When I was a young boy, the path to retirement was simpler. For the most part, if you saved your money regularly, paid your mortgage off, and lived modestly, you could retire well. This was partly because inflation was low since the dollar was pegged to gold and also because most employees could expect a company pension and health benefits until the day they died. It did not take much intelligence to have a secure, financial future.
Today, we live in a world that requires an extremely high, financial intelligence to retire well.
It is no longer enough to save money, as higher inflation and taxes wipe out your earnings. You can’t rely on a company pension because most companies don’t offer one. Instead, it is expected that you contribute to a 401(k) plan that may or may not provide you a secure retirement and that is simply a glorified, tax-deferred savings account that benefits the rich, not you.
These changes are because of two actions by the U.S. government that I’ve written extensively about, most notably in my book Conspiracy of the Rich. In 1971, Nixon took the dollar off the gold standard, making the dollar a currency instead of money. And in 1974, the Employee Retirement Income Security Act was passed, paving the way for 401(k) plans, forcing uneducated workers into the stock market, and creating the financial services industry.
It’s taken about three decades, but we’re seeing the devastating effects of those actions today as individuals and countries are living on the edge of financial disaster.
On an individual level, take for instance a young friend of mine’s father whose dad worked his whole life in an old-world industrial plant. Every time my friend talked with his dad, his dad would mention how long it was until his retirement, where he’d collect a pension and health benefits and enjoy golf a few times a week and sports on TV. There were no savings to speak of, some stock options decimated by the economic downturn, much debt, and no other plan. Unfortunately, only a few months before my friend’s dad hit the minimum retirement age, the plant went for sale, found no buyers, and closed. Now he, along with hundreds of others at that plant, cannot find a new job, have no savings, and are looking at a very insecure, financial future. For him, it may be too late.
On a national level, look at the Euro Zone. According to The Wall Street Journal, “The global economy faces a depression-era collapse in demand if Europe doesn’t quickly act to dramatically boost the size of its debt-crisis firewall, implement pro-growth policies and further integrate the euro zone, the head of the International Monetary Fund warned Monday.”
As IMF Managing Director Christine Lagarde remarked over the weekend, the Euro Zone’s efforts to stymie debt problems “is about avoiding a 1930s moment, in which inaction, insularity, and rigid ideology combine to cause a collapse in global demand… A moment, ultimately, leading to a downward spiral that could engulf the entire world.” If Europe collapses, the world goes down with it — and the jury is still out on what will happen. But the world’s financial experts are sending out the warning cry.
As you read these stories above, they probably sound vaguely familiar, have little emotional impact on you, and you may have even skipped over them.
These stories echo stories that have been shared for many years now. The news is filled with stories of people living in countries on the edge of financial collapse, and then buffered by good news here and there to keep us all from falling into complete despair.
The reality is that we have become used to living on the edge, and we’re forgetting what it means to live comfortably inland. This is not all bad, if you have the right mindset.
Living on the Edge Requires a Financial Education
Living on the edge requires alertness and intelligence, you cannot give up or be lulled or else you will fall. Each step must be calculated and taken carefully, but confidently, to get to safety. The only other option is to do nothing and hope someone will save you —which is akin to suicide.
It’s for times like these that the Rich Dad Company was formed. This website, our books and DVDs, our coaching, and financial education all exist to help equip you for the perils of our modern economy so that you can be sure to have the knowledge and practical application required to survive and thrive while others fail and fall.
For many, there is no choice about living on the edge. The die has been cast for us by people much more powerful and influential than us. But we can control our actions on the edge. It’s my hope you’ll step forward confidently and smartly, equipped with as much financial knowledge and courage as you can gain and muster. It sure beats the alternative.
To increase your financial education now, click here to find out about our free resources and online community.
It is absolutely madness. Yesterday was a huge injection of dollars into the global financial system by central banks. It seems fiat currencies are swirling the drain now.. Look for precious metals to surge again and listen for new talk of a one world currency..It’s only a matter of time. However, as Robert says, “The people who understand that they must increase their financial education, save themselves and not rely on the rich, or the government, survive and thrive in times of crisis”
So increase your financial education which will lead to increase in cash flow. Rely on God and your faith, not the rich or the government, and thrive in these times of oppertunity! – Joshua Gamen
In my book, Conspiracy of the Rich: The 8 New Rules of Money, I write that bailouts are the name of the game. This means that the ultra rich will never suffer like the middle class and poor do in financial crisis. The institutions that are deemed “too big to fail” will always be bailed out. This also means that sometimes big institutions prefer financial crisis because they know they will be bailed out, and they also know they can make a lot of money from those bailouts.
This week, a bombshell hit on the lending practices of the Federal Reserve to the largest banks in the world during the peak of the financial crisis. As Bloomberg reports in an article entitled, “Secret Fed Loans Gave Banks Undisclosed $13B,”
“The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he ’wasn’t aware of the magnitude.’ It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.”
“The Fed didn’t tell anyone which banks were in trouble so deep they required a combined $1.2 trillion on Dec. 5, 2008, their single neediest day. Bankers didn’t mention that they took tens of billions of dollars in emergency loans at the same time they were assuring investors their firms were healthy. And no one calculated until now that banks reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates, Bloomberg Markets magazine reports in its January issue.”
Big gets bigger.
Everyone knew that the name of the game is bailouts for institutions that are too big to fail, and while news agencies have been talking about the gargantuan $7.7 billion in commitments by the Fed to save the economy, the details released this week through the Freedom of Information Act show what we’ve known all along – the rich will say anything to protect their ass-ets and build their balance sheets.
