"What's Coming Is WORSE Than A Recession" — Robert Kiyosaki's Last WARNING
Summary
TLDRIn this video, the speaker discusses the current economic climate, comparing it to historical periods post-World War II, the 1970s, and the 2008 financial crisis. They highlight the IMF's warning of the world facing its worst economic headwinds since WWII, suggesting a potential recession. The speaker explores various economic indicators, including inflation, interest rates, and supply chain issues, and speculates on possible outcomes, including a sharp recession or a period of economic boom similar to the post-war era. They also touch on the impact of monetary policy, fiscal stimulus, and the debasement of currency on asset prices and the economy.
Takeaways
- 📉 The IMF has warned of the worst economic headwinds since World War II, which could lead to a significant downturn similar to post-WWII recessions.
- 🛑 Historical parallels are drawn to the economic challenges post-WWII, 1974 oil crisis, and 1984 trade disputes, suggesting potential recessions and market downturns.
- 📈 The speaker anticipates a sharp recession due to monetary tightening, high inflation, and rising costs of living, which could mirror the economic struggles of the 1970s.
- 💵 The debasement of currency through money printing is highlighted as a significant issue, leading to inflation and the devaluation of savings.
- 🏦 There's a concern that central banks' balance sheets and monetary policies might not be as effective in preventing economic downturns as they have been in the past.
- 🌐 The global economy is facing challenges from multiple fronts, including China's slowdown, European energy crisis, and potential supply chain disruptions.
- 📊 The speaker suggests that fiscal and monetary policies, such as Universal Basic Income (UBI) and Modern Monetary Theory (MMT), might lead to further wealth disparity and economic instability.
- 🏠 The real estate market is mentioned as being at risk due to job losses and potential overcorrections in the market, which could impact those heavily invested in property.
- 💼 Emphasizes the importance of financial education to navigate the upcoming economic challenges and to make informed investment decisions.
- 🚨 A warning is issued about the potential for a major market crash, advising investors to be cautious and prepared for significant economic shifts.
Q & A
What did the IMF recently warn about regarding the global economy?
-The IMF warned that the world economy is facing the worst economic headwinds since World War II.
Why is the post-World War II economic period considered fascinating in the context of the video?
-The post-World War II period is fascinating because it was marked by broken global supply chains, a lack of commodities and goods, and a surge in inflation, similar to the current economic situation.
What economic phenomenon occurred after World War II that is also being compared to the current situation?
-After World War II, there was a significant economic recession followed by a period of high inflation, which is being compared to the potential economic downturn and inflation concerns in the present day.
How did the economy respond to the oil crisis of 1974, as mentioned in the video?
-The economy went into a severe downturn, with the stock market falling 50% and the ISM survey dropping to 30, indicating a very weak economy.
What is the significance of the ISM survey in predicting economic conditions?
-The ISM survey is significant because when it crosses below 50, it suggests that the economy is weakening and a recession may be imminent.
What does the speaker suggest about the current state of inflation and monetary policy?
-The speaker suggests that current inflation is a result of tightened monetary conditions, and that these conditions, along with rising costs of goods and services, are leading to a decrease in consumption.
What historical economic event does the speaker compare the current situation to, and why?
-The speaker compares the current situation to the economic challenges of 1974, 1984, and 2008, due to similarities in monetary policy, inflation, and global trade disputes.
What is the potential impact of a sharp economic downturn on the job market and real estate, according to the video?
-A sharp economic downturn could lead to job losses, particularly in tech companies as mentioned, and a ripple effect on real estate, especially in areas with significant layoffs or company closures.
What role does the speaker believe the Fed's balance sheet and monetary policy will play in the upcoming economic changes?
-The speaker believes the Fed's balance sheet and monetary policy will be crucial in shaping the economic future, potentially leading to more money printing and affecting asset values and inflation.
How does the speaker think the current economic situation could lead to opportunities for wealth generation?
-The speaker thinks that despite the potential for a significant economic downturn, the current situation could present opportunities for wealth generation, especially for those who understand and adapt to the changing economic landscape and invest in hard assets or other inflation-hedge assets.
