John Butler Chief Investment Officer at Amphora Commodities Alpha and publisher of The Amphora Report talks to Alasdair Macleod about how America’s debt problem and political gridlock in Washington are risking the death of the dollar’s reserve currency status, and potentially leading the country on the road to a serious inflationary crisis.
Policy-induced inflation will triumph over deflation as a means in which credit deleveraging occurs, according to Butler. This is because it simply is not in governments or banks’ interests for a deflationary collapse to occur. As a result he expects central banks such as the Fed will continue to print money, and may resort to ever more blatant methods of doing so should more conservative policies fail to generate their desired level of inflation. This could result in purchases of corporate debt and perhaps even commodities.
Butler argues that though the eurozone’s debt crisis is a serious problem that should not be taken lightly, not enough attention is being paid to the severity of the debt and deficit issues facing America. He argues that the US is in worse shape than Europe on this score, and that the dollar’s status as a reserve currency actually makes it far more vulnerable than the euro to a currency crisis. Gold and silver will continue to benefit — the latter likely dramatically — from the increasing flight from the greenback. This podcast was recorded on 31 July 2012.