How To Make Money During A Market Crash
I hope I’m wrong, but I believe we’re headed for a depression. Right now, we’re living on borrowed time.
Today, the world is facing many of the same problems that were being faced before the Great Depression set in. The world’s governments are facing massive and unsustainable debt. All over the world people are paralyzed. They’re clinging to their money for security. This is bad news for established countries like the US that rely on consumer spending for the majority of their economic growth.
The problem in the first Great Depression was the countries’ inability to pay off war debts because of the constricting nature of the gold standard. Since Nixon removed the dollar off the gold standard in 1971, the US and other countries are now able to print their way out of debt—and they’re trying.
Today, the problem is the printing of trillions of dollars by the Fed. The economy has been propped up like an inflated balloon full of hot air and unfortunately, the smallest needle will cause it to burst.
Robert J. Samuelson writes in Newsweek, “There are eerie if crude, parallels [to the Great Depression] now. The welfare state is today’s equivalent of the gold standard. With aging societies, advanced countries have promised more benefits than their tax bases can support.” The debt is simply too much to sustain growth—both on the government and personal level. In response, the government continues to print more and more money out of thin air, making it worth less and less.
All this shuffling of one government’s debts to cover another government’s debts is like a big room full of traders handing each other IOUs but with no one really paying up. The only thing these bailouts are buying is time. The problem is that you could have all the time in the world but you’ll be no better off if you don’t fix the true problem—the massive and unsustainable piles of toxic government debt.
Many people will be paralyzed by fear during the coming years. But for the financially intelligent, this will be the opportunity of a lifetime. For those who aren’t financially intelligent, I’d suggest at the very least purchasing some gold or silver—as much as you can afford—to protect yourself from inflation. If you have high financial intelligence, be on the lookout for deals. As asset prices crash, be ready to swoop in and buy them up.
The important thing to remember about depressions is that wealth doesn’t disappear—it’s simply transferred.
This is the biggest transfer of wealth in modern history. You have the choice to be on the receiving end—or to lose it all. The dividing line will be those who are financially intelligent and those who aren’t.
I Don’t Trust The Dollar
On August 15, 1971, President Richard M. Nixon “temporarily” ended U.S. dollar convertibility to gold. When he did this, the U.S. dollar became fake money. This is because rather than be tied to real money—gold—it was tied to the “full faith and credit” of the United States. Translation: it became a giant IOU.
Why would Nixon do this? Because the trade deficits between the US and other countries were growing too much. Because we were importing more than we were exporting goods, we were losing our gold.
How does this happen? When a currency is not tied to real money, governments are able to print more and more money out of thin air. This leads to inflation, the devaluing of the purchasing power of that currency.
No one ever returned the U.S. dollar to the gold standard. Did they just forget? When—and why—did temporary become permanent?
I ﬁnd it interesting that on all fake paper U.S. dollars we see the words: In God We Trust
Why are we asked to trust in God? What happened to God’s money, gold, and silver? Gold and silver will be here when the last cockroach is ﬁnally extinct. So why then do the elites have “In God We Trust” on all our fake money?
This is not the ﬁrst time in history when trusted leaders used fake money to make themselves richer and more powerful. Paper money was ﬁrst used by the Chinese during the Tang Dynasty, (AD 618–907). It was used for centuries before the practice caught on in Europe in the 17th century. The Chinese Empire collapsed when the elites realized it was easy to print fake money to ﬁght wars and build monuments to themselves.
The Romans used gold and silver coins. The Romans created fake money by trimming the edges of the coins. The Romans then created more fake money by “debasing” their gold and silver coins. Debasing meant gold and silver coins were mixed with base metals such as copper, tin, and nickel.
In 1965, the U.S. government began debasing U.S. silver coins, which is why silver coins have a copper tinge around the edge.
The reason why fake money is so dangerous is that most people do not know that their money is fake. So, they do what they are taught. They save it. The problem is that savers are losers when money is fake. Just as Robert J. Samuelson wrote in Newsweek, it devalues over time and becomes more and more worthless.
The rich know the difference between fake and real money. That is why rich people use fake money to buy real money, i.e., gold and silver, as well as assets with a real value like real estate and commodities. By doing this, they print their own fake money (cash flow) that they then use to purchase more real money and assets.
You can print your own fake money too, you just have to take action.
Lesson: Everybody Can Do Something, You Have To Do It
Albert Einstein is quoted as saying, “Nothing happens until something moves.” And it’s more true than ever before. I see so many people who say things like, “I want to be rich,” or “I wish I could do that,” or “nothing good ever happens to me,” but they are the same people who never do anything about their situation.
Sound financial education can afford anyone, rich or poor, smart or not so smart, living in a rich country or a poor country. With the World Wide Web, anyone living anywhere can gain enormous wealth in the world economy. All they have to do is adopt new ideas, be serious about their financial education, and take action.
Taking action is important because we learn from our mistakes. The idea that mistakes are bad is a bad idea. If people do not make mistakes, they fail to learn, which is why my poor dad remained poor. Rather than look at the loss of his job, the election, and his ice cream business as blessings, he looked at his failures just as a school teacher would and punished himself for making mistakes. He died a poor man, not realizing that his failures were his biggest opportunities to learn and to grow.
You see, in school, students who make the most mistakes are labeled stupid. In the real world, people who make the most mistakes and learn from them, become smarter people.
I am happy to report that today I make much more money than my classmates who were the “A” students and became doctors and lawyers. I make more money simply because I made more mistakes and learned from them.
Editor, Rich Dad Poor Dad Daily