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Nirvana, Creditopia, And Why Central Banks Are The Devil
Via Hinde Capital,
Central banks are the devil. They are like drug dealers except they administer regular doses of supposedly legally prescribed barbiturates to their addicts. The 'easy money' or 'credit' they create is an opiate and like all addictions there is a payback for the addicts, one exacted only in loss of health, misery and death.
The economic system is an addict, but that system is comprised of banks, corporations, non-profit organisations, small businesses all of which are communities. And what comprises communities, us, human beings - individuals. We are the addicts.
Popular economic academia understates human action in the economic equation of money. It is human preferences that determine our desire for goods and services and so in turn really determines the utility of money. Sadly the desire of the State to control money and administer it like a drug has left our economies unproductive and incapable of standing on their own two feet.
Our reliance on 'easy money' as facilitated by credit has become terminal. Like drug users we continue to attempt to find a heightened state of Nirvana. We continue to hark for the utopian days prior to the eruption of the post 2008 crisis, even though our well-being was fallacious and based on an illusion of wealth paid for by credit - a creditopia. The abuse of credit is what defined the Great Financial crisis and one that still defines our economic system and one which will define a much worse crisis to come.
Central bankers have begun a concerted effort to fight the global debt problem which has been stifling growth as tax revenues merely serve to finance debt servicing rather than addressing the repayment of principal outstanding. Omnipotent governors, Bernanke, Carney, Draghi, Svensson and Iwata or Kuroda (either are likely to replace Shirakawa) are to take a far more aggressive and activist role in pursuing a new framework for growth and inflation by seeking an alternative way to conduct monetary policy. It's called Nominal GDP Level targeting and it is in our opinion as significant a moment as Volcker's appointment to the Federal Reserve governorship in 1978.
Many will recall Volcker's moment was to engineer a swift monetary contraction and deceleration of the money velocity to try and reign in excessively high inflation and stabilise growth. It worked. Today we are witnessing an ‘Inverse Volcker’ moment, whereby the opposite is likely true.
The question remains are they all still ‘inflation nutters' as Mervyn King, the BoE Governor glibly referred to those central bankers who focussed solely on inflation targets to the potential detriment of stable growth, employment and exchange rates.
Are central bankers merely expanding the boundaries of monetary largesse by focusing on a broader mandate and merely evolving the singular variable approach of inflation targeting or have they finally found a solution to eradicating boom bust business cycles? This is a question we need to answer as we are currently witnessing a Central Bank Revolution which could portend severe consequences for prices in our economies - and all the attendant misery that comes with very high inflation.
Nominal GDP Level targeting advocates believe they have a plausible case for a change of mandate by central banks and one which is being gradually adopted, but we believe that like central banks they have misdiagnosed the cause of the crisis by failing to examine the impact of credit creation in our global economy.
Money matters less credit matters more.
Global economies are still credit driven and Keynesian counterfeiting has merely arrested the collapse. The maintenance of heightened credit levels by financing of deficits with 'easy' money is beginning to see prices and output rise in the short term. In the long run only higher prices will remain whilst growth stagnates. A classic monetarist conclusion.
Hinde Capital has provided a long and consistent discourse on the relationship between credit and growth. Policymakers by now may well grasp that sustainable growth is not possible as nations still have an overreliance on credit-based sectors, namely the F.I.R.E. sectors, (Finance, Insurance and Real Estate). This is an understatement as all sectors are now directly or indirectly underpinned by this false mammon called credit.
Once upon a time merely altering the levels of money in the economic system could help an economy expand and contract without creating excessive levels of inflation both in asset, goods and service prices. However as this fiat currency regime has grown older so has the ability of central bank policy to contain large swings in the business cycle.
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It is our contention that central banks feel they need to maintain the balance of credit in the system as it currently stands by adjusting the money supply and monetary velocity (MV) but by doing so they merely circumvent the necessary adjustment in the economic system that comes about by market failure. If they don't allow this failure then any attempt to influence MV will only lead to higher prices (P) at the expense of output (T) in the famous monetary equation MV=PT.
Central Bank's Checklist Manifesto
At Hinde Capital we have attempted to codify both our objective and subjective observations of asset classes over the years and have naturally migrated to a checklist routine to eliminate any behavioural biases that lead to a misdiagnosis of events before an investment decision.
Full Hinde Capital Insight below...
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This is a must read? It's the same old sermonette ZH posts at LEAST once a day. Enough already!
You can always go hang out over at Yahoo ms. Smith. I'm sure you'll fit right in with that group of rubes.
