11/23/2017

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The Name of the Games Is Debt

In overly simple terms, after 1971, money became debt. For the economy to expand, you and I had to get into debt. That is why credit cards came in the mail; and home equity loans were available to people who had less than stellar credit.

Technically, the money in your wallet is not money. It is an IOU. Our money is debt. The reason the current financial crisis is so severe is because the banker's rules of Monopoly money allowed our biggest banks and Wall Street to package debt and sell it to the world as assets. According to Time magazine, from 2000 to 2007, America's biggest export was debt What the smartest and brightest minds in the banking and investment world were doing was not much different than when a poor person refinances his or her home to pay off credit cards.

If we as a people knew that our money was debauched, Monopoly money, we might not be in the financial mess we are in today. If people had more financial education, they would not blindly believe that their house is an asset, that saving money is smart, that diversification would protect them from risk, and that investing for the long term in mutual funds is a smart way to invest. But because of our lack of financial education, the powers that be are able to continue with their destructive monetary policies. It is to their benefit that you and I are in the dark. This is why the rich had to first take over our educational system before they could flood the world with debt. This is why our schools do not teach us about money.

Many people teach that debt is bad or evil. They preach that it is smart to pay off your debts and to stay out of debt. And to an extent they are right. There is good debt and bad debt. It is wise to pay off bad debt--or not get into bad debt to begin with. Simply said, bad debt takes money out of your pocket, and good debt puts money into your pocket. A credit card is bad debt because people use credit to buy depreciating items like big-screen televisions. A loan for an investment property that you rent out is good debt if the asset's cash flow covers the debt payment and puts money in your pocket.

The people who preach the evils of debt do not understand that debt is essential to the American economy. Whether that is good or bad is debatable. What is not debatable is that without debt, our entire economy would collapse. That is why our government is issuing record numbers of bonds to raise money. That is why it is engaging in deficit spending like never before. The government's greatest fear is deflation, and the one way to combat deflation is by inflation. And the one way to create inflation is by debt.

Of course, living by the sword of debt also means dying by the sword of debt. By 2007, as the overwhelming mountain of credit card debt and home equity debt reached its peak, the United States and the world could not absorb any more debt. Today, millions of people are finding out why, in 1997, in Rich Dad Poor Dad, I stated, "Your home is not an asset."

For a more detailed look at debt, it's good and bad influences, and how record amounts of personal debt, along with overwhelming government debt, has plunged this country into a very bad economic mess, read more from the book Rich Dad's Conspiracy of The Rich by Robert T. Kiyosaki.

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