Boomers and Clean Gold

Richard Russell - snippet
Dow Theory Letters
Oct 12, 2007

Extracted from the Oct 11, 2007 edition of Richard's Remarks

October 11, 2007 -- It's just starting. I'm talking about the monster drain on money as the first segment of the Baby Boomers helps themselves to their share of Social Security. These are the people who were born in 1946 and are now 61 years of age.

Shortly, an increasing number of these "baby boomers" will be taking early retirement. Why do I say that? Heck, read the papers. All you hear are these four words -- "escape," "vacation," "travel" and "retirement." But as I said, it's just starting. We're beginning to move into what I call the "Social Security Express Lane." This is the period when those people who were born between 1946 and 1964, 80 million in all, will qualify for Social Security and Medicare.

You see, it's just the old crazies like Richard Russell who love their work and who don't retire. The boomers are from a different era. The boomer dream appears to be -- "I made a fortune at age 45, and I retired. Now I'm playing golf seven days a week and lovin' it."

With the SS trust fund bare, cleaned out and holding only government IOUs, how are all these boomers going to be paid? On top of that, there's Medicare, which is now paying out more than it's taking in.

Looking at the whole picture, Brian Riedl of the conservative Heritage Foundation warns, "This is the single greatest economic challenge of our era."

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."

lots more follows for subscribers...

Oct 11, 2007
Richard Russell
website: Dow Theory Letters
email: Dow Theory Letters
Russell Archives

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