Gold Research Videos

James Turk: I'm James Turk. I'm a director of the Gold Money Foundation. I'm here with Ben Davies, co founder of Hinde Capital, a very successful bullion fund manager here in London, England. Ben, good to chat with you. I want to talk a little bit about the markets, but let's start first with the big picture. There are all kinds of distortions and imbalances in the monetary system today. How do you see that? What's the cause of that?

Ben Davies: Well, thanks for having me on the GoldMoney Foundation videos. I'm very excited. I think that's a good place to start because, as Chris Powell just said in the meeting we were in, he said gold is the knowledge of the financial universe, and I think that's absolutely true. But what is gold? We all know now and we begin to understand as we're in this field that gold is money. Not to belabour that point, it is a very important point, but the system that we're working under now, what we call the Bretton Woods II regime, is actually a fiat currency system. I think that's a very pernicious system. What we mean by the Bretton Woods II system is the currency system where the U.S. is centric to it, but currency is pegged and particularly China, the rest of Asia by dint of China. That has created huge imbalances, structural imbalances, as you know. For me, that unwind or the potential unwind we're seeing now as they try to hold it together is what is causing a lot of the financial difficulties we have today.

James: So things like the Sovereign Wealth Funds that various countries have, that's a huge imbalance. These huge pools of hot money going from currency to currency seeking a safe haven or higher yields, that's another imbalance. Those are the types of things that you're talking about.

Ben: Sort of along those lines. Let's go back to the real basics, and let's talk about vendor financing which is about China being mercantilistic and exporting to the U.S. and the rest of the world and Europe in particular, but what do they do with the dollars they receive? They've got a fixed or semi fixed exchange rate, and they want to maintain that because they're wanting to keep the competitive advantage by having a devalued or undervalued currency. And that's what they have currently.

James: To keep their export industry moving.

Ben: Absolutely.

James: ...and taking advantage of that undervalued currency.

Ben: Absolutely. But what does that actually entail? You get a flow of dollars back into China, but obviously they have to deal with those dollars so they have to sell their own currency in order to maintain the peg. Now, this leads to a huge FX accumulation which we've seen go from probably $500 billion to $3 trillion in China alone. In fact, currency reserves have gone from $500 billion to $11 trillion in a nine year period. Now you tell me that's the sign of a stable financial system, clearly not. You don't have that kind of level of foreign exchange reserves. For me, now we're in a situation where the QE3 or, sorry, the QE2... I'm running ahead of myself. I'm in anticipation of the QE3.

James: You're anticipating the future here.

Ben: The QE1, the QE2 that we've seen has just created more FX accumulation which they're having to deal with because now it's starting to create inflation. They're struggling to hold that peg. They can't keep issuing currency, so we're finding a situation where inflation is rising globally but probably rewind. What's interesting before, the reason why the system didn't appear to be so inflationary is because, obviously China, had a huge labour pool. As we move from an agrarian economy into an urbanized environment and as they moved from a lower income into sort of middle class environment, what we've seen is wages demands have risen. In fact, actually China has effectively said, 'Look, we realise that perhaps the game is up with this currency system, and we need some domestic growth. We can't completely rely on mercantile growth.' That's what I think is trying to happen. They want to let this happen over a gradual period of time, but this is where the pressures are growing.

James: But they are not adjusting the exchange rate in order to allow the adjustment, and so the consequence is they're going to continue to build these huge imbalances.

Ben: Well, they are but very, very slowly.

James: But not fast enough because their reserves are building rapidly.

Ben: Absolutely. That's a function of the quantitatives and the liquidity that we've seen in the system. It's happening at a far greater rate which is why we're coming to a zenith point, a tipping point, if you like. I think there's two ways of looking at the world now, either we're going to burst this fiat bubble, this currency accumulation, or we're going to have to have Asian economies actually allow the currencies to appreciate, allow those structure imbalances, either the current account surplus to move towards the deficit as they go more towards domestic demand. Personally, with what we've just seen the last couple of days, we've seen that begger thy neighbour behavior already beginning in the markets again. Look at Japan. Look at the Swiss intervening in the market. These are all a function of the dollar distortion, and they're having to react because they've got too strong a currency now for their export market, which is the only place that they seem to be able to get growth for the moment.

