Mike Norman, HardAssetsInvestor.com (Norman): Hello everybody, and welcome back to HardAssetsInvestor.com's interview series. I'm Mike Norman, your host. Well, here he is, Mr. Doom and Gloom himself, Peter Schiff.

I know you've been of this point of view that … just let everything go down, and somehow that's beneficial.

Peter Schiff, president of Euro Pacific Capital (Schiff): It's called capitalism.

Norman: No, it's not called capitalism. Capitalism has a political structure over it; there are laws, there are regulations.

Schiff: It's all that regulation, all that interference that's the source of our problems. It's the government that interfered with the market; that's why we had a housing bubble, that's why we have this phony economy ― because politicians mettle in the market, and they tried to direct capital in politically favored ways. That's what causes these problems.

Norman: Some people say, basically, Wall Street was given the keys and the government walked away, that it was a totally unregulated environment, and the cutting of regulations to the bone is what precipitated the whole bubble.

Schiff: They gave Wall Street the keys. But the problem is Alan Greenspan, the Fed ― they supplied the alcohol, Wall Street got drunk. It's the government that is responsible, it's the government that supplied the alcohol. If we had sound money and if we didn't have Freddie and Fannie …

Norman: We're going to get to the gold standard in a second, but I have to disagree with you on this, and this is just a fact. The one thing the Fed has control over is the monetary base, and if you look at the last six years ― which, by the way, includes the period when Alan Greenspan was in there supposedly creating all this money ― the monetary base shrunk. In fact, it got down to almost zero growth. We have never seen that, with the exception being periods of recession, but they've [the Fed] been very, very tight.

Schiff: It was showing up in other places. Look at the asset bubbles that they blew up, look how low interest rates were. Maybe they should have been looking at M3 [money supply statistics], but I guess that was growing so much they stopped covering it.

Norman: All right. You say that we'd be better off on a gold standard. I've heard you say that, but yet the trade-off with a gold standard, while yes you can maintain stable prices, the cost is less money. Gold standards are inherently deflationary. How can you not…? Even extreme economists [don't] buy into this idea now.

Schiff: Look, we were on a gold standard until 1971, right? We didn't leave it until then. What gold does …

Norman: FDR made it illegal for Americans to own gold in 1933.

Schiff: But international trade … the dollar was redeemable in gold up until 1971 … so all the currencies were backed by the dollar, which was convertible into gold. What gold does is it puts discipline on central bankers and governments: they can't simply spend money that they don't have, they can't run deficits, so it keeps a limit on the size of government.

Norman: The total value of gold ever mined since the beginning of time is $4.3 trillion. The global economy is $60 trillion. Are you suggesting that we should cut the global economy by what, $56 trillion?

Schiff: Mike, prices adjust downward to reflect the supply of gold; that's fine, and we want prices to fall. As consumer prices fall, that's how standards of living grow. You want money to be scarce. The problem is now it's abundant; there's an infinite amount of it.

Norman: If scarce money creates a deflation, a depression, a collapse of business profits, a collapse in employment, how could you argue that that's a better system?

Schiff: No, Mike, it doesn't do all that; it keeps monetary discipline and it allows a free market to function better when you have sound money. It keeps a better supply of savings and debt, and it allows for economies to grow. Because real wealth is not a function of money creation, it's a function of savings and productivity and capital investment, but you get more of that when you have sound money.

Norman: Well, economics savings equal investment, it's an identity, so you if you invest it reduces savings. You save in a forced way; there's that old thing called the paradox of thrift.

Schiff: It isn't a paradox, that's a Keynesian myth.

Norman: Well, he knew what he was talking about. OK, look, let's quickly talk about what's in your book, "Bull Moves in Bear Markets." It's certainly been a bear market; what are the bull moves?

Schiff: Well, they haven't materialized yet but they're going to. I think the bull moves are commodities; I think we're still in a bull market in commodities, particularly precious metals, but I think you buy in to this dip.

Norman: Now, I kind of agree with you, because we've had such a tremendous … and I'm a contrarian, so …

Schiff: I also like … a big part of my book is to play the Asian theme … to play the growth of the Asian consumer, the death of the American consumer.

Norman: Even with the dollar going up, doesn't that restore purchasing power to the U.S. now?

Schiff: For now, but it's going to go away. We're buying a lot of dividend-paying stocks around the world, particularly in Asia. A lot of the stocks are now trading at very low PEs, double-digit dividend yields.

Norman: There you have it. Sorry, Peter; ran out of time. There you have it, folks. We're going to have Peter back; he's always a great guest. Thanks very much. Keep checking by on this site because we're going to have a lot more great interviews like Peter. This is Mike Norman, your host. Bye for now.