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ОглавлениеWHY THE RICH DON’T WORK FOR MONEY
“They’re playing games with money… Our wealth is stolen via the money we work for.”
– R. Buckminster Fuller
Rich Dad Poor Dad was self-published in 1997. It had to be a self-published book because every major publisher we pitched it to turned it down. A few publishers commented, “You don’t know what you are talking about.”
Some of the points they objected to were my rich dad’s statements such as:
1. Your house is not an asset.
2. Savers are losers.
3. The rich don’t work for money.
Ten years later, in 2007, the subprime mortgage crisis hit and millions of homeowners found out—first hand—that their house is not an asset.
In 2008, the U.S. government and Federal Reserve Bank began printing trillions of dollars, causing millions of savers to be losers via the loss of purchasing power due to inflation, higher taxes, and low interest rates on their savings.
Rich Dad’s Lesson One in Rich Dad Poor Dad is The Rich Don’t Work for Money… and it was the least criticized of rich dad’s three teachings on money. In this chapter, you will learn why this comment is the most important of my rich dad’s lessons, and why it is important to understand before you consider your opportunities for a second chance, a fresh start for both your money and your life.
What You Need to Know About Money
The subject of money can be complicated and intimidating. But if you start with the basics and use them as building blocks you can gain the knowledge you need to understand money and investing and how to make your money work for you.
The most basic thing you need to know about money is that it is a subject that you can become smarter about, a subject that can give you the confidence to make informed and educated decisions.
Q: Who needs a second chance?
A: We all do.
Q: Why?
A: Because money—as we know it—has changed and continues to change.
Q: Why is that important?
A: Because the poor will become poorer, the middle class will shrink, and the rich will get richer.
Q: I think we all know that. What is different about the rich getting richer and everyone else becoming poorer?
A: Many people who are rich today will be among the new poor.
Q: Why will the rich become the new poor?
A: There are many reasons. One reason is because many rich people measure their wealth in money.
Q: What’s wrong with that?
A: The fact that money is no longer money.
Q: If money is no longer money, then what is money?
A: Knowledge is the new money.
Q: So if money is knowledge, you’re saying that many who are poor and middle class today, have the opportunity to become the new rich of tomorrow?
A: Exactly. In the past, the rich were those who controlled land and resources such as oil, weapons, or giant corporations. Today things are different. Today we live in the Information Age—and information is abundant and often free.
Oil was the life-blood of the Industrial Age, but the Industrial Age is dying. While that may be good news for many, it spells disaster for many countries.
Q: So why isn’t everyone rich?
A: It takes education to process information into knowledge. Without financial education, people cannot process information into personal wealth.
Q: But America spends billions on education. Why are there more poor people than rich people?
A: Hundreds of billions of dollars are spent on education, but almost nothing is spent on financial education.
Q: Why isn’t financial education taught in schools?
A: I have been asking that question for years, ever since I was nine years old.
Q: And what did you find out?
A: I learned that knowledge is power. If you want to control people’s lives, limit their knowledge. That is why, throughout history, despots have burned books and exiled (and even killed) those with knowledge who threatened their power. Before the Civil War in America, it was against the law in many states to teach slaves to read and write. Knowledge is the most powerful force on earth. That is why the control of knowledge is essential to the control of power.
The formula is:
Information × Education = Knowledge
Knowledge is power—and lack of knowledge is weakness.
My poor dad was a highly educated man with a PhD, but he had almost no financial education. He had authority within the school system, but little power in the real world.
My rich dad never finished school, but he was highly educated in the world of money. Although less formally educated than my poor dad, he had more power in the real world than my poor dad.
Q: So those in power maintain control of that power through the school system… through what’s taught—and what isn’t taught. That’s why there is no financial education in schools?
A: I believe that’s true. Today financial knowledge is more powerful than a gun or the whips and shackles of slavery. The lack of financial education enslaves billions of people in all parts of the world.
Q: What has replaced the whips and shackles and guns?
A: The monetary system.
Q: The monetary system? Our money? How does the monetary system control people?