James: It's always been my impression that the Chinese authorities have been very, very fearful of inflation because that really has a big impact on the standards of living of people living within China. They could allow the currency to revalue more rapidly to help offset the rising inflation that we're seeing in China. Is that likely to provide the incentive for the authorities to loosen this peg and start appreciating the currency much more rapidly?

Ben: That's a very good point. I think they just don't actually have the growth engine internally at the moment, and also they're not an autarkic nation. They need to accumulate a lot of goods, and they obviously want to procure those easily in time and obviously allowing the currency to rise. That would probably be advantageous, but at this point the accumulation of reserves they have because of a weaker currency actually, perversely, has allowed them to hoard a lot of real assets which they need for infrastructure build which we've seen to a large extent in the last ten years.

James: A lot of that infrastructure build has been bad investment. From what I understand, a lot of it has been wasted, built on things that have not been economically productive. We hear the stories about empty cities waiting for some future occupants to occupy them. It's a lot of that money and accumulation of capital has been wasted.

Ben: Well, again you bring up an interesting point. I'm definitely not schooled enough to be a Chinese expert. I have traveled there, I would consider extensively, but in order to really understand the country and it's so vast, you have to spend, I think, many years in that country. I don't think a few weeks here every year really counts, but I think you have those who say that there's been a huge misallocation of capital. There's a huge white elephants, and there's actually the speed of growth of some of the infrastructure, which is Chinese trains. One of the bullet trains had an accident, and everyone immediately started saying, 'Oh, Chinese buildings, it's of poor quality.'

I always remember the analogy of my work partner who said, he had a spanner. He was fixing his house and something happened. I don't know why. He broke it working on a radiator, and his father, he was helping him pulled out this steel spanner from the trenches, would you believe, and said, 'This was your grandfather's. This is British steel, and this won't break.' Sure enough, that's all about utility value. They have created a lot of goods at very cheap value.

To actually answer your question, I'm undecided on that. I think that it pays a lot to give more attention to what's actually going on within their financial system, but it is so opaque. We're not really sure how much of the loans, how much of them are starting to go wrong already. But there's one thing that I'm very sure of, this infrastructure build hasn't ended because there are 200 million plus people still needing to move into the urban environment.

That's going to need a lot of resources, and they have deficits in that regard. They need copper. They need iron ore. It's going to tail off. The rate of growth will not be the same, but those, who I think are calling for an impending doom in China, I would probably say that they will be able to manage that deflation, if that's the right word.

James: Do you see China going back to some kind of a gold standard? They have been an accumulator of precious metals. They still have a relatively small amount compared to the total value of the reserves, but do you think they'll eventually impose the discipline of gold on their money creation?

Ben: I think they may make a very tacit move to do that. I do believe that from my experience in dealing with the state government there in terms of the central banks. In my former life, I was the head of bond trading in London for U.S. government bonds. We were the number one dealer for the PBOC and Safe, and I was very impressed with their knowledge. In fact, I always remember a particular lady that had a book of Hayek on her desk. These are very intelligent, well schooled individuals about the capitalist system. I think they fully understand a sound monetary system predicated on physical assets, such as gold, as a way forward. I think they're doing it a very clever way, which is they are encouraging, and it doesn't take much encouragement because they have a natural affinity, that population. But savings in that country is taking place through now deposits at banks and banks backed by gold. I think they would be able to put their currency situation to have a gold backing because the populous, who already earns gold, so it would already be in the hand as a medium of exchange.

Just to say one last thing about that, China perhaps have more reserves in gold than we already know.

James: Yeah, I'm a believer of that.

Ben: It's a command economy. For instance, they came out and said, 'oh, actually we had a little bit more;' obviously, we found a few hundred tons more.

