The 1999 Decision That Killed Our Future
The Banking Act of 1933, known as the Glass-Steagall Act, was passed by the United States Congress with the purpose of separating investment banking from retail banking.
The bill was designed “to provide for the safer and more effective use of the assets of banks, to regulate interbank control, to prevent the undue diversion of funds into speculative operations, and for other purposes.” No longer could retail banks who mostly took deposits, manage checking accounts, and made loans use depositors’ funds for risky investments.
It all seems well and fine.
As a customer of a retail bank, you wouldn’t argue that Congress wasn’t acting in your best interest.
In fact, this Act restored a lot of faith back into the banking system after the 1929 crash.
House of Cards
In 1974, ERISA, the Employee Retirement Income Security Act, was passed and paved the way for the 401(k), IRAs, and employee pension plans. ERISA opened the doors to the big casino known as the stock and bond markets to millions of poor and middle-class workers without any ﬁnancial education.
As leaders printed money, ripping off most workers, a few middle-class investors, such as my rich dad, caught on to the heist and did well as the stock, bond, and real estate markets were blown into bubbles.
By 1978, millions of amateurs were forced into the giant casinos of banks and Wall Street, owned by the rich. The rich and powerful kept their winnings, even when they lost other people’s money.
Rich dad called these giant “casinos” the house of cards.
This house of cards became even more unstable in 1999 when Senator Phil Gramm, in 1997 and 1998, helped repeal the Glass-Steagall Act.
The repeal of the Glass-Steagall Act was one of the biggest bank heists in history.
If you recall, there are two types of bank robbers: those who rob banks from the outside and those who rob banks from the inside. This was the greatest inside job ever pulled off and because it revealed the inbred relationship between the government, the Fed, and the ultra-rich Wall Street bankers.
Once it was repealed, your money turned into a casino—one big casino. They could take your savings and they could put it into a casino. If they lost your money, tough. The taxpayer covered the bill. When the casino lost your money, the Fed and U.S. Treasury bailed out the casino, saving the rich at the expense of your future.
The rich bet your money, the rich lose your money, and you pay for the loss of your money via taxes, and the bailout money pays the bonuses of the rich who bet and lost your money in the first place.
A Casino Depends on Losers
A casino depends upon losers so that those at the top can win. In 1974, it was a thing called a 401K. They needed more losers to enter the market, and what did the financial planners tell you? “Save money and invest for the long term of the stock market.” They needed people to come in and push it up.
In the 1980’s, Wall Street began selling pension boards (made up of teachers, firefighters and police officers) high risk “credit assets.” In 1984, public employee pensions were 60 percent of GDP. In 2019, they were 120 percent.
Up until 1990, public employee pensions were becoming “the dominant global investor.” But it started to crumble when Long-Term-Capital Management, a hedge fund many pensions were invested in, imploded. Wall Street ended up bailing out LTCM.
In 1998, the foundations of global paper casino began to crumble and giant crashes began. After the 2008 crash, the global central banks and the U.S. government printed an estimated $9 trillion, to save themselves and their friends.
Why would anyone invest in the long term in the stock market when it’s a casino? My concern is, the old guys like me, are sitting there with their retirement plans which are broke. The California retirement system is broke, Hawaii’s retirement system is broke. Chicago’s retirement system is broke. When this casino finally comes down, my generation is toast.
Between 1971 and today, the poor and middle-class workers who worked hard to earn fake money also saved fake money, and invested it in fake assets run by fake fund managers educated in our ﬁnest business schools became today’s biggest losers.
Money as we know it—fake money—is dying. That includes the U.S. dollar. Historically, the average life expectancy for a fiat currency is 27 years, with the shortest life span being one month.
Since 1971, the U.S. dollar has lost 97 percent of it’s purchasing power. History has proven that printing fake money never ends in prosperity. History is evidence that printing fake money always ends in poverty for those who work for fake money.
In my opinion, the best way to prepare is to not need money.
Don’t Fight the System
In the end, it’s not the government that has the power. It’s the Fed and the ultra-rich banks. This latest stimulus bill is simply a way to pacify the voters and make the government look like it’s doing something. The fundamental problems that caused the crisis are still in place—and the people responsible are still in power. The boom and bust cycle will continue as it always has since Nixon took the dollar off the gold standard in 1971.
It’s pointless to fight the system. Instead, you need to learn to play by the rules of the rich. You cannot expect the government to bail you out. They only do that for powerful banks and corporations—and they use your money to do it. Counting on the government and regulation to save you and the country sets you up for disappointment and failure.
Only by educating yourself about money and taking control of your financial future by playing by rules of the rich will you be able to prosper. The game is always tilted in favor of the rich and powerful. But you can choose to opt-out and prosper by understanding how the world and money works, just like the rich do.
Many will be wiped out by the coming depression. But I want to see you win. Continue your financial education and understand the rules of the game. Only then can you prosper as others perish.
Editor, Rich Dad Poor Dad Daily