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Hi Robert
After reading "The Silver Lining and the Pot of Gold" section and seeing that chart on p194, I went out and bought Michael Maloney's book "Guide to Investing in Gold and Silver". This book was one of the most context changing books I have ever read. It brought into focus alot of the ideas you have talked about in your books such as why savers are losers (I didn't really get it and I am a recent Ph.D. graduate as well) and the impact of central banks and the fractional reserve banking system.
I am a New Zealander who lives in Western Australia near Perth. I looked up reserve requirments for Australian and New Zealand banks and the information I found (Wikipedia) stated there was no actual reserve requirements, which was a shock to me. I will research this further. Meanwhile I am travelling to the Perth mint tomorrow to buy some silver. I realise investing for capital gains is calculated gambling but as Michael Maloney stated in his book "gold and silver have never failed".
The lack of reserve requirements for down under banks is very disturbing. The Australian dollar dropped very quickly against the American dollar in late 2008 by about 30%, the New Zealand dollar dropped even more. There could be an implosion of the Australian and New Zealand dollars some time in the future especially given the predicted budget deficts laid out by president Obama ?
I'm an Aussie living in Canada. Therefore I feel like I can invest for cashflow where-ever. I have been following a few U.S. Real estate markets and have held off for the moment because my feeling is that the worst is yet to come. After seeing the charts and reading this chapter, perhaps I've done the right thing.
However, If you could invest anywhere in the world,,, where would you invest in Real Estate (for the Cash flow) and how would you go about it.
I am 25, read your book at 19 when I was in Russia, now I moved to Canada and already purchased 4 cashflow properties. Now I goal to buy 2-3 properties a year until I am 30.
As most of people I asked the same questions, back in Feb 2007 I heard for the first time what is adjustable rate mortgage on the Darren Weeks Seminar (He teaches your philosophy for Canadian market). And he and his team were already talking of the big collapse coming. I did not really understand any of it until I started investing and understood what is what.
In Dec 2008 I asked the same question: the recession started because adjustable mortgages from 2002 and 2003 started resetting. What is going to happened when the 2005 and 2006 starting resetting?
I tried to find any stats on the number of mortgage to be reset and I just could not. The banks I guess were trying to hide this info.
Where did you get these charts? I admire you but I always check for consistency with other sources and so far your book is the only source that I could find.
I think it is time to buckle up. Because the ride is going to be rough. Now is the time the poor need to get smart for this is the opportunity to get better as well as not get lost.
We either need to REDESIGN the Financial system or the same disasters and worse will keep recurring.
EINSTEIN said that insanity is doing the same things and expecting a different result.
Buckminster Fuller was right when he said that we could attain Financial sustainability.But we need to CREATE it.
This financial crisis is a mere warning but I fear that the powers who are manipulating the system do not want to listen.
I have found that many people in Australia appear to be afraid to discuss what is really happening and are prepared to let others control their financial future.Some have walked away when I have started to talk about this crisis and only some who are interested in financial matters even care.
By ignoring the immensity of the problems that have been created we are allowing others to manipulate and control our Financial FUTURE.
If we learn the lessons of DISASTERS then we may be able to achieve a much greater and beneficial result.The first step must include a real voice in the changes that are needed.
EDUCATION is the beginning of this process and Robert has helped it to begin.
Hi Robert!
Again, thank you for this excellent book! I can be a little slow on the uptake but the chart on Monthly Mortgage Resets is great but for folks like me, it would be great to match it with to stock market performance. This way, we can correlate the hit the markets took and how it matches with those resets to see the possible lag time (if any)?
I'm really digging the fact that in addition to getting some REAL knowledge, you actually take feedback as you are writing this book. Also, the audience that's participating ate bringing some great insight to the table.
Bravo for your vision of writing this book in such an interactive environment! As a person who loves knowlegde, I'm riding "in the curl"!!!
Unfortuatly, our gov is not what it used to be. It seems that they want to add another stimulus package. What us that going to solve? We are already in 11.7 Trillion dollars of debt or something like that. It will increase spending? Okay, how does that resolve the current issue. We we go to war with anoither country in the next 3 years. Watch out, things with debt are going to get vey ugly.
There is a good website that teaches people about money as well as this site. The site is www.HowMoneyReallyWorks.com, there is a good book called How To Get Off The Financial Tight Rope.
If there is one rule to remember when reading charts, it is the fact that "the map is not the territory", a famous quote by creator of General Semantics, Alfred Korzybksi.
Robert I recommend the above philosophy (general semantics) for further exploration because you will find some similar touchpoints to your own thoughts on the sources of the maniputation going on.
The Economy is undergoing a correction cycle for multiple reasons. The charts do not show everything.
The impact of the new rules that Uncle Sam is imposing on the American people and pressing the rest of the world to adapt is a lot more daunting.
The more the government prints more fake money, the more messier it gets. The economy now is dependent on taxpayer money, the money you and I pay every month to the government. Taxpayer money has always been cashflow to mega-corporations,but today they became the bigggest cashflow to them, those who can move minds of milllions of people around the world. The More taxpayer money needed to maintain those financial stick houses, the more taxes we get, the more bad debt we wind up onto, the more less-developed countries will want to secure themselves with taxpayer money of the U.S through loans and bonds.The Big Whooper under our chairs just keeps getting bigger until we can no longer sit on them, and that is INFLATION.
Depending on what happens through the next round of mortgage resets, I would be curious to know your thoughts or comments on the leveling out of those after 2012. Will the damage be too big to repair, or does that allow some level of reprieve to allow the economy to be able to sort itself out somewhat?
Robert, Hi..
This may not be the perfect place to comment about my huge concern, but wanted to inform you how many people feel and think.
It is about you going into details and blaming a ‘Jewish’ man for our financial troubles.
Not only was this Warburg an assimilated German Jew (more German then Jew)
What was your reason in pointing out this person’s nationality / race etc. aside from planting seeds of hate?
Why does it matter if this person was Irish, Japanese or Greek, well it does matter if your intent is to spread negative information on a small minority people = the Jews.
With that you have lost all your credibility in all matters including financial.
I now believe that your intention has nothing to do with financial education and everything to do with bigotry.
Such A narrow minded view on history, hinders the mind from ever making smart dynamic financial decisions.
I urge you to research the struggle, achievement and success of such individuals who had all the odds stacked up against them, yet they never gave up on improving themselves and others to the best of their ability.
In essence the story of Mr. Warburg (people like him) is the story of any potential Rich dad.
Robert, I truly believe that we are in the "eye of the storm."
However, during the first surge...real estate prices went down, gold went down, oil went down, etc., etc. Isn't this deflation???
Are we to expect the second half of the storm to be 180 degrees different in character from the first half?
I personally expect a period of severe DEFLATION, and following that period is when the rash reactionary government policies will actually take hold, and THEN hyperinflation will be in full gear.
Everyone seems to be expecting inflation, and I have never been comfortable going with the general consensus view.
Sure the "money" supply has grown, but you have shown us that money is just an idea. Won't the further implosion of the credit bubble actually reduce the amount of "money supply" in relation to actual federal reserve notes? Gold and silver may be a good play, but not in my opinion until we have actually reached the bottom.
Silver is still a fraction of the price it reached in 1981, and we have been through two decades worth of increase in money supply. I find it hard to believe in a setting of imploding credit that metals or any commodities will suddenly skyrocket.
Housing prices to drop at least 50% more from current levels
Robert,
With regard to the chart showing mortgage resets over the next ten years, it is clear that more and more foreclosures will occur, which will add to the already massive unsold housing inventory in America. This practically means that housing supply is going to skyrocket. Massive inflation combined with rising unemployment means that the average American, if anything, is going to be far less able to purchase a home at current prices.
Both the increasing supply and waning demand virtually dictate that home prices must fall significantly lower than they already have--and home prices in many areas are already 50% from their peak. The one saving grace is that large inflation means that the mortgage itself will become cheaper over time.
It will all depend on what people think. If they think there is going to be a recession and panic, then that is exactly what happens.
If they continue reading the media and are prepared to be influenced by it on a massive scale then whatever they read will happen.
You are right in that it all goes back to taking charge of your own life, own quadrants, and educating (and insulating) yourself in the right way. In the mean time if everyone acts the way they are (i.e. we're in a recession) then there is worse to come.
There hasn't suddenly been a few trillion pound less in the world but people have panicked and some of it has stopped flowing. (or has it?!).
Perhaps things have had to have their value re-adjusted but this just means that they were over valued in the first place. At the end of the day the value of something is what someone is prepared to pay for it.