A: The money system is designed to keep people poor, not to make them rich. The monetary system is designed to keep people working hard for money. Money enslaves those who are uneducated financially. Those who are financially uneducated become slaves to a paycheck.
And our wealth is stolen through money, through the very thing most people work for all their lives. That is why the people who work the hardest for money, often called the “working poor,” continue to grow poorer, not richer, no matter how hard they work.
Q: How is our wealth stolen via our money?
A: There are many ways. You may already know some of them. They are:
1. Taxes
The value of your labor is stolen via taxes.
2. Inflation
Prices rise when governments print money. As prices rise, people work harder, only to pay more in taxes and inflation.
3. Savings
The banks steal savers’ wealth via a banking process known as the fractional reserve system. Let’s use a fractional reserve of 10, as an example. A saver puts $1 into his or her savings account. The bank is allowed to lend $10, against that $1, to borrowers. This is another form of “printing money” which is not only inflationary but reduces the purchasing power of a saver’s money. This is one of a number of reasons why rich dad often said, “Savers are losers.”
Later in this book I will explain other ways in which your money is stolen from you. As I’ve said: The monetary system was designed to make people poorer, not richer.
Q: Can you prove that?
A: I will show you a graph. As the saying goes, ‘A picture is worth a thousand words.’ The graph is not proof, but it does tell a story about the growth of people needing government assistance.
The War on Poverty
In 1964, President Lyndon Johnson declared a war on poverty. Many believe we won that war. Others do not. The chart below shows the numbers of people who use “food stamps,” today called SNAP: Supplemental Nutrition Assistance Program. Although many believe we won the war on poverty, the increasing reliance on food stamps tells a different story.
The chart of individuals receiving food stamps shows that, in 1975, approximately 17 million people received food stamps. By 2013, the number had increased to approximately 47 million people and continues to increase.
Q: If the number of poor people is increasing, where are they coming from?
A: The middle class. Many of today’s poor were doing well as middle-class Americans a few years ago.
The War on the Middle Class
The chart above shows what’s happening to the middle class.
A few years ago, TV journalist Lou Dobbs wrote a book on this middle class decline, The War on the Middle Class: How the Government, Big Business, and Special Interest Groups Are Waging War on the American Dream and How to Fight Back. His point: If the middle class is in decline, the United States is in decline, since the middle class is the engine of the U.S. economy.
During the 2012 Presidential campaign, both candidates Barack Obama and Mitt Romney promised to save the middle class. An inquiring mind might ask, “Why does the middle class need saving?” As most of us know, if the government is promising to save you, you have already lost.
Inflation Steals Wealth
The monetary system steals our wealth through inflation. The chart below explains why the poor and middle class are struggling, regardless of how hard they work.
Q: How does the monetary system cause inflation?
A: The primary cause of inflation is the printing of money. When money is printed—by banks or governments—two things happen: inflation kicks in and taxes goes up. When prices and taxes go up, people struggle financially.
Q: How do people survive when prices go up?
A: When prices go up, people use their credit cards to survive. Many are forced to cut expenses… like healthier food or dental care. Many become slaves to debt. And many more become little more than indentured servants, or slaves to their paychecks.
Debt Slaves
As middle-class income declined, and taxes and prices went up, many turned to their credit cards to survive, becoming slaves to debt.
The chart below tells that story.
Today, taxes, debt, and inflation are the iron shackles that bind modern-day slaves.
Two Types of Rich
Q: How are the rich getting richer, if the poor and middle class are growing poorer?
A: There are two types of rich people. One type of rich is the truly rich. They are getting richer. The other type of rich is getting poorer. The chart on the next page tells that story.
Figure 2U Cumulative change in real annual household capital income, by income group, 1979-2007
Q: I can see that the rich, the upper 1%, are getting richer. But what is happening to the 90-95%? Why is their income going down? Are those the rich that you’re talking about, the rich that are growing poorer?
A: Yes. This chart tells a tale of two different types of rich people. As you can see from the chart, the real rich, the top 1% of all Americans, became extremely rich—with a gain of 309% in income since 1979.
Yet, the top 95-99% are losing ground. Their income is not growing.
