Like many of you, I have been a follower of Robert Kiyosaki and his teachings since around the year 2000. During his Rich Dad Radio Show on March 21, 2015, he introduced us to a book called, “When Money Destroys Nations” by Philip Haslam and Russell Lamberti. I was intrigued by Robert’s interview of the authors – so I read it.
The book describes an actual case study of what had happened in Zimbabwe as the government kept printing money – which was NOT backed by gold or anything else of substance – to pay for its mounting debts. The authors talk about six Gorge Moments, from each of which there was no turning back until its economy finally collapsed in 2008. From start to finish, it took about two decades.
Let’s stop here for a moment. There is something inherently wrong with that picture – about printing money, isn’t there? If a private citizen were to print money and pay for his/her debts with it, it is called counterfeiting. And it is a crime.
Call me naive but I don’t understand how such practices somehow become legitimate when a government does it. When it comes to money management in a country such as the United States, which is a democratic society where most adults have the right to vote, we, the people, are enabling elected officials – voted in by us – to establish double standards between the government and private citizens. Money is money. We must demand that those who are voted into any public office have the fundamental knowledge about how to manage money.
In Zimbabwe, the practice of printing ever-increasing amounts of money eventually created hyperinflation which, ultimately, led to the collapse of the economy. It caused countless heartaches for its citizens. Some of the worst hit were the retirees who became penniless because all of their savings – which they worked all of their lives to accumulate – became worthless. When the technology-stock bubble burst in 2000, I had a taste of what that would be like when I am retired and really old. Ever since then, I have been driven to do what I do today. Yet I remained faithful to the notion that I must still save for a comfortable retirement. When I read this book, what Robert has been saying all along hit me like a ton of bricks; that is, “savers are losers.” I finally understood what he meant. (Don’t get me wrong. I am NOT suggesting that you stop saving now just because you read my blog post. In fact, for most people, it takes at least a decade of non-stop learning and implementation of various investing techniques to get to a point where it finally makes sense to switch from “saving” to effective “investing.”)
Similar financial and economic problems exist in Greece today. Its citizens are demanding to continue to be paid through its entitlement programs. Few, if any, want to acknowledge that such collective demands are what drives politicians to decide to keep printing money – until the inevitable happens where the economy has nowhere else to go but collapse. What is interesting about Greece is that it has been struggling monetarily even when Mark Twain visited and observed the country in late 1860s, just after the Civil War in the United States!? He wrote about it in “The Innocents Abroad,” which was published in 1869. If someone had the foresight and courage to take the bull by the horns and fix the economic problems back then, nearly 150 years ago, would today’s Greek people be suffering the fate that they are now? I highly doubt it. Then again, human nature being what it is, most people find it difficult to address an issue which does not appear to be “bad enough” to deserve our attention at the moment.
Zimbabwe and Greece are not alone. The numbers vary depending upon which source you trust but, during the last 100 years, there have been around 32 hyperinflation occurrences around the world.
With all of the additional U.S. dollars being printed – in the name of what is known as Quantitative Easing to keep the economy from collapsing – our country is headed in the same direction as many of these countries. What is even more disconcerting is the sheer size of the U.S. economy as compared to that of Zimbabwe or, for that matter, Greece. Collapse of the U.S. economy will have a far-reaching and much greater impact around the globe than anything else we have seen elsewhere so far.
Every human activity has a cause and an effect. For the U.S. in recent history, it all started out in 1971 when President Nixon took the U.S. dollar off the gold standard. Back then, I was only 22 years old, about to be married to David and getting ready to come to America – the country of my childhood dreams. I was head-over-heels in love, consumed in the happiness of being with David. Our small world – just the two of us and starting our own family – was the only thing that mattered to me. Frankly, what was happening in the rest of the world did not seem to matter much at all.
Fast forward to 2000, when I started reading Robert’s books, I had no clue as to why President Nixon did what he did or what its consequences would be. The only difference I noticed personally in the early 1970s was that it took less and less to buy a dollar than the 360 yen it used to cost. In other words, over the years, the value of the yen strengthened significantly vis-à-vis the U.S. dollar. Today, 44 years since President Nixon’s action, it costs about 124 yen to buy a dollar. Put another way, the dollar is worth only one-third what it used to be against the yen.
As traumatic as the stock-market crashes of 2000 and 2008 were for many of us, it appears that they were just a tip of the iceberg of what can be expected in the future. As human nature would have it, politicians get elected by promising things that people want to hear, NOT what they NEED to hear. For instance, few people expect to be cut off from their Social Security benefits. Can we blame them, especially those who paid into the system while being employed?
I can go on and on about the thoughts I have on government entitlement programs. What I have been doing for the last decade has everything to do with weaning myself from the entitlement programs into which I, too, had paid over the years as required by law.
As a naturalized U.S. citizen, I would like future generations of Americans to continue enjoying what it has meant for me to be an American by upholding the values that have made this country great.
Contrary to the image of America I had growing up elsewhere, much of what I see happening in the United States today makes my blood boil. As a nation and as individuals, I think we are facing a crossroads. If we so choose, we can keep blaming the government, the media, and everyone else, and continue complaining about it with zero action taken to cope with the hands which we are being dealt. I choose to spend my every waking moment, figuring out how I can survive the mess in which we find ourselves DESPITE everything else that is happening in America. It is no cake walk but I keep at it, day in and day out, because I still believe in America and what it stands for.
Let’s get back to the original title of this post, “When Money Destroys Nations.” I cannot begin to do justice to this well-document case study on Zimbabwe. The authors give you a compelling insight into the irreversible steps that a government begins to take in order to pay for ever-increasing amount of debt. The parallels between what had happened in Zimbabwe and what has been happening in the U.S. are strikingly similar.
Do we trust the Fed, the Executive Branch (President of the United States, regardless of political affiliation), Congress, or the Supreme Court to “manage” the issue appropriately and get our economy back on its feet? With everything I have observed so far, I do not. Let’s not forget, however, that in the United States of America, we have one powerful wild card left. It is called, “We, the people.”
Happy investing!