So tough times still for the 'average person' and affluent times for the better prepared and rich who have built the power in the correct way. (There are also probably some mega rich that are controlling the current environment to make themselves more billions).
well what do I think of the future. After listening to your word on silver (bit later than I should of but still doing good) bought 32 KG. most think I am mad, but as I see it this is my chance to really make a difference & with the silver once hyperinflation kicks in I will be able to use that silver to purchase good investments to ensure cash flow in good & bad to underpin my businesses.
in meantime doing what I can to build my businesses in line with your teachings & to bring an income using that knowledge.
Just one more link to put in place then can really start moving.
In reading the charts and thinking about the future I personally see a lot of opportunities around the corner. Now is the time to start preparing to take advantage of them.
We live in a global market and for me it has been interesting to watch how throughout this credit crunch things happen in the US markets and then slowly filtered out to the rest of the world. Some countries are about 6 months behind and other countries more. So will the 'predictions' from the US based charts flow into the rest of world? Who knows but it is best to be prepared to take advantage of it.
I was glad to see you mention that you think we are in the eye of the storm. I was beginning to feel I was the only one thinking this way. I have a feeling there is more trouble to come from the banks and the consequences that go with that. In the UK the Bank of England Governor Mervyn King is saying no bank should be too big to fail. They need to have a plan in place to be closed down quickly without impacting on other banks. He wants greater powers to enforce this. The results of the stress test on banks have not to my knowledge been released here. So I have to ask is there more trouble brewing and was Kings comments a warning for the banks to get their acts together.
As the saying goes 'make hay while the sun shines'. I hope I have learnt the right lessons during the first part of the storm and I am now better prepared during this lull to survive the second half.
I don't think there is a quick end in sight. The charts show me that a bigger challenge is waiting around the corner. So prepare now for the challenges ahead and be ready to scoop up the opportunities as they arise.
I think the IMF graph is interesting and usefull. If i understand it correctly the likelyhood that interest rates will rise from where they currently are (in general) is pretty good, well until the end of 2011.
Which in term allows one to, i guess kind of crystal gaze to a certain extent and prepare and use these times to the best of ones ability, as you said yourself, and i think this concept applies here... you dont have to out run the bear just your friend.
...as we speak many small & medium companies are having the worst moment of their lives & probably more than half of them will not end very well positioned. Let´s face it, knowing that more than 70% of the world´s companies are "Family Co." things will get messy, let´s remember that these Co. are the ones that give many jobs too, these are the Co. that invest their patrimony in ventures they think are viable ones. If Governmets are not capable of making the right choices helping them out too (not only the "GRUNCH"), Family Co. owners will end up thinking only about their personal intrests too, not trusting what the Goverments are "TRYING" to do & not thinking of helping them out any more.
These charts tells us verry clearly that there is going to be a LOT of money arround for only a few peolple (smart ones) to take it so let´s get creative & do something about it.
Also I´m glad I don´t have a mortgage to pay any more & my credit card debt is decresing avery month...
Too many people in our world are ignorant and not willing to change that. They are lazy and perfectly satisfied with "thinking that our "government" will take care of us.
What people do not get is that the government is supposed to be an extension (representation) of the people. Unfortunately, instead - the "people" are willing to let the government handle everything and fix everything.
I see an incredible disaster on its way. Those "thinking" that Social Security, etc., will take care of them - good luck with that. What if those people are wrong. What then?
I am a student of scripture and bible prophecy. As I have read and listened to what you have to share, Robert; as I read The Creature from Jekyll Island; then I stack all of this up against scripture - it is so incredibly clear to me and my friends.
We are headed for disaster and the "people" are letting it happen not realizing (as Jesus said "they know not what they do") what is coming.
I for one, am not sitting back and waiting. I am doing the best I can to be prepared for the storm as you have suggested.
In his six months in office, Obama and the Democratic Obots that follow him have set the stage for irrepairable damage to the US as we know it. I agree with the charts but I also think that we will be some kind of socialistic branch of China since our dollar will be worthless since we are printing it into oblivion and China is buying us up. Just looking at how the government has taken over Government Motors (GM), looking at socialized medicine, and the cap and trade legislation and we are losing more and more of our personal and business freedoms right in front of our faces and no one is doing anything about it. How's that hope and change working for all you Obots? I haven't gotten my stimulus check yet, but my taxes in CA have certainly gone up.
We have set up a momentum that, if we don't slow it down and turn it around, we are in further big trouble! Some people think it's bad now just wait when all these taxes go into effect and they don't have an out. They wanted change, well they're going to get it. They (we) have set our heads in the sands too long saying it's going to get better...horse hockey! What's at the other end and who's going to kiss it!? The answer rests in us, one B and I at a time!
I hope we DON'T have a One World Monetary System...
This is painful to say and I hope I'm very wrong, but from all the research that I've done so far, viewing these videos and also researching on my own online of where I believe we're heading globally, it looks like we have long battle uphill. But what's life without a challange, right?
1) The Untouchable Banksters of The Capitalist Conspiracy - By G. Edward Griffin - 48 min. - I think this is the ORIGINAL video documentary film (40 years old) that uncovered quite a bit for us to understand how old and how organized this "elitist" group really is.
2) The Money Masters - 3.5 hrs. - Boring but VERY in depth documentary; probably the most detailed explanation of how the Federal Reserve started to where it is now. We're talking 200+ years BEFORE the Fed came into being.
3) Money As Debt - 1 hrs. - Very basic and easy to understand.
4) Fiat Empire - 45 min. - On and to the point.
5) Money Banking & The Federal Reserve - 45 min. - Again, on and to the point.
6) Inside the Meltdown (Frontline) - 1 hrs. - After viewing these videos and listening to Robert K's Audio Prophecy it's not surprising.
7) Ten Trillion and Counting (Frontline) - 1 hrs. - Again not surprising.
8) I.O.U.S.A - 1.5 hrs. - By David Walker & the Concord Coalition (we even had a follow up in person interview with David and his Coalition. Again, he exposes how deep in debt we're in)
9) Monopoly Men (Federal Reserve Fraud) - 50 min. - About the same as the rest of the docs, interesting.
10) The Crash Course - By Chris Martenson - 3.5 hrs. - You've got to watch this one!!! It helps you piece it all together.
11) Prophecy - By Robert Kiyosaki - 3.5 hrs. - AWESOME Audio Book. This one started it all for me; to do more in depth research into what money really is; where it started and where it's going.
12) Guide to Investing in Gold & Silver - By Mike Maloney - 3.5 hrs - Another great Audio Book. This too exposes the Fed for who they really are. You go Mike Maloney !!!
13) Grunch of Giants - by R. Buckminster Fuller - This one I actually read !!! Incredible book that also exposes more than just the Federal Reserve.
14) David Icke - Live at the Oxford Union Debating Society - 2 hrs. - Very deep. This too pieces it all together.
15) Zeitgeist - 2 hrs. - Although I disagree with the first 40 min. of the religion section of this video (since the more I study the Bible how very real it is to me. It just reconfirmed my convictions as a disciple of Christ), this documentary is very deep and exposing.
16) Zeitgeist: Addendum - 2 hrs. - Just an addition to exposing the Fed for who they really are.
17) Wake Up Call New World Order - 2.5 hrs. - Judge for yourself where we might be heading.
18) The Obama Deception - 2 hrs. - Again, judge for yourself where we might be we're heading.
Just google any of these titles and watch and/or listen to them on your own. Again, judge for yourself where things started and where we might be heading. This is going to be a very long road of recovery. I hope Robert K. if you're reading this that you can take the time to continue educating yourself by watching these documentaries (if you haven't already). You have been a constant inspiration to me ever since I listened to your Audio Book - Prophecy (even though it wasn't you're biggest seller, it was one of my favorite audios that I listened to 6-7 times over). I wish the opportunity presented itself to meet you so I could spend the day with you just to learn from just how you deal with day to day life. By the way, thanks Robert for leading me to Bucky's book Grunch of Giants. Very good read, even though I learn better through audio and video, this still captivated me. This man I believe was truly a person generations ahead of 99.9% of all of us. Thanks again for allowing me to share this with you... Hope to meet you soon...
The current economy looks increasingly like a global depression. The prolific printing of money will eventually lead to hyperinflation. However, right now the money is being either hoarded or used to deleverage. This is temporarily causing deflation. I think we will see that continue for longer than most expect. People aren't spending. Banks aren't lending. Factories are manufacturing less. Less is being shipped. The economy will get much uglier before we reach bottom; then the recovery will be long and slow.