What advice does the speaker give regarding investment strategies in the face of potential economic challenges?
-The speaker advises investors to be aware of the economic conditions and adjust their portfolios accordingly, considering hard assets and other strategies that may protect against inflation and currency devaluation.
Outlines
🌐 Economic Headwinds and Historical Parallels
The paragraph discusses the IMF's recent statement on the world economy facing its worst economic headwinds since World War II. It draws parallels with historical economic periods post-WWII, highlighting the rapid rise in inflation and subsequent recession due to tightened monetary conditions. The speaker expresses concern about the current economic state, suggesting that most people's understanding of it is likely incorrect. The narrative includes a history lesson to provide context and concludes with a warning about the potential for a sharp recession.
📉 Recessions, Market Crashes, and Economic Indicators
This section delves into the patterns observed during economic downturns, referencing the 1974 recession triggered by the Arab Oil Embargo and the subsequent stock market crash. It also mentions the 1984 trade disputes and the Plaza Accord, and the 2008 financial crisis. The speaker suggests that the economy is on the brink of a similar downturn, with indicators like the ISM survey suggesting a weakening economy. The paragraph also touches on the potential for a depression and the role of the Fed's balance sheet in influencing economic outcomes.
💵 Currency Debasement and Economic Implications
The speaker discusses the concept of currency debasement, using historical examples of the Roman and Chinese empires to illustrate the consequences of currency devaluation. They argue that the current economic situation is similar, with central banks globally engaging in money printing, leading to a potential devaluation of currency and inflation. The paragraph also speculates on the future of economic policies, including direct transfers to individuals, and the potential for a rapid economic shift similar to historical transitions.
🏭 Post-War Economic Boom and Financial Repression
This paragraph draws a comparison between the post-WWII economic boom and the current economic climate. It discusses the potential for a similar boom driven by financial repression, where inflation erodes the value of war debt, and assets like housing and equities rise in value. The speaker suggests that the current economic challenges could lead to a period of stability and growth, driven by technological advancements and fiscal stimulus, much like the post-war era.
📈 The Impact of Money Printing on Asset Classes
The speaker addresses the impact of money printing on various asset classes, including stocks, bonds, and real estate. They argue that the current economic policies are creating asset inflation, which benefits the wealthy but could lead to higher taxes for the middle class and financial difficulties for the less informed. The paragraph emphasizes the importance of understanding the relationship between equities and bonds and the need for investors to adjust their portfolios in anticipation of potential economic changes.
💼 Entrepreneurship and Portfolio Management in a Volatile Market
In the final paragraph, the focus shifts to the role of entrepreneurship and the importance of portfolio management in a volatile economic environment. The speaker contrasts the positions of price-makers, such as business owners, with price-takers, like the general public. They discuss the risks associated with bond investments in a high-inflation environment and the benefits of real estate as a hedge against inflation. The paragraph concludes with a cautionary note on the potential for a market crash and the need for financial education to navigate such economic challenges.
Mindmap
Keywords
💡Inflation
💡Interest Rates
💡Recession
💡Monetary Policy
💡Supply Chains
💡Debasement of Currency
💡Quantitative Easing
💡Fiscal Stimulus
💡Depression
💡Asset Inflation
Highlights
The IMF warns of the worst economic headwinds since World War II.
Post-World War II economic recovery compared to current economic challenges.
Historical parallel of 133% inflation post-WWII and its impact on the economy.
1974 economic crisis driven by the Arab Oil Embargo with a 50% stock market drop.
1984's global trade disputes and their effect on the dollar and interest rates.
2008 financial crisis with oil prices at $147 and the Fed's response.
The common pattern of economic downturns due to monetary tightening.
Rapid increase in mortgage rates and its effect on consumption.
Tech companies laying off staff and giving earnings warnings as a sign of economic stress.
The potential for a sharp recession indicated by the ISM survey.
China's economic slowdown due to lockdowns and its global impact.
The possibility of a depression and the role of the Fed's balance sheet.
Historical currency debasement leading to empire collapses.
The speed of economic changes and the potential for a quick recession.