James: Yeah, I believe they've been accumulating a lot more than they announced, but when it's politically advantageous for them, or they deem it to be political advantageous, they announce an increase in reserves. I think this last one was the third one that they announced in this past decade of an increase in the gold reserves. I want to tie it back to how we started this conversation about the problems and deficiencies and the imbalances in Bretton Woods II, which is our current monetary system. You're basically saying that the Chinese understand how the current monetary system is broken, and they're not going to rock the boat, but they're going to continue to take advantage of it as well as they can in order to raise the standards of living of the Chinese population.

Ben: Absolutely. I think that's absolutely where they're heading. They're not God. They can't move the Titanic, the boat, that quickly unless they obviously hit an iceberg which comes back to the non performing loans. Is there a hidden iceberg there in China, and will it ever come to light because again, it's a command economy. You can obfuscate to hell and back, and no one is ever going to know. Will that misallocation of capital that some people believe has occurred? They can start cutting rates. They've already raised its rates, as a way of sterilizing all this FX accumulation they had of late. I think they have a lot of powder.

Unfortunately, it's the Laws of Diminishing Returns, every time that they have a fiscal spend or they open up their monetary figure, actually they're not really getting much return on their capital. They were just as guilty as anyone else in the 2008 crisis over having a huge fiscal boom, a fiscal spending boom and they didn't get much bang for their buck, but they got through.

James: The bottom line is every time the federal reserve turns to the printing press, call it quantitative using of printing money, whatever you want, because the dollars of the world, the reserve currencies of the world, some of those dollars are going to end up in China and cause inflation domestically.

Ben: Yeah, absolutely, and the rest of Asia. Let's talk about moving on to QE and perhaps, as we've talked before in the interview, the potential for QE3, and there is no doubt growth is slowing dramatically. Markets are beginning...

James: In the U.S., growth is slowing.

Ben: Yeah. Globally. I mean, in the periphery of Europe, even Germany now, it’s starting to slow. That's an export market. It's the Impossible Trinity, isn't it? It's the economic trilemma where you can't control capital controls. You can't have your cake and eat it. You need your own monetary policy and FX controls as well. What we're seeing is everyone is trying to graze from the same bin. Obviously, growth is slowing and some people are going to get a bit more of the grazing, but not everyone is going to be able to keep their growth up.

So growth is falling. The U.S., clearly, is going to come back, in my opinion, to some form of QE3. Unfortunately, I think that they will probably do something like buying long end bonds, which, actually I think is a very inefficient way of trying to transmit money into the system. Obviously, I don't approve of it, as someone who doesn't believe in dilution of your currency. But in the current system if they want to create aggregate demand, I think what they should be doing, I don't approve, but if I was Ben Bernanke, and I was thinking about this, I would be wanting to stimulate the householders, because, clearly, they need to get rates down for these individuals.

How do you actually do that? Maybe you reset on mortgages of FHA loans, et cetera, maybe you make them cheaper. Maybe they're going to go and buy commercial real estate. It would be a qualitative using, not a quantitative using.

James: Yeah, but that's not going to solve the problem, is it really? The other thing you're doing is you're just destroying the savings of the middle class and the capital that they've accumulated.

Ben: Yeah. You and I are on the same boat on this. I think this what they would like to do; it's not what, we would like to see happen. The reality is, what's happened in Europe, take the EFSF, and what's going to become of the ESM, Exchange Stability Mechanism in 2013, we've seen a huge fiscal transference. We've effectively got a fiscal supranational entity that has taken over monetary policy. They will be able to print unlimited amounts of money, to recapitalize the banks, obviously, with funny money, and they also will able to bail out the bond markets. They will be able to buy bonds in the bond market, as we saw today.

James: But as we both know that's not really recapitalising because this is not coming from savings...

Ben: Absolutely.

James: It's coming from money printings.

