Ron Paul believes gold is the ideal protection against coming risks.
Last August, former Republican congressman Ron Paul predicted that the stock market could fall by as much as 50%. His warning appeared to come true at the beginning of February, as both indices experienced a plunge of historic magnitude.
And while the correction wasn’t as severe as Paul forecasted, the congressman believes that the market is still liable to see a 50% drop. Talking to CNBC, Paul explained that stocks are suffering from overbought conditions, brought on by big bubbles due to excessive spending.
According to the article, he places a large portion of the blame on money printing, which truly blew out of proportion after the 2008 crisis. Because quantitative easing went on for such a lengthy period of time, Paul believes that market conditions are severely distorted.
“Ultimately, when these corrections have to occur, they always go down a lot more than people expect. Just like they go up higher than people expect,” Paul said. “A 50% correction with all the distortion that has existed for all these years — I think it’s very possible.”
Paul also touched upon the exploding U.S. debt, noting that the Federal Reserve has placed little focus on mitigating a debt that approaches $22 trillion. The article reports that, as the deficit grows wider, Paul sees no other path for the dollar to go besides down.
As in the case of equities, Paul dismissed any short-term recovery in the dollar since fundamentals paint a bleak picture for both. This is especially true in the case of the greenback, which Paul believes is incorrectly measured against other currencies instead of gold.
Pointing to the metal as the most accurate gauge of the dollar’s value, Paul notes that gold’s price movement over the past decades shows just how severely the reserve currency is inflated. To him, the fact that the dollar went from $20 an ounce to over $1300 since the Fed came into existence shows how much money has been printed during the period, reports the article.
Ultimately, Paul expects prices to continue climbing as the dollar weakens due to excessive printing. He also thinks the U.S. will see an environment of stagflation, where weak economic growth combines with rising prices.
Along with the likelihood of an even worse correction in stocks, the article writes that Paul believes that gold is the ideal protection against coming risks. He finds gold’s current price levels, in particular, to be of interest to both first-time investors and seasoned gold bulls such as himself.
“I personally would be better off if I did buy a little bit more gold,” he said.