The potential for a Fed pivot and rate cuts in response to economic downturn.
The concept of financial repression and its impact on debt and purchasing power.
The potential for a new economic boom post-crisis, drawing parallels to the 1940s and 1950s.
The importance of understanding macroeconomic cycles for investment strategies.
The impact of money printing on asset prices and the wealth gap.
The potential for Universal Basic Income (UBI) to exacerbate wealth inequality.
The risks of investing in bonds during high inflation and the importance of liquidity.
The advantage of being an entrepreneur and a price maker in times of inflation.
The correlation between stock market performance and bond interest rates.
The potential loss of purchasing power in a bond portfolio during inflation.
The significance of financial education in navigating economic shifts.
Transcripts
[Music]
the date of today is important date and
the reason that's important is just
yesterday at davl Switzerland the IMF
stood up and said the world economy is
hitting into the worst economic
headwinds since World War II the worst
and that's why it could be bad news but
depending how you look at it it could be
very good news this is about as macro
environment as I've ever seen and I
think most people's read on it is
probably wrong right now I'm going to go
take you through a history lesson and
then we'll get to today tell you why I'm
concerned so why World War II World War
II was a fascinating period because like
covid the entire world had basically
been stuck at home or been on
battlefields everyone came back there
was no supply of Commodities and goods
Global Supply chains were broken and
everybody came back and started
consuming again and guess what inflation
went up to 133% or something maybe even
higher and that period was fascinating
because interest rates went up and the
first thing that happened was the
economy went straight back into
recession and inflation went negative
because it was a massive tightening of
monetary conditions you raised the cost
of goods on people and didn't raise
their salaries enough people couldn't
get the goods that they wanted exactly
like now and everything collapsed so we
went back into recession and then
eventually some better times and I'll
come back into the 19 40s and 50s cuz I
think it's a really important parallel
that most people misunderstand the next
time we saw anything remotely like this
was 1974 a lot of people tell you it's
the' 70s again inflation inflation well
the inflation episode we had in the late
'70s was driven by demographics that was
the Baby Boomers entering the workforce
all at the same time it was the largest
demand Shock the World had ever seen and
we had a supply shock of this oil crisis
of the Arab Oil Embargo that's not
repeating now what is actually more
similar as 1974 1974 was the Arab Oil
Embargo the price of oil tripled and
interest rates went up inflation shot up
and the immediate effect was the economy
went down the toilet Almost Do not pass
go the stock market fell 50% and the ism
survey which is a good Guide to the
business cycle anytime it crosses below
50 suggests the econom is getting weak a
recession comes at about 47 it hit 30
which was the lowest in all history and
it happened in the space of 4 months
based on exactly the same kind of setup
we've got now so are you saying that the
70s are now are pretty close yes and
inflation fell in 1974 afterwards people
are still thinking inflation goes on
forever it did not and it did not in the
1940s either then the next one up is
1984 we saw an issue where global trade
there was a huge amount of trade
disputes the dollar was pretty strong
like it is now interest rates were going
up and inflation was high and everybody
was fearing looking back and saying oh
we don't want the early ' 80s late '70s
again the inflation inflation so vulka
was tightening rates too much and the
economy collapsed it didn't go to
recession because the FED quickly
started cutting rates but the dollar
went up a lot more and created a lot
more problems when we ended up with a
plaza record in 1985 when everybody had
to stop the dollar going up from
destroying the global economy so then
the next time we see something similar
was 2008 if you remember the oil price
was at
$147 inflation was 6% the FED had been
cutting into that because the economy
was imploding 2018 exactly the same oil
prices High inflation High the FED were
hiking rates trying to tighten the
balance sheet what happened is the
economy rolled over really quickly again
okay so what's going on here why does
this phenomena keep happening everyone
extrapolates inflation out forever what
actually happens is that consumption
Falls because we've tightened monetary
conditions so tightening monetary
conditions to Ordinary People means the
cost of your mortgage has gone up at the
fastest Pace in history over a oneyear
period mortgage rates have never risen
this fast so any money you've borrowed
has suddenly got much more expensive
your wages haven't kept up with the cost
of just basic services like food so
you're actually feeling poorer so you
can't consume as much and you start not