Ben: This is the problem. We have already spent our capital that's been available to us, true capital that was created through the private sector, because we've had such an over leveraged system in order to pay for Social Security, Medicare, and other such liabilities. I think, going forward, if we continue these policies, there is no doubt that we're going to get to one of, what Mises, the Austrian economist said, is a Crack Up Boom. I am in the camp, at this point, that should they come back to the markets with some form of qualitative using, or quantitative using that we will only accelerate.

I think it can happen a lot quicker than people think. Even those who are very doom and gloom on the paper currency system, believe that it can stretch out five, 10 years, but I think we're getting to a point where it's almost self fulfilling.

The more people discard each currency, from the euro, Swiss franc, we see them intervene today. That's going to have people thinking about the Swiss franc. Do I want to be in yen, no they're intervening in that. Everyone's selling each currency, and every time they discard a currency and go into gold, it's an inverse function. Of course, the more you do that more gold goes up, so it becomes self fulfilling as a positive feedback.

James: Was this part of your thinking on 'King World News' recently, you were talking about $2,000 gold here in the not to distant future? That we're starting to get that self fulfilling feedback loop, that as the gold price goes up and as more government intervention occurs in the currency markets, more people are going to move to gold?

Ben: Yeah, and I definitely want to state that this self fulfilling prophecy here, at this point, it's not a destabilising moment for gold. It's a destabilizing moment for fiat currency. I do not believe that we've got the precursory pans for a bubbling gold, that's not what I'm saying and people are trying to label it as such. I think I also have is a sort of trader's viewpoint on this. We were breaking out to nominal highs, at a point, where other than Swiss francs and yen, which were all at very extreme levels already. Where do people have to go? I think it dawned on people, in fact, I think I have friends obsessed about the validity of the credit system as it stands, who've never been interested in money, in terms of what it meant to them, and a day's labor, and what is the value of a PAN. They just assumed that they get a cheque and, 'Hey, I can go spend this.' When you have people like that who start to really worry about the financial system, and actually say to you, 'What currency do you go in?' It all leads back to gold. I think that's where we're going, from my trader's point of view, as we break to new highs. Who's wanting to sell the gold? We have not moved auction to a price high enough to find a long term holder of gold who said, 'In this environment I'm prepared to sell out and go into something else.'

James: Sell gold and take paper?

Ben: Or take paper, or take something that gives you a rate of return in a paper currency. Maybe if I was a brave man, some people would say, 'Good discounts on Greek bonds.' But I know this is only the beginning, as you do, for the European Union, or, perhaps, the breakup of the European Union. I think it could come down to that, and I maintain that will happen. At some point in our career, if we don't have a gold standard brought on by China, or even the U.S., if they want to maintain, if they have the gold, which as we all agree, we suspect they don't. If we don't have that standardisation, at some point, in the next 10 years, maybe even sooner, there will be some real assets to sell out of, at much higher prices, to buy paper assets with a much higher yield or discount that gives you that comfort and safety, maybe it's like in 1980, long bonds at 20%. Maybe we get that opportunity.

James: Yeah, markets eventually move to extreme where something becomes so overvalued, and something else becomes so undervalued, that the disparity just can't exist, and the market ultimately clears it by bringing down the price of the overvalued asset and bringing up the price of the undervalued asset. We see that in financial markets all of the time. But the point with regard to gold I'm agreeing to what you were saying even though the price is high, the value of gold is still quite good at the moment.

Ben: That's a great point. Yeah.

James: Yeah.

Ben: I keep saying that's a great point. But the two distinct constructs, price and value, price is the level at which you exchange, and value is whether it's worth it.

James: Yeah.

Ben: Hopefully I've articulated that correct.

James: And in this Bretton Woods II a system...

Ben: Yeah.

James: Price is even harder to determine accurately because of the fact that currencies and central bank intervention, you have all these huge imbalances and what not, it makes the value of the currency that much more suspect. It's like having a measuring stick that's constantly changing.

Ben: Yeah.

James: Or giving a carpenter a yardstick, which is very..

Ben: Extending it.

James: Yeah, or, in the case of currency, shrinking it.

Ben: Shrinking it. Yeah.

James: Yeah. In terms of loss of purchasing power.

