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Robert Kiyosaki Why the Rich Get Richer

Robert Kiyosaki, Why the Rich Get Richer

Survival of the Richest

by Robert Kiyosaki

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Posted on Monday, April 14, 2008, 12:00AM

Most of us are aware of the sacrificial slaughter of Bear Sterns. Some people call it a bailout, but I call it a handout -- a government handout to some of the richest people on Earth, paid for by American taxpayers.

It's the survival of the richest, and the poorest be damned. There's something dismal about a society that operates by those values.

The Economy on Life Support

I understand why the Federal Reserve did what it did with Bear Stearns. The Fed was doing its job -- acting as the lender of last resort, pumping money into a dying system. It wanted to prevent a run on the bank and economic chaos. It was a very creative financing move, using the Fed's magic checkbook to pump more liquidity into a thirsty market -- sort of like a physician administering life-saving measures to a critically wounded patient.

My problem with the move is that the Fed saved this patient because it's a wealthy one. Saving the biggest investment banks in America is welfare for the rich. Would the Fed do that for you or me if we screwed up our investment portfolio? Is the Fed going to bail out the millions of people facing foreclosure because the value of their homes is less than their mortgages? If I'm a small-business owner and fall behind on my taxes, is the Fed going to pay my taxes for me? If I can't pay off my college loan, will the fed pay it for me?

Aren't these investment bankers supposed to be the smartest guys in the world? Aren't they the people we entrust with our investment and retirement money? Aren't they supposed to be financially fit? Some blame subprime borrowers as the culprits in this mess, but the supposedly brilliant investment bankers bought their mortgages. Was that smart?

A Handout for the Rich

This bailout was a signal to Wall Street that the Fed stands behind them -- that they're on the same team. It was a thumbs-up to the super-rich: "Do what you want. If you screw up, we'll cover your blunders."

Ralph Nader's father purportedly once said that "Capitalism will never fail because Socialism will always bail it out." My concern, especially in this election year, is that socialists will seek revenge. Already I can hear the war cry "tax the rich!" The problem with taxing the truly rich is that the rich simply move their money to countries that treat them and their money with undue respect. And when the rich move their money, the poor and middle class end up paying more taxes.

Not only will taxes go up, but the prices of food and fuel will increase, because the purchasing power of the dollar will continue to decline. This rise in cost of living, plus higher taxes and stagnant wages, could lead to unrest -- protests, riots, and possibly chaos. In other words, what the Federal Reserve was attempting to prevent may happen anyway.

When Capitalism Stumbles

Bailing out the rich means over $800 billion from the Fed's magic checkbook entered the market. Immediately, the stock market rebounded and the price of gold and silver declined. The U.S. dollar strengthened against the euro. While this looks like a good sign, I'm afraid the problem isn't solved. The inevitable may only have been delayed.

Our problem is a toxic U.S. dollar. Printing funny money steals from the poor and middle class, savers, and the elderly. It may be legal, but it isn't moral or ethical. As long as the Fed is allowed to wield its power at will, the prices for food and fuel will only go up.

So will the price of gold and silver. Some are calling for gold and silver to go over $2,500 and $200 an ounce, respectively. Some even believe gold will go as high as $5,000 an ounce. I hope not. While I get excited about seeing the gold I purchased for less than $300 an ounce flirt with $1,000 an ounce, I also begin to worry.

The rise in the price of gold is a sign that capitalism has stumbled. And when capitalism stumbles, workers' wages buy less and savings are wiped out. Even gains from the stock market are diminished because our dollar gains are worth less.

Troubles Past and Present

Throughout history, when capitalism stumbles chaos erupts and sometimes despots take over. For example:

• In 1897, the Russian ruble was pegged to gold and a period of relative economic growth followed. Russia went off the gold standard to finance World War I. The government fell to the Bolsheviks in 1917, and the Russian mafia took control of the economy.

• After World War I, the German middle class was wiped out and Adolf Hitler was voted into power in 1933.