Obviously the only thing that is holding inflation in check [barely] is consumer fear. However, even that fear will not hold down commodity prices for very long. Petrochemicals and industrial metals will be in increasingly short supply per the "value" of the dollar/euro/pound...and bid up in price. The left-leaning governments will rail at corporate gouging and cartel price fixing...to deflect criticism of their own policies which are the real cause of the problems. Consumer goods that are based on petrochemicals & metals for manufacture & distribution will have to go up and that includes food. Even labor rates will eventually be pushed up significantly as employment strengthens and union-friendly governments remain in control. {All this will happen despite the PR & blather from the nation's capitals to the contrary.}
It's ironic that the very instruments the banks, et al, designed to enhance profitability [ARMs, CDOs, CDSs...] have been and will continue to be the very things that caused them to fail. The creative, high-leverage stuff is only good IF people will continue to pay for it; if they stop you go broke. None of this "mortgage crisis" would have happend with 20% down, fixed rate loans. Even a burst housing bubble wouldn't have caused more than non-crisis downturn in the economy for a year or so had mortgages been investments instead of gambling flings.
I don't have a mortgage of my own, but my partner who recently seperated has had to put his house on the market. House prices have gone down, so now his house is worth less than he paid for it, the bank won't let him sell the house for less than he owes on the mortgage without paying the difference, which he doesn't have.
I know it's normal for house prices to change, but I really do think it is daft that an item "house" can change in value so dramatically when the item itself does not change. It just doesn't make sense!
Those that are doubting your explanation should open Economics 101 textbook in a local bookstore. I think your parable of "an eye of the storm" describes perfectly where we are today.
Nobody knows how this will play out, however preparing for the bad times and knowing only good times sounds like a good strategy:)
I do like charts a lot!! ...and these are completely nuts!!! wow...
I think we are going to see more of the same and those who are not prepared are going to get hit again. i think unemployment will rise more and bad legislation will emerge and become law and cause more problems than they solve. This mess is not a bump in the road. It is a new reality of how it is now. We will need to learn how to survive in a new paradigm or hide in fear and do our best to just hold on. Just like in 9-11 we can either be spectators and let them take us where they want or we can rise up and take control of our own future. It is up to us. So... what do you say, FREEDOM or SECURITY!
I think the only people who are really in the loop as far as "knowing" what is going to happen in the economy are the ones who are making the rules, and therefore 'making' the economy. A very very few.
The subprime mortgage collapse was not brought about by banks, it was brought about by $4.00 a gallon gasoline. There will be no recovery until there is trust in a stable energy environment. How this is brought about could take many different turns. On the other hand it may not happen at all.
War is profitable for the few. And a bad economy ensures that employees (soldiers) will be more plentiful.
I pretty much knew there would be a time when prices would drop That allows those who have access cash to buy up all the goodies at a discount. Then when they have done so, whether it is real estate, stocks, or gold, up go the prices again.
My theory is become adaptable. Look around you, consider your intuition as well as what you read and hear. Remember we are all here only a short time and we all end up the same way. Do some good each day. There is no shortage of kindness that needs doing in this world.
Recently I went through a drive thru to get a cup of coffee. The person in front of me had paid my ticket. I still think fondly of this because that person was a stranger.
One hot summer day I stopped at a shopping center and a group of young people were passing out ice cold bottled water for free. Some of their group were washing the windshields of cars in the parking lot.
I know people who hide dollar bills around the grocery store or pharmacy so others will find them. Some even up the amount and hide 5s, 10s or 20s. How much fun would it be to go out on a street and just pass out 20 $5 bills.
A kind word costs nothing. A smile costs nothing. Being polite costs nothing. Having good manners costs nothing.
In the paragraph below the chart, Robert stated that Nixon "took the world off the gold standard." Should not be U.S. or the dollar instead of the world? Or did Robert mean the rest of the world was / is tied to the dollar?
Dear Robert, first of all, I have you to thank. My life changed ever since I picked up your book Rich Dad Poor Dad back in 2001. Though it's been only a short period of 8 years never, this book changed my life forever. Your other books on the B-I Triangle, 90/10 rule, Cahsflow Quadrant and so on not only helped me, never in my dreams did I dream it would turn out to be so good but even better than my plans and dreams. Life making money is so full of fun!
The charts. The Fed is printing way too much money making them the world's largest debtor. This is surely not good debt and the only difference from those whose homes are being foreclosed is that the US goverment is "licensed" to print more money. This is going to create hyperinflation and a world currency crisis. The only thing to own would be real assets. Look towards China. Look at the inflation rate in China. Imported inflation is pushing up prices like a rocket. We're in no period of deflation.
The mortgage resets charts. The long term treasury yields will increase and in tandem the interest rates will follow. The next collapse will be (and already is) in treasury bills. The financial sector will fall off the cliff. The world will dump their US assets creating a massive selloff and a collapse of the Dollar!
I keep hearing that the only real hedge is buying Gold/Silver. I think in a really bad economy (as in the Great Depression) the only real "rich" people are the farmers and land owners. If they don't produce any food it will not matter how much gold or silver you have. You can't eat or drink it (precious metals). I understand that precious metals have always been the one constant for the rich/wealthy. I sometimes think that farmers these days do not realize the power they have if things go really bad. They do need to be smart and not owe the bank so much money that they give it all back. One of my goals is to purchase 100 acres or more of land of good growing/hunting land as a hedge against things really getting bad. Hopefully things will not get that bad so that we are not selling our gold/silver for food, etc.
I'm not sure I completely understand the meaning of numbers on the Mortgage Resets chart. I understood that a mortgage reset is when a bank changes an interest rate (correct?). So what do these figures represent? Are these the amount of debt that borrowers have to pay a bank?
Hello Robert, I appreciate your sharing your thoughts via this website.
I think by preparing for hyperinflation you look too much into the future and miss the present and imediate future.
We are now in a financial environment where we contemplate the death of credit. Credit being a derivative of money, means that in order to pay it back you will ned cash (or another credit, but this is not the case in this financial environment). Therefore, until all unsustainable credit is going to be destroid, deflation will stay in force and cash is going to be the single place to hide from deflation. Gold or silver will decrease in value relative to cash, just as any other commodity. I think this trend has only paused recently, but we still have years until it will be over.
Ultimately a point will be reached where the amount of credit left in the economy will be sustainable and that will be the moment to think about the next inflationary environment. If the money supply created during deflation to replace the disappearing credit will be too high, a hyperinflation can occur. But we are not there yet, so as long as deflation is here we should stay safe on cash and benefit from the big discounts that are still lying ahead.
Warning your readers (me included) about hyperinflation from now, is a little bit to early in my opinion.
Hope this helps,
Andrei
The first graph shows they are going to be dealing with inflation. That can either mean affordability or higher prices, depending on whether the Fed is true to its founding economic model. Bad derivitives in other than economic form could feasibly have a negative effect on affordability, through 'fairy tales' and misinformation.
The second graph shows a lot of spending and overhead. That is supposedly going to get things 'back on track'. Productivity has to be an essential component for this to work.
Spending and overhead in the second term of Obama's projected presidency in the graph could be a 'ready response' to the results of the first term. If small business is to save the economy, as it is known to do in severe downturns, the second term may represent the larger economy getting back on track, to a large extent. It looks a lot like an extension of the bailout methodology.
The third graph shows housing, which has to do with personal finance. The return of projected high resets in the next few years will likely mean high expenses for consumers, or the continued need for things like loan modification programs.
The idea that hedge funds would continue to be allowed to rip off mutual funds does not look good. It is not surprising, here, that there is legislation to control hedge funds in the works.
Business has access to money that is being printed. Consumers may face expenses if productivity and affordability cannot agree, or if there is not some kind of floor on inflation.
I think that the Government is entering a bubble.
Logic tells me that just like any other bubble, they grow too powerful and there is too much money focused and based on their own inability to manage so much money and their inability to grow, along with all the protests and riots that are increasing, they will collapse.
I read that 75% of resets end up in negative equity position
90% of them in negative equity position end up in foreclosure. As California got hit the worst with the foreclosures befoore putting them in major trouble, California and other states ill likely default. If not they will have to go to extreme measures such as releasing prisoners, legalizing drugs, dramatically increasing taxes and so on.
Unfortunately governments that collapse generally turn to war, and the larger the empire, the greater the war. Whether it's Romans, Persians, Greeks, or Germans the result of destruction is more destruction.
In earlier chapters you quoted the bible saying the word became flesh. I believe it also says something like 'to him that hath shall more be given, to him who have not, shalt more be taken'. If he focus is on what we have (debt, inflation), we will get more, if we focus on what we lack (surplus) more shall be taken.
Yet my spirit tells me that somehow we will grow stronger because of this. Somehow we will make it through, and pressure will make us stronger if it occurs under the right circumstances.
If a tree falls into a bog and falls into the pressures of the earth it can turn into coal, If coal is put under enough pressure, it can turn into a diamond. A more complex and precious thing emerges. A star can go supernova, impload, and then turn into a brown dwarf, something far more complex and more dense.
