — the driving force behind the GBP, the weakness and the income there reflects the underemployment that you refer to.

One other number that I can toss at you is in terms of payroll employment. This is the two big numbers that come out each month from the Government. One’s the unemployment rate, the other’s how much payroll employment has changed. There’s this — what companies report to the Government in terms of the number of people that they’re writing employment checks to, wages, salaries and such.

Payroll employment, today, again, and it hasn’t recovered. I mean the economy is not recovered based on that. It’s below it was going into the collapse that started in late 2006 or the end of 2007. But again it’s below where you were in the — the beginning of the 2001 recession. Payrolls today are lower than they were 10 years ago. That’s total payroll employment in the United States, yet — yet the population’s growing by 10 percent in the same time frame.

Jason Hartman: Right. So really, it’s a double whammy. The — the payroll numbers are lower, but the population is higher. So, you’ve got a double differential there, right?

John Williams: Well, it’s just another measure of how (inaudible) this down turn is. There’s no recovery. Nothing again that’s going to do — or nothing the Government’s done and certainly nothing that it’s talking about is going to help major impact here. It’s going to take decades really for this to work around and we’ll get back to that a little bit later.

Jason Hartman: Right, right. And the decades coming have huge entitlement obligations that the Government simply cannot afford to pay. So, we’ll — we’ll get into that, but you know John, I — I got to say, as — as grim as all this news is, it — it’s kind of odd and see, I don’t have the prospective of living in the ’30s or the ’50s or the — realizing what it was like in the ’60s or even the ’70s, but it’s just — I don’t know. It’s hard for me to equate this because when I look at old movies and I look at old TV shows, you know, I try to think it’s not really representative, but it is somewhat representative how life was back then. And then I look around today and I — I — I have friends and associates and acquaintances of all ages of all economic socioeconomic levels, and this is just very anecdotal and I know it’s not may not your thing, but I just wanted to run it by you real quickly.

People that are unemployed or underemployed I see now a days, they have a house full of gadgets. They go on vacations. They go get massages at the spa. They have a closet full of nice clothing and they drive a reasonably nice car. I — I just — it’s hard for me to equate that things are so bad. And yes I know there are tent cities. I know that there are homeless people. I completely understand that, but I — I don’t know. I — I just — I have trouble kind of reconciling that in my mind. I agree with you, statistically, certainly.

John Williams: There are — there are people who — who are doing well, but that’s —

Jason Hartman: But those aren’t people doing well. Those are people doing —

John Williams: And that’s — and that’s — you’ll always have people who are doing well and always have people who are — who are suffering. The problem is that the numbers are shifting towards those who are suffering and rather — rather markedly so. And — and — and you’ve got to watch out for those who are really enjoying themselves with nothing but substance behind them.

Jason Hartman: Yeah. They — well, that’s —

John Williams: They’re — they’re the ones who are going to be very quickly as things continue to —

Jason Hartman: Yeah, hurt — hurt the most. No savings, no assets, no investments. The other thing I didn’t mention is those same people unemployed, underemployed, they’re going out to dinner and —

John Williams: Well from that stand point, I mean, with a (inaudible), well, the most important ones is the — what they call income variance or dispersion and the idea is that if you look at how income is distributed, when it’s strong in the middle, you tend to have a strong economy. Reason being is those middle class consumes — consumes — consumes (inaudible).

Jason Hartman: Well they consume — they consume you know like 70 percent of the S&P 500s. So, it’s a big deal, you know. Middle class is so important.

John Williams: But you have the — what we see now is — we’re seeing a continual diversion here that are record and no one’s ever seen anything this extreme in the United States where you have a concentration at the top and a concentration at the bottom, and the middle class is being squeezed and — and that is actually bad for the economy and that the — the middle class is — is the powerhouse of consumption. What usually happens with that is you get — and I mean and the markets and systems are just left to itself, the — the — the extreme divergence will lead to very (inaudible) in the financial markets. The markets crash, the economy falls, incomes get redistributed and the middle class moves up again. I don’t know whether the Government’s moving with its taxation. How usually that will be done, but the problem is that those who are currently enjoying the — the fruits at the top of the — the ladder have to keep in mind that, unless the middle class resumes it’s consumption, you’re not going to have positive economic growth going forward. You’re not going to have a positive financial markets. You’re not going to have a Government that can continue to support society. And unfortunately, what ends up here is that we end up with — actually a (inaudible) inflationary great depression, which destroys most of what the average guy, even the wealthy have if they’re — if they’re not well protected.