Q: Is this why you said earlier about some of the rich becoming the new poor?
A: Yes. Notice the chart we just looked at only takes us to 2007. That was the year the Great Recession began. After 2007, many millionaires were wiped out in the subprime mortgage fiasco and the stock market crash.
Q: So this chart would look worse today?
A: Yes. The upper 1% of Americans has gotten richer. Many of the others, the other type of rich I’ve described, are now poorer. Many slid from rich to poor in less than a year. Many were wiped out when they lost their high-paying jobs, their homes, and their wealth as stock portfolios collapsed.
Of the rich who survived the crash and remain in the upper 20%, many (thanks to inflation) are becoming poorer. Some have already slid into the middle class.
Q: Tell me again… what’s the difference between the two types of rich?
A: One type of rich is people with high-paying jobs, such as corporate executives, professional people such as doctors and lawyers, athletes, and movie stars. They are high-income rich.
The other type of rich is the person who does not need a job to be rich. Most of these people are asset-rich.
The Millionaire Next Door
In 1996, The Millionaire Next Door was published. It was a great book for its time. Written by Thomas J. Stanley and William D. Danko, the book described how ordinary, middle-class citizens had become millionaires. They did it without being Donald Trump, Steve Jobs, or Gordon Gekko from the movie Wall Street. They were not millionaire movie stars, rock stars, or professional athletes. They had become middle-class millionaires by having a good education, living in a modest home in an upscale neighborhood, driving sensible cars, saving money, and investing steadily in the stock market.
Many were “net-worth millionaires,” people who had become rich as a result of the rising value on their homes and retirement portfolios. They had become middle-class millionaires through inflation, by being part of the rising U.S. economy. They were living proof of the American Dream.
The September 11, 2001 terrorist attacks signaled the start of the new millennium and end of the American Dream.
The chart below shows that, since 9/11, life for the millionaire-next-door has not been easy.
In 2000, the NASDAQ or dot-com crash triggered a series of booms and busts, shaking many millionaires-next-door out of the millionaire category.
The Foreclosure Next Door
In 2007, when the subprime-mortgage bubble burst, many millionaires-next-door became the foreclosure-next-door.
Figure 4: U.S. Homes Foreclosed
June 2012
Prior to 2007, housing prices had been rising steadily for years. As home prices rose, millions of homeowners began taking out “home-equity loans,” which many used to pay off credit card debt or go on vacation. Using their homes as ATMs… they learned the hard way—when they were upside down—that their “house is not an asset.”
When housing prices crashed, credit card use went down. When homeowners stopped using their credit cards, the economy slowed because the economy depends upon consumer spending and use of their credit cards. When consumers slowed their spending, retailers began to suffer, and when retailers suffer the world economy suffers.
Today, in 2014, there are approximately 115 million households in the United States. Of those 115 million households, 43 million are renters and 25 million are households or families who own their homes free and clear. Of the approximately 50 million households with mortgages, it’s estimated that over 24 million are “underwater,” which means they owe more on their home than their home is worth.
As long as homeowners feel poor, the economy will suffer.
The Lost Generation
When the middle-class millionaires-next-door lost their jobs and their homes, and began using retirement accounts to pay the bills, there was another casualty: The children of the millionaire-next-door.
All over the world, there is a generation of young people known as the new lost generation. They’re the college and trade school and high school grads who cannot find jobs or jobs that utilize their level of education. More than income, they are losing crucial real-life work experience. Without real-life work experience in their 20s and 30s, their earning power and income in later years will suffer, which is why they’re often called the lost generation.
Young, Educated, and in Debt
Many of these highly educated people graduate saddled with student-loan debt, quite possibly the worst of all possible debt. Unlike a car loan, home loan, or business loan, student loan debt is rarely forgiven. A student cannot declare bankruptcy and expect to be released from the loan. Student loan debt is an albatross around the neck of a student for life, accruing interest for life. Many will have problems buying a car, home, or investing for their future until their student loan debt is paid off. The current overhaul of the student loan programs may address these issues and challenges.
Many of these young people are boomerang kids, kids who leave home, only to return to live with mom and dad. This makes many moms and dads, the sandwich generation, people who are now caring for their kids and their parents, often with three generations living under one roof.
