John Butler gave an interview on Capital Account, these are the main points.

On  Gold

  • Regulators have dictated capital controls and gold is not a Tier 1 asset.
  • Banks sell their positions in paper gold to raise capital.
  • Leveraged gold positions need to be cleared.
  • The smoke will eventually clear and when capital restraints are relaxed, gold will take off.
  • Banks at the moment, must stop lending and increase capital.
  • The stresses in the banking system are similar to 2008 and policy makers to react so JB sees gold rally in same way.
  • Banks are looking for Tier 1 assets to include gold but its unlikely regulators would include gold because regulators know banks would choose gold over bonds.
  • Gold is now being used as collateral and as money.

On the Dollar

  • Japan and China to trade in each others currencies is unprecedented. They are very large economies and will mean less dollars been accumulated by them in the future.
  • This is a major step away from the dollar and very significant.
  • Other countries are edging away from the dollar including Iran selling oil for anything other than dollars.
  • BRICS don’t like US policy with Iran.
  • Eventually US will have to blockade Iran or risk a large shift away from the dollar.
  • World economy is now multi-polar in which US monetary hegemony doesn’t exist anymore and so gold will be used in some part as a world reserve currency because it can’t be manipulated.