Learn The #1 Secret Tool of the Rich
When I published Rich Dad Poor Dad in 1997, I said “your house is not an asset, it’s a liability.” The so-called experts mocked me. Now that the housing market has been all but obliterated, I’m sad to say, I’m the one with the last laugh.
When I published Rich Dad’s Prophecy in 2004, I said that the stock market was going to crash. Once again, the so-called experts ridiculed me. Four years later, we experienced what is now considered the most serious financial crisis since the Great Depression, I’m the one with the last laugh.
And finally, when I published Conspiracy of the Rich: The 8 New Rules of Money in 2009, I said that the Great Recession wasn’t an accident but exactly what the big banks and ultra-rich had planned.
And you know what happened? The so-called financial experts derided me. One more time, I’m sad to say, I’m the one with the last laugh. At the time when I wrote the book, many people dismissed it as a conspiracy theory—the ramblings of a known financial provocateur.
I admit that I’ve always been a contrarian when it comes to money. But I’ve never been one for its own sake. Rather, I’ve always shared what I truly believe about the world of money.
To me, it was maddening and appalling that the world’s richest bankers, traders, and politicians got away with so much. And it was a tragedy that so many lives were ruined in the process.
A headline from The Guardian stated, “Now we know the truth. The financial meltdown wasn’t a mistake—it was a con.”
If you’ve been reading these letters for a while then, this isn’t news to you. But sadly, it’s news to most people. In the article writer Will Hutton states, “The global financial crisis, it is now clear, was caused not just by the bankers’ colossal mismanagement. No, it was due to the new financial complexity offering up the opportunity for widespread, systemic fraud.”
Everyone knew that the name of the game is bailouts for institutions that are too big to fail, and while news agencies have been talking about the gargantuan $7.7 billion in commitments by the Fed to save the economy, the details released this week through the Freedom of Information Act show what we’ve known all along – the rich will say anything to protect their assets and build their balance sheets.
For instance, in November of 2008, Bank of America’s CEO, Kenneth Lewis said that his bank was “one of the strongest and most stable banks in the world.” On that same day, Bank of America owed $86 billion to the Federal Reserve in emergency loan money.
Jamie Dimon, CEO of JP Morgan Chase, told his shareholders in 2010 that he only borrowed from the Fed to encourage others to borrow from the Fed.
In reality, the bank borrowed twice its cash holdings from the Fed, and on one day in February 2009, borrowed a colossal $48 billion—one year after the creation of the Fed’s emergency lending program.
All in all, the big six banks comprised of JPMorgan, Bank of America, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley accounted for 63 percent of all daily average lending by the Fed to banks and financial institutions, receiving over $160 billion in TARP funds and borrowing around $460 billion from the Fed.
During that time, “Total assets held by the six biggest U.S. banks increased 39 percent to $9.5 trillion on Sept. 30, 2011, from $6.8 trillion on the same day in 2006, according to Fed data.”
Additionally, the Fed helped prop up both Bear Sterns and Wachovia with emergency loans as they were being gobbled up by JPMorgan and Wells Fargo respectively.
The Fed transferred $50 billion in secret loans to Wachovia to prevent financial collapse until Wells Fargo could seal the deal, and they sent $30 billion in secret loans to Bear Sterns so that JPMorgan could wrap up that deal—all while providing $29 billion in financing to JPMorgan to fund the deal.
Essentially, the Fed protected the bigger banks and helped them grow even bigger by keeping brain-dead banks on financial life support long enough to graft them into the bodies of bigger financial institutions like a financial Frankenstein.
This was all done in secret, and without the knowledge of the American people and the Congress.
In other words, a bunch of crooks and thieves running some of the biggest banks in the world used smoke and mirrors financial tools to rob the middle-class and defraud the world. At the center of this ring of thieves was Goldman Sachs.
The SEC filed a lawsuit against Goldman Sachs for telling their investors everything was rainbows and sunshine while secretly preparing to cash in big as the economy crashed.
Pulling the Wool
Deception. The tool of the conspiracy of the rich. How do they achieve this? How do they pull the wool over our eyes?
It’s simple. They’re banking on our financial ignorance.
The Goldman Sachs case is the worst of all because it so blatantly preyed on the financial ignorance of its investors by creating a fake investing tool packed to the gills with toxic collateralized debt obligations (CDO) so that other smarter, in-the-know investors could enjoy the windfall when the house of cards fell. In the process, they helped to bring down most of their competitors—who were equally deceitful but not as smart—and collapse the world economy.
More of the Same
After these frauds were exposed, the scenario was set for an epic battle between big banks and impotent governments dealing with angry citizens. It was interesting to see how it all played out. And while not much has happened.
One or two people took the fall, becoming the scapegoats of a morally bankrupt system that will find new, more exotic ways to rob the financially ignorant.
But the US government will continue to keep you and me quiet, and to practice their own form of deception by convincing those who are financially ignorant that everything is OK now that big brother has stepped in.
Get Angry, Get Smart
It is true that people, especially investors, tend to have short memories. As soon as a market heats up, greed takes over and caution is forgotten.
For instance, the real estate market hit bottom in 1992. Property prices were horrible, the savings and loan industry went bust, and dishonest bankers and real estate developers like Charles Keating were going to jail. Scandals were everywhere, and the federal government had to step in for a bailout.
But in less than 10 years, memories of that horrible disaster were erased, crooks and corruption were forgotten, and people were pouring their money back into real estate.
Most of the people who were responsible for one of the biggest market crashes in history are still in the system today, doing many of the same things today that they were doing then.
Your mind is still your most important asset, so be careful who you take your advice from and what you believe is true. Remember that all financial markets are filled with good but not necessarily innocent people looking after their own self-interests before they look after yours.
Here’s my advice. Get angry, but also get smart. While others will continue to follow what the media and Government tells you, you can begin to increase your financial education and move ahead of the curve.
Editor, Rich Dad Poor Dad Daily