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It comes down to the question of whether you believe Milton Friedman and Ben Bernanke that they just didn't do enough fast enough in the '30s. They did everything they could in the '30s to avoid the deflation. They were not successful. In fact, Roosevelt's New Deal was a major flop, propaganda and contrary opinion notwithstanding. It wasn't until the U.S. involvement in WWII that the economy came out of the Great Depression. By that time excessive debt had been repudiated, setting the stage for a recovery in any event. But the intervention of Roosevelt prolonged the Depression.

We have a debt situation now that is far greater—far, far greater than it was in the 1930s. We have something like 350% of GDP now in total U.S. debt, where it was like 270% at the peak in 1932. And, by the way, that peak of debt to GDP resulted primarily from a collapse in GDP. So far, we haven't seen a collapse in GDP this time, although it's starting to look like we may be facing that now, and we have this enormous indebtedness. What people have to realize is that debt is deflationary by its nature.

So in a way, the policies that are being put into effect increase that debt, which is the root cause of our problem because fiat money is debt money. Unlike gold-backed money, unlike silver-backed money, it's not asset money. It's money that's created out of thin air through the creation of debt and debt is growing exponentially. If you look at the growth of debt relative to GDP—and this is a slide I show frequently in my talks—debt is growing exponentially and GDP is growing in a linear fashion. Actually, of course it's not growing at all now; we're in a recession so we're having negative GDP growth. Sooner or later, we will not have the ability to meet those debts. So the argument is, do we inflate, can we print so much money that we just overcome the debt by debasing the currency, by making the units of currency worthless that we pay the debt back in.

I'm not convinced that they're going to be able to do that and we're seeing now the enormous amounts of money being put into the banks, but the banks aren't lending. This is exactly what happened in the 1930s; the banks would not lend. Why are they not lending? Well, they're looking around for credit-worthy borrowers and they can't find many because the easy credit conditions, especially during the Greenspan years, resulted in a virtual default of a very large percentage of American consumers. The corporations aren't in as bad a shape, at least not yet, as we are now just entering a recession. But because individuals borrowed beyond their ability to pay we now have a U.S. landscape littered with insolvent consumers.

The mining industry is having quite a time raising capital. I think that's going to change with the gold mining industry. I'm seeing evidence just within the past couple of weeks that some very worthwhile gold projects are going to get funded. I think where the return on investment is outstanding, where the risks are low, we're going to start seeing some life breathed back into the economy. But, quite frankly, in the mining sector, the only place I'm seeing any real ray of hope there so far is in the gold. Again, this is for the reasons I mentioned a moment ago; the economics are improving with the cost of production going down very dramatically relative to the price of gold.

TGR: You say the economics of mining are working well because other base metal miners are stopping projects so more workers are available. Is that true worldwide or is that a U.S. phenomenon?

JT: I don't know to what extent that's happening but I know it's happening in North America. There certainly is anecdotal evidence. For example, Sangold Corporation (TSX.V:SGR) has a very exciting gold mining project in Manitoba. A few weeks ago, when I was talking to Dale Ginn, the CEO, he said that the economics are improving drastically because to a great extent, energy costs have come down, but even more significantly because he now has an abundance of labor. When I went to visit that project a year and a half ago, one of the major problems they had in Manitoba then was a shortage of labor. Well, Dale said that he just hired two geologists, two mining engineers, and 12 underground miners who were begging for work because they were laid off from their base mining operations.

You see, copper prices collapsed and a collapsing copper price suggests that global economic growth is slowing down and doesn't look very bright. Copper is sometimes referred to as "Dr. Copper" because its price foretells global economic activity. We're looking at a copper price of about $1.40 now, when it was up close to $4 not that long ago. So with the prices falling that drastically, the base metal mines are shutting down.

But again, gold will buy more than twice as much copper as it did two or three months ago, twice as much oil as it did two or three months ago. Gold has come down in nominal terms from its all-time high of slightly over $1,000; it's around $800 or so now. But in percentage terms, its value has risen, and the margins are improving because the cost of production hasn't come down nearly as much as the price of the metal itself.

TGR: So we can assume that you're more bullish on gold than you were six months ago.