Ben: Yeah. That's a great analogy. I think when you debase a numerat, to the extent that we're seeing now, is how do we ascertain what true demand is. Asia, clearly, has a growing economy. This is the positive side of what's happening, or because of this booming demographic. But it's accelerating on an illusion of a standard of living because of all this money and people will say, 'Well, standard of living is so much higher.' Unfortunately, we've spent our available capital, and we've taken from future generations. Unfortunately, it's going to come back on us now, not my children, and their grandchildren, it's going to happen in my lifetime, and your lifetime.

That demographics, though, that we're seeing that boom, how much is that real demand? How do you value that? It's very difficult. What is the value of a barrel of oil? Should it be 80? Should it be 10? If we divide by the denominator, just cut it by 10, or divide the numerator, slash it by 10, we can bring everything down. That's, effectively, money as we all know, is like any other commodity. It has a supply and demand.

James: We were talking before about some of the problems that we have in the financial system. A lot of people say that the problem started with Lehman Brothers, or Bear Stearns, but, in fact, Northern Rock went belly up several months before Bear Stearns did. One could reasonably argue that the financial crisis really started here in the U.K. back in August of 2007, when Northern Rock went on the rocks. The question is, what is the U.K. economy and financial position like today? Has it been improved or is it still a problem?

Ben: I would actually say the problem actually started in 1971 when we exited off ...

James: Yeah, that's true.

Ben: Of the gold standard and I believe it's 40 years...

James: This month.

Ben: This month. I should know the exact date because I've written that in my file.

James: August 15th.

Ben: August 15th, exactly. Thank you for reminding me. Yeah, I think that, obviously, the U.K., as the center of the banking universe, which it is to all intents and purposes. We have a banking system that's five times the size of our GDP. There's a too big to fail situation in the eyes of the government. They, from a liberal economist viewpoint, are making all the right noises about liquidation of the financial system by not spending as much, trying to bring down the depths of the austerity. You can get rid of your debts through, you either grow your worth out of the problem, you have an explicit default, or you have an implicit default, where you devalue the currency.

James: Just to clarify . . .

Ben: Yeah.

James: When you're talking about liberal economists, you're talking about classical liberal economists, not the way liberal is used in American and other parts around the world.

Ben: Yes, absolutely. Yeah. I think, unfortunately, as you can see with the UK, when you look at the numbers, really when they said they were going to cut spending, all they did was actually take the inflation rate off. The stock is still rising; public sector borrowing is going up exponentially. I think also there's a Tanzi effect, which is that the mismatch between tax on earnings and what they're spending it on, and that's inflationary. So it builds up even more. I think I explained that correctly.

Ben: Nobody actually owns sterling. It's not a reserve currency. I think that it's been a small bastion of safety at the moment, if you can call it that.

James: In view of what's going on in Europe.

Ben: Yeah, and actually I think very much that we're very much in the same place as possibly Greece. I actually think that it's going to come home to roost.

James: Actually, I was going to ask you that question. Is the UK economic situation more like Greece or more like Italy? In other words, is it a mess yet to be discovered or is it one about ready to blow up?

Ben: I think that it's probably one about to blow up. It does never cease to amaze me how long markets can remain... I think some people say that speculators are going off to Spain and Italy. Maybe that's true, but that's a reflection of the true state of their economies. If you don't like to hold a bond because it's at the wrong price, I have no problem with shorting it either. But again, going back to the U.K., you walk around the streets here and it's like everywhere in Europe. I've just come back from Barcelona and it feels like everything's fine. But that's obviously because we spent our capital to make the place look fantastic. But in a few years time, we're not going to have anything. There is no doubt that, outside of London, that we have a situation where people are really very concerned about their jobs. I'm talking from middle class workers down to lower class, lower socio income. I think that it's going to come across in the next couple of years.

James: But even London is feeling some pain, isn't it? Because the problems within the financial industry, the banking system in particular?

Ben: Volatility, despite how it might seem, has actually dropped off immensely relative to 2009 10. Banking profits have come down in their trading. All the banks are cutting numbers.

