Taking The Security Out of Social Saving

     People save for their future. They put money into a savings account and often an IRA. Every week, every paycheck, a lot of people in the US also put money into a union pension fund and Social Security.  Now these same diligent savers are told their payments are cut 51%, as is the case with The Central States Pension Fund, and even those less-than-half payments will last only another ten years before the fund is depleted. Even so, whether out of habit or disbelief this will happen to them, people continue to make regular deposits into their bank accounts, their IRA accounts, their Social Security and Pension fund accounts without taking another other defensive actions. The population is aging at a greater rate than new workers --new fund contributors--are entering the workforce. The cookie jar money will not be enough. Disaster looms on the horizon. Statistical fact, not a matter of faith. 

     Countries behave the same blind-sighted way. Central Bank governors and political leaders act as though things can and will carry on for the simple reason things have always carried on and come through. Greece and Cypress provide recent evidence this is 'in the box' denial. Heads-in-sand attitudes do nothing for individuals, and even less for countries.

     Take for example China. Once again, China hit the front page of the Wall Street Journal Market section. This time for hoarding. Not cash, but a cash crop. Cotton. ELEVEN MILLION METRIC TONS, enough to make 10 million pairs of jeans. This is 60% of the world's stockpile of cotton, a third of global consumption, according to the WSJ. This stockpile has caused a push down on the trading price to 2004 levels. Since the beginning of 2016, the price has fallen 11.7%. As bad as this is, the real kicker is the fact cotton deteriorates over time in storage. The Journal quotes Nick Hungate, global head of cotton at RCMA Commodities Asia Pte, as saying the quality cotton has already has already been sold, leaving the Chinese with lower grade goods. 

     The lesson here is clear, we need to open up our thinking. Change our minds; change our actions. To continue making deposits into bank accounts which no long pay interest doesn't work. Relying on social retirement funds doesn't work in the long run. Hoarding degradable materials like paper and cotton leaves only so much dust.

     Isn't it by far better to preserve the value of our earnings in a medium of exchange that doesn't run out, rust or rot? To paraphrase a children's rhyme:

    Ashes to ashes,

Dust to dust,

If you want to grow old,

You best save with gold.

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