You had me at "central banks are the devil."
The message will be repeated until even the davidsmiths of the world "get it."
good bye. dont let the door hit you in the ass.
2 years 21 weeks and you post that out of the gates Dribble Smith, is that a pee stain or are you just a little gassy?
Acccording to some they are doing GODs work, they never mentioned it was for the opposite team.
This was actually a very fresh, damn good important article, something that has been a bit overdue on ZeroHedge
The paper above is the biggest and most thorough presentation on ZeroHedge so far, on the new Central Bank fad 'magic fix' of Nominal GDP Level Targeting ... which the central banks of the world, led most aggressively by Japan, are starting to implement
Rightly or wrongly - and many people think this will work - it is the near future of world economic policy, and it is indeed something 'new', well beyond ordinary QE or money printing, or neo-Keynesian loading up with 'stimulus' debt ... it really has not been tried yet, so we are all 'assuming' if we claim it won't work or will work
One of the many interesting aspects is that NGDP targeting explicity has a bias toward letting sectors and institutions (big banks etc.) fail, as long as money supply maintaining Nominal GDP is cranked
There was a lot of nice detail above, like covering the work of Scott Sumner from his blog 'The Money Illusion'
What is good is that the paper actually tries to cover a lot of this new-fangled 'Market Monetarism', which as the paper notes, is significantly the first major economic school of thought to win favour almost purely out of the blogosophere
Ultimately, though, Hinde Capital is a gold bug financial advisor, and they are much too nit-picky and narrow in their assumptive conviction that NGDP targeting won't work
They go through a big song-and-dance claiming that NGDP needs to be done from some cherry-picked base year - 2007 or something - but that is not really the case.
More sophisticated NGDP views are that you just need to pump the money supply to maintain NGDP a couple points higher than the dominant gov't interest rate (which of course southern European countries can't do, until they finally wise up and break off from the euro-zone)
Hinde ends up just rather insisting that destructive inflation will be the only result of NGDP targeting, but they seem to miss the main point ... it is precisely that kind of Paul Volcker type attention to money and credit supply which NGDP is oriented to addressing
Although Hinde has really rather failed at arguing that NGDP targeting should not be tried ... even Hinde Capital admits it might be the best thing the Central Banks have adopted
But quite good of ZH to print this discussion
If Japan pulls it off with NGDP targeting, we will all know what to do ... if Japan explodes in Kyle Bass flames, well, we will honour them for their noble bravery and sacrifice
"Fed bankers target nominal GDP. Real Bankers target Greece." this was a very good article i agree. it's SHOWTIME in my view. "all the pieces are in place" for some REAL fireworks. "and i'm not talking the market." i'm talking SOVEREIGN MEANING AND AUTHORITY. one thing a lot of people don't know (but i did bring up during 2008 and after) is that the US stock market was CLOSED during World War I. "with volume this low why not turn it off?" is one question i have. it ain't like i'm watching CNBC. (though i do miss Maria B and still want to sleep with her. Or is it "she wants to sleep with me"? i'm easily confused. Speaking of which is Burnett pregnant yet? How's the "action Jackson" going on that front?) http://www.youtube.com/watch?v=gWubhw8SoBE
Bank Guy thanks
how does japan pull it off if Bass is wrong? (not a snarc just a question)
"If Japan pulls it off"
Are you fucking NUTS? What do you think Japan has been doing for 20 years now?
So maybe this time.... or may if they just print more ... it might work.
Are you Paul Krugman hiding behind an alias?
Look mate - 1 + 1 = 2. You cannot make the circular block fit into the square hole. And when you drop an apple - it falls - it does not rise - it falls.
And when countries are drowning in debt - more debt is not the answer. It certainly helps kick the can when you haven't massive debt loads but IF you, year after year after year, keep trying this strategy it will catch up to you.
And it has caught up to America (and many other countries).
So now having exhausted that INSANE IDEA that you can run up debt forever - we PRINT.
And retards are suggested OH THIS MIGHT JUST WORK!!!
I say again. ARE YOU FUCKING NUTS!!!!
I can see how you can get growth out of debt (up until the point you reach insolvency)- but for the life of me I cannot see how you can get growth out of money printing.
And if I am wrong - and Bernanke has created a perpetual motion machine - he deserves the Nobel Prize for Economics - and I will eat a bowl of steaming shit
But of course I am not wrong - there are many examples of other RETARDS who tried to print their way out of collapse. And every single last one of them failed.