James: HSBC announced 30,000 globally, I think it was.

Ben: Yeah, and they said it's going to be...

James: Are being laid off.

Ben: Yeah, and they said it's 700 or 1,000 in the U.K. But yes, I suppose we'll call it, if you worked at Greenwich Capital, my former place, are now obvious and said... Just the pricing that's going on is very competitive. People aren't making money just... And that said, obviously with all the regulatory changes that are coming, they're downsizing. But a couple of years ago, just after the crisis, they were ratcheting back up again. I'm not sure whether this is something that's going to continue. But certainly I think the U.K., to really answer your point, is we have such unbridled debts and no amount of austerity is going to help us when you've got growth effectively at zero. There's no income coming in and just your fiscal burden isn't going to raise. So I think the Bank of England is going to keep doing that. Purchase programs or some version of it in time.

James: Possibly leading to hyperinflation?

Ben: I think in the end, hyperinflation is a political phenomenon. What is meant by that, it's when you start monetising your fiscal imbalance.

James: That's what the Bank of England is doing.

Ben: That's what the Bank of England is doing, so anyone who says that can't happen, it absolutely can. They are just like... Take the U.S. QE2 stopped and they did 200% purchasing of the treasury issuance in QE1. FQ1 2011. Now that's stopped. Who's going to buy it? The private sector? Possibly, but I think it will be some form of financial repression. You will force the banks to recapitalise with sovereign debts. They can do that. That could be something that could happen. Actually, that brings up another point, which for me, the banking system, the way it's capitalised. being really predicated on sovereign debt has been exposed as a Ponzi scheme, in Europe particularly. You cannot have provision of capital based on a zero weighting of sovereign debt because clearly, there are scales of credit. I think that's actually where politicians... Actually, not... Even before, I think they did actually understand the mechanisms and then they realised that the sovereign debt and the banking debt were synonymous.

James: I'm not so sure they realise it yet. They're starting to realise it. Maybe some people still don't because they continue to pursue these foolhardy policies where they're borrowing money to try to take some of these insolvent institutions and insolvent countries who are never going to meet those debt obligations. They're throwing good money after bad.

Ben: Well then, let me put a question to you. Clearly, the eurozone and the creation of the European Union was, in theory, about creating harmony and stability after, obviously, the awful events of World War II. And really to make Germany impotent in terms of when they actually had the unification. That was a... You're going to come into the union. This is going to happen. This is when we'll allow you to have this unification. Do you think, today, the reason why it went to the wire with this last solution being offered, that actually the French and the Germans are trying to have a political coup here where they take control of the Union and they can take control of the periphery assets?

James: Yeah, I think there already has been a political coup, in a sense that one of the key rules of the EU is that the European Central Bank is not going to monetise government deficits. Despite Mr. Trichet's pledges of not buying sovereign government bonds, he's been buying sovereign government bonds. And so, as a consequence, what you have happening is political control of the euro, which is very, very different from the way the Bundesbank had been managing itself and managing the Deutschmark. I think the euro is looking more and more like the pound or more and more like the dollar in a sense that the European central bank's not making sound monetary decicions. They're making politically expedient ones.

I think that's one of the reasons why we see the gold price at record highs. The U.S. dollar, record high. euro, record high. The British pound.

Ben: The Aussie dollar has broken out again with a new high.

James: What we're seeing is the flight out of fiat currency into tangible assets, into a safe haven called gold. I guess that's going to continue. In terms of your fund – I know you're a specialised bullion fund – do you focus more on bullion or more on the other related investments in the bullion side?

Ben: We always have... The bedrock of the fund is 75% in allocated gold, which in our case is stored in a private bank in Zurich, the oldest private bank. We didn't want to have a paper asset, obviously, as a gold fund. We then create... That is the bedrock of our fund, and it allows us to create a structure of being able to over allocate and under allocate it through some other financial instruments. We try and create an absolute return above the gold price. That's how we benchmark.

James: You have achieved that.

