The Federal Reserve is clearly not worried about inflation. Chairman Ben Bernanke said as much on Friday in a speech meant to lay out his argument for another round of quantitative easing. Problem is, inflation is a problem and Bernanke’s policies will lead to hyper-inflation says, Peter Schiff, President of Euro Pacific Capital and noted central bank critic.

An inflation hawk, Schiff discussed his investment strategy with Aaron and Henry in this clip.

Gold: With gold prices above $1300 per ounce, skeptics question whether this is yet another asset class bubble about to burst. Schiff disagrees, as you might expect. He believes the U.S. dollar will continue its downward trajectory – in turn, adding to the value of gold. “I think we’re still relatively early in the game," he says. "It’s not rock bottom prices, but prices are not high for the metals, especially given what central banks are going to do,” i.e. more quantitative easing.

Schiff not only recommends buying the psychical metal, his portfolio is heavily weighted with gold mining stocks. “Gold mining stocks are bargains right now,” he contends. “Not a single gold stock I’ve owned has split. If this was a real mania, you know how many times these stocks would be splitting?”

Stocks: If, as signaled, the Federal Reserve goes ahead with a second round of “QE2,” Schiff believes this will result in inflation. Many bulls agree and like stocks as a hedge against inflation. Schiff isn’t convinced of this argument. “A lot of the stocks will not keep pace with inflation,” he predicts. “You’re much better off owning non-U.S. stocks than U.S. stocks.”

Most notably, he recommends buying international stocks in markets with strong currencies to offset impending inflation. In this case, he argues, not only will investors benefit from rising commodity prices (a result of inflation), commodity-based currencies offer another hedge to a falling will U.S. dollar. For compliance reasons, Schiff doesn’t name stocks but does mention Australia, New Zealand and Singapore as markets of interest.

Treasuries: Looking for a bubble? The Treasury market, Schiff believes, not gold is the place to focus. “I’ve been talking about the bond bubble for years,” he says, admiting an inability to time the market’s downfall. “I’ve never been able to figure out when it would burst because markets can be irrational for quite some time. But I do know it is a bubble. I do know the 10-year (note) should not be yielding 2.5%.”