Rich Dad's New Rules of Money #3: Savers Are Losers!

Savers are Losers

“Savers are losers!”

“Cash is Trash!”

Rather disturbing words, but they are the gist of New Rule of Money # 3 as advocated by Robert Kiyosaki. Watch and listen as he explain why:

The Bretton Woods System and Why You Should Know About It

The Bretton Woods Agreement was enacted in 1944, essentially making the US Dollar the world’s money.

Before 1971, the dollar actually had real value, because it was backed by gold. Those were the times when saving money made sense.

But in 1971, President Nixon took the US off the Gold Standard, effectively changing the dollar from real money to a currency. This single act changed the rules of money altogether, because it meant that the US could print “money” in unlimited amounts. The funny thing was that the whole world went along with this insanity.

The Rise of Funny Money

Yes, currency is basically play money, or “funny money”. The purchasing power of the dollar has dropped, is steadily dropping and it will just keep dropping. That’s why “Savers are Losers” – even if the banks pay higher than the average 5-10% interest on your savings, it isn’t enough to keep up with the rate of “money” being printed. So if you’re one of those people who’s banking on a retirement plan which basically consist of hoarding as much money now so you can live off the interest in the future, I hope you at least consider Kiyosaki’s arguments here.

What’s more interesting is that this (turning money into currency) isn’t the first time it’s been done. As Kiyosaki mentioned in the video, the Romans did it, the Greeks did it, the English did it, the Japanese did it, and the Germans did it. What’s concerning is the pattern it had always followed – history have shown us several times that when money is turned into currency, social, economic and political crises ensued as that currency eventually hit its inevitable decline.

And today, as we witness one tragic event after the other, it’s very easy to see the same pattern unfolding, for there are far too many economic indicators demonstrative of a moribund dollar:

America’s largest mortgage providers, American Home Mortgage, went bankrupt in August 2007.
This problem with US subprime mortgages led the European Central Bank to release three cash infusions into the global capital markets totalling to about 204 Billion Euros – and that happened within 5 consecutive days.
In August 2008, President Bush asked for $700 Billion bailout money.
Soon after, Bear Stearns and Lehman Brothers collapsed, and soon after American automotive companies like Ford, Chrysler and General Motors also asked for bailout money (GM and Chrysler received over $17 Billion in government loans).

“If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.” — Joseph Goebbels

Clearly, the philosophy espousing that “a dollar saved is a dollar earned” is no longer useful. The message is clear: stop hoarding your money; instead, learn how to invest it in assets that will produce high enough returns, and this is where the topic of hedging comes in.

How to Hedge

Hedging in simplistic terms means putting your money on investment vehicles that appreciates in value as the dollar goes down – in other words, you are betting against the dollar. Gold, currently selling at about $935 per ounce, has become too expensive for the average person, but silver, at $14 per ounce, remains within the reach of many. If you have enough savings and if you are to hedge using Kiyosaki’s advice then, buying assets (assets with appreciating value against the dollar) like Gold, Silver or Platinum is the way to go.

In short, go buy real money with funny money!