Baby Boomers Retirement Is The Real Problem

November 17, 2008

"Democracy is a form of government that cannot long survive, for as soon as the people learn that they have a voice in the fiscal policies of the government, they will move to vote for themselves all the money in the treasury, and bankrupt the nation". Karl Marx

Karl is correct and I never thought that I would ever agree with a communist! The free markets and by extension democracy do not work without some base rules. This is one of the prime reasons, behind the American constitution. The free markets are like a game with lots of individual players, you need referees to govern the game otherwise the game will simply degenerate to the lowest common denominator. For example, children working 15 hour days in the coal mine. The Government referees who govern the Wall Street free market game have been conspicuous by their absence over the last few years they have been AWOL. However many of the solutions being proposed at present are stating that the referees should now take over the game completely!! And we should have no players whatsoever that is Karl Marx,s solution its called Communism, no private enterprise and no free markets because Government always knows best. History has proven beyond any reasonable doubt that Communism is even more discredited than the pure free market no rules ideal.

What we need and what we have always needed is a vibrant free market with some base rules like any other good game. The American Constitution did a very good job of identifying many of these base rules, it was only mans subsequent "amendments" usually for self interest purposes that have caused so many of the problems that we face today.

All of the turmoil in the financial markets today is but a symptom of a killer $100 trillion Dollar financial problem that most of the developed world now imminently faces. We have already acted very irresponsibly by using up the accumulated capital of the previous generations that we inherited. As well as hopelessly indebting, the unfortunate future generations. However the biggest financial problem of our time the baby boomers retirement now lies directly ahead and it still has no real answers.

The cost of the impending baby boomers retirement is simply overwhelming as Karl Marx said unfortunately the boomers during their working lives have voted for themselves all the money from the treasury, and now another $100 trillion Dollars for their retirement. The only way the Government can keep the promise to pay is as follows:

  • Renege or introduce some form of means testing.
  • Renege or introduce some form of means testing.
  • Pay at present day purchasing power and watch tax go to 400% of income
  • Pay at a vastly reduced purchasing power, via inflation

This is why I believe this problem only has one cure that will be politically acceptable it will be a HUGE AND ON-GOING INFLATIONARY PROCESS better known as Zimbabwe economics. The unpleasant symptoms of this ongoing inflationary process that has already started are a series of large financial bubbles and busts such as the tech and housing bubbles that we have already witnessed.

The baby boomers impending retirement all but guarantees the Governments inevitable money printing inflationary response and subsequent ongoing booms and busts as this fresh money finds its way into the real economy. When Government is faced with such an intractable problem it really is a case of inflate or die.

I am always aware that every Dollar and Cent that is given by the Government to any particular group ultimately has to be paid for in some way. People do not like to be told the awkward truth that they have simply not paid in enough for the benefits or pensions they will receive. Sit down for 10 minutes with a pen, paper and calculator and work out the sum total of all your social security payments throughout your working career and then deduct that from the sum total of what you will receive before you die and trust me on this, the figures for the average person will not add up and by some margin. If you are a Government worker with fabulous fixed pensions your figures make no rational sense whatsoever. Think I am wrong? Well, then we will have no Baby Boomers retirement problem will we, the whole $100 trillion problem will simply disappear.

The Government only has three ways of paying for any of their promises which are debt they simply borrow money to be paid back by future generations. Or they can print fresh new money therefore devaluing the purchasing power of all existing units of money in circulation or they take more of your money, it is called tax.

You then have to feed into the whole process the massive inefficiency and corruption of all Governments and you will find that for every $100 distributed to its ultimate destination as defined by Government via some law, it will actually cost $200 of new debt, new money printed, or increased taxes. Government is never a solution to anybody's problems they are normally without exception the problem.

So let's have a look at the facts. We have a huge and imminent Baby Boomers pension problem that is likely to be solved with the printing press. The pensions will be paid as promised. Problem is the money paid will have no purchasing power.

This means that I have to believe in the long term future of Gold and Silver. In which case the present price implosion of particularly Silver is a gift and presents a wonderful buying opportunity. It is why I never worry about the COMEX manipulation, if they want to manipulate the price of Gold or Silver down, it simply means that I am able to buy and accumulate more ounces by handing over Dollars whose ultimate destiny is to be worth less in the future than they are today.

The only way to protect yourself is to purchase Gold and Silver which simply cannot be printed. I can guarantee that over the coming years the rate of production around the world of new paper money is going to be far greater than the production of new Gold and Silver.

I have not mentioned the massive inflationary effects of all the promised bank bailouts, which frankly pail into insignificance against the baby Boomers retirement promises. The bank bailouts will simply be a bit more icing on the cake for Gold and Silver investors. Also remember that the supply of Gold and Silver is finite but the fiat money printing that will be required for pension's promises and bailouts is not simply an American phenomenon it is a global problem this time. This will result in global and synchronized money printing. This means that Gold and Silver are likely to rise in nearly all of the world's currencies as the production of new fiat money around the world overwhelms available supply of Gold and Silver.

In this environment whichever way you look at it, the future is bright and assured for the time proven wealth protectors Gold and Silver who are the cornerstones of real capitalism, democracy and the free markets but with some basic rules!.

Ceri Shepherd

We at Trendinvestor have written many articles concerning devaluation and the market linkages and would state that we were probably the first serious analysts to work out the Federal Reserve Banks devaluation game and its effects on the various markets! Please review all our previous articles for yourselves.

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Gold is the official state mineral of Alaska.

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