consuming other things people
overextended on housing because they
rushed into housing and rates have gone
up for them also just the rise in things
like the cost of oil has meant that you
know gas prices all of this stuff and
then the rise in the dollar which is a
monetary tightening all of these things
get together would suggest that the ism
is going back to 30 which is as it was
in 1974 which is a terrifying form and
it's suggesting that if we're not
careful we could have a very sharp nasty
recession meaning kind of a negative 5%
GDP recession it might be short depend
what the FED does and we'll come on to
that in a bit so we've got the setup
that we've seen many times in the past
we've got the forward-looking indicators
this monetary tightening suggesting
we've got some real pain to come then
the anecdotal evidence we're seeing all
the tech companies who were bullet proof
laying off stuff and giving earnings
warnings because everybody can't raise
prices enough so their margins are
falling and people have overextended
Amazon said we've hired too many people
they're one of the biggest employees in
the United States okay this is not good
but the answer to higher prices is
higher prices and that's what's happened
and everybody's looking around saying
well what's going to break when stuff
like this happens the market goes down
something's going to break you know
we're looking what bank is it what hedge
fund is it the actual answer is it's the
economy the economy has just broken and
the FED are going to have to Pivot the
monetary conditions that we have imposed
on corporates and people is the biggest
tightening in all history we've also got
China slowing down very fast because a
lockdowns but also they've been in
recession and Europe with a war and
having to deal with this energy
transition so we've got no leg of global
growth here now the question is how bad
does this get let's talk some scenario
when people use the word recession that
means two backto back quarters of
negative growth that's the technical
definition of a recession to you and me
I think it means a loss of jobs and a
loss in your net worth because it's the
falling of asset prices that comes with
a recession what's the possibility of
sliding to a depression so depression I
would suggest is a much longer more
extended period I don't think that can
happen right now now I don't say that
with certainty I never do talking
probabilities the reason being is
there's one piece of Magic the FED
balance sheet the FED balance sheet
disguises all bad things because what it
does is when they print money it lowers
the purchasing power of the dollar and
most of the central banks at the same
time do it and people always think it's
going to be inflation is what it leads
to it leads to something much more
pernicious and evil which is the
debasement of currency and what that
does how it manifests itself is all of
these scarce assets equities real estate
gold crypto go up a lot but all they're
doing is reflecting the devaluation of
the F currency itself so that optically
can change everything because suddenly
all of these things go up everybody
feels okay and it changes the outcome
people are still worse off generally but
it's a trick and so I think that trick
gets played again pretty soon this time
I think the trick gets played in a
different way which was the other Genie
that came out of the bottle in 2020
which the Europeans are doing now some
states in the US are doing Japan is
doing India is doing which is direct
transfer payments to individuals when I
heard you talking about the that rail I
thought you went to the dark site man
mmt Ubi and all that stuff which is too
many Marxist but you're also looking at
from the humanitarian side regardless of
what our political economic views are
this is what is going to happen so we
have to judge it with that lens not how
we would like it to be but what it will
be what the probabilities are look at
the emptying office spaces cuz people
are not going back to work I mean this
is not an ordinary recession you know
Apple says they're not going to go back
to work you look all the Office
Buildings empty and you know residential
real estate depends upon jobs you know
what I mean if you're saying recession
means means a loss of jobs which
Amazon's laying off what happens to real
estate wherever they have an Amazon
office this is the ripple effect which
is why I'm saying that was one of the
biggest announcements I ever heard that
the IMF is saying the world faces one of
the biggest economic challenges since
World War I but one thing that he
mentioned talked about debasement of
currency so here's a penny it's copper
and in 1964 I was looking at the
quarters and dimes same color do you
know what I mean it's the same color so
basically
1964 dimes quarters and half dollars
became copper and that's what you were
talking about debasement and I think
we're paying the price for it because
I'm really glad you started with history
because macroeconomics is history you
have to look back in time and every time
people did this first was a Chinese they
printed paper money and the Chinese
Empire collapsed and then when the
