| Best of the Best: Today's Top Investment Ideas |
| Boomers, dollars and debt |  | Digg It! |
| Thursday, 25 January 2007 | |
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In addition, the Adens share some thought-provoking commentary regarding government debt, the dollar and baby boomers from David Gallard of Casey Research, also a long standing expert in this sector. “We often discuss the unprecedented U.S. debt load and what it means for the economy, gold, the dollar and so on. But we rarely discuss the baby boomers and how this will affect the future, which is also one of the main reasons why we believe gold will continue to rise for years to come. In the excerpts that follow, David Gallard explains why… “Seventy eight million is the number of baby boomers who are in or approaching retirement. That’s the biggest demographic bulge in U.S. history, fully 26% of the population. "And many of those 78 million are in a jam. As they approach retirement, they are still carrying historic levels of debt and, on average, have woefully inadequate net worth — and much of that based on shaky housing prices. “In fact, 25% of the retiring boomers are facing retirement with a net worth of less than $50,000. You don’t need to be an accountant to see that they won’t get very far on so little. "Meanwhile, U.S. government debt now tops $9 trillion, before taking into account its unfunded obligations for Social Security and Medicare — debts that the retiring boomers will soon have their hands out to collect. “After adding in Social Security, Medicare and all the government’s other pay-later obligations, the current debt actually comes in at over $60 trillion—an amount so large, not one person in a million has a real sense of it. So let’s try to put that number into perspective. “A trillion is 1000 X 1000 X 1000 X 1000, or a million millions. President Reagan, himself a big spender, accurately pointed out that a stack of $1,000 bills four inches high makes you a millionaire, and that a trillion dollars would be a stack 67 miles high! The U.S. government owes 60 of those sky-piercing stacks of $1,000 bills. “It’s a lot of money. And it’s not just any kind of money. Amazingly, this unbacked currency of a bankrupt government is still the reserve currency of virtually every nation in the world today. But not, we think, for much longer. “To service its debt and keep the game going, the U.S. government must sell on the order of $2.5 billion per day in new Treasury bills, much of it to foreigners already sitting on something like $6 trillion of U.S. paper. "Recognizing that the U.S. has little capacity to rein in its profligate spending and has neither the intent nor the ability to actually pay off its $60 trillion debt in money worth anywhere near what it’s worth today, foreigners are increasingly leery about accumulating more greenbacks. “So what are nervous bureaucrats to do? The answer is to depreciate the currency – and as quietly as possible. That allows the government to meet its obligations, but with ever more worthless dollars. It’s their only way to buy time. “In other words, the total amount of money in the system – what we ‘print’ — is whatever the government finds convenient from one day to the next. That’s a way of saying that the U.S. government is planning to paper over all its many obligations and accelerate a trend that has been in motion since the creation of the Federal Reserve in 1913. “While no one can say with certainty how this will play out, there is one truth you can take to the bank. Throughout all of human history, gold has always held its value as a monetary instrument. That sort of shock-proof durability cannot be claimed by any paper currency, certainly not by the dollar, which has lost 70% of its value since abandoning the gold standard in 1971. |
Mary Anne and Pamela Aden have long been among the most respected advisors in the resource sector and in the latest issue of 
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