I have painstakingly typed this transcript from the show, in order to highlight a fascinating debate about the lasting value of gold and the tendency for all paper currencies to eventually become worthless due to the irresistibility of printing more of it.
At 21 mins 50 seconds:
Peter Schiff: “The next call is John from Canada.”
John from Canada: “There is an argument going around about going back to the Gold standard: We have 4.5 billion ounces of gold in the world, and 6.7 billion population and counting. That’s only 0.7 ounces per person and dropping. So if we go back to the gold standard, there’s not enough money to go around, and the economy would be anemic. The result would be that we would go back to the fiat currency, anyway. What’s your take on that?”
Peter Schiff: “Well, it doesn’t matter how many ounces of gold circulate. Prices will merely adjust to the ounces of gold. The price of gold will simply rise dramatically and prices will adjust accordingly. You could theoretically run the entire world economy on one ounce of gold if there was only one ounce. So, I don’t think it matters how many ounces there are in existence relative to the global population. That’s something that people who support fiat currencies try to bring up as a flaw in gold, saying there’s not enough of it. Well, the fact that it is scarce is what gives it value. You need your money to be scarce; it can’t be abundant, because if it’s abundant it’s not going to work as money. So I think that’s nonsense. And if you actually look at prices in terms of gold, if you look for example at the price of oil, it’s been pretty constant relative to gold for a hundred years – you can see that the price relationships still work and that gold is very effective as a means of exchange and a store of value.”
John from Canada: “It’s good you said that. But the thing is, one would say that if the government doesn’t print currency like crazy, fiat currency … wouldn’t they be able to counter and say we can run the economy on one U.S. dollar, right?”
Peter Schiff: “No, because when you have fiat currency, they’re gonna print it, they’re going to print it into oblivion, which is what they are doing…”
John from Canada: “Say they don’t”
Peter Schiff: “But you can’t do that with gold because you have to actually mine it. You have to find the gold. If you’re on a gold standard, the government just can’t create money, which means that if the government wants money, it has to levy taxes, or it has to legitimately borrow it. It can’t simply create it out of thin air and spend it, which is what it’s doing now, and pretend it does that without exacting a cost on society.”
John from Canada: “But you’re saying it’s ok that we have a fiat currency if they don’t print it into oblivion. Let’s say we have 100 bills in circulation, and 100 is all we have, then it’s ok, is that what you are saying?”
Peter Schiff: “Look, in theory a fiat currency will work, but in practice it can’t work because it depends on politicians resisting the temptation to print money, and they have proven historically that they can’t do that. So we know that fiat currencies don’t work, because politicians cannot be trusted. They just can’t. So in theory you can say yes, we don’t need gold, if we can change the human psyche and change the people who run for political office and the people who are appointed as central bankers. If we can somehow replace them with some kind of a robot, then yes, it would be possible not to have gold money. But unfortunately, we haven’t been able to do that. We have the same type of human frailties that we had since whenever the printing press was invented. So we know from practical experience that fiat currencies never work, they always fail. And that’s why we know from practical experience that gold does work.”
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