Ben Davies talks with James Turk

Ben Davies talks with James Turk

Ben Davies (hindecapital.com) and James Turk, Director of the GoldMoney Foundation, talk about the current fiat currency world monetary system established under “Bretton Woods II”. They explain the imbalances created by the hegemony of the fiat dollar, and how it allows mercantilist vendor financing and the accumulation of huge FX reserves in sovereign wealth funds and other vehicles. Ben Davies thinks that this system is close to the breaking point.

They talk about potential problems in China, and how the Chinese need to import huge amounts of raw materials in order to keep their economy growing. Davies and Turk also explain how China has more gold than they are admitting.

They talk about the economic outlook and how growth is slowing in the US and the EU as the sovereign debt crisis takes its toll. They discuss the probability of further rounds of monetary stimulus, be it QE3 or an equivalent. The two men also explain how this will result in a crack-up boom as described by the Austrian economist Ludwig von Mises. They both see gold as undervalued, but explain the problems of using dollar price targets because the fiat dollar is a changing yardstick. Ben Davies explains that money, like any other good, is affected by supply and demand, which set the price.

They talk about the potential for hyperinflation; Davies comments that hyperinflation is a political phenomenon, and that the conditions for it are in place in many countries. They see the rising gold price as a reflection of the flight from fiat currency into real goods and tangible assets.

They see gold breaking the $2,000 barrier this year and moving exponentially higher. Ben Davies explains that he uses a power-function model to analyse the price of gold, based on Benford’s law.

This interview was recorded on August 4 2011 in London.