Romans did the same thing debased the
currency the Roman Empire collapsed
you're looking at the end of the
American Empire I think it's going to
happen at a shocking speed so 1974 we
went from everything looks okay to the
worst recession since World War II in 4
months I'm thinking it's going to look
similar because of the speed of the
monetary tightening the speed of the
rise of prices so I think we are going
to have a very ugly few months both
economically and for markets the
question is what comes next and that's
the key point if my base case comes into
play which is the Fed pivot and after
that they will say well we're just going
to see and we'll see the economy start
going down the toilet and they will
start thinking well we're not going to
do QT now either so they're not going to
start shrinking the FED balance sheet
and before you know it we're going to be
talking about rate Cuts but we don't
have many rates to cut you know rates
are nowhere so the only outcome is
they're going to have to print money the
credit markets are already starting to
dry up that's usually an indicator the
housing Market's rolling over printing
money is this stuff here you have a
silver coin you have a copper coin made
silver right basically it's called de
basing the currency which the Romans and
Chinese already did yeah because don't
forget the basement of currency Works in
a simple way if you're really thirsty
and I have a bottle of water you'll pay
anything for it if you're really thirsty
and I've got five bottles of water
you're kind of thinking yeah I probably
need some of that water I'll buy them
all but at a lower price if I say here's
a million bottles of water you don't
want any of it because there's too much
water now it has no scarcity so if you
make too much of something it becomes
less valuable so if D Vinci created 50
million pieces of art guess what they're
worthless and so it's that concept and
what it does is if something gets
devalued versus something else so we're
not making more shares in the S&P
actually what we're doing is buying them
back making less of them therefore the
S&P goes up real estate yes there's
periods where we try and create new real
estate but generally real estate prices
go up versus the fair balance sheet
because it's a relatively scarce asset
same with gold same with crypto so
that's the phenomena depends how fast
they deploy the balance sheet cuz this
balance sheet magic optically changes
markets and if markets go up then
household net worth stabilizes and
spending comes back companies stop
laying people off so it's actually a bit
of a magic trick it comes down you know
that wall saying the bull goes up the
stairs the bear goes out the window the
bear is about to go out the window the
question is when does a bull start
climbing again right and we either go
through a scenario like 2000 which was a
typical old school recession where
Equity markets Unwound excesses the B
Market was 18 months or so and then the
FED keep cutting rates and eventually it
stabilizes but if we look at 2008 which
was the next recession as soon as the
FED used the FED balance sheet we pretty
much stopped in its tracks really quite
quick after they did that they cut rates
first didn't really help cuz the banks
had seized up then they used the balance
sheet then they did it again in 2010 12
16 and then 18 was the FED pivot the PO
pivot where they went from hiking to oh
my God we need to cut TR older the guy
he says you cut this out you're killing
my economy that's right so inflation had
gone up pal like well I need to do this
but the economy cannot take higher rates
cuz everybody's so in debt and
everybody's so old that is the problem
so here we are we have employers not
going back to work so all these reats
raits real estate investment trusts they
own all these Office Buildings and then
there never has the FED I think it was a
30 trillion dollar debt now with 200
trillion off balance sheet and they keep
cutting rates and this but the question
is can they keep doing the same thing
given the conditions this is going to
take us back to the 1940s in a sec but
you're going to get destroyed because of
the supply chain issues because of Co
and all of this and your wages won't
keep up so we're going to destroy
household net worth and everything's
levered so all the borrowings against
houses and all the borrowings against
equities and all of the borrowings on
top of borrowings and you're going to
let the collateral go down and blow the
entire thing up but isn't that what
they're doing when they say they're
going to pay off the student loan debt
that's forgiveness that's mmt right
which is coming whether we like it or
not what they're trying to do is reduce
the debt via Financial repression which
is you basically have inflation running
slightly higher so you have then
interest rates so what you want is to
reduce the real value of the debt so if
you think back to your parents how much
they paid for a house and the mortgage
they had the mortgage seems laughable
it's because over time inflation rais
the value of the house and the debt
doesn't get raised so in the end the
debt is nothing so the way that is this