Those buyers of FRNs will soon say, " you mean you're gonna pay me back with those soggier, wartered-down, fiat greenbacks? No thanks. Think Ill dump what I got and buy a mine or two or some farms." Then what do you target?
Hey Fuckbubblescientist
take your 26 weeks and pull it out of your ass toss it on the barbee and dine on some swine shit for brains.
FIRST OF ALL YOU HAVE NO FUCKING IDEA WHAT THE QUESTION WAS AS YOUR PAGE VOMIT SO ARTFULLY DEMONSTRATES
The question relates to what Bass has been saying for a couple of years now but obviously you have no idea with your 26 weeks handle what I'm talking about.
Pull you cock out of your ear and listen up youngster
It's just pathetic the way the functionally retarded resort to unsupported ad homs against other people's intelligence, while making the logical fallacy of acting like the recency of someone's registration with ZH is a sound argument of their inferiority, and while being here over a year and still not figuring out how to follow a damn thread. (Notarocketscientist's post was a reply to bank guy's post, not yours.)
nitwit
look at his thread again and pull your cock and your fist out of your ear
Jim Rickards actually addressed NGDP targeting for the Fed, and therefore all central bankers in chain reaction, while this approach from Davies looks at the Fed as not being first to this particular trough. I listened to the KWN podcast probably 12 to 14 months ago.
If you're looking for online entertainment you might check out http://krugman.blogs.nytimes.com/ . That or you could go to http://www.whitehouse.gov/
Options are available.
Game on. The low hanging fruit has been picked.
but ...
that is the "beauty" of the public/private arrangement,
why the fed is of private ownership with the guise of
public function and "satisfaction".
.
first fiddle
http://www.youtube.com/watch?v=OF6m3pq-Rfw&list=UULwXLS-KHDAABP02xEzplsg...
all the better for rivers of blood. gotta happen.
no, not true that
hofjuden running central banks are agents of the devil
judefetzen verboten herr kommissar
ja voll. ich schaue vorwärts zu kristallnacht.
Liar.
enlighten us
Really? That's the best you can do? That's what's supposed to stop us from discussing central bankers?
Sunstein overpays you.
the agents of Mossad have awoken. what the fuck is a sunstein?
edit: just discovered ZH history is stopping at 2.5 months ago, nm.
I think you’re misunderstanding what that fairly racist term means. First of all, it implies positions of influence & perhaps destruction in Imperial courts. You’d be hard pressed to find those true imperial courts. Second it implies pretty much those Jews have only one lifeline – to remain useful – while in the COURT of a King who is not a Jew.
Even the Nazis were actually shocked at the initial release of that book, you know. That’s right, the Hofjuden book was so racist it made NAZIS blush the first time they saw it.
Borrow & spend!...we have created all this for you comrades!...spend like there's no tomorrow!...people will die if you don't spend!...800,000 lepers will be thrown in the streets if you don't SPEND!!!
Borrow what from who. It's all a fucking illusion. Go make some.
Emo bitchez.
I'll take it from you...excuse me...just borrow ;-)
What are your terms? Do I have to pay it back...plus interest or will YOUR children (assuming you're capable of caring or wanting any) have to pay it back?
Emo investor's we have a winner!
What rhymes with razor blade?
It's all so sad.
I wish it was the olden days when kings deflowered your daughters and then they died from cholera.
This whole era of everybody sitting around jacking off and reading blogs after a solid four hours if fucking off at their paper pushing service jobs, it has to end.
Bring back the monarchy!
Sorry emos, carry on.
:(
Let's see we are getting ass raped by the central bankers, dying from the toxins in the food and drink, all while our "representatives " live like kings and queens.
Not much has changed since the days of the monarchy... just a different group of people doing the fucking.
There are more queens now than back then when the fair ear hair was stuck in the right rear wheel well.
and a different group getting fuck't. . . everyone gets a turn, in the end. . .
Now if I were online.... and I wanted to jack off.... I think I could find better source material that ZH.
This one's for you Bud! http://www.hornyasianladyboys.com/wp-content/uploads/2012/10/13.jpg
Central banks are the devil and teh Bernank is Chairsatan..
Not really true. There is no distinction between money and credit...credit is money and money is debt.
That is the sole problem, the only problem and there is no policy aside from non debt based money that can ever hope to save the system
Volker did not save the system nor did his policy work. It delayed the inevitable. Nothing more
So long as gdp equals an increase in money/credit supply and all money is debt and all debt carries interest....the absolute anti miracle of compound interest will work like poison on the system until peak debt/death results
This is no more a central banks fault as it is the general population who willingly adopts the fraud that credit equals money and the illusion that pulling forward demand is real growth in wealth
There are too many words wasted on blame and too few on the real fundamental issue...the system of money as debt.
