Hathaway continues:

“You know to me the major thing Eric is that they simply can’t get the toothpaste back on the tube in Europe.  Ireland supposedly has been put to bed, but I’ll be from Missouri on that one.  You’ve got Portugal, Spain, maybe Italy, who knows?  Where does this all stop?  It’s not any specific country as much as it is the banking system in Europe and its failure to recognize these cross-border transactions that really aren’t worth par on their books.  The implications of that, conceivably, are a deeper European banking crisis, and of course the response to that will be more money printing on that supposedly sober side of the Atlantic.  I think that is what has gotten into gold, the idea that these problems just aren’t going to go away.”

Continued money printing on the US side as well?

“That’s what it looks like to me.  Certainly if anyone thinks that QE2 is the end of it, I’ve got a bridge to sell you.  To me this is going to become a way of life for the central banks.  Any talk of an exit strategy is just talk.  Those deficit issues are not going to go away.  So, I think on both sides of the Atlantic you have intractable issues that really I think are only resolved in a political crisis, where somebody hands over carte blanche to a political leader that everyone trusts to lead us out of it.  Does that happen democratically or does it happen in a non-traditional manner?  That remains to be seen but I think we’ve passed the point of no return and the only way out is to kind of hand over the keys to the kingdom to hopefully a group of people who know what they are doing and that sort this mess out.”

What about consolidation and the juniors specifically?

“As far as the junior sector is concerned, these big companies have proved remarkably inept at bringing new reserves into production.  I mean basically they (the majors) are running in place....We have a lot of money invested in small cap companies that have exciting prospects in terms of reserve growth, and they are all targets of the larger companies...I expect them (large gold companies) to become more aggressive on the takeover scene because they need to in order to regenerate their reserve profile.” 

Hathaway had much more to say regarding gold, silver, consolidation and other prescient topics.  The entire in-depth interview with John Hathaway will be available shortly.

Eric King

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