I don't know if we will evolve and transform, or if the major declines in the economy will lead to a major war as has happened in the past. I don't know if a team will come up with the next great invention providing free energy for all, or if businesses will be destroyed largely by taxes and inflation, and lack of credit and inventory. I do know if we are to grow from this experience, we must look at everything as an opportunity to improve ourselves, our intellegence, our awareness, and our actions.
The chart is an eye opener, but not at all surprising.
So many people are hailing Obama as a savior, having very little understanding of the dynamics of programs that redistribute wealth and the damage it does.
The first time I picked up your books and I read about Fanny Mae and Freddie Mac, I thought this isn't right. And as a prospective investor in real estate, this would help me finance? Surely, in the hands of someone who knows what they're doing. But that's not the case with most people lead by a dream to own a home. Now look at it. And socialized medicine. There are major factors about the population of the US that are ovelooked that it will never have the degree of success that smaller European countries claim (although that is often debatable.) And stimulus packages? Governers who opposed this are criticized for not wanting to improve the school systems of thier states. That's a laugh.
Look at Florida. They instituted the state lottery to help fund their education system. Instead it created a large unwieldy system that is focused on Fcats. One high school will not accept the credits of a student transferring from a public charter school. So on. I had to appreciate the wisdom of Hawai'i for not starting a lottery, no matter how bad their school system is. The stimulus package would even be worse, indebting us to China...
I could go on like this...
I have repeatedly said on other forums that it is up to we the people and that to get a financial education. It isn't enough to read Suze Orman. These people have no idea what hyperinflation is, how it will affect their cozy little savings.
Due to the deficit that U.S. currently has, the consequences of fighting the Irak War, and the vast amount of money that has been borrowed from foreing countries like China, This depression does not resemble the Great Depression of the 1930's (when the U.S.) had a trade surplus and was and up-coming country). As the deficits grow and the downturn deepens, the stimulus has to continue to escalate. The goverment will have to continue to sell more treasury bonds and borrow more money from itself. This could jeopardize the credit quality of the United States. This, in turn turn could mean rising interest rates into 2010 and possibly further.
Robert, you are making a big assumption with graph C and the mortgage resets. The assumption is that mortgage resets are the only factor affecting mortgage defaults. It is a quite important factor alright, but you have to consider other factors too. For example, the interest rates in 2006 were very different from the interest rates today. The banks reset to a nominal interest rate that is marginal to the real interest rate of the country. If I'm not mistaken, the interest rates in the US right now are negative..
Also, you are wrong in saying that countries will have to print money to devalue their currency so that they continue to export to the US. What usually happens is that with a devalued dollar, these countries will be able to import much more US goods without increasing expenditure. This in turn will increase demand in US exports which will create more jobs in the US and also dollars will flow back into the US economy. The increased demand for dollars will in turn fix the current trade deficit and will also appreciate the dollar back to where it was. The problem however is that this may happen in 10 days or in 10 years, timing is the problem.
The other argument is that you don't know if the US will decide to devalue the dollar. To devalue the dollar would mean that the US government would have to print lots of hard currency and inject it in the economy. Instead of doing that, there is another option (what Argentina did) which is simply to go bankrupt and inform investors that US cannot pay them back. This way, the strength of the dollar will remain the same, but I guess some investors have to be repaid to maintain trade relationships. But you cannot know this until the government goes bankrupt and Obama announces his plan, so all these assumptions are based on a lot of uncertainty. Its like speculating in the stock market. Things are really bad, but some optimism is needed because if you fill the readers with pessimism its going to be even harder for them to face the problems ahead. Instead you should explain the solutions to these problems, what the average Joe can do and what to expect in the long run, as the short term is going to be really bumpy.
These charts to me mean that I need to really take control of my debt and get it paid off and get some assets. I'm a single grandma in my late 40s raising my 3 year old grandson. I have a decent paying job, two bachelor's degrees, student loans, and debt from a previous divorce and am working extra in a multilevel marketing program to learn sales. I am also working on thinking of new ideas that I could create a business from. After reading this chapter, I realize that my mission is fuzzy and all the rest from there is shaky or non-existent. I need to focus on a mission statement first, then build from there. My goal is to be a wealthy woman in 10 years and teach my grandson and perhaps my daughter, how to live in the B/I quadrant rather than the E/S quadrant. I have owned a "corporation" in the past but it was more of a sole proprietorship listed as a corporation. My financial intelligence is lacking even after earning two bachelor's degrees. You are so right that schools train us to be good employees or even self employed workers, but not to be business owners or investors. I want to jump to that quadrant in the next few years once I dig myself out of this debt. I'm already at bare bones so there's no extras to cut out of my budget, just more money to bring in via the sales and network marketing system and making the money I have be used more efficiently. I'm tired of working hard. Working smart is the only way to survive the future if these charts hold true.
Rich Dad mentioned the different levels of investor in Rich Dad's Cashflow Quadrant. Level 4 investors use index funds like the S&P 500 index fund to build wealth and to invest for the long term. The recommendation is to get to at least level 4 as soon as possible. Based on the risk of hyperinflation and the need to raise taxes, index funds held in an IRA should be converted to a Roth IRA and 401Ks should convert to Roth 401Ks. The Roth advantage is that in theory there will be no taxes when the money is withdraw because you're "investing" after tax dollars. That is if an investor wants to/hopes to stay a level 4 investor and not move ahead into levels 5 and 6. This is just an opinion of a student of Rich Dad and shouldn't be taken as financial advice.
Since starting on the Rich Dad series, I'm almost sorry I've opened my eyes. It's a scarry place and it just confirms what I've been saying (jokingly) for years. For someone that really does not have a social network of any kind, I think it means that I will try to do better but will more than likely go down with the ship. However, I have no plans of refinancing my home and I was not niave enough to get cought up in the scams so I do have a fixed rate and the interest rate is low. If I could find out what my mission is, maybe I could move on from there. As for the Rich Dad clubs, in Massachusetts it seems they are a bit exclusive as requests for information on joining them are never answered. I guess time will tell.
I think you right on about opportunties for people who have ADD. I have been involved with networking marketing in the past and guess that I didn't come across the right opportunity. I have ADHD and will have nothing to do with a lot of the things that are going on in our society.
I look forward to my future with a lot of hope, and know that things will work out for the best.
I think it's worth talking about the emotional consequences of people being squeezed out of their homes. Psychologically, it's an assault on a person's foundation for living, i.e. a metaphor for death. The problem here is that real estate is both a commodity and a basis for a secure life (except for a small number of natural nomads who don't mind being "in between" dwellings). As long as one has some control over one's living space, it's possible to be calm, capable and ambitious without being greedy or manipulative. What happens when a large number of people are squeezed out of "their" homes, suddenly realizing they don't own the basis for their own security?
Being in debt is also a huge psychological stressor, triggering violence in some cases and anxiety in most. A lot of people have ADD or other issues affecting the prefrontal lobes, and they are easily lured into debt because of their natural present-tense focus. This plays on mental illness (or natural variations in neural configuration that are maladapted to modern systems), and qualifies as abuse -- but is not legally deemed abusive.
Solutions? Perhaps some form of network marketing, which provides a mentor and low barriers to entry (perfect for ADD and young people who instinctively reject the compulsive and compulsory aspects of the system). Is it possible to create a global networked economy of individuals, subverting mega-corporations and producing a genuinely diverse economy?
Robert the government spending chart should be spread in logarithmic form so that you can easily see that the government spending has doubled on average every ten years. It is alarming though that it doubled in one year in 2009. but to compare dollars historically is skewing the data to make your point stronger but it isn't a stronger point. the data should be presented as a percent gain so as not to show distortions. ex. price of movie was 10 cents in the 40's how is it $10 today? logarithmically it would not seem so distorted.
It confuses me. The government is printing lots of money recently. Yet bank is not lending, corporate earning is down, people losses job, houses loss value. Most people are getting poorer, not richer. Then, where did that money go?
I think that economy in america latina, specially in Ecuador my country, is in very high risk because a lote of people depends of the mensual bonus, that the goverment "gives". so people in general has no way to scape of the temtation of have easy money only for be poor
I am worried about hyperinflation. Back in the 30's FDR devalued the gold than confiscated it. Are we due for this again? Also, the last few times that the Fed Reserve dumped money on the market as it does today inflation wasn't a problem, this is similar to Japan's economy some twenty years happening.
what are we to truley expect? I'm cautious but I'm also diversified. I feel that we have less than 120 days before it hits the fan.
