Greenlight Capital head David Einhorn says gold is going higher, interest rates are way too low, and the U.S. government has no intention of paying its bills.
“We’re going to continue to own gold as long as we think the monetary and fiscal policies don’t make sense,” Einhorn, who expects the price of gold will continue to rise, told CNBC. “Zero (interest) rates are a very dangerous long-term policy.”
“Individuals would benefit, particularly pensioners, from having some income,” says Einhorn. “There are people who save money but can’t speculate in the stock market, and they’re getting nothing. If we raised the rates a bit, they might have a bit more income, and that could help the economy.”
The beneficiaries of the zero-rate policy are the banks, those with variable-rate liabilities and the federal government, which owes a mountain of debt it has “no serious plan to repay,” Einhorn points out.
The world appears to have learned the wrong lesson from the demise of Lehman Brothers, Einhorn notes. "The policy (now) is not to let anything fail,” he says. “That works until you have something that’s too big to bail.”
“If you build a safer car, people drive faster,” Einhorn observes, and bailouts encourage increased risk-taking.
Weak U.S. nonfarm-payroll data undermined confidence in the dollar and sent gold prices higher, as did Federal Reserve Chairman Ben Bernanke’s suggestion the Fed’s program to buy $600 billion in Treasury securities may be extended beyond the initial target it announced early last month.
"Given that further debasing of fiat currencies is back on the agenda it seems likely the precious metals, particularly gold and silver, are poised for fresh gains, with gold homing in on last month's all-time record," James Moore, analyst at FastMarkets.com, told The Wall Street Journal.
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