Jason Hartman: Yeah, and I think what we’re moving into is we’re moving toward society that is more and more of a Banana Republic. I hate to say it, but you see it in California. For certain, you see it in many areas where you know, you’ve got this concentration of wealth and then more and more on — on the — on the lower economic scale and it’s — it’s very sad because what has made America so stable and so great for so long, is — is its large middle class.

John Williams: That’s — that’s true.

Jason Hartman: Yeah.

John Williams: Let me suggest something here. Let me quickly get into the problem with inflation and then we’ll then move to the (inaudible) inflation.

Jason Hartman: Would love to talk about that, absolutely.

John Williams: Was that —

Jason Hartman: Yes.

John Williams: — there’s some key points of inflation that’s helpful to the other. So, getting back to starting again, a big — big factor that the average guy has to look at here in terms of what’s been reported by the Government and — and — and where most people recognize that there’s a problem is — is reporting of inflation. The consumer price index is the most popularly followed series. It’s a bit measure of consumer inflation of consumer goods and services.

When it was — and it has a long history, but when it was first used as a cost of living indicated with the — the auto union contracts, it’s really a very large usage. The concept simply was that the CPI was a measure of a cost of living that maintaining a constant standard of living. That makes some sense if you’re going to use this as a way to adjust your wages or your salary, you’d at least want to stay ahead of inflation or at least keep up with inflation. So, if you had a measure that would reflect your standard of living, this would give you the inflation that you needed in order to maintain your standard of living, the quality of your standard of living.

And very simply, the way it was done, I had a fixed basket of goods. Simplistically they’ve — they measure off say the cost of a pound of beef, a gallon of gas, a loaf of bread and then they’d measure that same basket of goods the next year and however much the basket of goods have changed, that’s what your salary had to have changed by an order to be able to continue to buy the — they way you had the year before, or along that wafer, decades.

Into the early ’90s and at that time Alan Greenspan started making noises along with some others about how the — the CPI was overstating inflation.

Jason Hartman: Overstating, that’s a —

John Williams: Yeah, it’s —

Jason Hartman: — that’s amazing.

John Williams: Overstating, that’s a —

Jason Hartman: Yeah.

John Williams: — overstick — the angles overstick.

Jason Hartman: Yeah. Right.

John Williams: Right. And so I said how — what do you mean and he said, “Well, steak gets too expensive. People will buy more hamburger — they buy more hamburger that the cost of living is actually reduced –.

Jason Hartman: Substitution —

John Williams: — [inaudible] reflected in the CPI. Well of course that’s not the concept of infla — the level of inflation that — that you need to cover in order to maintain a constant standard of living. They — they — they did away with the concept of maintaining the concept of standard of living. They changed — they made efforts — very significant efforts and changes to the CPI series to make it a substitution based series as opposed to fixed basket of goods. They didn’t go all the way with it. They — they have another — they did the best they could within the adjusting system to change the CPI. They have a new CPI that’s been being counted as the — one thing it will be used to help slash the budget deficit. It — it reduces inflation. There is lower — artificially reduces the reported inflation.

Even more, the whole concept here, the reason for pushing this was to find a way of reducing the cost of living adjustments for Social Security recipients. And the effect was that if these changes should not been made, Social Security checks would be affectively double what they are today and the numbers that are put out are well shy of reality and — and I view that as criminal from a number of angles.

Number one, I mean beyond what’s being done to the Social Security recipients, a lot of people in the private sector rely on these numbers. If — if you’re receiving money that’s being based on CPI, if you’re — or if you’re the guy receiving the payment, you’re being underpaid and if you’re the guy who’s making the payment, you’re — you’re getting away with an awful lot.

It’s — if you’re an investor and you’re looking to find a greater return that’s going to keep you ahead of inflation, you’re using CPI, you’re not going to save even with inflation. You’re going to fall well short. Not only have they changed the waiting, they’ve also changed actually reporting the full out of pocket expense of goods, and what they call hedonic adjustments. Like quality adjustments, you can’t measure in normal sets. The nebulous factors that they — they come up with, they’re very fancy statistical calculations. But nothing what the average guy recognizes.