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Hi Robert
After reading "The Silver Lining and the Pot of Gold" section and seeing that chart on p194, I went out and bought Michael Maloney's book "Guide to Investing in Gold and Silver". This book was one of the most context changing books I have ever read. It brought into focus alot of the ideas you have talked about in your books such as why savers are losers (I didn't really get it and I am a recent Ph.D. graduate as well) and the impact of central banks and the fractional reserve banking system.
I am a New Zealander who lives in Western Australia near Perth. I looked up reserve requirments for Australian and New Zealand banks and the information I found (Wikipedia) stated there was no actual reserve requirements, which was a shock to me. I will research this further. Meanwhile I am travelling to the Perth mint tomorrow to buy some silver. I realise investing for capital gains is calculated gambling but as Michael Maloney stated in his book "gold and silver have never failed".
The lack of reserve requirements for down under banks is very disturbing. The Australian dollar dropped very quickly against the American dollar in late 2008 by about 30%, the New Zealand dollar dropped even more. There could be an implosion of the Australian and New Zealand dollars some time in the future especially given the predicted budget deficts laid out by president Obama ?
chrisford51
I'm an Aussie living in Canada. Therefore I feel like I can invest for cashflow where-ever. I have been following a few U.S. Real estate markets and have held off for the moment because my feeling is that the worst is yet to come. After seeing the charts and reading this chapter, perhaps I've done the right thing.
However, If you could invest anywhere in the world,,, where would you invest in Real Estate (for the Cash flow) and how would you go about it.
Thanks
Deano
Hello Robert,
I am 25, read your book at 19 when I was in Russia, now I moved to Canada and already purchased 4 cashflow properties. Now I goal to buy 2-3 properties a year until I am 30.
As most of people I asked the same questions, back in Feb 2007 I heard for the first time what is adjustable rate mortgage on the Darren Weeks Seminar (He teaches your philosophy for Canadian market). And he and his team were already talking of the big collapse coming. I did not really understand any of it until I started investing and understood what is what.
In Dec 2008 I asked the same question: the recession started because adjustable mortgages from 2002 and 2003 started resetting. What is going to happened when the 2005 and 2006 starting resetting?
I tried to find any stats on the number of mortgage to be reset and I just could not. The banks I guess were trying to hide this info.
Where did you get these charts? I admire you but I always check for consistency with other sources and so far your book is the only source that I could find.
Thanks for the Book
Aleksey
I think it is time to buckle up. Because the ride is going to be rough. Now is the time the poor need to get smart for this is the opportunity to get better as well as not get lost.
The worst is yet to come
We either need to REDESIGN the Financial system or the same disasters and worse will keep recurring.
EINSTEIN said that insanity is doing the same things and expecting a different result.
Buckminster Fuller was right when he said that we could attain Financial sustainability.But we need to CREATE it.
This financial crisis is a mere warning but I fear that the powers who are manipulating the system do not want to listen.
I have found that many people in Australia appear to be afraid to discuss what is really happening and are prepared to let others control their financial future.Some have walked away when I have started to talk about this crisis and only some who are interested in financial matters even care.
By ignoring the immensity of the problems that have been created we are allowing others to manipulate and control our Financial FUTURE.
If we learn the lessons of DISASTERS then we may be able to achieve a much greater and beneficial result.The first step must include a real voice in the changes that are needed.
EDUCATION is the beginning of this process and Robert has helped it to begin.
Hi Robert!
Again, thank you for this excellent book! I can be a little slow on the uptake but the chart on Monthly Mortgage Resets is great but for folks like me, it would be great to match it with to stock market performance. This way, we can correlate the hit the markets took and how it matches with those resets to see the possible lag time (if any)?
I'm really digging the fact that in addition to getting some REAL knowledge, you actually take feedback as you are writing this book. Also, the audience that's participating ate bringing some great insight to the table.
Bravo for your vision of writing this book in such an interactive environment! As a person who loves knowlegde, I'm riding "in the curl"!!!
Unfortuatly, our gov is not what it used to be. It seems that they want to add another stimulus package. What us that going to solve? We are already in 11.7 Trillion dollars of debt or something like that. It will increase spending? Okay, how does that resolve the current issue. We we go to war with anoither country in the next 3 years. Watch out, things with debt are going to get vey ugly.
There is a good website that teaches people about money as well as this site. The site is www.HowMoneyReallyWorks.com, there is a good book called How To Get Off The Financial Tight Rope.
To me don't mean much.
If there is one rule to remember when reading charts, it is the fact that "the map is not the territory", a famous quote by creator of General Semantics, Alfred Korzybksi.
Robert I recommend the above philosophy (general semantics) for further exploration because you will find some similar touchpoints to your own thoughts on the sources of the maniputation going on.
The Economy is undergoing a correction cycle for multiple reasons. The charts do not show everything.
The impact of the new rules that Uncle Sam is imposing on the American people and pressing the rest of the world to adapt is a lot more daunting.
The more the government prints more fake money, the more messier it gets. The economy now is dependent on taxpayer money, the money you and I pay every month to the government. Taxpayer money has always been cashflow to mega-corporations,but today they became the bigggest cashflow to them, those who can move minds of milllions of people around the world. The More taxpayer money needed to maintain those financial stick houses, the more taxes we get, the more bad debt we wind up onto, the more less-developed countries will want to secure themselves with taxpayer money of the U.S through loans and bonds.The Big Whooper under our chairs just keeps getting bigger until we can no longer sit on them, and that is INFLATION.
Depending on what happens through the next round of mortgage resets, I would be curious to know your thoughts or comments on the leveling out of those after 2012. Will the damage be too big to repair, or does that allow some level of reprieve to allow the economy to be able to sort itself out somewhat?
Robert, Hi..
This may not be the perfect place to comment about my huge concern, but wanted to inform you how many people feel and think.
It is about you going into details and blaming a ‘Jewish’ man for our financial troubles.
Not only was this Warburg an assimilated German Jew (more German then Jew)
What was your reason in pointing out this person’s nationality / race etc. aside from planting seeds of hate?
Why does it matter if this person was Irish, Japanese or Greek, well it does matter if your intent is to spread negative information on a small minority people = the Jews.
With that you have lost all your credibility in all matters including financial.
I now believe that your intention has nothing to do with financial education and everything to do with bigotry.
Such A narrow minded view on history, hinders the mind from ever making smart dynamic financial decisions.
I urge you to research the struggle, achievement and success of such individuals who had all the odds stacked up against them, yet they never gave up on improving themselves and others to the best of their ability.
In essence the story of Mr. Warburg (people like him) is the story of any potential Rich dad.
Robert, I truly believe that we are in the "eye of the storm."
However, during the first surge...real estate prices went down, gold went down, oil went down, etc., etc. Isn't this deflation???
Are we to expect the second half of the storm to be 180 degrees different in character from the first half?
I personally expect a period of severe DEFLATION, and following that period is when the rash reactionary government policies will actually take hold, and THEN hyperinflation will be in full gear.
Everyone seems to be expecting inflation, and I have never been comfortable going with the general consensus view.
Sure the "money" supply has grown, but you have shown us that money is just an idea. Won't the further implosion of the credit bubble actually reduce the amount of "money supply" in relation to actual federal reserve notes? Gold and silver may be a good play, but not in my opinion until we have actually reached the bottom.
Silver is still a fraction of the price it reached in 1981, and we have been through two decades worth of increase in money supply. I find it hard to believe in a setting of imploding credit that metals or any commodities will suddenly skyrocket.
Robert,
With regard to the chart showing mortgage resets over the next ten years, it is clear that more and more foreclosures will occur, which will add to the already massive unsold housing inventory in America. This practically means that housing supply is going to skyrocket. Massive inflation combined with rising unemployment means that the average American, if anything, is going to be far less able to purchase a home at current prices.
Both the increasing supply and waning demand virtually dictate that home prices must fall significantly lower than they already have--and home prices in many areas are already 50% from their peak. The one saving grace is that large inflation means that the mortgage itself will become cheaper over time.
It will all depend on what people think. If they think there is going to be a recession and panic, then that is exactly what happens.
If they continue reading the media and are prepared to be influenced by it on a massive scale then whatever they read will happen.
You are right in that it all goes back to taking charge of your own life, own quadrants, and educating (and insulating) yourself in the right way. In the mean time if everyone acts the way they are (i.e. we're in a recession) then there is worse to come.
There hasn't suddenly been a few trillion pound less in the world but people have panicked and some of it has stopped flowing. (or has it?!).
Perhaps things have had to have their value re-adjusted but this just means that they were over valued in the first place. At the end of the day the value of something is what someone is prepared to pay for it.
So tough times still for the 'average person' and affluent times for the better prepared and rich who have built the power in the correct way. (There are also probably some mega rich that are controlling the current environment to make themselves more billions).
