Defend Against Government Idiocy with Gold

Dow Theory Letters (06/22/2009)
"Right now, the Obama government is dealing with current problems. But this year the first generation of the baby boomers graduate to retirement age, and they'll be eligible for what's left of Social Security and Medicare. Congress, in its stupidity, has promised retirees 'too much,' far more than what is in the government coffers. . .The money's been promised, trillions of dollars of it, but it's been spent. All that the Social Security trust holds now is a collection of IOUs that will never be paid off. You see, instead of building up the trust, the government spent it.

The first baby boomers started to turn 62 in 2008. Some of these early boomers have elected for early retirement. At age 65, they can sign up for Medicare. Over the coming years, millions of boomers will arrive and many will want to retire, but the squeeze will be on. The money won't be there, not enough of it.

You can count on this—taxes will be heading up. And there will be a VAT (value added tax). Either the baby boomers will be short-changed or the government will have to cut way back on expenses. The massive military expenses (half a trillion dollars annually) will have to be shaved back; and the U.S. will no longer be the greatest military power on the planet, nor will it be in shape to fight multiple wars.

It's clear (at least to me) that Obama is following the path Roosevelt took during the Great Depression. In 1933, the government devalued the dollar by 41% by raising the official price of gold from $20.67 to $35 an ounce. In a devaluation, the dollar value of debt remains the same, but all other assets would be worth more (in nominal terms) whether it was a house, a stock, a car or an ounce of gold.

The Bernanke Fed is trying desperately to bring back inflation, and devaluing the dollar is the surest and quickest way to inflate. Our defense against government idiocy is gold. I believe that what's coming is a worldwide panic to own gold. The panic has not started yet. But it's coming. . ."

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