Jason Hartman: Right. Right. Well, you know what hedonics, the — the interesting thing about hedonics John, it that it has sort of — I can see some rationale to it, but what it basically says is that if you’re going to make hedonic adjustments to the consumer price index, it says to us that we are not entitled to the benefits of progress. The index is rather than us. So hopefully as things progress, and society becomes more advanced and technology becomes more advanced, we benefit from the power of a process or increasing and things becoming better and less expensive at the same time and smaller and more portable and having more features. But the hedonics index would say we’re not entitled to that progress. We don’t get that.

John Williams: Your — your point is well taken. I — I haven’t heard it expressed that way before but that is — that’s a very valid — very valid point. And the average guy doesn’t understand this is happening to him. A very simplistic example, extreme example and one that they actually reversed, which means they recognize — they didn’t reverse it, they stopped it, but it — it gives you the in — the intent because it’s continuous in many other areas.

Some years back, the Gov — the Government mandated that a particular gas — gasoline formula would improve air quality. It added ten cents per gallon to the cost of gasoline.

Jason Hartman: Yeah, that’s why California’s so much more expensive.

John Williams: Yeah. But the — it was not added into the CPI because it was deemed a quality adjustment and the Government’s got a feeling of [inaudible} standing around thinking, oh my goodness, I’m spending ten cents per gallon here to get better quality years and that wonderful ease money and drawing that he’s out of pocket an extra ten cents per gallon of — of — of gas, but he doesn’t see it reflected in the inflation numbers or his paycheck, and it’s because of things such as that that the CPI’s moved far away from common experience. If you look at all the changes at the Bureau of Labor Statistics has made since 1980, and they estimate the effect it has on — on — on the reported annual consumer price index, the differential — and — and another couple of percent that they haven’t published estimates on. It’s about seven percentage points. So, that we’re — you’re seeing inflation around three percent now taken up to about ten percent. If you were getting full reporting, if you’re out of pocket expenses and something that was reflected with maintaining a constant standard of living.

Jason Hartman: Okay. So — so say that again just to — I — I just ant to make sure that it’s not lost in any complexity. What do you think we should add to the Government reported “official statistics of the CPI” to get a more accurate picture of inflation?

John Williams: I — I — I have seven percentage flights. But — but some — some of — you can — depending upon where — where you want to look at it, since 1990 the changes a little over three percent. To be safe, I put in seven but you — you know, there are people you know that can lower it now somewhere in the three to seven percent range, maybe five percent.

Jason Hartman: Okay. So — so then that means the real rate of inflation now is what?

John Williams: I’m figuring it at about ten percent.

Jason Hartman: Okay, ten percent and I couldn’t agree with you more. Let me take a brief pause. We’ll be back in just a minute.

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Jason Hartman: Now, what seems interesting is — is you did a report on hyper inflation John. Tell us about that because that’s the prediction for the future and I — I just don’t see how — I mean, there are very few of them out there but there a few deflationists out there and I just don’t get their argument. You know, they say crazy things like, this deleverging issue is so big and so massive that the Government can’t print enough money to cause inflation. And I’m thinking like, what are you talking about? The Government can print as much money as they want. You know, and they don’t even have to print it anymore, it’s electronic. They just click a mouse and — and money is put into the system. It’s — it’s crazy the amount of money being created right now.

John Williams: Well, they can create anything they want and indeed they have. And the thing is that when people talk deflation, you have to make sure that you’re talking the right — the same terms. When I talk inflation and deflation, I’m talking about price changes for — for consumers in terms of consumer goods and services. I’m not looking at asset prices. A lot of people — look at the stock market. Oh, the stock market’s going to crash, that’s — that’s deflation act. Most certainly deflationary in terms of stock prices but it doesn’t necessary mean that consumer prices are going to come down. So, it’s — the credit collapse by itself does not collapse money supply. With the banks money that tends to create money supply. If it — the bank lends a million dollars to a company the way the system used to work, although we’re not seeing much bank money with — that would get repeated and you’d end up with about ten — you know, some funds were deposited [inaudible] about ten. Ten — ten million dollars from the million from the million dollars that was originally lent. But then the company goes under, can’t — can’t pay its loan. The bank can’t pull that ten million dollars that’s been created in the money supply, having the money supplying. It doesn’t happen. So, the — having a debt collapse does not contract the money supply.

What it does do is it — it prepares balance sheets with the bank and then they can’t lend money the way they used to. And if they don’t lend money the way they used to, you see slowing of bank — bank lending, that — that can slow — slow money growth and that’s — that’s what happened. It actually turned negative for a while. It’s now — now growing up — up again and I still track the Government’s — and three measure which is the broadest one, but there’s more — more than just the — the — the level of the money supply. It’s a matter of how willing the people are to holding. And the people who want to hold it which is [inaudible] what you call velocity, how quickly the money turns over, that can be as devastating as the actual printing of the money.