Other countries offer free higher education. In America, we create debt slaves out of our students.
Q: Is this why you say everyone needs a second chance? Because some of the rich are becoming poor, the middle class is shrinking, poverty is increasing, and our students are highly educated, underemployed, and deep in debt?
A: Yes. The world is changing and money is changing. Those who are operating in the past, with the old-world rules of money, are being wiped out in the present.
We live in the Information Age. There is an abundance of information, and much of it’s free. But without financial education, a person cannot convert that information into knowledge.
Q: And if knowledge is power, then millions are highly educated but without much power. Is that why millions of people need a second chance… to get their power back?
A: Yes.
Q: The Millionaire Next Door was published in 1996. Rich Dad Poor Dad was published in 1997. What was the difference between the two books?
A: The Millionaire Next Door was about net-worth millionaires. Rich Dad Poor Dad was about cash-flow millionaires.
Q: There’s a difference?
A: A very big difference. Many net worth millionaires were counting their liabilities, such as their home and their car, as assets. When the real estate and stock markets crashed, many net-worth millionaires were wiped out as the value of their liabilities crashed.
Many cash-flow millionaires, millionaires who receive their income from real assets, got richer. They got richer buying the liabilities of the net-worth millionaires at bargain-basement prices.
Q: So without financial education, millions do not understand the difference between the different types of rich people?
A: That is correct. There are many different ways a person can achieve great wealth. For example, a person can inherit wealth or marry into wealth. As Warren Buffett often says, “There are many ways of getting into financial heaven.”
Since my poor dad was poor, a man without assets, I had no wealth to inherit. Nor did I want to marry for money. At an early age, I decided I would gain my wealth my rich dad’s way—via financial education and acquiring assets.
Q: So… without financial education, most people don’t know the difference between assets and liabilities. So their wealth is stolen via a lack of financial education. Is that what you’re saying?
A: Yes. If a person knew the simple definitions of basic financial words, their wealth would increase. The good news is that words are free.
Past, Present, and Future
Q: And that is why millions of educated, hard-working people are losing their wealth? They have become educated slaves to money, much like the uneducated slaves before the Civil War. Is that what you are saying?
A: Yes. Education—or the lack of education—is one of the keys on the key ring of those in power.
Q: What is happening to those in power?
A: The Information Age is causing those in power to lose power. That’s why your personal financial education is more important today than at any other time in history. Desperate people in power are doing desperate things to hold on to their illusion of power.
Q: What do you see in the future?
A: Once again, pictures are more powerful than words. I will show you a few pictures, add a few words, and let you decide what the future holds.
On this one chart, you are looking at the past, present, and future of the Dow Jones Industrial Average. It is not a measure of the whole economy, but it is a snapshot of what has been going on in one part of a complex economy.
Q: So there are three choices for the future: up, down, or sideways?
A: Yes. The choices are always the same.
Q: What do you see for the future?
A: The best way to see the future is to look at the past. In the chart we just looked at you can see the past and an event known as the Great Depression, an event marked by the stock-market crash of 1929.
Q: That was the giant stock market crash of 1929?
A: Yes.
Q: Could a next crash be bigger?
A: Yes.
Q: What would happen if the next crash were bigger?
A: Look at the Great Depression.
The Great Depression, when measured against the Dow, lasted 25 years, from 1929 to 1954. In 1929, the Dow hit an all-time high of 381. It took 25 years for it to reach 381 again. This is an alternative point of view, as there are those who believe it ended in 1939.
Q: Could we be entering a New Depression?
A: Yes. Many people already are in their own New Depression. That’s why food stamp use is up, the middle class is shrinking, students who are loaded with student-loan debt can’t find jobs, and many of yesterday’s millionaires-next-door are broke. On top of this we have the first of approximately 76 million American baby boomers retiring. Many, if not most, of these aging baby boomers don’t have enough money to retire. Advances in healthcare and medicine may mean these baby boomers will live longer, while the cost of healthcare is likely to continue increasing, as is the cost of food, fuel, and housing.