No policy will fix this. It's a math problem, and exponent problem and compounding interest on money/debt problem and nothing else
Agreed, it's a problem and one that will happen again and again. I see no great concern in that.
The real problem is when you have the hubris of our current "leaders" who think they can stop it from ever happening again. The minute they started anointing certain banks and institutions as "too big to fail" and back-filling all lost demand with mountains of government spending, we were sunk.
The ability to fail MUST remain part of the system for the system to survive. They're trying to create a world where nobody ever dies. Nice for a short time, but the worst possible curse in the longer term.
I thought Chavez said W was the devil because he smelled of sulfur and all that other crazy shit.
The devil takes on many forms.
The Real Devil?
When discussing Israel we need to look at the root cause of the conflict - have a look at this video The Israeli General's Son – the video Israeli does NOT want you to see was made by the son of the general who lead the 73 Israeli offensive - and later turned against Israel's foreign policy
A real eye-opener, pass this around http://www.youtube.com/watch?feature=player_embedded&v=TOaxAckFCuQ
"there is no historical proof that King David ever existed (outside The Bible-which is not a historical document)." What a yo-yo. Had to turn it off at that point.
The idea that a small group of people can tinker with this candy cane money button or that pixie stick interest rate lever and will be able to "moderate" the economy of some 300 million people is impossible unto itself. All else is circling the edges of the toilet.
300 million-try 7 billion
All dealers know. Do not use the merchandise.
No, you've got it upside down. It's the modernity, aka capitalism, that created the central banks as we know it. In other words, central banking is one of the essential devices required for the modernity to function.
Privately owned central banking is pretty far removed from free market capitalism. It is a cartel or monopolization for the member banks that control the central bank. Without monopoly control of legal tender laws, they fail.
"Sadly the desire of the State to control money and administer it like a drug has left our economies unproductive and incapable of standing on their own two feet."
So all those billions of people who go out every morning and dig rocks from the ground, plant seeds in the field, assemble ipads in factories, design software apps, deliver mail, serve food, provide foot massages, build houses, teach children, sweep the streets.... all this is unproductive work, because it's financed by easy money? Whodda thunk it?
Hinde Capital needs to calm down. It should also learn the difference between reign and rein.
Yes, Prairie Dog, this is EXACTLY the point!
Easy money effects all business decisions. You can't make a correct decision on the productive use of capital in this environment, when credit is easy, business does not put enough thought into it's investments. Malinvestment becomes the norm.
Just two examples from what you mentioned above (but trust me I can go on and on about this topic):
Is the creation of an ipad a productive activity, when the funds used to purchase the ipad come from student loans and other easy forms of consumer credit? Whats the real return on the money spent on an iPad? Whats the real return including the interest you are now paying on the loan to buy the ipad? What if the only reason there is any demand for this product at all is becuase of easy credit? Could this money spent be put to more productive use?
You mentioned build houses. Really? You really think building a house is a productive activity with the current shadow inventory? But the easy credit market makes it possible for builders to create new houses in this environment.
They are the devil, but David Hasselhoff is the anti-christ. Not convinced? Check out:
www.esquilax.com/baywatch/
That's really twisted... I like!
BANK GUY
"If Japan pulls it off"
Are you fucking NUTS? What do you think Japan has been doing for 20 years now?
So maybe this time.... or may if they just print more ... it might work.
Are you Paul Krugman hiding behind an alias?
Look mate - 1 + 1 = 2. You cannot make the circular block fit into the square hole. And when you drop an apple - it falls - it does not rise - it falls.
And when countries are drowning in debt - more debt is not the answer. It certainly helps kick the can when you haven't massive debt loads but IF you, year after year after year, keep trying this strategy it will catch up to you.
And it has caught up to America (and many other countries).
So now having exhausted that INSANE IDEA that you can run up debt forever - we PRINT.
And retards are suggested OH THIS MIGHT JUST WORK!!!
I say again. ARE YOU FUCKING NUTS!!!!
I can see how you can get growth out of debt (up until the point you reach insolvency)- but for the life of me I cannot see how you can get growth out of money printing.
And if I am wrong - and Bernanke has created a perpetual motion machine - and deserves the Nobel Prize for Economics.
But of course I am not wrong - there are many examples of other RETARDS who tried to print their way out of collapse. And every single last one of them failed.