For instance, in November of 2008, Bank of America’s CEO, Kenneth Lewis said that his bank was “one of the strongest and most stable banks in the world.” On that same day, Bank of America owed $86 billion to the Federal Reserve in emergency loan money.
Jamie Dimon, CEO of JP Morgan Chase, told his shareholders in 2010 that he only borrowed from the Fed to encourage others to borrow from the Fed. In reality, the bank borrowed twice its cash holdings from the Fed, and on one day in February 2009, borrowed a colossal $48 billion – one year after the creation of the Fed’s emergency lending program.
All in all, the big six banks comprised of JPMorgan, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley accounted for 63 percent of all daily average lending by the Fed to banks and financial institutions, receiving over $160 billion in TARP funds and borrowing around $460 billion from the Fed.
During that time, “Total assets held by the six biggest U.S. banks increased 39 percent to $9.5 trillion on Sept. 30, 2011, from $6.8 trillion on the same day in 2006, according to Fed data.”
Additionally, the Fed helped prop up both Bear Sterns and Wachovia with emergency loans as they were being gobbled up by JPMorgan and Wells Fargo respectively. The Fed transferred $50 billion in secret loans to Wachovia to prevent financial collapse until Wells Fargo could seal the deal, and they sent $30 billion in secret loans to Bear Sterns so that JPMorgan could wrap up that deal—all while providing $29 billion in financing to JPMorgan to fund the deal.
Essentially, the Fed protected the bigger banks and helped them grow even bigger by keeping brain-dead banks on financial life support long enough to graft them into the bodies of bigger financial institutions like a financial Frankenstein.
This was all done in secret, and without the knowledge of the American people and the Congress.
The safety net.
This type of behavior is reckless because it creates a false safety net. The big banks and the ultra rich know they will be bailed out and so they take even greater risks, putting the economy at even greater risk, and playing games with your money.
As Professor Oliver Williamson says, “The banks that were too big got even bigger, and the problems that we had to begin with are magnified in the process. The big banks have incentives to take risks they wouldn’t take if they didn’t have government support. It’s a serious burden on the rest of the economy.”
Of course, this should come as no surprise, as the Fed doesn’t exist to protect the middle class and the poor. Rather, it exists to protect banks and the ultra rich. Something they’ve shown they can do well, efficiently, and without government knowledge or intervention.
Learn the rules of the rich with a financial education
All this is to show what I’ve been saying for many years, you can’t rely on the government to save you, and your definitely can’t rely on the Fed. The government doesn’t even know what’s going on in our financial policy and the Fed hides those details in order to help their friends on Wall Street…after all, the people who run the Fed used to work there, and probably will again someday. You don’t bite the hand that feeds.
If you want to avoid getting wiped out by the next financial crisis, you must understand the rules of the rich and play by those rules. With a new presidential election heating up this year, I’m sure you’ll hear many calls for hope and change on both sides. Many people will believe that their candidate will make a difference and that this will be the time things will change.
The reality is that nothing has changed in decades. The rich take care of the rich and grow richer. The poor and the middle class grow poorer. And the people who understand that they must increase their financial education, save themselves and not rely on the rich, or the government, survive and thrive in times of crisis.
Take charge of your financial future so that you can live large when hard times come.
In the movie, Network, Howard Beale, an aging news anchor, gives one of the most famous speeches in movie history, capped with the line, “I’m as mad as hell, and I’m not going to take it anymore!”
Crazy-eyed and drenched in rain, he proceeds to encourage all of New York City to put their heads out the window and yell the same thing at the top of their lungs. Surprisingly, it happens and the whole city erupts in the yells of the residents’ pent up frustrations. Beale’s speech, set in 1975, is eerily relevant today as it deals with themes like inflation, unemployment, depression, and more.
I thought I’d share this speech with you:
I also thought I’d share some articles with you from the last couple weeks that will show you why, today in real life, many people are also as mad as hell:
As you can see, there’s plenty of reason to be mad as hell. The question is, what are you going to do about it?
In the movie, Network, people stick their heads out the window and yell. It’s a poignant yet pointless moment. It doesn’t change a thing.
In the streets today, many people are doing the equivalent of sticking their heads out the window and yelling. They’re sitting in parks and unsure what will happen next. Others are complaining on blogs. Seems everyone shares the sentiment that they “aren’t going to take it anymore,” but very few people are doing anything about it.
As I’ve written before, I don’t think yelling and protesting will fix our problems. They only make us feel better for a while, but at the end of the day, our situation is the same.
Instead, I believe that financial education is the only way to change our life and the lives of others.
After all, the reason why the rich and powerful can take advantage of us and game the system is because they have a financial education, and the average person knows nothing about money or how the rich use it to get richer off of them.
Instead of yelling, throw your energy into financial education and learn about money and investing. Instead of protesting, take action and beat the rich at their own game. Instead of complaining, be part of the solution.
As the few articles above show, there is plenty of legitimate reason to be angry. Most people have been dealt a bad hand. But life isn’t fair, and those that win in life are those who make their own cards. We’re all mad as hell. Let’s do something about it that will create a better future for us and our families, not just an interesting footnote in the history books.
This week we are talking about information, and how it effects you if you are a trader or a cash flow investor. We’ll talk a bit more about employment. Also on the agenda is the tax code and why it is set up the way it is. Of course I’m going to rant about gold and silver. And then I’ll let you know what I see this weekend in the BCS