• In the 1930s, China was the only country on the silver standard. In 1935, the nationalist Chinese government started issuing paper money. In 1937, in order to fight the Japanese, the government began printing funny money. The value of their currency went from four yuan per dollar in 1936 to a trillion yuan per dollar in 1949. In May of 1949, the Chinese government fell to Mao Tse-Tung and the Communists.

• In 1984, Yugoslavia hosted the Winter Olympics just as their currency, the dinar, began to devalue. In 1989, the IMF recommended more devaluation and the freezing of workers' wages. Rioting broke out, and in 1989 Communist party leader Slobodan Milsoevic was elected into power. Yugoslavia broke apart as war and ethnic cleansing began.

As capitalism falters, the rich move their money out of the country, violence increases, and politicians promising prosperity are elected. It's happened before, and I fear it's happening again. Trouble brews when we steal from the poor and give to the rich.

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536 Comments

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  • Gillian - Monday, October 27, 2008, 2:40AM ET  Report Abuse

    • Overall: 5/5

    robert kiyosaki for president

  • benjamin - Thursday, October 9, 2008, 6:34PM ET  Report Abuse

    • Overall: 5/5

    Hi Robert, I would like to hear your views on the measures that you think should be taken to resolve the situation.

  • Judy S - Thursday, October 9, 2008, 5:30AM ET  Report Abuse

    • Overall: 5/5

    Hi Robert, I totally agreed with you and trust you. Can you offer a solution to this crisis? Can you advise me what should I do now? I have some investment in stocks and I have no idea what to do with them. Do I hold or sell? What investment should I do now? I think many people would like to know these answer. If you can offer a solution to the Fed or US government.

  • RONALD and JOAN - Friday, October 3, 2008, 9:52PM ET  Report Abuse

    • Overall: 5/5

    The US is doom to repeat history.

  • birdie - Wednesday, September 24, 2008, 3:35AM ET  Report Abuse

    • Overall: 5/5

    Kiyosaki is better than the Fed or George Bush in overall out look of the economy. He is even better than Greenspan.

  • TandL - Tuesday, September 9, 2008, 9:29AM ET  Report Abuse

    • Overall: 5/5

    your awakening content in this message is very important reading to those who care to vote.

  • mike - Monday, September 8, 2008, 11:48AM ET  Report Abuse

    • Overall: 5/5

    Your pretty good Robert! Keep speaking the truth.

  • Donovan - Monday, August 11, 2008, 10:52AM ET  Report Abuse

    • Overall: 5/5

    Excellent article

  • GiorgioM - Friday, July 4, 2008, 1:10PM ET  Report Abuse

    • Overall: 3/5

    To basballdawg's comments of 6/27. Gotta stop drinking that Free Market Capitalism (FMC) kool-aid. Both extremes communism & FMC do not work. The only reason for a successfull business to lower prices is if there's an opportunity to increase profits - has nothing to do with how sucessfull they are. As for taxes - a government cannot run a huge deficit - this lowers it's currency as it goes in debt & becomes a debtor nation. Better than the "party line" of cutting taxes, let's stop subsidizing sports stadiums with taxpayer money and other boodogles - which is welfare for the rich. Cutting taxes is kidergarten economics - it is just one side of the ledger. Study accounting & you'll discover a ledger has two sides. Credit/Debit, Assets/Liabilities, etc. Trickle Down economics? - Businesses have discovered that they can reduce labor costs by shipping it to China mostly - a loss of millions of US jobs! Trickle down to China - yes.

  • Yahoo! Finance User - Thursday, July 3, 2008, 4:29PM ET  Report Abuse

    • Overall: 5/5

    10, 9, 8, 7, 6, AMERO! :(

  • Yahoo! Finance User - Tuesday, July 1, 2008, 9:14PM ET  Report Abuse

    • Overall: 1/5

    A bailout? The majority of the loans they agreed to stand behind will likely be performing loans. I doubt a penny of taxpayer money will be paid out.

  • Roy - Sunday, June 29, 2008, 8:49PM ET  Report Abuse

    • Overall: 3/5

    Capitalism is not working because the capital itself is being diluted rapidly. Another reason is that not everyone knows that the money rules have changed. It seems the private get special "privilege" for some reason.

