If you desire to become a great cook, free advice from Gordon Ramsey or Wolfgang Puck would naturally draw your attention. What if your focus shifted from the kitchen to your pocketbook? Where would you turn for free advice on how to protect and grow your wealth during the current period of epic uncertainty? Would you consider a billionaire investor with decades of experience a good source of information? He’s already accumulated billions, so you can set aside any concerns about conflict of interest. John Paulson’s success stems not only from his ability to assess current economic conditions, but even more so from his ability to anticipate what is to come. He’s looked into the future and his current appraisal calls for limiting exposure to dollars and accumulating more gold. Are you listening?
John Paulson is an American hedge fund manager and the founder of Paulson & Co., a New York-based investment management firm that he started in 1994. Paulson became famous for his ability to foresee the US housing market crash in 2007, which earned him billions of dollars and made him one of the most successful hedge fund managers in history. In a recent interview with Alain Elkann he had much to say about what lies beyond the financial horizon, and why gold is a smart option for preserving your financial wealth.
His case for gold starts with recognizing the dedollarisation trend gripping the world. The United States is no longer the sole powerhouse economy of the world. Dollar hegemony is fading as countries like China, India, Russia and others experience both significant economic growth and a desire to conduct trade in their own currencies. John points out “…the US also has an enormous deficit with the rest of the world in terms of trade and investment balances that used to be very positive, but now it’s very negative. That points to the intermediate and long-term depreciation of the dollar versus other currencies.”
John does not have nice things to say about the Federal Reserve and their legendary ability to print money and destroy the US Dollar. “A lot of our growth has been based on fiscal spending that has been financed by the Fed buying the debt of the government. The Fed balance sheet has exploded due to ‘quantitative easing’, a polite way of saying ‘money printing’, and inflation resulted. If you had dollars and 9% inflation, this year you lost 9% of your money; interest rates were nowhere close to compensating for that loss.” His case for gold gains focus when you consider the antidote for a depreciating currency is holding real assets like gold.
Everyone from the world’s central banks to ordinary citizens are looking for a way to protect themselves from the ravages of inflation inflicted by the eroding US Dollar. John points us towards a solution when he speaks of gold “…again because it’s been the reserve currency of the world for thousands of years, a legitimate alternative to holding the dollar or other paper currencies. There has been a significant increase in demand from central banks to replace dollars with gold, and we’re just at the beginning of that trend. Gold will go up and the dollar will go down, so you’d be better off keeping your investment reserves in gold at this point.”
A key benefit to holding precious metals is the elimination of counterparty risk, which is the probability that the other party in an investment, credit, or trading transaction may not fulfill its part of the deal and may default on the contractual obligations. When explaining record Central Bank gold buying, John brings counterparty risk to the forefront. Countries are becoming increasingly concerned their US Dollar reserves can be sanctioned or seized! John explains “If you possess physical gold you don’t face that risk. You also have the potential for appreciation. We’re at the beginning of trends that are going to increase the demand for gold, and inflation and geopolitical tensions will determine the rate at which gold increases. This year gold will appreciate versus the dollar, and also over a three, five and ten year basis. “
What do you think? Let us know in the comment section below. The unfortunate history of the US Dollar is that of devaluation, while precious metals have proven themselves a steady store of value. John Paulson provides us with a glimpse of what to expect, and the opportunity to adjust our wealth preservation recipe. He’s already made billions in his life and is often heralded as a generous philanthropist. We can be confident his gift of advice isn’t tainted in self gain. You don’t have to be a billionaire to make strategic wealth preservation moves, but it doesn’t hurt to listen to one!
Read the full John Paulson interview by Alain Elkann here: https://www.alainelkanninterviews.com/john-paulson/
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