So-So Security
Take a look at the chart below on the condition of the United States Social Security Fund.
Q: What does this chart mean?
A: It means different things to different people. If you are young, it means you’d better not count on the government to take care of you. If you are a baby boomer, it means the money you paid into the Social Security fund is gone. If you are of the World War II generation, your timing was good.
Another interesting chart is this one on the National Debt. It tells another story.
Q: What story does this chart tell?
A: Again, it depends upon who you ask. For most people, and the average American, it means nothing. Without financial education, most Americans are clueless. This chart has very little meaning to them.
Today the national debt tops $17 trillion. To some people it means the end is near. And to a few, it points to the opportunity of a lifetime.
Q: What does it mean to you?
A: While I empathize with the first two groups, I am in the third group. Although I’m a bit fearful and very concerned for those who will be hurt, I view the future with excitement, excited to be a witness to the biggest power shift and transfer of wealth in the history of the world. It is the dawn of a new age. If the change is managed well, many of humanity’s shackles will be thrown off and we will enter an age of sustainable prosperity for all. If things do not go well, and those in power today win using violence to retain control of their power, we may enter a New Dark Age.
Q: What will make the difference?
A: Many things will play a role… such as technology and the rise of China as a world power. Yet the big shift must come in education, not only in what we teach but how we teach.
Q: What do you think the chances are? Do you think education will change?
A: No. Not in the near future. A case could be made to support the position that those who control the monetary system also control the educational system. That is why I became an educational entrepreneur back in 1984. That is why I write my books and create financial education games outside the school system. Today I am a hybrid, an entrepreneur like my rich dad and an educator like my poor dad.
As you may know, I believe in personal responsibility. I believe in changing the things we have the ability to change and control. Each of us has the power to change ourselves. And the easiest—and often most powerful—change we can make is through education.
Q: What do you see in the future?
A: To see the future you must study the past. As the saying goes, “Those who do not learn from the past are condemned to repeat it.”
In the past, there were two different types of Depressions:
1. The American Depression (1929 to 1954)
2. The German Hyper-Inflation (1918 to 1924)
Q: What was the difference?
A: In very simple terms, Americans did not print money and the Germans printed money.
Pictured on the next page is what happened when Germany began printing money.
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The picture above shows what happens when a central bank and a government print money to pay their bills.
In 1918, a German citizen could be a “millionaire” by having millions of German Reischmarks in savings. In less than five years, that same German millionaire was poor.
Q: Is the same thing happening in the United States today?
A: Yes. England, Japan, and Europe are all printing money.
Q: Why are these countries printing money?
A: To pay their bills.
Q: I thought countries collected taxes to pay their bills?
A: Yes. The problem is the world economy is collapsing, so the bills go up as tax revenue from the economy goes down. A real-life example is a family of four with both mom and dad working. One day, dad loses his job. Although mom is still working, her income cannot cover the family’s expenses, so the bills keep piling up. The difference is that mom and dad can’t just print money. A country has the power to print their currency… until the world stops accepting their currency as money.
Q: What will happen when the family’s bills become mountains of debt?
A: Eventually mom and dad might declare bankruptcy.
Q: What happens to a country?
A: The currency of the country collapses. That means no one will accept the country’s money. A country’s currency collapse is the same as mom going to the grocery store only to find that her credit card is declined and the store won’t accept her checks, even though she has a job.
Q: Is that what happened to Germany in 1923?
A: Yes.
Q: Has it happened recently?
A: Yes. In Zimbabwe, once the richest country in Africa. In 2008 its currency, the Zimbabwe dollar.
Since few of us are old enough to remember the 1923 collapse of Germany’s currency, I traveled to Zimbabwe in 2004 to experience a currency collapse first hand. It was not pretty. In fact it was frightening. Millions fled Zimbabwe and tens of thousands died.
Zimbabwe was once known as Rhodesia, named in the 1880s after Cecil Rhodes, once the richest man in the world. He was an entrepreneur in South Africa who made his fortune in diamonds.