Kia Ora Robert,
well what do I think of the future. After listening to your word on silver (bit later than I should of but still doing good) bought 32 KG. most think I am mad, but as I see it this is my chance to really make a difference & with the silver once hyperinflation kicks in I will be able to use that silver to purchase good investments to ensure cash flow in good & bad to underpin my businesses.
in meantime doing what I can to build my businesses in line with your teachings & to bring an income using that knowledge.
Just one more link to put in place then can really start moving.
In reading the charts and thinking about the future I personally see a lot of opportunities around the corner. Now is the time to start preparing to take advantage of them.
We live in a global market and for me it has been interesting to watch how throughout this credit crunch things happen in the US markets and then slowly filtered out to the rest of the world. Some countries are about 6 months behind and other countries more. So will the 'predictions' from the US based charts flow into the rest of world? Who knows but it is best to be prepared to take advantage of it.
I was glad to see you mention that you think we are in the eye of the storm. I was beginning to feel I was the only one thinking this way. I have a feeling there is more trouble to come from the banks and the consequences that go with that. In the UK the Bank of England Governor Mervyn King is saying no bank should be too big to fail. They need to have a plan in place to be closed down quickly without impacting on other banks. He wants greater powers to enforce this. The results of the stress test on banks have not to my knowledge been released here. So I have to ask is there more trouble brewing and was Kings comments a warning for the banks to get their acts together.
As the saying goes 'make hay while the sun shines'. I hope I have learnt the right lessons during the first part of the storm and I am now better prepared during this lull to survive the second half.
I don't think there is a quick end in sight. The charts show me that a bigger challenge is waiting around the corner. So prepare now for the challenges ahead and be ready to scoop up the opportunities as they arise.
I think the IMF graph is interesting and usefull. If i understand it correctly the likelyhood that interest rates will rise from where they currently are (in general) is pretty good, well until the end of 2011.
Which in term allows one to, i guess kind of crystal gaze to a certain extent and prepare and use these times to the best of ones ability, as you said yourself, and i think this concept applies here... you dont have to out run the bear just your friend.
...as we speak many small & medium companies are having the worst moment of their lives & probably more than half of them will not end very well positioned. Let´s face it, knowing that more than 70% of the world´s companies are "Family Co." things will get messy, let´s remember that these Co. are the ones that give many jobs too, these are the Co. that invest their patrimony in ventures they think are viable ones. If Governmets are not capable of making the right choices helping them out too (not only the "GRUNCH"), Family Co. owners will end up thinking only about their personal intrests too, not trusting what the Goverments are "TRYING" to do & not thinking of helping them out any more.
These charts tells us verry clearly that there is going to be a LOT of money arround for only a few peolple (smart ones) to take it so let´s get creative & do something about it.
Also I´m glad I don´t have a mortgage to pay any more & my credit card debt is decresing avery month...
Too many people in our world are ignorant and not willing to change that. They are lazy and perfectly satisfied with "thinking that our "government" will take care of us.
What people do not get is that the government is supposed to be an extension (representation) of the people. Unfortunately, instead - the "people" are willing to let the government handle everything and fix everything.
I see an incredible disaster on its way. Those "thinking" that Social Security, etc., will take care of them - good luck with that. What if those people are wrong. What then?
I am a student of scripture and bible prophecy. As I have read and listened to what you have to share, Robert; as I read The Creature from Jekyll Island; then I stack all of this up against scripture - it is so incredibly clear to me and my friends.
We are headed for disaster and the "people" are letting it happen not realizing (as Jesus said "they know not what they do") what is coming.
I for one, am not sitting back and waiting. I am doing the best I can to be prepared for the storm as you have suggested.
In his six months in office, Obama and the Democratic Obots that follow him have set the stage for irrepairable damage to the US as we know it. I agree with the charts but I also think that we will be some kind of socialistic branch of China since our dollar will be worthless since we are printing it into oblivion and China is buying us up. Just looking at how the government has taken over Government Motors (GM), looking at socialized medicine, and the cap and trade legislation and we are losing more and more of our personal and business freedoms right in front of our faces and no one is doing anything about it. How's that hope and change working for all you Obots? I haven't gotten my stimulus check yet, but my taxes in CA have certainly gone up.
We have set up a momentum that, if we don't slow it down and turn it around, we are in further big trouble! Some people think it's bad now just wait when all these taxes go into effect and they don't have an out. They wanted change, well they're going to get it. They (we) have set our heads in the sands too long saying it's going to get better...horse hockey! What's at the other end and who's going to kiss it!? The answer rests in us, one B and I at a time!
This is painful to say and I hope I'm very wrong, but from all the research that I've done so far, viewing these videos and also researching on my own online of where I believe we're heading globally, it looks like we have long battle uphill. But what's life without a challange, right?
1) The Untouchable Banksters of The Capitalist Conspiracy - By G. Edward Griffin - 48 min. - I think this is the ORIGINAL video documentary film (40 years old) that uncovered quite a bit for us to understand how old and how organized this "elitist" group really is.
2) The Money Masters - 3.5 hrs. - Boring but VERY in depth documentary; probably the most detailed explanation of how the Federal Reserve started to where it is now. We're talking 200+ years BEFORE the Fed came into being.
3) Money As Debt - 1 hrs. - Very basic and easy to understand.
4) Fiat Empire - 45 min. - On and to the point.
5) Money Banking & The Federal Reserve - 45 min. - Again, on and to the point.
6) Inside the Meltdown (Frontline) - 1 hrs. - After viewing these videos and listening to Robert K's Audio Prophecy it's not surprising.
7) Ten Trillion and Counting (Frontline) - 1 hrs. - Again not surprising.
8) I.O.U.S.A - 1.5 hrs. - By David Walker & the Concord Coalition (we even had a follow up in person interview with David and his Coalition. Again, he exposes how deep in debt we're in)
9) Monopoly Men (Federal Reserve Fraud) - 50 min. - About the same as the rest of the docs, interesting.
10) The Crash Course - By Chris Martenson - 3.5 hrs. - You've got to watch this one!!! It helps you piece it all together.
11) Prophecy - By Robert Kiyosaki - 3.5 hrs. - AWESOME Audio Book. This one started it all for me; to do more in depth research into what money really is; where it started and where it's going.
12) Guide to Investing in Gold & Silver - By Mike Maloney - 3.5 hrs - Another great Audio Book. This too exposes the Fed for who they really are. You go Mike Maloney !!!
13) Grunch of Giants - by R. Buckminster Fuller - This one I actually read !!! Incredible book that also exposes more than just the Federal Reserve.
14) David Icke - Live at the Oxford Union Debating Society - 2 hrs. - Very deep. This too pieces it all together.
15) Zeitgeist - 2 hrs. - Although I disagree with the first 40 min. of the religion section of this video (since the more I study the Bible how very real it is to me. It just reconfirmed my convictions as a disciple of Christ), this documentary is very deep and exposing.
16) Zeitgeist: Addendum - 2 hrs. - Just an addition to exposing the Fed for who they really are.
17) Wake Up Call New World Order - 2.5 hrs. - Judge for yourself where we might be heading.
18) The Obama Deception - 2 hrs. - Again, judge for yourself where we might be we're heading.
Just google any of these titles and watch and/or listen to them on your own. Again, judge for yourself where things started and where we might be heading. This is going to be a very long road of recovery. I hope Robert K. if you're reading this that you can take the time to continue educating yourself by watching these documentaries (if you haven't already). You have been a constant inspiration to me ever since I listened to your Audio Book - Prophecy (even though it wasn't you're biggest seller, it was one of my favorite audios that I listened to 6-7 times over). I wish the opportunity presented itself to meet you so I could spend the day with you just to learn from just how you deal with day to day life. By the way, thanks Robert for leading me to Bucky's book Grunch of Giants. Very good read, even though I learn better through audio and video, this still captivated me. This man I believe was truly a person generations ahead of 99.9% of all of us. Thanks again for allowing me to share this with you... Hope to meet you soon...
The current economy looks increasingly like a global depression. The prolific printing of money will eventually lead to hyperinflation. However, right now the money is being either hoarded or used to deleverage. This is temporarily causing deflation. I think we will see that continue for longer than most expect. People aren't spending. Banks aren't lending. Factories are manufacturing less. Less is being shipped. The economy will get much uglier before we reach bottom; then the recovery will be long and slow.
