On 9 October 2009 I was interviewed (MP3) by Business News Network, Canada’s premier financial channel, live from the NASDAQ in Times Square New York about the rise of gold.
BNN HOST: A note that caught our eye from RunToGold.com saying “Gold price rise pretends another round of the Credit Crisis. … Gold in Q2 2010 $1,300.”. Joining us to talk about that prediction, Trace Mayer, financial blogger and author of The Great Credit Contraction. He is in the city so nice the name that twice New York, New York. Very happy to be with us, Trace.
TRACE: Oh Thank You.
BNN HOST: You said the credit crisis has not been calmed but intensified. Why?
TRACE: Yes, one of the reasons is that the FASB mark-to-market has just obfuscated the toxic assets. So it is preventing the credit liquidation. So we still have the same bad assets that have not been liquidated in the market on the balance sheets. But people do not necessarily know where they are lurking.
BNN HOST: So the idea that the stimulus package and government back stops, things of that nature, have really delayed the inevitable more than anything else?
TRACE: Yes. They have delayed it and they have just pushed it off. And because people continue to make misallocations of capital because of that government intervention. It will only lead to bigger crisis later.
BNN HOST: Ok. When is later though?
TRACE: Well, we have been pushing this off for decades now. It seems to have really picked up in 2007 and the next round appears to be coming pretty soon. Mostly because of the move into gold. We see it closing at $1,050 this week and it now has a 3 week moving average above $1,000 and so there is a lot of strength. And a reason is because gold functions as a currency.
BNN HOST: Really the only currency that does not have obligations.
TRACE: Yes, it is a currency that at all times and in all places remains money. And there is a difference between money and currency. Gold is money because it can never become worthless. As you say it is no one’s liability.
BNN HOST: What is really moving gold on a day to day basis though, more speculation than actual demand. Is that accurate?
TRACE: Yes, there is a lot of speculation along with the central bank gold price suppression scheme. Because gold is a competitor to their fiat paper franchises they have a heavy vested interest in interfering with the gold market. So in the short term we do see a lot of central bank interference. But now it appears that Greenspan’s Call which is leasing gold should the price rise has been counteracted by the Beijing Put which appears to be putting quite a floor in the gold market.
BNN HOST: You have an interesting graphic in the report of the Day, an inverted pyramid, explain this to us.
