One reason that liberty has been compromised in America is because citizens compartmentalize it into different categories, like economic versus social liberty, former Congressmen Ron Paul told attendees at the Fourth Annual Innovative Retirement Strategies conference produced by Financial Advisor and Private Wealth magazines in Orlando, Fla., today.
The focus should be on total individual liberty that allows people to do what they want as long as they don't hurt others, Paul noted, adding that social and economic liberty are connected.
Paul told more than 200 financial advisors he didn't envy being in their profession, explaining that the present cycle of printing and spending money was not sustainable. Adding that he thought the day of reckoning would have already arrived for the Federal Reserve Board's easy money policy, the former congressman refused to put a date on when he thought that policy would unravel.
Asked about his own investments, Paul acknowledged he favored gold and property. "I'm not opposed to people who know and study the stock market because many of them seem to do well," he told a questioner.
However, he took a different view of buy-and-hold investing. "If you had bought the Nasdaq in 1999, you'd be down 40%," he remarked.
Paul voiced the widely held view that bonds, particularly those issued by the government, were in a bubble. "If Bernanke is right and I'm wrong, none of us should ever need to work again," he declared.
Why? Because at the rate the government is printing money, it could give each of us "$10,000 a month" rather than purchase Treasury and mortgage-backed securities. Paul was exaggerating of course, but the real math comes out to more than $2,000 a year.
Long-term bonds are particularly problematic. "Who would buy a 30-year Treasury?" he asked.
Paul traced the genesis of America's current maladies to 1971, when President Richard Nixon decided to go off the gold standard. It is no coincidence, he said, that real middle-class incomes began their four-decade-long descent in that very year.
Equity markets also can send investors false price signals. Paul recalled that the day Nixon announced the U.S. would leave the gold standard, the stock market experienced a record rise in prices. But the rest of that decade turned out to be a miserable one for both the stock market and the overall U.S. economy.
Unsound economic policies partially explain income inequality issues as well. Paul noted that he was in New York City the same day earlier this month when the stock market set a new record. It just so happened that it was reported the number of homeless in the city reached 50,000 the same day.
Paul's attitude towards buy and hold seemed to be confined to equities. When it comes to gold, he took a different position. Recalling that some financial observers dissed him in the 1990s when stocks were soaring and gold was floundering, Paul said it didn't matter that much to him since he had buying gold in 1971 at prices close to $35 an ounce. At that point in time, it was almost guaranteed to appreciate since the U.S. government had suppressed the market for 25 years by fixing the price at $35 an ounce in 1946.