FAKE by Robert Kiyosaki
Who Took Your Money: How Retirement, Pensions, And Fake Assets Are Causing The Poor And The Middle Class To Grow Poorer?
Since 2008, the four biggest Central Banks have printed over $9 trillion to save the world economy. Where did all that money go? Who got the money? Did you? And why are so many pensions going broke?
Threats to the World Economy:
1. Rising interest rates
3. A Strong U.S. dollar
Five reasons why the poor and middle class lose:
Reason #1: Gamblers Run the Casino
During the 1950s and 1960s, only gamblers invested in the stock market. It was considered unethical for a financial advisor to recommend stocks to their clients.
In the 1950s to 1960s, my poor dad and my rich dad were savers. Saving money was safer than the stock market because after the 1944 Bretton Woods Agreement, the U.S. dollar was backed by gold. The U.S. dollar became the reserve currency of the world, or “good as gold.”
In 1971, Nixon put the final nail in the coffin of the gold standard. The dollar and all government money became debt. Gamblers took over the government casino. Debtors became winners and savers became losers.
Learn to use debt and acquire assets.
Printing money made the working poor and middle class poorer because fake money creates inflation and inflation makes life more expensive.
The House of Cards Collapses:
- In 1998, the foundations of global central banks and the U.S. government printed an estimated $9 trillion, to save themselves and their friends.
- In 2018, the world is in another giant bubble economy. Stock, bond, and real estate prices have made millions of gamblers very rich.
- Between 1971 to 2018, gamblers were the winners.
- Between 1971 and 2018, the poor and middle-class workers who worked hard to earn fake money, saved fake money, and invested it in fake assets run by fake fund managers educated in our finest business schools became today’s biggest losers.
Three Giants Bubbles:
1. GIANT BUBBLE #1: 1998: Thailand bust 1999: Long-Term Capital Management bust 2000: Dot.com bust
2. GIANT BUBBLE #2: 2008: Real estate derivatives bust
3. GIANT BUBBLE #3: Bubble Top year?
The author suspects that, between 2019 and 2025, many amateur gamblers who are rich today may become tomorrow’s biggest losers.
Is the Golden Age of gamblers coming to an end?
As the saying goes: “Gambling: the sure way to get nothing for something.”
Here are the four additional reasons how retirement, pensions, and fake assets cause the poor and middle class to become poorer.
Reasons #2: Inflation
“Blessed are the young for they shall inherit the national debt.” Herbert Hoover
“If there were no government-guaranteed student loans, college tuition would be much lower.” Gary Johnson
Concerns for the Coming Generations
Baby Boomers in the United States had an easy life. We grew up during the biggest economic boom in world history.
Their children and grandchildren – Gen X, the millennial generation born after 1982, and the Gen Z internet-generation born after 1995 – have a very hard road ahead. Not only are many Millennials unemployed or underemployed, but many start their adult lives burdened by onerous student loan debt. They also inherit a massive national debt, a financial disaster left behind by their parents, grandparents, and great-grandparents.
“By a continuing process of inflation, the government can confiscate, secretly and unobserved, an important part of the wealth of their citizens.” John Maynard Keynes
“The way to crush the bourgeoisie (middle class) is to grind them between the millstones of taxation and inflation.” - Vladimir Lenin
“Inflation destroys savings, impedes planning, and discourages investment. That means less productivity and a lower standard of living”- Kevin Brady.
Remember: The banking system is based on printing money. It is known as the fractional reserve system. That means, for every dollar a saver saves, the bank is allowed to lend out a “fraction” of that money. If the fractional reserve is 10 percent a bank may lend out $9 to debtors for every $10 of savers’ money. When the $9 goes to the debtor’s bank, the debtor’s bank may lend out $8.10. The sad truth is, there is only $1 of real money in savings. That is why if savers panic, banks may not be able to give the savers back their money.
Reason #3: Real Assets Make the Rich Richer
Amazon founder Jeff Bezos is a billionaire. Do you think he became a billionaire because he received a billion-dollar paycheck?
Although Bezos’ salary of $1.7 million a year may (technically) be low, there’s a reason he’s called the richest man in the world. His net worth is skyrocketing, mostly due to the fact that he owns about 80 million shares of Amazon stock. Every month, a portion of the billions of dollars from millions of workers’ 401(k)s and retirement plans flow from their paychecks into shares of Amazon stock. Jeff gets richer although his salary may stay the same.
Lesson: “Cash” and “flow” are the two most important words in the world of money. Every month, retirement cash flows from the Moms and Pops of the world into the pockets of the Jeff Bezoses of the world.
Reason #4: Crashes Make the Rich Richer
When the market crashes, and it always does, the poor and middle class are wiped out. When markets crash, the rich simply borrow money and buy back workers’ shares at bargain basement prices.
Reason #5: Rubber Chicken Dinners
How do the rich get richer if pension funds are going broke?
The name of the game is “assets under management.” Everyone talks about the benefits of compounding interest, but few mention the danger of compounding fees. Treat agents as partners, not as real estate brokers. If a house is a rental property and putting money in your pocket, the house is an asset. If the house is your home and taking money from your pocket, then it is a liability. And that is what rich dad’s son and I learned.
- Assets put money (cash flow) into your pocket.
- Liabilities take money (cash flow) out of your pocket.
When your banker tells you your house is an asset, he is not lying. He’s just not telling you the truth. What he does not tell you is that your house is the bank’s asset, not yours.
The same could be said for your savings, stocks, bonds, mutual funds, ETFs, and retirement plan. They are all fake assets because the cash flows to the ultra-rich via compounding fees and expenses.
All you have to do is follow the money, and you will see where the cash is flowing to. As legendary investor John Bogle, founder of Vanguard Funds, said, “[Investors] put up 100 percent of the cash, took 100 percent of the risk, and got 33 percent of the return.”
And if the mutual fund crashes, the investor loses 100 percent. If the mutual fund makes money, investors receive 20 percent of the reward, the owners of the mutual fund receive 80 percent.