stuff here make the money less valuable
correct it makes the debt less valuable
right so it's okay if you're in debt but
if you're lending money it becomes
complicated but the point being is you
either have a fiscal stimulus which is
let's say the Republican view we'll have
a fiscal culus cut taxes and we'll put
some spending and what happens is is
that doesn't go to the people who are
the worst off it's creating this issue
of 1% versus 99 which nobody can see and
nobody knows how to solve the issue is
actually the balance sheet cuz all of
the expensive assets keep going up cuz
they keep printing money get richer but
doing this blanket fiscal stimulus is
hard because the rich get richer again
so I think people have thought well
maybe we should just try and give it
directly to the people who are most
affected okay those are the two choices
or you do nothing which is too late
because there's too much debt so you
can't let the system clear anymore the
old way would have been you let the
system clear it's all okay you just have
a recession everyone stops borrowing as
much money blah blah blah blah blah the
world is 400% of GDP in debt the world
has never been this in debt in all
economic history let's go back to the
1940s now and figure out how bad it was
then this was the very similar setup the
worst supply chain issues massive
inflation everybody coming back in but
what happened was the economy collapsed
then interest rates came down and they
stabilized and they stabilized cuz the
FED stabilized them and inflation was
running slightly hot 3% and bond yields
are about 2% so real rates meaning you
in the property Market are going to make
a lot of money so negative real rates
become very good for assets and what
happened in the 1940s and 50s was a
massive economic boom what we actually
got was the value of the war debt
eroding because of this financial
repression we had the value of assets
like housing the equity Market went up
900% over that period of time there was
a lot of fiscal stimulus because you had
to rebuild after the war and companies
were building factories so if you think
of now companies are going to be
rebuilding factories in the United
States or in Europe and not in China so
that's going to Gad some stimulus yes
the jobs are not there it's robots in
the factories but it's still stimulus
for the economy the government will do
some stimulus as we've talked about
interest rates will remain relatively
low inflation will remain controllable
but a little bit higher than it has been
and what that sets off is a period of
stability and boom because there's so
much technology you know there's a lot
of big things happening in the world
that could be so that would be my rosy
outcome would be that and I think that
is still my highest probability that we
kind of muddled through this in a way
that we don't expect cuz it feels like
the end of the world imagine what it
must have felt like in
1948 all you can see is the end of the
world and then you get this massive
inflation you just think this is the
worst thing that could possibly happen
what actually came out of it was
something very different it was the rise
of Technology it was the rise of the us
as a big superpower it was a rise of the
rebuilding of Europe the of Japan it was
an incredible period the Britain Woods
agreement where the dollar became the
reserve currency of the world and all
these really good things happened for
America it's the same moment all of
those things got built then every one of
them from the Geneva Convention to the
IMF to the World Bank to the United
Nations they all came in that period 47
right same time is this what they're
kind of alluding to with the great reset
it's all going to change again yeah it's
the fourth turning and that's where we
are and this may be the final event of
the fourth turning it maybe just another
phase of pushing this towards it 2008
2020 and maybe now it just keeps moving
the world to the direction that we all
know it has to go is we need to stop
what we're doing and change what we're
doing I always say the bond market is
the truth the bond market the job of
bond market participants is two things
only what is the future rate of
inflation and what's economic growth now
in the stock market it's like earnings
and this and emotion and all that the
bond market is simply two things so they
usually get it right and this is a
structural shift in the glob glal
economy if we're right here and you got
cash and we're going to see this big who
and it probably means that the economy
and asset prices there's certain things
it's going to set up for what we're
looking for if you want to generate
wealth this is the time to step up yeah
this is the best time macroeconomics is
through history you know the fall of
Empires and all this I think we're
falling right now you know that's a huge
problem all Cycles go through up it's
approximately the age of a human being
20 years 20 years 20 years you know said
that also and it's matures and the whole
thing changes fourth training is always
marked by weak leadership and then we
have that today but the people that get
hammered are the people operating on