In 1980, Rhodesia became Zimbabwe—and went from being the breadbasket of Africa to the basket case of Africa. Why? The government began printing money to pay its bills. After the 2007 crash, several of the richest countries in the world began to follow the economic model of Zimbabwe.
Most of us have experienced a stock market or a real estate market crash. Few of us have experienced a currency collapse. A currency collapse is very different from stock and real estate market crashes.
Q: What can I do?
A: That is what this book is about. Part One of this book begins with understanding the past so you can see the future. That’s why the picture of a German citizen, sweeping a street littered with paper money in the 1920s, is really a look into the future. Always remember, when governments print money to pay bills, cash becomes trash.
Q: So this book is about preparing for a global currency collapse, as well as a stock and real estate crash?
A: It is.
The following is a chart on QE, Quantitative Easing.
Q: What does this mean?
A: It means the United States is following the German model from the last Depression. America is attempting to “print” its way out of financial crisis.
Q: What does this mean to me?
A: It means exactly what I stated earlier in this chapter. It means your wealth is being stolen via the money you work so hard for. As I said, the monetary system was not designed to make you rich. Money was designed as a means to steal your wealth.
Look at the chart below. It shows what has happened to the purchasing power of your money.
It has taken about 100 years for the dollar to lose 95% of its purchasing power. I doubt it will take another 100 years to lose the last 5%.
Q: Are you saying the dollar will go to zero?
A: If the United States keeps printing money, it might.
Q: But it can’t happen in America, can it?
A: It has happened a number of times.
Q: When?
A: During the Revolutionary War, President George Washington and the Congress of the United States began printing a currency known as the Continental to pay for the war. The British helped destroy the Continental by printing bogus Continentals. Soon the Continental was worth less than the paper it was printed on. During the Revolutionary War, “Not worth a Continental” was the slogan of the war.
The same thing happened to the Confederate dollar. The Confederacy printed money to pay its bills and buy weapons. In many ways, the Civil War was lost because of “bad money.”
The U.S. government printed the “greenback” to pay for the Civil War. If the North had lost, the “greenback” would have followed the Confederate dollar into the trash can.
Today, if the U.S. government keeps printing today’s “greenbacks,” they, too, may be as worthless as the Continental and Confederate dollars.
Q: What happens if the dollar goes to zero?
A: It means savers will be the biggest losers and those who work for money will have lost the battle. Their wealth will be gone. I always remind myself that a German person could be a millionaire in 1918 and wiped out by 1923.
And that’s why Lesson One in Rich Dad Poor Dad is The Rich Don’t Work for Money.
Q: If the rich don’t work for money, what do the rich work for?
A: That is what this book—and most of my books and games—are about. Many people need a second chance to rethink about what they work for.
Q: What do I need to learn?
A: We will start with the past.
Q: Why the past?
A: Because it’s from the past that we can see the future. From the past, you will learn how the rich and powerful steal our wealth via our money.
In the following chapters, you will learn how the rich and powerful have ripped us off via a Cash Heist. If you understand how the Cash Heist works, you will have a better chance to make smarter choices in the present for a more prosperous and secure future.
Q: Will everyone have a prosperous and secure future?
A: No, unfortunately. I’m afraid not.
Q: Why?
A: Because most people are still in the past. If they are stuck in the past, they will not understand Rich Dad’s Lesson One… The Rich Don’t Work for Money.
Today, most people are too busy working for money, working hard to pay bills and save enough for the future. They will not understand Lesson One unless they are willing to take the time to first understand the past.
A second chance will do little good for people stuck in the past. As the saying goes, “The definition of insanity is doing the same thing over and over and expecting different results.” When it comes to money, many people are insane.
Since we must start with the past to see the future, are you ready to move into the past? If your answer was “Yes” please read on.
Q: One last question: If money was designed to make people poor, to steal their wealth, then whom does money make rich?
A: The rich… the rich who do not work for money… the rich who control the game of money.
Q: How long has the game been going on?
A: The game of money has been going on for as long as humans have walked the earth. Humans have always wanted to enslave others or take what others have. It’s not a new game. The rich have been playing the game for a very long time.
If it is your turn to learn the game of money, the game the rich play, then this is your second chance.
