Ludwig: So you’re cautiously optimistic that some corner may have been turned?
Stein: Yes, I think we have turned the corner, barring some new calamity in Europe or some political instability in the U.S. or some totally hare-brained idea like drastic cuts in the budget. But it’s going to be a very long, slow, slippery corner.
Ludwig: You seem to be optimistic about the United States in general.
Stein: Well, China is clearly going to be the dominant industrial power of the 21st century. But we still have a very large multiple of per capita GDP of China. And we still have a very pleasant way of life for most middle-class Americans.
All the prognostication of doom and gloom for America has turned out to be wrong. I’ve heard so many: that Europe would overtake us; that Japan would overtake us; that Russia would overtake us. It never happened.
Maybe it will happen with the Chinese, but it doesn’t matter that China will become the No. 1 industrial power in the world. Even on a per capita basis, we have a much better life, and even if they get to have the highest per capita GDP in the world, it doesn’t mean we will be poorer. It means we will be richer because they’ll be more able to buy our products.
I’d say, generally speaking, people who have bet against the long-run future of America have cause to regret it.
Ludwig: You clearly don’t share the doom and gloom of Peter Schiff?
Stein: Not at all. Peter Schiff made a really good call about the finance sector. He and I debated about that, and he was far more pessimistic than I was before the crash. He turned out to be right, and I turned out to be wrong, and God bless him for it.
But he also predicted that we were going to have mega-inflation like Weimar Germany, and that turned out to be totally wrong. He also said in early ’09 and late in ’08 to sell all your stocks and go entirely into cash and gold, and that turned out to be wildly wrong.
Ludwig: So how is Ben Bernanke going to get out from the extraordinary situation he’s in and help the U.S. economy get back on its feet?
Stein: I think that he and the people at the Treasury Department saved the day with the TARP plan, but I don’t think he’s going to get us out now. I think what’s going to get us out is the ingenuity and the cleverness and agility of the American businessman and the American worker.
What I see is that even with all our problems, we’re still wildly prosperous. Times are nowhere near as good as they were 2 1/2 or three years ago, but this is still a very wonderful place. The living here compared to any other place at any other time in history is awfully good.
Ludwig: Are you planning any books?
Stein: My colleague Phil DeMuth and I have written a number of books on the economy, and we have a new one coming out in April, “The Little Book of Alternative Investments.” We go into an awful lot of new things but, even if they put us in prison and give us truth serum, we’d still say go with indexing and go with the broadest possible ETFs.