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What happens when 80 million Baby-Boomers start to qualify for Social Security?

*Dow Theory Letters, Richard Russell, October 11, 2007

“You think the US government’s balance sheet is over-the-top now? Listen, over coming years, these programs will rack up $50 trillion in government obligations. How’s it all going to work out?

I have my own thoughts on the Social Security and Medicare situation. I believe that the US government will address the situation two ways. The first way will be to scale back on the benefits — there’s just no other choice. The second way that the US government will address the situation will be through monetary inflation.

The government will have to print the money to cover the coming tidal wave of unfunded liabilities. This process will have a brutal impact on the dollar. The purchasing power of the dollar will continue to head down. In my lifetime I’ve seen the purchasing power of the dollar lose 80 percent of its value. And I have to wonder what the dollar will buy ten years from now — fifteen years, twenty years. It’s very sad, indeed.

This is the reason to own gold. I hear a lot of talk about gold not keeping up with inflation, gold spending twenty years between 1980 and 2000 doing nothing or simply declining. Forget it, that was then, this is now. As I see it, the third phase of the great gold bull market lies ahead. Gold is fated to rise to ‘impossible’ heights in terms of current US dollars. I know this sounds far-fetched to today’s impatient holders of gold. But for a great move to materialize, it has to be considered to be ‘almost impossible’ in advance.

Another way of putting it is that for a move to be huge, the public has to be clean of the item to start with. Ideally, nobody should be in the item. And today the US public is ‘clean as a whistle’ when it comes to owning gold. ‘Oh yeah, I’ve got gold. I bought two American Eagles a year ago, and I still have ’em put away some where. Heck yeah, I got gold.'”


*This information is solely a highlight of the opinion of a third-party publication and is incomplete.  Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.

Monex Bullion Investor