IDK seems to me that the Fed is buying up PD holdings of bonds using printed fiat to do a few things. Give its owners, the PDs, liquidity and to transfer the risk to the Feds balance sheets. Then once the time is ripe put the enevitable default onto USD holders by blowing up the currency and Fed with it.Who walks away the winners? Asset holders ie the Feds owners. Then after the dust settles asset owners ie old Fed owners create new world reserve currency and own the whole game once and for all.
I say this because we (you know, people who pay attention) know this is a train wreck. We are in their realm. Manipulation is their God.
So I ask myself, what is their plan? They have to have one Imo. They are not stupid. They sound stupid but it has to be a ruse. They have a plan and man I for one do not want what they are driving towards. It's sadistic. It is nothing short of complete facsist control of everyone. All it takes is a bit of planning and alot of propoganda.
There's no freakin' plan. They're just pigs. They need to be exposed and eliminated...
If an overly simple, linear equation of MV=PT and phase delay is what la-la-land economists and bankers use, it's a miracle that the real world isn't more messed up than it is. No doubt Maxwell's equations from over a hundred years ago would make their heads explode. There's more active and adaptive information-processing and computational ability in a micro-chip than in the combined theories of these pseudo-science clowns.
If we follow Napoleon's advice to 'kill all the lawyers', and then proceed to economists and bankers, we can culminate it all with Diderot's advice to 'kill the last monarch with the entrails of the last priest'. Metaphorically speaking.... as a means of conveying the total uselessness of of the types of people.
Please change "uselessness" to "destructiveness".
MV = PT is by no means linear, more like at least 3 of those variables are independent of each other.
Sadly, the predators-that-be and predator-class banksters don't just hurt their debt slaves.
Everyone who is frugal and avoids the debt-scam has to pay vastly inflated prices for most goods, plus vastly inflated taxes. And they get SQUAT for saving... any interest they receive for savings is a tiny fraction of the actual inflation rate.
The only ones who gain from fiat, fake, fraud, fiction, fantasy, fractional-reserve debt-mania is the predators-that-be and predator-class. PERIOD.
The purpose of government is the looting of the governed.
The purpose of the Fed is to transfer wealth to the banksters.
Why these simple truths are not told in the government run schools is beyond me, Oh, wait......
Ahahahah Market Monetarism. Peter Schiff had a debate with the editor of National Review, a conservative magazine where the editor said the Fed was too tight. ROFL.... Just more mumbo jumbo from mainstream economist creating a theory which the next day will be replaced with another theory. Mainstream economist treat economics like a empirical science. Like you can prove transactions between two people on a certain specific trade as empirical, repeatable falsifyable truth.
Federal Reserve is basically doing what it has always done. Remove purhcasing power, misallocating resources, and creating a phony economy. A real economy is based on savings, and investment, consumption is a by product of all that, instead we have a dysfunctional economy where consumption, low productivity are encouraged. Purchasing power is a economic growth. The ability to accumulate capital. Creation of cheap credit distorts that.
Interesting read on some spots providing history, and the dollar reserve currency coming into being. I already knew this, but some people don't.
fighting private banking fire n money power with central banking unlimited fiat power; yep, targetting the Templars' financial rule with state power.
New game in town...When state oligarchs and private oligarchs match up; as both cannot survive, one pillar has to fall.
Who else but the state to save the world from Corporate Combine, even though the state is incestuous as hell with those very private sector czars.
If the US ship cannot survive maybe the meme will be repeated until the corporate fire has been doused and the hundred headed hydra cauterised, slain worldwide.
And then where?
The United states of one party politburo governance?
Lol, We will all bow to the Chinese model and eat our hamburgers with noodle sticks!
This is going to end with man capitulating to economic law and gold rising to back all this paper, or man self immolating out of spite and gold replacing all this paper.
The real problem is that too many people want their neighbors to pay for their benefits. And this can't be done without inflation. And this means that people wont stop until there is some kind of default, one way or another.
Washington, D.C.s response to the People: Laissez-les manger le gâteau
"Hyperinflations are always caused by public budget deficits which are largely financed by money creation. If inflation accelerates these budget deficits tend to increase "(Tanzi’s Law).
Bankruptcies of governments have, on the whole, done less harm to mankind than their ability to raise loans.
—R. H. Tawney, Religion and the Rise of Capitalism, 1926
Greenspan's little money printing experiment after 911 dumped so much money into the U.S. and elsewhere causing the U.S. housing bubble and other problems.If you think that was a taste of inflation,you ain't seen nothin' yet.