to the power you have to control your financial future if you have the proper financial education.
Our educational system has failed millions of people—even the educated. There is evidence that our financial system has conspired against you and others. But that is ancient history. Today, you control your future, and now is the time to educate yourself—to teach yourself the new rules of money. By doing so, you take control of your destiny and hold the key to playing the game of money according to its new rules.
Reader Comment
I think most people who are reading your books are looking for some sort of magic pill solution because that is the mindset of society in America today, with their instant gratification desires. And I think you do a good job of letting people know that this is not a magic pill book. When you discuss the new rules of money, what you say is excellent in reshaping people’s minds and how they should think.
—apcordov
My Promise to You
After President Nixon changed the rules of money in 1971, the subject of money became very confusing. The subject of money does not make sense to most honest people. In fact, the more honest and hardworking you are, the less sense the new rules will make. For example, the new rules allow the rich to print their own money. If you did that, you would be sent to jail for counterfeiting. But in this book, I will describe how I print my own money—legally. Printing your own money is one of the greatest secrets of the truly rich.
My promise to you is that I will do my very best to keep my explanations as simple as possible. I will do my best to use everyday language to explain complex financial jargon. For example, one of the reasons why there is a financial crisis today is because of a financial tool known as a derivative. Warren Buffett once called derivatives “weapons of mass destruction,” and his description proved true. Derivatives are bringing down the biggest banks in the world.
The problem is that very few people know what derivatives are. To keep things very simple, I explain derivatives by using the example of an orange and orange juice. Orange juice is a derivative of an orange—just like gasoline is a derivative of oil, or an egg is a derivative of a chicken. It’s that simple: If you buy a house, a mortgage is a derivative of you and the house you buy.
One of the reasons we are in this financial crisis is because the bankers of the world began creating derivatives out of derivatives out of derivatives. Some of these new derivatives had exotic names such as collateralized debt obligations, or high-yield corporate bonds (aka junk bonds), and credit default swaps. In this book, I will do my best to define these words by using everyday language. Remember, one of the objectives of the financial industry is to keep people confused.
Multilayered derivatives border on legal fraud of the highest order. They are no different than someone using a credit card to pay off a credit card, and then refinancing their home with a new mortgage, paying off their credit cards, and using the credit cards all over again. That’s why Warren Buffett called derivatives weapons of mass destruction: Multilayered derivatives are destroying the world’s banking system just as credit cards and home equity loans are destroying many families. Credit cards, money, collateralized debt obligations, junk bonds, and mortgages—they’re all derivatives, just going by different names.
In 2007, when the house of derivatives began coming down, the richest people in the world began screaming “Bailout!” A bailout is used when the rich want the taxpayers to pay for their mistakes or their fraud. My research has found that a bailout is an integral part of the conspiracy of the rich.
One of the reasons I believe my book Rich Dad Poor Dad is the bestselling personal finance book of all time is because I kept financial jargon simple. I will do my best to do the same in this book.
A wise man once said, “Simplicity is genius.” To keep things simple, I will not go into excessive detail or complex explanations. I will use real-life stories, rather than technical explanations, to make my point. If you want more detail, I will list a number of books that explain subjects covered here in greater depth. For example, Dr. Fuller’s book Grunch of Giants might be a good book to read.
Simplicity is important because there are many people who profit from the subject of money being kept complex and confusing. It’s easier to take your money if you’re confused.
So I ask again, “Is the love of money the root of all evil?” I say no. I believe it is more evil to keep people in the dark, ignorant about the subject of money. Evil occurs when people are ignorant of how money works, and financial ignorance is an essential component of the conspiracy of the rich.
Reader Comments
I went to Wharton and am embarrassed to say that nothing in my course of study explained wealth creation this clearly. Everyone should read this book (and all of Robert’s books) starting in high school.
—Rromatowski
Robert—I would say yes, the love of money is the root of all evil, for the same reason you say no. The evil of keeping the masses in ignorance about money is just a “derivative” of the evil love of money.
—Istarcher
Timeline of a Crisis
In August 2007, panic silently spread throughout the world. The banking system was seizing up. This set in motion a domino effect that threatens even now to bring down the entire world economy. In spite of massive government bailouts and stimulus packages estimated to be over $7 trillion to $9 trillion worldwide, some of the world’s biggest banking and business institutions, such as Citigroup and General Motors, continue to wobble. Their long-term survival is in question.
The crisis threatens not only major corporations and multinational banking conglomerates, but also the security of hardworking families. Today, millions of people who thought they were doing the right thing by following the conventional wisdom of going to school, getting a job, buying a home, saving money, staying free of debt, and investing in a diversified portfolio of stocks, bonds, and mutual funds are in financial trouble.
In talking with people around the country, I find that they are concerned and scared, and a number of people are suffering personal depressions after losing their jobs, homes, savings, kids’ college savings, and retirement funds. Many don’t understand what is happening to our economy or how it will eventually affect them. Many wonder what caused this crisis, asking, “Is anyone to blame? Who can solve the problem? And when will the crisis end?” With that in mind, I think it’s important to spend a moment reviewing the events leading up to our current crisis. The following is a brief and by no means comprehensive timeline highlighting some of the major global economic events that have led us to the precarious financial state we find ourselves in today.
August 6, 2007
American Home Mortgage, one of America’s largest mortgage providers, filed for bankruptcy.
August 9, 2007
French bank BNP Paribas, because of problems with U.S. subprime mortgages, announced it couldn’t value assets worth over 1.6 billion euros.
As global credit markets locked up, the European Central Bank injected nearly 95 billion euros into the Eurozone banking system in an effort to stimulate lending and liquidity.
August 10, 2007
A day later, the European Central Bank pumped another 61 billion euros into global capital markets.
August 13, 2007
The