David Einhorn, the hedge-fund guru who warned early that Lehman Brothers would collapse, now says that there is no reason for the Federal Reserve to keep the interest rate at zero.

In fact, he thinks the Fed’s position increases the risk of second, government-driven collapse.

"The crisis that required zero interest rates has passed," Einhorn told London daily The Sunday Telegraph.

Keeping rates low "increases the chance that governments will over-borrow and fall into a debt trap," says the founder of the $6.5 billion Greenlight Capital fund.

"If interest rates ever do go up again, you have another crisis," Einhorn said.
Tellingly, Einhorn’s single largest position is in gold, a hedge against flight from paper currency.

Gold has put on 26 percent this year, hitting a record $1,432.50 on Dec. 7 before falling back.

“The big concern is debt, not only ours but European debt,” Frank Lesh, a trader at FuturePath Trading LLC in Chicago told Bloomberg News.

“It means further currency volatility, which will drive capital into gold.”
Gold futures for February are now at $1,382.20 an ounce, according to Bloomberg.