As more people realize the need for sound money, gold, silver and to an extent Bitcoin will be natural choices, said Larry Lepard of EMA.
Larry Lepard: "Economic Debt Doom Loop" Unfolding, Sound Money is the Solutionyoutu.be
Larry Lepard, investment manager and managing partner at EMA, sees an "economic debt doom loop" unfolding in the US, and he believes that sound money is the solution to this pressing issue.
Speaking to the Investing News Network, he explained that what's happening is simple math — if debt grows more quickly than GDP, eventually GDP won't be able to support the debt. The result? Either the debt collapses or there's inflation.
"It's what I call the economic debt doom loop," Lepard said.
Going into more detail, he noted that two years ago, when interest rates were lower, the US government spent about US$350 billion a year on interest expenses; now, however, that amount has risen to around US$750 billion.
"If we get to 4 percent across the whole spectrum of debt — we're not there yet, some of the longer debt is cheaper — but we'll be at US$1.2 trillion, which adds another US$500 billion in expenses," Lepard said.
Interest expenses are paid out of the federal budget, and as they rise they will increase the budget deficit.
"It's going to make the budget deficit bigger — that's the important point to recognize. So then you've got a bigger budget deficit. How do you finance the budget deficit? You sell more debt. Well, by selling more debt, what does that do in a fixed amount of buyers? It pushes the rate of the debt up," Lepard continued. "So now the interest rate's higher on more debt. What does that do? That increases the deficit. See where I'm going here? It's a doom loop ... it cycles around, right?"
This cycle has happened in countries like Argentina, Venezuela and Zimbabwe, but Lepard said it hasn't been seen in a G7 nation since Germany in 1922. Ultimately, he said, people will realize they need to look at assets that won't lose value.
"The natural choices are gold and silver, and to a degree Bitcoin, right? Because you can't print gold, you can't print silver, you can't print Bitcoin. So that's kind of the model that I see unfolding," he said.
Lepard added that the Bank of England's recent actions are an example of the type of money-printing intervention he's concerned about. "The thing that I would say is that the US is England, we just don't know it yet. What happened to them is coming here. It's just we're a little behind them, because we're bigger," he concluded.
Watch the interview above for more from Lepard on gold, silver and sound money. You can also click here to read our recap of the New Orleans Investment Conference and here for our full event playlist on YouTube.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.