Social Security paid out more in benefits than it took in during the first half of 2010. The severe economic collapse and sustained unemployment have seriously dented the inflows while some baby boomers have been forced to start collecting benefits early. Some projections estimate that 70% of baby boomers don't have retirement savings. Many people aren't even aware that the social security "fund" was lost long ago when it was decided to lump that money in with with the general fund thereby masking the true deficit/debt problems our country faces.
Of course, if the economy picks up and employment increases, we could see tax receipts bring the cash-flow positive. But that would be just a short term correction. The long term problem can only be solved a number of ways:
-Benefits can be reduced (as well the cost of benefits paid).
-Taxes can be increased.
-The government can print its way out.
Currently, the political will doesn't exist to accomplish the first two options and by the time it does, the problem will probably be too big for it to make a difference anyways (many say it is already). That leaves us with choice #3; print print print (well, these days all it takes is a computer keystroke). So how do investors take advantage of this long term theme? Buy stuff! Tangible assets will be the primary benefactor of an environment in which the value of the US dollar is eroded, especially commodities and foreign companies/currencies. That is the main reason we are so bullish on Gold, but more on that later...
-Sean
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