Ben Davies Hinde CapitalGoldMoney’s Alasdair Macleod has released an interview with Ben Davies of Hinde Capital. They discuss the idea of nominal GDP targeting as a monetary policy strategy for central banks.

Nominal GDP growth is the sum of real GDP growth plus the inflation rate. Davies says that proponents of a nominal GDP targeting — so-called market monetarists — are gaining momentum in central banks and the media. They discuss how depressions are not caused by tight monetary conditions but rather by the preceding excessive expansion of credit. Davies points out that credit and debt are two sides of the same coin, which makes it impossible to clear one without the other.

Davies says that by driving down long term interest rates, central banks are trying to draw investors into equities in order to create a so-called wealth effect. However, he explains that debt levels are simply too high for this method to translate into sustained long-term growth. He foresees stagflation with low growth and excess liquidity.
Davies’ full interview is below:

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  1. Hey Charlie and Steve.  I hear you.
    28 minutes of my life that I won’t get back.  LOL.  Actually as I listened, to the gist of this essay. It was good in comparing the 1970’s era of stagflation.  Guns and Butter, War war war. Hugely expensive social programs  Dow started at 800 and ended at 800,  Gold hit $800 by 1980.  Inflation 10% (the real stuff) 10-15% interest rates.  Uemployment 10% (the real deal) and Stagflation, an event and phenomenon that went for nearly 10 years.
    If history is any guide, we are well into that time period where interest rates should be booming, the printing press is rolling, debt is exploding and precious metals are in a holding pattern that preceeded the huge price uptick of silver to $50 and gold to $800  The parallels are kind of spooky. Rates have not begun to rise and that is going to be the real problem.
    The one biggest difference and, no, it’s not the lying bastard politicians, it’s the nearly $17 trillion in present day debt with a debt to GDP ratio of 1.10 to 1 vs $900 billion in 1980 national debt and a debt to GDP of .3 to 1.  We had some wiggle room and the country recovered.  We have no wiggle room today which is the reason that PMs are such a vital part of our survival kit. 

    • “We have no wiggle room today which is the reason that PMs are such a vital part of our survival kit. ”
      Agreed, AG.  PMs ARE vital to our long-term survival and that’s what this is… an endurance test.  This is not a wham, bam, thank you Ma’am operation.  This is a long term slow slide into financial oblivion.  Those who demand immediate gratification are not going to find it in PMs.  They want to jump in and out all the time, raking off a bit of profit each time.  Well, let me explain it this way… that’s fine for traders but not for either investors or those who would enrich themselves via converting fiat into REAL money.  Like anything else of great value, buying and holding PMs is something that works VERY well over years and years.  For those who do it, it will be the difference between being OK financially and being rich.  It could also be the difference between surviving or not.  Again, this is a situation wherein there are GREAT things in motion and none of them move quickly.  This is a slow motion train-wreck that will take YEARS to play out.  It is unlikely to happen over-night.  However long it takes, it will be completely unpredictable.  The only part of this that is predictable is the inevitability of the outcome.  WHEN that happens is not only unknown but unknowable.  The best advice I can share with others is to:  1) buy the silver and gold that you can afford, secure it, and hold it for a long time; 2) use asset allocation to invest in various asset classes, including stocks, cash, real estate, PMs, oil & gas, food stuffs, etc.; 3) create a food and water storage and resupply program that will see your family through at least a year of severe difficulty wherein one cannot easily obtain food.  More is better, of course, but a balanced approach with your planning and prepping usually works the best.
      Note that I do not recommend bonds.  These are vicious value traps, IMHO, and best avoided.  My wife holds some bonds that she inherited from her mother in 2009.    These pay a 4% coupon and we are holding them for the moment.  They are not new bonds, which I would not buy at this time.  At some point, we will sell these bonds, most likely in 2013 and 2014 so as to not cause as large a tax problem.  I hope that at least part of this money will be invested in gold but with the ladies one never knows how much persuasion can be successfully applied.  She definitely has her own mind and ideas about what should be done, particularly when money is involved.  It is her property and not mine, so her decision will be what decides this issue.

    • You got it, Charlie.  Tap into that pool of universal knowledge that we all can access to see what the truth really is.  You will know what needs to be done when you are calm, at peace.  My connection is saying, “Buy gold and silver, you fool, while you still can!”.  lol

    • “…politicians are so used to lies and false data that they actually believe the crap they spout.”
      Which only makes the [email protected]@rds even better liars than they would be without all that practice!

  2. Stagflation ! !
    LOL, this guy is an optomist !
    I found a link to an eye opener, figuratively speaking – a real slap in the face from a stand back point of view.
    All the noise going on in the US economy is just the big players unwinding positions which have been built during the past century, the can is being kicked by the vested interests to milk it for as long as they can, no wonder the families who own the central banks and the cronies who run them want their Gold back.
    The law of deminishing returns is starting to become evident.
    Stagflation my eye.
    BTW this guy is peddling something and I’m not promoting it. Just absorb the information and bail when you’ve seen enough, the most portentious material is in the first 30 odd min, it unravels pretty fast from then on into the spiel.
    Keep stacking the goods

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