Why the Rich Get Richer by Robert Kiyosaki

Tuesday, September 19, 2006

This past June, I was invited to visit the New York Mercantile Exchange (or NYMEX) by my friend Steven Spivak, a professional commodities trader.

For those of you unfamiliar with the NYMEX, it's the exchange where commodities like orange juice, pork bellies, gold, crude oil, natural gas, copper, and silver are traded. (A good deal of the Eddie Murphy movie Trading Places takes place there.) The New York Stock Exchange (NYSE) trades primarily in equities, as opposed to the commodities traded on the NYMEX.

Bells Are Ringing

To my surprise, I was asked to ring the opening bell for the gold and crude oil exchanges, both commodities I'm heavily invested in. As soon I rang the bells, all hell broke loose. Traders like Steven were buying and selling commodity futures -- as well as put and call options -- as fast as they could.

For Steven, it didn't matter if the market was going up or down. He was busily buying and selling as he ran between the gold and crude oil pits. In less than an hour, he'd made over $70,000 in profits. Not bad for a guy in his 20s.

During that hour, I was standing next to a NYMEX employee. I asked him if he understood what was going on. He replied, "No. I've worked here for nineteen years and I've never bothered to learn. I like my job, and I don't like the pressure these guys go through every day." Although I didn't ask, I suspect he's lucky to make $70,000 a year.

Run, Don't Walk

The reason I'm comparing my young friend Steven to this older, clearly less well-off man is to give you an idea of the disparity between individuals' earning power in this country. Financially, millions of Americans are being left in the dust.

A few days later, as I was driving back to Phoenix, I was held up at a crosswalk by two young, overweight people crossing against the light. Instead of hurrying, they looked at me as if to say, "We're in a crosswalk. We have our rights. The government protects us from impatient drivers like you."

As I watched their ample backsides waddle slowly in front of me, I thought back to my hour in the trading pits of the NYMEX, and to the idea of relative speeds of wealth creation.

Clueless in La-La Land

Which brings me to my politically incorrect thesis for this week: Most Americans live in la-la land.

They're clueless about what's going on in the world of money, and still think we're the richest country in the world. In reality, we're the biggest debtor nation there is.

Most Americans also still think our government will protect them. The world is changing at an alarming rate, yet most people here waddle stubbornly through the crosswalk, so to speak, still believing that this country has the right of way and that our political institutions are still sound.

Midterm elections will take place in a couple of months. The common question regarding the outcome is: Will the Democrats or Republicans win? But the question should be: What difference does it make? Regardless of which party wins, the rich still make the rules.

The Chickens Come Home to Roost

In Thomas Frank's book What's the Matter with Kansas? : How Conservatives Won the Heart of America, which I highly recommend, a poor man reports that he voted Republican because he wanted to get back at Wall Street.

Can you imagine that? I always suspected that a lot of people aren't very bright. To paraphrase a popular statement, a poor person voting for a Republican is like a chicken voting for Col. Sanders.

Recently, Congress worked diligently to have English passed as the official language of the United States. They also worked hard to make burning the American flag illegal. Now, I'm in favor of speaking English as well as of not burning the flag. But don't our political leaders have bigger and more pressing issues to focus on?

What about Medicare, which is running in the red? And what about Social Security, which will soon be running in the red? In case you don't know how in trouble both programs are, as of 2004, Medicare's long-term fiscal gap is over $60 trillion, while Social Security reportedly has a $10 trillion shortfall.

Yet in spite of these financial challenges, millions of Americans continue to waddle through the crosswalk of life, expecting our government to take care of them instead of building wealth. They're living in la-la land.

The Catastrophe Ahead

Donald Trump and I co-authored a book, to be published next month, about what individuals can do to address the massive problems facing this country. Our point of view is that, while it would be nice to change the government, doing so seems to be an unrealistic goal at this time.

Instead of changing the government, we recommend that you change yourself and prepare for the economic turbulence that lies ahead. If you think political action can save this country from itself, I'm afraid you're dreaming -- or perhaps daydreaming as you waddle through that figurative crosswalk.

In the next five years, the United States and the world will go through some of the most financially disturbing times in the history of the world. Once again, the rich will become very, very, rich, and the unsuspecting will be left like the passengers on the S.S. Titanic, heading straight for an economic iceberg.

One way to approach the coming changes is to ask yourself whether you'll be like my friend Steven Spivak -- trading rapidly, earning over $70,000 an hour -- or like that 19-year NYMEX employee, who's content to work for $70,000 a year at best. While both men are working for a dollar that's declining in value, one is earning more than enough of them to stay ahead of its erosion.

Both options are available to each of us. Which reality you choose -- deciding on how much you can earn and how fast you can earn it -- will determine your station in life five years from now, when things start to get really sticky.