Obviously the only thing that is holding inflation in check [barely] is consumer fear. However, even that fear will not hold down commodity prices for very long. Petrochemicals and industrial metals will be in increasingly short supply per the "value" of the dollar/euro/pound...and bid up in price. The left-leaning governments will rail at corporate gouging and cartel price fixing...to deflect criticism of their own policies which are the real cause of the problems. Consumer goods that are based on petrochemicals & metals for manufacture & distribution will have to go up and that includes food. Even labor rates will eventually be pushed up significantly as employment strengthens and union-friendly governments remain in control. {All this will happen despite the PR & blather from the nation's capitals to the contrary.}
It's ironic that the very instruments the banks, et al, designed to enhance profitability [ARMs, CDOs, CDSs...] have been and will continue to be the very things that caused them to fail. The creative, high-leverage stuff is only good IF people will continue to pay for it; if they stop you go broke. None of this "mortgage crisis" would have happend with 20% down, fixed rate loans. Even a burst housing bubble wouldn't have caused more than non-crisis downturn in the economy for a year or so had mortgages been investments instead of gambling flings.
I don't have a mortgage of my own, but my partner who recently seperated has had to put his house on the market. House prices have gone down, so now his house is worth less than he paid for it, the bank won't let him sell the house for less than he owes on the mortgage without paying the difference, which he doesn't have.
I know it's normal for house prices to change, but I really do think it is daft that an item "house" can change in value so dramatically when the item itself does not change. It just doesn't make sense!
Those that are doubting your explanation should open Economics 101 textbook in a local bookstore. I think your parable of "an eye of the storm" describes perfectly where we are today.
Nobody knows how this will play out, however preparing for the bad times and knowing only good times sounds like a good strategy:)
I do like charts a lot!! ...and these are completely nuts!!! wow...
Thanks for sharing!
I think we are going to see more of the same and those who are not prepared are going to get hit again. i think unemployment will rise more and bad legislation will emerge and become law and cause more problems than they solve. This mess is not a bump in the road. It is a new reality of how it is now. We will need to learn how to survive in a new paradigm or hide in fear and do our best to just hold on. Just like in 9-11 we can either be spectators and let them take us where they want or we can rise up and take control of our own future. It is up to us. So... what do you say, FREEDOM or SECURITY!
I think the only people who are really in the loop as far as "knowing" what is going to happen in the economy are the ones who are making the rules, and therefore 'making' the economy. A very very few.
The subprime mortgage collapse was not brought about by banks, it was brought about by $4.00 a gallon gasoline. There will be no recovery until there is trust in a stable energy environment. How this is brought about could take many different turns. On the other hand it may not happen at all.
War is profitable for the few. And a bad economy ensures that employees (soldiers) will be more plentiful.
I pretty much knew there would be a time when prices would drop That allows those who have access cash to buy up all the goodies at a discount. Then when they have done so, whether it is real estate, stocks, or gold, up go the prices again.
My theory is become adaptable. Look around you, consider your intuition as well as what you read and hear. Remember we are all here only a short time and we all end up the same way. Do some good each day. There is no shortage of kindness that needs doing in this world.
Recently I went through a drive thru to get a cup of coffee. The person in front of me had paid my ticket. I still think fondly of this because that person was a stranger.
One hot summer day I stopped at a shopping center and a group of young people were passing out ice cold bottled water for free. Some of their group were washing the windshields of cars in the parking lot.
I know people who hide dollar bills around the grocery store or pharmacy so others will find them. Some even up the amount and hide 5s, 10s or 20s. How much fun would it be to go out on a street and just pass out 20 $5 bills.
A kind word costs nothing. A smile costs nothing. Being polite costs nothing. Having good manners costs nothing.
There is plenty for all.
In the paragraph below the chart, Robert stated that Nixon "took the world off the gold standard." Should not be U.S. or the dollar instead of the world? Or did Robert mean the rest of the world was / is tied to the dollar?
Dear Robert, first of all, I have you to thank. My life changed ever since I picked up your book Rich Dad Poor Dad back in 2001. Though it's been only a short period of 8 years never, this book changed my life forever. Your other books on the B-I Triangle, 90/10 rule, Cahsflow Quadrant and so on not only helped me, never in my dreams did I dream it would turn out to be so good but even better than my plans and dreams. Life making money is so full of fun!
The charts. The Fed is printing way too much money making them the world's largest debtor. This is surely not good debt and the only difference from those whose homes are being foreclosed is that the US goverment is "licensed" to print more money. This is going to create hyperinflation and a world currency crisis. The only thing to own would be real assets. Look towards China. Look at the inflation rate in China. Imported inflation is pushing up prices like a rocket. We're in no period of deflation.
The mortgage resets charts. The long term treasury yields will increase and in tandem the interest rates will follow. The next collapse will be (and already is) in treasury bills. The financial sector will fall off the cliff. The world will dump their US assets creating a massive selloff and a collapse of the Dollar!
I keep hearing that the only real hedge is buying Gold/Silver. I think in a really bad economy (as in the Great Depression) the only real "rich" people are the farmers and land owners. If they don't produce any food it will not matter how much gold or silver you have. You can't eat or drink it (precious metals). I understand that precious metals have always been the one constant for the rich/wealthy. I sometimes think that farmers these days do not realize the power they have if things go really bad. They do need to be smart and not owe the bank so much money that they give it all back. One of my goals is to purchase 100 acres or more of land of good growing/hunting land as a hedge against things really getting bad. Hopefully things will not get that bad so that we are not selling our gold/silver for food, etc.
Hi All,
I'm not sure I completely understand the meaning of numbers on the Mortgage Resets chart. I understood that a mortgage reset is when a bank changes an interest rate (correct?). So what do these figures represent? Are these the amount of debt that borrowers have to pay a bank?
Can anybody, please, explain? :-)
Thanks in advance!
Hello Robert, I appreciate your sharing your thoughts via this website.
I think by preparing for hyperinflation you look too much into the future and miss the present and imediate future.
We are now in a financial environment where we contemplate the death of credit. Credit being a derivative of money, means that in order to pay it back you will ned cash (or another credit, but this is not the case in this financial environment). Therefore, until all unsustainable credit is going to be destroid, deflation will stay in force and cash is going to be the single place to hide from deflation. Gold or silver will decrease in value relative to cash, just as any other commodity. I think this trend has only paused recently, but we still have years until it will be over.
Ultimately a point will be reached where the amount of credit left in the economy will be sustainable and that will be the moment to think about the next inflationary environment. If the money supply created during deflation to replace the disappearing credit will be too high, a hyperinflation can occur. But we are not there yet, so as long as deflation is here we should stay safe on cash and benefit from the big discounts that are still lying ahead.
Warning your readers (me included) about hyperinflation from now, is a little bit to early in my opinion.
Hope this helps,
Andrei
The first graph shows they are going to be dealing with inflation. That can either mean affordability or higher prices, depending on whether the Fed is true to its founding economic model. Bad derivitives in other than economic form could feasibly have a negative effect on affordability, through 'fairy tales' and misinformation.
The second graph shows a lot of spending and overhead. That is supposedly going to get things 'back on track'. Productivity has to be an essential component for this to work.
Spending and overhead in the second term of Obama's projected presidency in the graph could be a 'ready response' to the results of the first term. If small business is to save the economy, as it is known to do in severe downturns, the second term may represent the larger economy getting back on track, to a large extent. It looks a lot like an extension of the bailout methodology.
The third graph shows housing, which has to do with personal finance. The return of projected high resets in the next few years will likely mean high expenses for consumers, or the continued need for things like loan modification programs.
The idea that hedge funds would continue to be allowed to rip off mutual funds does not look good. It is not surprising, here, that there is legislation to control hedge funds in the works.
Business has access to money that is being printed. Consumers may face expenses if productivity and affordability cannot agree, or if there is not some kind of floor on inflation.
a small feed-back:
on page 17 you have written "pubic" instead of public
I think that the Government is entering a bubble.
Logic tells me that just like any other bubble, they grow too powerful and there is too much money focused and based on their own inability to manage so much money and their inability to grow, along with all the protests and riots that are increasing, they will collapse.
I read that 75% of resets end up in negative equity position
90% of them in negative equity position end up in foreclosure. As California got hit the worst with the foreclosures befoore putting them in major trouble, California and other states ill likely default. If not they will have to go to extreme measures such as releasing prisoners, legalizing drugs, dramatically increasing taxes and so on.
Unfortunately governments that collapse generally turn to war, and the larger the empire, the greater the war. Whether it's Romans, Persians, Greeks, or Germans the result of destruction is more destruction.
In earlier chapters you quoted the bible saying the word became flesh. I believe it also says something like 'to him that hath shall more be given, to him who have not, shalt more be taken'. If he focus is on what we have (debt, inflation), we will get more, if we focus on what we lack (surplus) more shall be taken.
Yet my spirit tells me that somehow we will grow stronger because of this. Somehow we will make it through, and pressure will make us stronger if it occurs under the right circumstances.
