Ron Paul Gold Portfolio Might Seem Crazy, But It's Genius


Former Texas representative Ron Paul is a well-known libertarian and lover of gold, as can be seen when he sometimes wears his gold-and-black tie. However, some think his love of the yellow metal is a little extreme. A recent analysis of his investment portfolio reveals that 64% of his money goes towards gold and silver mines, qualifying it as "the craziest portfolio ever seen."

At first sight, it might indeed look crazy putting so many eggs in the same basket, especially if you consider the high volatility of gold and silver in the past years, but also of mining companies stocks. It looks crazy, too, because most banks recommend reducing risks when retirement is nearing, as one wants to be sure to have enough money to have a happy retirement. For young people like me (30 years old), losing more than 60% of the worth of a retirement investment in gold isn't a problem as such since I will retire at least 30 to 35 years from now. But for older people like Ron Paul (80 years old), having such a volatile investment can be risky, as he might outlive his savings quickly. I remember attending a meeting where people nearing their retirement or retired actually cried because they lost so much money in the 2008 crisis.

However, by looking at the former doctor's rationale behind his investment, then one can see that he is actually quite wise, unlike "experts" like Paul Krugman who think that people like Paul are promoting gold because they want to increase their own investment. Paul says that the Detroit bankruptcy is an omen of what can be expected in the long run of other governments, including D.C. "People will give up their confidence in us, they'll give up confidence in the dollar," he thinks, and history proves him right.

Gold prices flat-lined until Roosevelt ended the civil gold standard in 1933, after which gold rose to remain at a stable level until Nixon definitively ended the gold standard in 1971. After that move, the price of gold, as predicted by Austrian economists, exploded since the dollar had basically become worth as much as Monopoly money. The tendency remained until the Fed rose interest rates to double digits to quell inflation. With such an incredible increase, the U.S. dollar was worth something once more, which explains the concomitant decrease in the price of gold. Ever since, there seems to be an inverse relationship between gold and dollar worth.

So far, this relationship has been proved right, with yet another incredible increase in gold with a similar increase in the Fed's balance sheet. Despite what Krugman might say, this excessive money printing from the Fed (quantitative easing) will either yield decades of stagnation despite null interest rates or will give rise to hyperinflation, which is likely considering the ballooning deficit.

Should that happen, then gold will definitely become an interesting thing to have. It's already starting, with some states considering letting merchants accept gold and silver coins. Ron Paul would be right yet again ...