Economics For Beginners

Dear Reader,

It is said that Mayer Amschel Rothschild, founder of one of the most powerful banking families of Europe, once observed, “Give me control of a nation’s money supply and I care not who makes the laws.”

To understand today’s economy, it is important to understand the relationship between the U.S. government, the Federal Reserve System, and some of the most powerful people in the world. This relationship is depicted in the overly simple diagram below:

In 1913, the creation of the Federal Reserve System granted the very rich of the world the power to control the money supply of the United States and fulfilled the spirit of Rothschild’s sentiments. Many people don’t know or understand that the Federal Reserve System is not a government institution or a bank, nor does it have any reserves. Rather, it is a banking cartel run by some of the most powerful men in the financial world. The creation of the Fed was basically a license to print money.

Federal Reserve System was created was to protect the biggest banks from failing by providing liquidity to those banks when they were in financial trouble, which protected the wealth of the rich, not of the taxpayers.

We See This In Action Even To This Day

In 2008, when President Bush authorized $700 billion in bailout money, Secretary of the Treasury Henry Paulson, formerly of Goldman Sachs, in conjunction with the Federal Reserve, immediately handed out billions of dollars in TARP (Troubled Asset Relief Program) money to the biggest banks in the country, his friends, no questions asked.

The reality of the situation is that the TARP bailout money went straight from our pockets—taxpayers’ pockets—into the pockets of the banks and corporations that helped create our financial mess in the first place. We were told the money was given to the banks with a mandate to lend it out, but our government was either unable or unwilling to enforce that mandate—or both.

2013 marked the hundredth anniversary of the Federal Reserve System. For nearly 100 years the Fed has pulled off the biggest cash heist in the world. This cash heist is a bank robbery where the robbers do not wear masks, but rather business suits with American flag pins in the jacket lapels. It is a robbery where the rich take from the poor via our banks and our government.

The Global Economy As A Big Hot-Air Balloon

Things were going along splendidly until August 6, 2007, when too much hot air—debt—caused a tear in the balloon. As the horrifying ripping sound spread, central banks of the world began pumping more and more hot air—debt—into the balloon in an attempt to keep it from crashing to the ground and causing a depression.

In his book A Tale of Two Cities, Charles Dickens famously wrote, “It was the best of times, it was the worst of times; it was the age of wisdom, it was the age of foolishness.” Amazingly, things have not changed much since Dickens wrote that in 1859.

For some people, deflation makes these the best of times. The cost of living is going down as the prices of oil, real estate, stocks, and commodities drop and thus become more affordable.

Walmart isn’t the only one rolling back prices. The central banks and governments of the world, hoping people, businesses, and governments will get deeper into debt by borrowing more money, are pumping trillions of dollars into the economy at interest rates near zero—virtually free money.

Holders of massive pools of money are waiting like vultures for the right moment to flood back into the market and pick clean the bones of dead and dying companies. For well-positioned investors, this is the opportunity of a lifetime to snatch up assets at a discount. For well-positioned businesses, now is the time to gain market share, as their competition goes under due to bankruptcy. These people see abundance.

Proof in Recent History

Below is a timeline highlighting some of the major global economic events in recent history to prove that the Fed controls the economy.

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 European Central Bank released another 47.6 billion euros, the third cash infusion totaling almost 204 billion euros in a span of three working days.

September 2007
Northern Rock, the largest mortgage broker and a large consumer bank in Britain, experienced a run on the bank by depositors. It was the first bank run in over 100 years.

October 9, 2007
The Dow Jones Industrial Average closed at a historic high of 14,164.

September 2008
President George W. Bush and the U.S. Treasury asked for $700 billion in bailout money to save the economy, over a year after the European Central Bank had already infused 204 billion euros into the economy in August 2007 and almost a year after the Dow hit its all-time high.

Toxic financial derivatives resulted in the collapse of Bear Stearns and Lehman Brothers and the nationalization of Fannie Mae, Freddie Mac, and one of the world’s largest insurers, AIG.