Jason Hartman: And — and then the velocity has slowed pretty dramatically, hasn’t it?

John Williams: Well, yes and no. I contend it’s actually rising now. It’s in a circumstance — the average — the average person cannot get a safe return o his money that is better than the Government’s official rate of inflation. That’s a current circumstance. There’s better going out buying the goods and services that are — that are inflating. Go out and buy canned goods.

Jason Hartman: Right. Right.

John Williams: That’s a better investment now than a [inaudible].

Jason Hartman: You’ve had — well that’s a good point. In that sense I couldn’t agree with you more. It’s — it’s causing the — the — the current economic situation is causing inappropriate behavior that’s not necessarily prudent behavior. So yes, you have people stocking on — on stuff because they know their money is going to be worth less in the future. And so, that’s exactly what they did in — in Wymar and — and — and so forth. They couldn’t wait to spend. Not necessarily a good thing.

John Williams: Well that actually reflects a turnover — an increasing turnover of — of — of the currency, but the big problem here right now is the U.S. dollar. When the Feds put out enough money but if it ever got into the money supply in a normal matter, the banks are not lending. It’s — let me back off. Let me get back to square one here. You go back to 2004, the Government’s overwhelmed with Medicare. They put prescription — prescription plan in place, at that point in time they added about eight trillion dollars and then found that liabilities the Government’s balance sheet. That’s net present value, you know how much money you need in place today to cover that. But they knew — what they’re doing at the time is bankrupting the Country. It’s that simple. Eight trillion dollars in prospective at the time was a total level of gross [inaudible]. I talked with people in the Bush Administration at the time and said, hey what you’re doing to the system to hyper inflation here, and I — and it’s not just Bush Administration. This is something that’s been building up over time over a number of administrations, but this is when I — I started taking this — this [inaudible] to task and the response I got was, oh it’s too — too far into the future to worry about.

Back in the ’70s, the big ten accounting firms got together with Congress and we’re in the largest business on the face of the planet. You — you really should have modern accounting, do the same type of accounting a large — large corporation does. And it took them 30 years but earlier this decade the Treasury started publishing financial statements on the Federal Government based on generally accepted accounting principles. It doesn’t get much publicity, but it — it was published feature, and if you include the — your — your change in the — that doesn’t value the unfunded liabilities.

You’ll find that we’re running deficits here after — about five trillion dollars. The total debts and obligations are about 80 trillion dollars. Again, that includes the unfunded liabilities for Medicare, Social Security and such. Five trillion dollars is beyond contain — containment, it’s beyond sustainability. Put into prospective, if you wanted to bring that in the balance in a year — for a year, you couldn’t do it. At least you couldn’t do it by raising taxes. You can’t raise taxes enough to cover that short fully. You can take 100 percent of everyone’s wages and salaries and you can still be in deficit.

Jason: And — and then raising taxes, of course, we all know suppresses economic activity anyway, so —

John Williams: Well —

Jason Hartman: — it’s a terrible idea. Well.

John Williams: — if you get every penny of Government spending except for Social Security and Medicate, you’d still be deficit. The system’s bankrupt. It — there is no way this can be sustained and left to its own devices, by the end of this decade we would have been at a — at a point where the only way the Government can find it’s obligations would be by — by printing it, printing the money, which would give you hyper inflation.

Jason Hartman: Right, right. So, what are your predictions for hyper inflation?

John Williams: That — it’ — originally, I was looking at that time frame. As the financial crisis rose, you saw the circumstance where the — the system is on the brink of collapse. They weren’t kidding back in September of 2008, when they said, look we don’t — we have a funding in place here. We’re going to see the system collapse, the banking system collapse, have a run on the banks. Everybody — they were having a run on the banks. It was globally [inaudible]. Money was being taken out of the U.S. They had to stabilize the system or the system would collapse. The systemic failure is not an acceptable option to the Fed or the Federal Government. The Fed’s primary function is to keep the — the banking system solid. So, they spent — guaranteed — loaned and printed — they did whatever they had to do. They created whatever money they had to create in order to keep the system from failure.