I love the guy. His book "Rich Dad, Poor Dad" is a great read and full of financial wisdom. And I liked this article too.

Which describes my friend raytri perfectly. He's the one on this forum who's obsessed with me. He'll hate this article.

And they think there's no problem with fiat currency or central banking. They're in for a huge surprise.

Sad, but true. I don't think we'll be able to change the government before the next major disaster. Too many are happy with the status quo. It would be wise to take as many financial precautions as possible.


I'll actually be surprised if it's this soon. I would say a little longer. 20 to 30 years and there will be serious consequences.

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"All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident." - Schopenhauer

Who's obsessed with whom? Lordy.

The article's fine. I agree with much of it. We are a huge debtor nation, thanks to our huge deficits. We have a growing gap between rich and poor. There are a lot of stupid, ignorant voters. Medicare and Social Security need to be addressed from either the funding side or the spending side.

I don't think we're going to collapse in five years, I don't think the problem is fiat currency, and I think it's kind of silly to be heavily invested in commodities. But to each his own.

In 20 or 30 years, you say lower down. Meanwhile, it's been 70 years and no surprise yet. Also, no Depressions, bank panics or the like. Just unprecedented economic growth.

If it takes a century or more for your prediction to come true, is it still a valid point?

And of course that means your prediction can never be put to the test in the context of this forum. You have made an unfalsifiable assertion.

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Man up.

You're obsessed with me. You're following me again.

The central bank is manuevering for a soft landing. Long wave depression cycles have always been 50 to 60 years anyway. The central bank has just learned how to manipulate things better. If you had actually read the articles I posted in the fiat currency thread, you'd see one way in which they've done this. And at the last G8 summit, all the other nations agreed that the U.S. will have to devalue its currency by at least 30%. Now tell me if that will be fun or not...

If it eventually happens for the reasons stated, sure.

I wasn't stating it as something that could be tested here. Just my speculation. As usual, you're wanting it to mean something I didn't intend it to signify.

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"All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident." - Schopenhauer

I read or skim just about every post on this forum. I post in a fair number of them. I don't "follow you around." I use the "view all posts since last visit" screen and read threads from oldest to most recent.

Okay. Unprovable, and possible "good for them." If they can smooth out the economic cycles, that's a net benefit in my book.

I agree that deficits and our staggering national debt stink. I think paying it off should be a high national priority.

A devaluation would have mixed effects, though. It would reduce the buying power of existing savings and make foreign goods in particular more expensive. On the other hand, it would make our exports and domestic goods more competitive, giving our economy a boost. And it would make it easier to pay off debts. There's a reason China keeps the value of its currency artificially low.

I guess my point is that over the course of a century the variables would tend to get out of control, so it would almost impossible to attribute an eventual crash to the fiat system, or state with confidence that it wouldn't have happened had we been on a gold standard the entire time.

I wasn't wanting it to mean anything. Just noting that the time frame makes the prediction effectively untestable. That's neither good nor bad; it just is.

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Man up.

That's the line I use to describe the conservatives that claim that everything is great in the world.

true

Many on this forum don't think that this matters.

I don't think our government will protect us. Look at the open boarders, they're courting and protecting the illegal immigrants.

That's why they hate class warfare.

I have family from Kansas. true, true, true.

Good one, I like it.

Impossible.

I am prepared.

Isn't that the way it's suppose to be?

Of course every one would like to be like Stevie boy, not everyone is cut out to be like this.

Not really, like I said before, not everyone is cut out for positions that make the big bucks.

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I've been informed....don't blame Bush, he's "not in control"
That must make him out of control

Hmm well $70,000 is pretty good money to make per year. I resent this guy's attitude that money makes a person who they are. If more people were satisfied with less money the world would be a better place.
Also, this guy seems to say, "don't bother with any social causes or try to improve society, just worry about yourself and your precious money, money, money"
I read an article today that said the most competetive countries in the world are nordic countries that have welfare states. The availability of college, health care, and a feeling of economic justice has led to a general trust in their governments and society.
Unfortunatly, it seems that people can counteract the greed that has led us into debt with further personal greed. Maybe those people walking across the street walked in front of the car as a means of protest against the writer's wealth and intolerance. Either way he condescendingly construed their walking as a symbol of their inferiority to him and his wall-street cronies. But in reality, the situation has a lot to do with wealth, power and family. Some people are born into a caste that allows them to become privileged wallstreet
fatcats, pushing paper in what is essentially an abstraction of the actual work that is being done. Others simply need to work their lives away to protect the profits of those elitists who make risiculously unneccesary amounts of money. That is the nature of capitalism, there will always need to be some level of exploitation to uphold the system.

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"In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule." - Nietzsche