A new report from the Congressional Budget Office revealed that Social Security may go broke long before the Social Security Administration predicts.

Everyone knows that the government fudges its inflation statistics.

The benefit is clear: the government understates inflation and is able to keep social security, Medicare and other inflation sensitive costs down. It also can then claim that its clearly inflationary policies are not resulting in inflation.

But, as with everything else the government does, the unintended consequences of their inflation fudging are beginning to show up.

The debt deal in Congress is as good as passed. And yet stocks sold off hard yesterday. And today isn't shaping up to be much better. The reason, in my opinion, has to do with government spending cuts, austerity and what that means for economic growth.

Yesterday, I asked the question "where will new demand come from?" And I recently received a reader question that hits the same theme...

I'm forcing myself to turn away from the obvious debt ceiling story that's playing out right now.

For the record, I don't believe that the debt ceiling will have any long term effects that won't be completely superseded by the fact that our debts are already much too high. We'll default sooner or later. The debt ceiling is an imaginary line that will be crossed regardless of how politicians vote. Interest rates will rise. Social Security will go unfunded.

All of these things will happen - not because our leaders failed to act to raise taxes or to cut spending - but because our debts are so incredibly large and our leaders so clueless that they can't even conceive of how to solve the problem.

Raising the debt ceiling now is like throwing another few squirts of gasoline on the bonfire. Sure, it will make us feel warmer, but we're already on fire.

JP Morgan (NYSE:JPM) turned in a very solid second quarter earnings report this morning. Revenue was $2 billion better than expected, at $27.4 billion. And earnings were $0.06 better than expected, at $1.27 a share. This was the 11th consecutive quarter that JP Morgan has beaten.

You'd think analysts would be able to adjust their estimates to account for the consistent out-performance at JP Morgan. And truth be told, they probably are.

But there are so many little things the company can do to get its quarterly numbers that analysts have little chance of nailing it.

In a speech at George Washington University today, President Obama outlined his proposal to cut the federal deficit by $4 trillion in the next 12 years.

And with $65 trillion in current unfunded liabilities for Medicare, Medicaid and Social Security, it should be no surprise that cuts to these programs are in the works.

Medicare and Medicaid spending alone amount to $12,000 a year per recipient right now. At the current rate, that amount will balloon to $44,000 a year by 2040.

Indeed, according to a study done by Mary Meeker from Kleiner Perkins Caulfield & Byers, the Congressional Budget Office reports that if nothing is done about entitlement and debt, "...entitlement and net interest payments combined will equal all federal revenue by 2025, just 14 years from now."

For 60 years it worked nearly flawlessly. You work hard, you save any excess earnings, invest prudently, you pay your taxes, and you pay into Social Security. Then when you retire, you have a nice pillow-cushion of savings, investment income and social security checks to fall back on.

But that’s clearly not the case anymore. The social contract is broken – and it wasn't broken by the average retiree. The average retiree held up their end of the bargain. But now, every single penny sitting in savings accounts, 401(k) plans, mutual funds, and being held in what remains of the Social Security coffers is a huge liability for the Federal Government.

Why? For a Federal Government that demands never-ending bureaucratic AND economic growth, money that just sits in a savings account or in a retirement fund could be better spent on war-machines and/or frittered away on stuff from China, Japan or Indonesia.

There are literally trillions of reasons to be bullish on gold - but I recently received a letter from the Social Security Administration (SSA) that further cemented my belief in the uptrend for gold (and silver).

In a letter titled "Your Social Security Statement" the Commissioner of Social Security Michael J. Astrue wrote:

"...by 2037, the Social Security Trust Fund will be exhausted and there will be enough money to pay only about 76 cents for each dollar of scheduled benefits. We need to resolve these issues soon to make sure Social Security continues to provide a foundation of protection for future generations."

I've done the calculations, and I now pay about 7% of my income in FICA taxes, an amount I realize also includes Medicare - which is of course, matched by my employer. So, that's 14% of my potential income gone. It's more than I currently save for my own retirement.