Additionally, the U.S. auto industry revealed that it was ailing, and GM, Ford, and Chrysler asked for bailout money. Many states and city governments were also now asking for bailout money.

September 29, 2008
On a black Monday, after President Bush asked for bailout money, the Dow plunged 777 points. It was the biggest single-day point-based drop in history, and the Dow closed at 10,365.

October 1, 2008, through October 10, 2008
In one of its worst spans ever recorded, the Dow dropped 2,380 points in a little over a week.

October 13, 2008
The Dow began to exhibit extreme volatility, going up 936 points in one day, the best point gain in history, closing at 9,387.

October 15, 2008
The Dow plunged 733 points, closing at 8,577.

October 28, 2008
The Dow gained 889 points, the second-best point gain in history, closing at 9,065.

November 4, 2008
Barack Obama was elected president of the United States with the campaign slogan, “Change We Can Believe In.” He will take over a government that has by now committed $7.8 trillion in various forms to salvage the economy.

December 2008
It was reported that Americans lost 584,000 jobs in November, the biggest posted loss since December 1974. Unemployment was reported at a 15-year high of 6.7 percent, with nearly two million jobs lost in the United States alone in 2008. Additionally, it was reported that China, the world’s fastest-growing economy, lost 6.7 million jobs in 2008, an indication that the global economy was in severe distress and on the verge of a meltdown.

Economists finally admitted the U.S. economy had been in a recession since December 2007.

December 31, 2008
The Dow closed at 8,776, down 5,388 points from its record high achieved just over a year earlier. It was the worst yearly performance for the Dow since 1931 and equated to $6.9 trillion in lost value.

The Relationship Between The Fed And The Four Forces That Steal Our Money

Taxes: America was relatively tax-free in its early days. In 1862 the first income tax was levied to pay for the Civil War. In 1895, the U.S. Supreme Court ruled that an income tax was unconstitutional. In 1913, however, the same year the Federal Reserve System was created, the 16th Amendment was passed, making an income tax permanent. The reason for the reinstatement of the income tax was to capitalize the U.S. Treasury and Federal Reserve. Now the rich could put their hands in our pockets via taxes permanently.

Debt: The Federal Reserve System gave politicians the power to borrow money, rather than raise taxes. Debt, however, is a double-edged sword that results in either higher taxes or inflation. The U.S. government creates money, rather than raising taxes, by selling U.S. bonds, IOUs from the taxpayers of the country that eventually have to be paid for with higher taxes—or by printing more money, which creates inflation.

Inflation: This is caused by the Federal Reserve and the U.S. Treasury borrowing money or printing money to pay the government’s bills. That’s why inflation is often called the“silent tax.” Inflation makes the rich richer, but it makes the cost of living more expensive for the poor and the middle class. This is because those who print money receive the most benefit. They can purchase the goods and services they desire with the new money before it dilutes the existing money pool. They reap all of the benefits and none of the consequences.

Retirement: As stated, in 1974, the U.S. Congress passed ERISA. This forced Americans to invest in the stock market for their retirement through vehicles like the 401(k), which generally have high fees, high risk, and low returns, and gave Wall Street control over the country’s retirement money.

Today, those who have a strong financial education have an unfair advantage over those who do not. With a sound financial education, a person can use taxes, debt, inflation, and retirement to become rich rather than poor. Conversely, the forces of taxes, debt, inflation, and retirement rule those who do not have a strong financial education.

Regards,

Robert Kiyosaki

Robert Kiyosaki
Editor, Rich Dad Poor Dad Daily

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Robert Kiyosaki

Robert Kiyosaki, author of bestseller Rich Dad Poor Dad as well as 25 others financial guide books, has spent his career working as a financial educator, entrepreneur, successful investor, real estate mogul, and motivational speaker, all while running the Rich Dad Company.

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