Central bank money printing knows no limits

Episode 74: GoldMoney’s Alasdair Macleod talks to John Butler – Chief Investment Officer at Amphora Commodities Alpha and publisher of the Amphora Report, as well as author of The Golden Revolution: How to Prepare for the Coming Global Gold Standard. They discuss the huge debt problems confronting Western economies, central banks’ reflation efforts and the significance of the shadow banking system.

Butler emphasises that policymakers will do everything in their power to fight natural deflationary pressures with policy-induced inflation. He argues that when central banks really want to double-down on their efforts to push prices higher, they may consider monetising the entire shadow banking system by taking it onto their own balance sheets in return for newly created cash – a possibility that Butler calls the “nuclear option”.

Butler states that a flexible money supply which can be manipulated at political will is an unsound foundation for finance and global commerce. In the realm of international finance there is still a lack of understanding when it comes to gold. As far as the debt crisis is concerned, there is no free lunch: no magic policy tool that can prevent the rebuilding of savings required when a country has over-borrowed and over-spent.

Alasdair and John also discuss Japan moving from a net creditor to a net debtor, and how this will put upward pressure on interest rates around the globe, which central bankers will likely address with even more monetary stimulus. To protect oneself from the effects of debt deleveraging or currency debasement when such deleveraging is being delayed, one should own real tangible assets that cannot be defaulted upon.

This podcast was recorded on 22 November 2012.

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