yesterday's ideas we talked about how
bull markets make stupid people look
smart you know so you could be really
stupid and you put your money on Apple
and you got really rich or Bitcoin and
oh my God I'm rich I'm smart and then
the bare Market makes shows you how
stupid you are and that's why what r is
saying is going to come quick all the
stupid people who think they're smart
are going to find out how stupid they
are and it's going to be a very
interesting time when the crash comes it
comes so fast on you you don't know
what's going to hit I think the most
important message from today's lesson is
this the bull has been going up the
stairs for a while now it's about to go
out the window so that's what in davil
Switzerland when the IMF says we're
going to face the biggest economic
headwinds and voila I can't believe that
what a gift I'm predicting the biggest
bust in world history is coming so it's
going to be the biggest opportunity of
all times because you know Kim and I
made our fortunes
2008 remember quantitative easing when
it first came out Ben beri never said
that it was qe1 he just said it was Q
because we weren't supposed to have a
two three and now Infinity but what
happens is the economy gets addicted to
it so now the economy is addicted to
stimulus government spending and there
for addicted to this money printing mmt
whatever you want to call it so that's
what the average investor needs to be
cognizant of because they have to adjust
their portfolio accordingly if they
don't then they're really going to have
some financial difficulties in the
future what that means is simply there's
more currency units in the economy that
are chasing goods and services so
there's more dollars fake money there
fake news fake money the dollar is fake
money because it's just an IOU and to
make it more extreme all your checking
account is is the bank saying we owe you
IUS it's like a double
IOU but they're creating more dollars so
it's just simple math if there's more
dollars out there chasing the same
amount or fewer goods and services most
likely the price of those goods and
services are going to increase and if
prices are going to increase over the
next call it 10 15 years significantly
you need to have your portfolio set up
in a much different way than if prices
were to go down or stay the same over
the next 10 to 15 years the reason I
call it fake money is the more the FED
prints money the rich get rich you know
we have asset inflation right now we
have asset inflation in the stock market
bond market real estate market it's
really it's feeding the rich so you bi
mmt quantity us making the rich rich
unfortunately the middle class will pay
higher taxes because the rich don't pay
taxes but what it does when you have
Universal basic income in mmt the poor
get poor you know so if you're a poor
person you can't afford a house now
because of real estate prices are so
high you know and if you have Universal
basic income I don't think a bank will
touch you you know if you want to buy
real estate yeah it's like the what was
it in the Roman days the bread and
circus it seems like it's the same thing
today with these stimulus checks and the
Ubi is that people are getting a couple
bucks in the mail and they're thinking
that's fantastic well at the same time
they're not realizing that they're being
priced out of every single asset
denominated in dollars and if they do
try to buy a house or if they do try to
invest in stocks or bonds and if they
don't know what they're doing they're
going to get steamrolled because
everything is in a bubble thanks to the
fed the money printing the artificially
low interest rates and Ubi will
accelerate them that's right it'll make
the bubble so big it turns into a Mania
you know what's interesting too you use
the word Mania and we hear a lot in the
media right now with this cancel culture
where everyone is hysterical about
everything else but there's also a lot
of Hysteria in the stock market in all
these asset classes so it's like we live
in this world where everyone is
hysterical about something it's just
kind of pick your poison there's capital
gains and there's cash flow and you got
to know what you're going for so in real
estate or in stocks or in bonds people
most of the time are going for capital
gains so when a person flips a house
they're going to buy it for 100 goes to
200 they're going to net
but the trouble with capital gains is
you pay tax on it but the other part
there's always a boom and a bust and I
predicting the biggest bust in world
history is coming so it's going to be
the biggest opportunity of all times
because you know Kim and I made our
fortunes 2008 because you know we had
apartment houses and our tenants were
leaving to buy their houses they
couldn't afford I me there was a thing
called a ninja loan no income no job
okay so there booms bus capital GES cash
flow and there's a thing called you know
in there's always the opposite I was at
the gym just now before everybody came
out I said I felt for this guy he says
I've been a bus driver for 40 years I'm
going to retire and I can't wait you
know he's turned 65 I said what do you
