Ron Paul on Maintaining Cash Flow

For decades, millions of Americans have saved and invested their earnings in the financial markets in order to grow large nest eggs to provide for themselves in retirement. Especially for those whose prime working and saving years came during the relative market calm of the 1980s and ‘90s, buying stocks, bonds, and mutual funds with the expectation of holding them until retirement was the norm. Many 401(k) and IRA programs invested in the same types of assets. Once they retired, people thought that they could start to sell off their assets in order to gain enough cash to live comfortably. But what happens when everyone is trying to sell at the same time?

An Aging Population of Baby Boomers

It’s no secret that the American population is aging. Many Baby Boomers are already retired, with millions of others nearing retirement age. Their expectation is that they can sell their stocks, bonds, and mutual funds and live comfortably off the cash they receive. But what if there is no one to buy those assets, or at least to buy them at the prices the Baby Boomers expect to receive for them?

Savings patterns of most working people today are far different from what they were a few decades ago. Household debt has exploded, and many people are working overtime just to try to make ends meet, paying off college loans, credit card debt, and making car payments. In many cases they don’t have the money to think about investing the same percentage of their income as their parents or grandparents would have.

Mandatory distributions from IRAs are starting to affect the first of the Baby Boomer retirees too, most of whom invested in stocks, bonds, or mutual funds. If they’re forced to sell, they have to hope that someone is there to buy. If that forced sale comes during a financial crisis, as may very well happen in the next year or two, people will find themselves hurting. And of course, if those who are already retired see the price of their assets dropping, so will everyone whose retirement funds are invested in the same assets.

Not Just a Problem in the United States

But this isn’t just a problem that is confined to the United States. Because world markets are so interconnected nowadays, and because so many Americans invest in foreign markets and foreigners invest in American markets, drops in asset prices abroad can have major effects on American retirees. Japan is facing a similar dilemma, as the large number of older people are facing a much smaller number of younger people who could buy their assets when they hope to liquidate them.

If this nightmare scenario takes shape, those who will find themselves hurt the most are those who are the last to cash out from their financial assets. The people who cash out first will reap the highest prices while buyers are still primed to buy, while those selling later will see much lower realized prices.

How to Protect Yourself

Is there a way to protect yourself against this? Of course there is, by investing part of your retirement savings in gold. Companies come and go and their stocks and bonds fluctuate in value or even disappear entirely, but gold doesn’t vanish. It’s always in demand, from investors, savers, jewelers, etc. By investing in gold you’ll never have to worry about your investment losing a significant portion of its value, because gold maintains its value over time.

Half the companies listed on stock exchanges today may not exist 20 or 30 years from now, but gold and the demand for gold will still be going strong. Gold has been trusted for thousands of years to act as a store of value and a hedge against market uncertainties. By making it a part of your investment portfolio you can ensure that, even if your stocks, bonds, or mutual funds take big losses, your gold investments will always maintain their value over time. And besides, prices for gold even increase during stock market crashes because so many people decide to flock to gold as a safe haven. You can’t go wrong making the decision to put a portion of your portfolio into gold.