The best they did was they stabilized it a little bit. They did nothing to significantly resolve the — the solvency crisis in the banking system. They did nothing to significantly correct the economy. The economy continues to be — I’ll say bottom bouncing after collapse. It’s — it’s beginning to trend even lower. The big problem there is that the — all the happy forecasts on the deficits going forward, the treasury funding going forward, but they’re all based on positive economic growth. That’s not going to happen. Much worse deficits are expected, much worse treasury fundings, if that is they’ve gone so far as to last year with its [inaudible] to effectively monetize the bulk of new debt issuance by the U.S. Treasury. That in turn gave a first real blow to the dollar. By early 2011 you will — the dollar had lost its safe haven status. You still have enough people in North Africa, the Mid-East and such, the dollars or the world currencies were flowing into the Swiss Bank Gold, not the U.S. dollar.

When you had all the — all the problems in Washington over the debt sealing and the very clear expression of lack of any political rule whatsoever to address a long term solvency issues of the U.S. Government, which unfortunately requires restructuring the — the social programs. And it’s just not going to happen but as that blew apart, they destroyed the global confidence in the dollar. The dollar — you sort of see a dollar panic against Swiss Bank, against gold and then the Euro crisis popped up again and the Euro effectively is foil to try and distract the world from the dollar. And I think that was deliberate. But the Euro situation will — will get resolved and — and what lies ahead here, the fundamental gist just can’t be worse. You’re going to have heavy dumping of the dollar at some point, and if that happens, that — that in turn will become very inflationary as — as the little bit of easement we got by the Fed, you saw the dollar show up there. That’s by oil prices, that’s by gasoline prices. You can have inflation with a weak economy. That’s what we’ve been having. We’re — we’re seeing our inflation now then we have had since the — after — after the crisis broke and — and that’s not because of a strong economy. It’s because of monitory disclosing that have spiked commodity prices that they’re affecting us in the United States. It has nothing to do with economic demand here.

Jason Hartman: Yeah, yeah. Well, that did — the — the Government and central banks distort the heck out of everything, for sure. So John, you’re predicting hyper inflation by 2018?

John Williams: Well, I’m — I’ve moved my forecast into an outside timing of 2014.

Jason Hartman: 2014?

John Williams: And my contention is that we may be on — we — we have — we’ve crossed through the various prerequisites to it. I mean we’re — we’re at a point where the dollar has lost its — lost its safe haven status. It’s lost its — its lost its confidence of the rest of the world. It’s — it’s — the next blow may — may be the — the fatal one. It may be the one that puts us inside of — out of reserve currency status that may be the one that results in oil being priced in something other than U.S. dollars and if that happens the inflation will just pivot very rapidly.

Jason Hartman: So — so, there’s no academic definition of hyper inflation but you’re saying 2014, that’s only two years away, what type of inflation rate are you talking about when you say hyper inflation? Is that 25 percent annually? Is it 100 percent annually? Is it 1000 percent? I mean, you look at historically hyper inflation around the world and it’s just — Hungry, Zimbabwe, Argentina, those — those numbers are insane.

John Williams: I’m — I’m talking primary republic time. Where the definition I — I use again as you pointed it out, there’s no formal definition. That is that when the [inaudible] denomination currency before the inflation. In this case a 100 dollar bill becomes worth more than a toilet paper or wall paper, you have a hyper inflation. That’s the type of thing I’m looking at and it’s the type of circumstance where number one, I don’t see any way of avoiding it. I wish it were. I mean I’d be — it — it would take a big political shift in our Government — it — if the Government could move rapidly to restore the long term solvency of — of itself and — and put in discipline with the rest of the world’s [inaudible}, they might be able to save the situation, but there’s — that doesn’t help them too much because they still — they — they need to bail out the banks. We need to boost the economy. There’s — they’re really in a no — no win circumstance with very, very few options and the options that they have are not — not politically feasible. So that the end result of this is that you’ve got to look at it from a personal standpoint. How do you protect yourself?

And — and then there are several things. One, in terms of your wealth and assets, it’s a time to [inaudible] down the hatches what — to preserve wealth buying — hedging with things such as physical gold. I personally prefer sovereign coins. Gold, silver and precious metals are basic hedges. Getting some dollars outside the U.S. dollar, Australian dollar, Canadian dollar [inaudible] despite the intervention there at the moment with — tied to the Euro that’s not going to last. And once you’ve been able to hedge your — at least your core assets, and you’d rather have money you want to play around with and the gambling casino of the stock market, that’s all fine and dandy but you want to get your —

Jason Hartman: I love how they call the stock market a gambling casino. It is. You couldn’t be more accurate on that one.