got he said I got a 401k I said what's
it filled with he says oh I just sold
all my stocks at the top of the market
and I went into bonds George what did he
just do the most stupid thing you could
possibly have done first of all you
should never put all your eggs in one
basket but especially not the bond
market right now with the all the money
printing that you referred to earlier
you know Robert before you said you
think the market is going to crash so
whether that's the stock market real
estate market um the question is does it
crash in nominal terms or adjusted for
inflation see the stock market can stay
the same as it is right now but if we
get 10% inflation because the money
printing you'll actually lose purchasing
power you see so the market can crash up
just as easy as it can crash down if
your definition of a crash is losing
purchasing power so if you're someone
that believes like I do that once the
FED starts printing all this money the
government prints all this money with
stimulus and whatnot they cannot stop
it's like a heroin addict the only thing
they can do is print more and more and
more and they can't reverse course then
you need to start thinking through your
portfolio in terms of hard assets
correct something tangible well I'm an
entrepreneur but if the crash wipes out
your business you have no cash flow and
what happened when um a covid hit for
Kim and myself cash flow went up you
know because the market was demanding
more financial education it's always
going up and down in and out and that's
what investing is you're the capital
cash flow boom bust liquidity all this
stuff and that's what Financial
education is it's not this poor guy he
says I have a
401k and I was told to sell all my
stocks and get into the bond market now
George would you explain why you said
that is the most stupid thing you could
do because you're getting a future
stream of dollars that's all a bond is
you're buying a bond for
$1,000 and they're saying okay in 10
years we're going to give you $1,000
back and along the way we'll pay you a
little bit of Interest I mean it's
negligible at best so what happens if we
have a high rate of inflation because of
the money printing you're going to get
paid that $1,000 back but it's going to
buy you a loaf of bread so you don't get
back your purchasing power you only get
back your dollars see when I look at the
stuff I'm look at the relationship
between equities or stocks and bonds and
so the reason the stock market went up
is it kept dropping the interest rates
on the bonds so you know when I started
off interest rates were about 16% so if
I had a bond I was getting 16% interest
that was a very valuable Bond if they
dropped the interest rate to 14% my 16%
Bond was more valuable that makes sense
it's like my cash flow from the bond or
the dividend was good and so when the
market kept crashing they dropped up to
eight and today I think is about two and
a half on the long Bond so as to keep
the stock market up they had to keep
dropping the bond prices down and now
we're at zero they call it the zero
bound yeah and that's for Japan is yeah
for a long time they can't keep dropping
that bond price the stock market comes
down so that's the correlation between
equities stocks and bonds this is my
question George so let's say today bonds
are 2% what happens if it goes to 5%
because inflation comes in they have to
raise the bond rate to 5% what happens
to the 2-year Bond the value of the
bonds purchased at 2% goes down yeah and
that's what that guy do that's right
he's buying a bunch of stuff with a
value you really can't get any capital
gain on it that most likely you're going
to be stuck holding and that's not going
to be good in inflation one of the great
things about being an entrepreneur going
back to Rich Dad Poor Dad is you put
yourself in the position of being a
price maker where other people are price
takers the majority of people are price
takers so they have to take whatever
price is offered by whatever it is they
want to buy but the real estate owner
the apartment owner let's say or the
business owner can raise their prices if
the rate of inflation is going up so it
Hedges you against inflation while at
the same time paying you to own it with
that positive cash flow and a bond
holder does not have that opportunity to
say the least bonds and stocks are
liquid real estate's not so it's like
that guy buying a bond at 2% nobody
wants it if it's 5% so if you buy a
piece of real estate let's say in Dallas
Texas and suddenly the prices drop it's
hard to get out of that debt on that
real estate because it's not liquid yeah
so the good thing about the bond he can
dump and take his loss now but real
estate is El liquid yeah and that's why
we highly suggest investing your
financial education because it's not an
answer to it it's a process and my
concern is and I'm not saying don't buy
like I was just in Texas it's a Mania
because everybody's running out of
California New York wherever they're
running from and everybody wants to get
out of the Cities so they want a piece
of the country so land prices spiked now
is that good or bad
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