  • Mike - Friday, June 27, 2008, 9:35AM ET  Report Abuse

    • Overall: 1/5

    This writer obviously has not heard of, or perhaps does not understand the concept of trickle down economics. He understands the fact that if you over punish the rich via taxes; smart business people will take their money elsewhere. The issue that the writer seems to misunderstand is the fact that the wealthier the upper class becomes the wealthier the lower and middle class also become. This occurs because when large business owners (typically upper class) obtain more money, they can afford to lower prices and make better products which sparks competition. As a result, the lower class also wins because they can pay less for better goods. The country gets in trouble when the government punishes successful people for making money (over taxation) and hands it to the poor. Then large businesses can't afford to operate at competitive prices, make better products, or even hire workers (hence increasing unemployment). This may sound harsh, but the reality is that there is no such thing as liberal economics. I take that back, there is, it's called Communism. No competition, lack of incentives for competing and being successful, lack of production. People look around and see that they will make just as much as the person sitting next to them regardless of how hard they work or how productive they are, so they just stop putting forth an effort. That is a major problem and the main reason Communism fails. If America wants to continue being a world financial powerhouse, we need to make sure the government stays out of business unless it's to help out a hick up in our system (insider trading, monopolies, Bear Stearns...anything that hurts true competition). There is a theory that if we combined everyone's bank accounts in America and then distributed it out evenly to all of its citizens, within 2 years most of the rich will become rich again, and most of the poor will become poor again. When the government takes money from the upper class and hands it to the poor, all they are doing is making it more difficult for successful Americans to compete in this already cut-throat global market. The government should be careful because if the tax system becomes too unfavorable for the rich, large American businesses will just set up shop in countries where the successful are rewarded deservingly. If you think the standard of living has declined and it's tough to get a job now...vote for leaders who want to save the world by punishing those greedy successful business people, then in 5 years, see who is left in America to run the country.

  • Natalie - Sunday, June 22, 2008, 12:32AM ET  Report Abuse

    • Overall: 1/5

    Very poorly thought out. It's not about helping the rich you fool, it's about preventing bank collapses and systemic defaults that threaten this nation. Ever hear of the Great Depression? Do you have any idea how close we are to repeating it? Helping individual homeowners that overpaid, now that is a complete waste. Preventing a banking doomsday, that is a necessity. I just wish he had a better understanding of history and economics before he makes such glib comments. He apparently has no idea what BS defaulting on its obligation would have meant to this Country. Total disaster.

  • Yahoo! Finance User - Wednesday, June 18, 2008, 8:18AM ET  Report Abuse

    • Overall: 5/5

    This is all fulfilling Bible prophecy. It's all leading up to the one world government spoken of in Rev. 13.

  • Bowen - Wednesday, June 18, 2008, 3:11AM ET  Report Abuse

    • Overall: 5/5

    keep the good works up!

  • Chris - Tuesday, June 17, 2008, 10:57PM ET  Report Abuse

    • Overall: 4/5

    This is an incisive analysis of the situation that all Americans should pay attention to, especially if they want to get rich. They need to understand the financial system and how to use it to their advantage. It also shows, as does every one of your posts, the value of financial education. The only weakness I see is that you do not go into solutions. Most of your posts have solutions about what we should do about this or that problem. There are no easy solutions to this, of course, but that is the most important part of your perspective to me. What can we do, say, to hedge our money, or move it out of reach of the Fed? Thank Mr K! Keep up the good work!

  • Mario - Tuesday, June 17, 2008, 9:37PM ET  Report Abuse

    • Overall: 4/5

    Keep up the good work, there are very few thinkers in the US media willing to be as clear as Robert K,. Americans need to understand the enormous damaged created by the devaluation of the currency, just asked Americans living in the diaspora the impact of cheaper dollars.