John Williams: Well, I — I’m — I’m looking at survival here and it’s — you need to — you need to preserve the purchasing power of your — your assets. If you can ride through the storm and maintain the liquidity and the purchasing power of your assets, you’ll have some of the most extraordinary investment opportunities anyone will have ever seen on — on the other side. And — and at least you — you’ll be in a better position to survive. But survive involves than just the finances and the United States is the most powerful country on earth. It’s — it’s got the world’s largest economy and it has no bankrupt system like Zimbabwe does. Zimbabwe had the worst hyper inflation anyone’s ever seen stretched over a period of time. The economy continued to function. People continued to work. The reason they did was they had a backup in — backup system of a black market in — in U.S. dollars. We don’t have a backup system here. When hyper inflation hits the United States, it’ll be extraordinarily destructive to our economy or way of life and I would urge anyone to basically look at preparing a store just as you would for a natural disaster.

I’m sitting on the Hayward [inaudible] here in California and the people out here, well they have — they’ll have store of food and water and baby diapers, whatever they need to get through at least a couple of weeks. Here you need something maybe that will carry you through a couple of months. You get things that you can rotate so it really doesn’t cost you anything and you might look for those gods that would be useable in the [inaudible] circumstance. Gold claims — probably a big item that go — trade against a loaf of bread. I — I talked to one fellow that had been through hyper inflation, he said he got a perfect — small change was a — airline size bottle of a quality scotch.

Jason Hartman: Yeah, yeah. Vodka — vodka and cigarettes probably wouldn’t be bad either.

John Williams: Yeah. But the key thing is to use common sense.

Jason Hartman: Right, right. You know what I say —

John Williams: Let —

Jason Hartman: — over John, and just let me run this investment strategy by you. Denominate your assets in things, in commodities that are useful to people whether they be hedging with physical metals or owning construction materials or food products or food resources, and then denominate your liabilities in depreciating evermore debased fiat currencies like the dollar. Debt would just be wiped out when we have this inflation, but it’s got to be long term fixed rate debt attached to things of real use that you control. So —

John Williams: I mean, what you’re saying is fine in theory. Where I — I would raise questions is that this is something that will be extraordinarily disruptive if — if — I’m not advocating people take on debt for example to take advantage of this. I can’t tell you exactly how it’s going to break or what the political circumstance is going to be. You need to be able to — if you take on the debts you need to be able to cover the debt, even if you’re suffering a period of unemployment and perhaps before the full hyper inflation kicks in. You don’t know what the Government’s going to do here. I mean we can have it — we’ve been playing with mortgages, maybe those [inaudible] to save the tax. So now we’re going to redenominated you loans where some kind of a quasar new dollar. Who knows.

The way I’m looking at it, I’m just ultra conservative here, primarily looking to hedge the basics. And what you will — what you’re saying is right in principle and — and is well worth looking at and — and — and thinking through in terms of your own circumstance. But it’s — again, it’s the type of thing that requires good financial advice and common sense.

Jason Hartman: Absolutely. Well, good points. Well John, your website is Shadowstats.com. Anything in particular you want people to see on the website? You’ve just got a wealth of data there and I just love it. I constantly refer to it as a resource to find out the reality behind the statistics and you’ve — you’ve done some great work that and — and we all appreciate that. Anything in particular you’d like people to look at, maybe the hyper inflation 2012 reports?

John Williams: Well, the — the hyper inflation 2012 report is — is — is for subscribers who will make that available to the public. In the not too distant future, the prior hyper inflation report for 2011 is available now on the website. It gives you a lot of the basics as does the background information on the different Government series. Anyone interested in subscribing, of course, we’ll put out an electronic newsletter that is at least weekly in frequency. It depends on when the Government statistics are released, and we update hyper inflation network and other things that are happening there on a — on a regular basis.

Jason Hartman: Fantastic. Well it’s Shadowstats.com. Everybody go check it out and John Williams, thanks for joining us today.

John Williams: Again Jason, thank you for having me.

Female Voice: This show is produced by the Hartman Media Company. All rights reserved. For distribution or publication rights, and media interviews, please visit www.hartmanmedia.com, or email media@hartmanmedia.com. Nothing on this show should be considered specific personal or professional advice. Please consult an appropriate tax, legal, real estate or business professional for individualized advice. Opinions of guests are their own and the host is acting on behalf of Platinum Properties Investor Network, Inc., exclusively.

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