If a tree falls into a bog and falls into the pressures of the earth it can turn into coal, If coal is put under enough pressure, it can turn into a diamond. A more complex and precious thing emerges. A star can go supernova, impload, and then turn into a brown dwarf, something far more complex and more dense.
I don't know if we will evolve and transform, or if the major declines in the economy will lead to a major war as has happened in the past. I don't know if a team will come up with the next great invention providing free energy for all, or if businesses will be destroyed largely by taxes and inflation, and lack of credit and inventory. I do know if we are to grow from this experience, we must look at everything as an opportunity to improve ourselves, our intellegence, our awareness, and our actions.
The chart is an eye opener, but not at all surprising.
So many people are hailing Obama as a savior, having very little understanding of the dynamics of programs that redistribute wealth and the damage it does.
The first time I picked up your books and I read about Fanny Mae and Freddie Mac, I thought this isn't right. And as a prospective investor in real estate, this would help me finance? Surely, in the hands of someone who knows what they're doing. But that's not the case with most people lead by a dream to own a home. Now look at it. And socialized medicine. There are major factors about the population of the US that are ovelooked that it will never have the degree of success that smaller European countries claim (although that is often debatable.) And stimulus packages? Governers who opposed this are criticized for not wanting to improve the school systems of thier states. That's a laugh.
Look at Florida. They instituted the state lottery to help fund their education system. Instead it created a large unwieldy system that is focused on Fcats. One high school will not accept the credits of a student transferring from a public charter school. So on. I had to appreciate the wisdom of Hawai'i for not starting a lottery, no matter how bad their school system is. The stimulus package would even be worse, indebting us to China...
I could go on like this...
I have repeatedly said on other forums that it is up to we the people and that to get a financial education. It isn't enough to read Suze Orman. These people have no idea what hyperinflation is, how it will affect their cozy little savings.
Due to the deficit that U.S. currently has, the consequences of fighting the Irak War, and the vast amount of money that has been borrowed from foreing countries like China, This depression does not resemble the Great Depression of the 1930's (when the U.S.) had a trade surplus and was and up-coming country). As the deficits grow and the downturn deepens, the stimulus has to continue to escalate. The goverment will have to continue to sell more treasury bonds and borrow more money from itself. This could jeopardize the credit quality of the United States. This, in turn turn could mean rising interest rates into 2010 and possibly further.
Robert, you are making a big assumption with graph C and the mortgage resets. The assumption is that mortgage resets are the only factor affecting mortgage defaults. It is a quite important factor alright, but you have to consider other factors too. For example, the interest rates in 2006 were very different from the interest rates today. The banks reset to a nominal interest rate that is marginal to the real interest rate of the country. If I'm not mistaken, the interest rates in the US right now are negative..
Also, you are wrong in saying that countries will have to print money to devalue their currency so that they continue to export to the US. What usually happens is that with a devalued dollar, these countries will be able to import much more US goods without increasing expenditure. This in turn will increase demand in US exports which will create more jobs in the US and also dollars will flow back into the US economy. The increased demand for dollars will in turn fix the current trade deficit and will also appreciate the dollar back to where it was. The problem however is that this may happen in 10 days or in 10 years, timing is the problem.
The other argument is that you don't know if the US will decide to devalue the dollar. To devalue the dollar would mean that the US government would have to print lots of hard currency and inject it in the economy. Instead of doing that, there is another option (what Argentina did) which is simply to go bankrupt and inform investors that US cannot pay them back. This way, the strength of the dollar will remain the same, but I guess some investors have to be repaid to maintain trade relationships. But you cannot know this until the government goes bankrupt and Obama announces his plan, so all these assumptions are based on a lot of uncertainty. Its like speculating in the stock market. Things are really bad, but some optimism is needed because if you fill the readers with pessimism its going to be even harder for them to face the problems ahead. Instead you should explain the solutions to these problems, what the average Joe can do and what to expect in the long run, as the short term is going to be really bumpy.
These charts to me mean that I need to really take control of my debt and get it paid off and get some assets. I'm a single grandma in my late 40s raising my 3 year old grandson. I have a decent paying job, two bachelor's degrees, student loans, and debt from a previous divorce and am working extra in a multilevel marketing program to learn sales. I am also working on thinking of new ideas that I could create a business from. After reading this chapter, I realize that my mission is fuzzy and all the rest from there is shaky or non-existent. I need to focus on a mission statement first, then build from there. My goal is to be a wealthy woman in 10 years and teach my grandson and perhaps my daughter, how to live in the B/I quadrant rather than the E/S quadrant. I have owned a "corporation" in the past but it was more of a sole proprietorship listed as a corporation. My financial intelligence is lacking even after earning two bachelor's degrees. You are so right that schools train us to be good employees or even self employed workers, but not to be business owners or investors. I want to jump to that quadrant in the next few years once I dig myself out of this debt. I'm already at bare bones so there's no extras to cut out of my budget, just more money to bring in via the sales and network marketing system and making the money I have be used more efficiently. I'm tired of working hard. Working smart is the only way to survive the future if these charts hold true.
Rich Dad mentioned the different levels of investor in Rich Dad's Cashflow Quadrant. Level 4 investors use index funds like the S&P 500 index fund to build wealth and to invest for the long term. The recommendation is to get to at least level 4 as soon as possible. Based on the risk of hyperinflation and the need to raise taxes, index funds held in an IRA should be converted to a Roth IRA and 401Ks should convert to Roth 401Ks. The Roth advantage is that in theory there will be no taxes when the money is withdraw because you're "investing" after tax dollars. That is if an investor wants to/hopes to stay a level 4 investor and not move ahead into levels 5 and 6. This is just an opinion of a student of Rich Dad and shouldn't be taken as financial advice.
Since starting on the Rich Dad series, I'm almost sorry I've opened my eyes. It's a scarry place and it just confirms what I've been saying (jokingly) for years. For someone that really does not have a social network of any kind, I think it means that I will try to do better but will more than likely go down with the ship. However, I have no plans of refinancing my home and I was not niave enough to get cought up in the scams so I do have a fixed rate and the interest rate is low. If I could find out what my mission is, maybe I could move on from there. As for the Rich Dad clubs, in Massachusetts it seems they are a bit exclusive as requests for information on joining them are never answered. I guess time will tell.
I think you right on about opportunties for people who have ADD. I have been involved with networking marketing in the past and guess that I didn't come across the right opportunity. I have ADHD and will have nothing to do with a lot of the things that are going on in our society.
I look forward to my future with a lot of hope, and know that things will work out for the best.
I think it's worth talking about the emotional consequences of people being squeezed out of their homes. Psychologically, it's an assault on a person's foundation for living, i.e. a metaphor for death. The problem here is that real estate is both a commodity and a basis for a secure life (except for a small number of natural nomads who don't mind being "in between" dwellings). As long as one has some control over one's living space, it's possible to be calm, capable and ambitious without being greedy or manipulative. What happens when a large number of people are squeezed out of "their" homes, suddenly realizing they don't own the basis for their own security?
Being in debt is also a huge psychological stressor, triggering violence in some cases and anxiety in most. A lot of people have ADD or other issues affecting the prefrontal lobes, and they are easily lured into debt because of their natural present-tense focus. This plays on mental illness (or natural variations in neural configuration that are maladapted to modern systems), and qualifies as abuse -- but is not legally deemed abusive.
Solutions? Perhaps some form of network marketing, which provides a mentor and low barriers to entry (perfect for ADD and young people who instinctively reject the compulsive and compulsory aspects of the system). Is it possible to create a global networked economy of individuals, subverting mega-corporations and producing a genuinely diverse economy?
Robert the government spending chart should be spread in logarithmic form so that you can easily see that the government spending has doubled on average every ten years. It is alarming though that it doubled in one year in 2009. but to compare dollars historically is skewing the data to make your point stronger but it isn't a stronger point. the data should be presented as a percent gain so as not to show distortions. ex. price of movie was 10 cents in the 40's how is it $10 today? logarithmically it would not seem so distorted.
It confuses me. The government is printing lots of money recently. Yet bank is not lending, corporate earning is down, people losses job, houses loss value. Most people are getting poorer, not richer. Then, where did that money go?
I think that economy in america latina, specially in Ecuador my country, is in very high risk because a lote of people depends of the mensual bonus, that the goverment "gives". so people in general has no way to scape of the temtation of have easy money only for be poor
I am worried about hyperinflation. Back in the 30's FDR devalued the gold than confiscated it. Are we due for this again? Also, the last few times that the Fed Reserve dumped money on the market as it does today inflation wasn't a problem, this is similar to Japan's economy some twenty years happening.
what are we to truley expect? I'm cautious but I'm also diversified. I feel that we have less than 120 days before it hits the fan.