  • Yahoo! Finance User - Tuesday, June 3, 2008, 1:41AM ET  Report Abuse

    • Overall: 1/5

    So tired of this guys B.S.! I'd like to read some solid advice from this guy for once instead of his endless financial fables and useless cliches. He's only rich from his books and if you told him to start from scratch using his own techniques, I bet you a million he couldn't do it...oh wait, 20/20 already proved that. The fact that RK is on these advice columns makes me doubt the validity of anyone else they put on here. Or did I mistaken this for a blog that anyone can participate in?

  • Yahoo! Finance User - Saturday, May 31, 2008, 1:33PM ET  Report Abuse

    • Overall: 5/5

    you got to listen to this man if you want to become rich

  • Vivian - Tuesday, May 27, 2008, 4:02AM ET  Report Abuse

    • Overall: 5/5

    This guy has got it!!!

  • Marina - Friday, May 23, 2008, 12:14PM ET  Report Abuse

    • Overall: 1/5

    What a pile of garbage. Everyone should have sold their stocks in 1971 when Nixon de-linked US Currency from the Gold Standard. You would have only missed a small Dow increase from 920 to 12,500. The Nasdaq has only moved from 105 to 2450. Capitalism has completely stumbled since then, and the smart guys like RichDaddy got out. Don't listen to this MORON!!!! Or... buy gold, hide under bed, and keep following this expert.

  • Edwin - Friday, May 23, 2008, 10:18AM ET  Report Abuse

    • Overall: 5/5

    As a 81 year old WW2 Vet I'm afraid its a little to late to stop the rich from stealing from the poor. It has already spread to cities, counties, states and our congress and White House. Thank God I'm as old as I am. Skip

  • Yahoo! Finance User - Thursday, May 22, 2008, 3:15PM ET  Report Abuse

    • Overall: 5/5

    Good call. Protect your money from the plunder that is coming. Get out of debt. If you don't think you can get out from under your debt load with your current income, you need to educate yourselves about combining your checking, savings and mortgage accounts. Google "Current Account Mortgage" in AU, "The One account" in the UK or "Mortgage Savings Account" in the U.S. You will be amazed how easy it can be to get out of financial bondage!

  • Afasf - Thursday, May 22, 2008, 9:24AM ET  Report Abuse

    • Overall: 1/5

    "Actually, right now is a great time for real estate investors." - RK, April 16, 2007 http://finance.yahoo.com/expert/article/richricher/29458 By all means, follow his advice and buy gold, silver, and euros. Good luck, you'll need it.

  • Yahoo! Finance User - Wednesday, May 21, 2008, 10:36PM ET  Report Abuse

    • Overall: 3/5

    I don't know why people get so emotional after reading RK. I definitely do not believe in everything he has to say but I will say he is one of the few writers on yahoo that can make me really think. He doesn't repeat the same old personal finance advice. He brings up some valid points but is also far-fetched at times. We as a country need to be thinking critically about certain cuircumstances. I've realized lately that most major problems come about from people not being able to reflect and look at things from an objective perspective.

  • Yahoo! Finance User - Tuesday, May 20, 2008, 1:17PM ET  Report Abuse

    • Overall: 1/5

    Would you bozos pimping your mortgage savings accounts spare us your testimonials and go back to selling Amway.

  • keith J - Saturday, May 17, 2008, 1:26PM ET  Report Abuse

    • Overall: 4/5

    even though I know that the bailout was needed I just do not see the fed doing or spending as much to help the middle class who are the hardest hit right now by this mortgage meltdown.

  • scarf - Tuesday, May 13, 2008, 7:24PM ET  Report Abuse

    • Overall: 2/5

    Thanks alot Kyosake, I bougt silver with my entire retirement savings and so far I'm down over 25%. I haven't told my wife yet, any ideas how I can make it back quick?? I'm 68 yo..

  • mrbiff - Monday, May 12, 2008, 5:29PM ET  Report Abuse

    • Overall: 5/5

    Silver is undervalued. It has stronger fundamentals than gold, and in fact, there is less silver above ground today than there is gold. Hellicopter Ben is printing more money to get us out of the recession and finance the war. Inflation is down the road, and it could be ugly. Don't put all of your $ in one asset, but people should buy some gold and silver as a hedge.

Showing comments 6-35 of 536<< PreviousNext >>
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