Ben: Yeah. That's very obvious to bring up. We have achieved 17 18% annualised above the gold price. We're very proud of that. We feel that, in our own way, that our fund is about integrity. We've helped a lot of people get out of paper assets and into an asset that has a great return. I know from my own personal account that my run rates 10% a year, in terms of inflation. It's rising at that amount. I need to create a return for myself at least at 20% in nominal terms, because it could take...

James: Just to keep up.

Ben: Just to keep going. I did ask this of someone who's going to be at the conference. I said, 'You're probably very excited about gold being high, but are you an advocate of a gold standard, or are you just excited about feeling like you're better off?' Because clearly, at the moment, there are people who have owned gold and silver, and particularly silver at $6 and watched it up to $50. That's real wealth accumulation. But actually, they are still a long way behind the inflation destruction we've had over the last 40 years. In the short term, although they feel fantastic. Actually all you've done is started to catch up to where we should have been before.

James: But there's another important message. You're basically saying that gold and silver are still undervalued. As well as they've done over the past several years, if you look at it over a 30 , 40 , 50 year period they're still undervalued by the historic metrics.

Ben: Yeah. It actually comes back to what I talked about earlier, that price and value. People say, 'How do you measure the worth of an ounce of gold?' At this point, because the system's inverted the other way and everything's predicated off a dollar or a sterling but actually, historically, it was off the weight of gold or silver. Now we look at it and say, 'Hang on. Gold only backs the U.S. monetary base 17, 18%. Maybe it's a bit higher now.' But just to go back to the average over a gold standard period where banks were capitalized with gold 40, 50%. That takes us north of $4,500 $5,000 for a fair value.

James: Would you care to venture how far this bull market has to run? Not in terms of price, but in terms of time. Are we talking about three years? Five years? Three months? Five months? What's your guess?

Ben: Well, one thing... I'm speaking at GATA tomorrow. I'll give a little snippet away. I talked about something called Benford's Law, which is a power law, an exponential logarithmic function whereby effectively if you take something like a data series and it doesn't follow a uniform distribution, it actually... The higher the lower digits... One, two, three. You get a population of price or currents. You probably get 60% at one, two, and three. And then, as you move from four to nine, there's less population there. We spent a lot of time between $1,100 and $1,400. I say a lot of time. It was actually only a year and a half. Based on this probability assumption, moving from $1,400 to $2,100 we should do in 10 months. Which means that we should hit $2,100 by January. I hope anyone who didn't understand that will just go and read my speech when it's up on our website. For a bit of fun, I think that we're going to see a bit of a exponential move here that takes us to $2,100. I'm not going to venture any more than that. I've said on a basis of monetary valuation and the rate that we've already accumulated reserves in the world, we should be at $4,500.

One last thing I would like to offer is that there's so much leverage in the system. In some ways, I actually feel sorry for Ben Bernanke. I actually believe that in his intellectual mindset, that he understands the situation. He understands full well what gold means to the world. He understands that we've got so much leverage, he's just got to let the air out of it very gently. He's trying to do that manfully, working within a system that he understands. I'd offer him that.

James: But at the end of the day, I'd rather own gold than U.S. dollars.

Ben: Absolutely. People will say, 'Inflation or deflation.'

James: It doesn't matter if you own gold.

Ben: Absolutely. I think that I'd be absolutely ecstatic if other assets were to go down in price, being a bit mercenary about it, because I believe that my purchasing power will increase dramatically. When I sell my gold, I won't get charged taxes on it and I'll be able to pick up some nice, cheap assets.

James: The only think I would say is that instead of selling gold when this bull market is over, you're going to spend your gold. I really do believe it's going to become currency once again. Time will tell.

Ben: I would like that opportunity, and obviously GoldMoney has been a fantastic advocate.

James: Thanks very much. It's very kind of you to say that. Well, Ben, it's been a real pleasure. I've been speaking with Ben Davies, co founder of Hinde Capital here in London, England. Thanks very much.

Ben: Great. It's been an honor. Thank you very much.