Is The “Trump Bump” Over?
In the U.S., President Biden has now been in office for about a month, and as a result, I’ve heard the “Trump bump” is over.
The “Trump bump” was a phrase to describe the euphoria that many people felt during President Trump’s administration. People are automatically assuming that with Biden in office, we are instantly doomed.
The problem with this thinking is that our economy no longer works the way it used to when gold was money. Most economists, however, have not grasped the profound significance of the change in the way our economy works now.
We have a new kind of economic system. It responds differently to government policies than did 19th Century Capitalism. It is not bound by the same constraints. Our economy is turbocharged, but the operating manual that still guides the economics professions was written in the days of the horse and buggy. If we don’t learn how to operate our new economic system, it is very likely to crash.
Back before World War I gold was money, governments balanced their budgets, and trade between nations balanced. Sound money, balanced budgets, and balanced trade were the core principles of the foundation which all classical economic theory was built.
Capitalism worked the way it did because gold (or more precisely a gold-based monetary system) would not allow it to work any other way. The gold standard forced governments to balance their budgets and it forced trade between countries to balance.
Today, millions of people are calling for a return to the gold standard. In other words, they want to turn the clock back to pre-1971. Saying it another way, some people, such as former presidential candidate Ron Paul, want us to go back to the time when money was commodity money.
While it is possible that this might happen, it is not probable, and the pain of doing so would probably mean a massive collapse of the entire global economic system. But rather than wait in hopes of turning back the clock, it is the position of the Rich Dad Company that it is time for financial education.
Are You A Capitalist Or A Socialist?
In a true capitalist system, there should be no inflation. In a true capitalist system, prices should come down and productivity should go up. For example, cell phones today cost less and do more. That is an example of capitalism working properly. One reason why prices go up is that inefficient socialist governments cost more and do less. And once the banks and government officials took over our money supply, it drove costs up because the purchasing power of money went down.
To beat this system of funny money, my rich dad said to me, “If the government has a license to print money, you should learn to print your own money.”
There is a joke I heard years ago, explaining the difference between a socialist and a capitalist.
One day a socialist knocked on a farmer’s door and asked him to join the local socialist party. Not knowing what a socialist was, the farmer asked for an example of socialist behavior. The socialist said, “If you have a cow, then everyone in the village can have some of the milk from your cow. It’s called sharing the wealth.”
“That sounds good,” said the farmer.
“And if you have a sheep,” the socialist said, “then everyone shares in the wool.”
“Very nice,” said the farmer. “This socialism sounds good.”
“That’s great,” said the socialist, believing that he had a convert to socialism. “And if you have a chicken, then everyone shares in the eggs.”
“What?” the farmer screamed angrily. “That’s terrible. Get out of here and take your socialist ideas with you.”
“But, but, but…” stammered the socialist, “I don’t understand. You were happy with the idea of sharing milk and wool. Why do you object to sharing eggs?”
“Because I don’t have a cow or a sheep,” snarled the farmer. “But I do have a chicken.”
Everyone agrees that we need to share the wealth, as long as it is your wealth, not their wealth.
It Doesn’t Matter Who Is In Office
Many people believe that Republicans are better than Democrats when it comes to money.
The facts do not support their belief.
Republicans say, “Democrats tax and spend.”
Republicans, on the other hand, borrow and spend.
The net result, regardless of party, is increasing long-term national debt, a debt that will be passed onto future generations in the form of higher taxes.
It was Democratic presidents Franklin Delano Roosevelt and Lyndon Johnson who is credited with creating Social Security and Medicare, two of the most expensive and potentially disastrous programs in world history.
America was the world’s biggest creditor nation under Republican president Dwight D. Eisenhower. We were a rich nation. When Republican Richard Nixon became president, however, the rules of money changed, and the wealth of the United States began to change. As president, Nixon took us off the gold standard in 1971. This converted the dollar from money to currency.
Nixon allowed the U.S. government to print as much money as necessary to solve our money problems. This is the same as a person writing checks without having any money in the bank. If we did what the government does today, we would be in jail. One of the reasons for the growing gap between the rich and everyone else is that most people are still working by the old rules of money—the old capitalism. After 1971, the new rules of money took over. The rich became richer and the poor and middle class worked harder trying to keep from falling between the cracks.
In 1980, Republican president Ronald Reagan gave us supply-side economics, aka “voodoo economics.” The new economic theories promoted by the Great Communicator Reagan, an actor not an economist, were the illusion that we could cut taxes and continue to pay the government’s bills by borrowing money. This is the same as taking a cut in pay and using credit cards to pay bills.
President Reagan’s vice president, the first George Bush in the White House, realizing the national debt was exploding due to the loss of revenue from Reagan’s tax cuts, ran for president promising, “Read my lips: no new taxes.” After he was elected, he raised taxes and was not reelected.
I’m writing all of this just to say that at the end of the day, it doesn’t matter which party is elected into office.
If it’s Democrats, they will probably tax and spend.
If it’s Republicans, they will probably borrow and spend.
The net result is the same: greater debt, bigger financial problems, and higher taxes. All funded by taking as much of your money as possible.
Personally, I do not want the government managing my future financial security. The government does a horrible job. I’d rather take care of my own money. The government does not have much financial intelligence. It spends the money it collects. The powers that be know that most people are not financially educated.
Be Part Of The Solution
What America needs more now than ever is entrepreneurs and investors with a high financial IQ, who have the financial education to understand money and how it works.
The biggest tragedy taking place right now is bigger than the credit crisis, even bigger than the degradation of a capitalist system that has brought such prosperity to the American people. The biggest tragedy right now is that so few people truly understand what happened, and even more so, why it happened; nor do we understand what we should do to protect ourselves and our economy. And because many of us don’t understand these things, many of the opportunities that face us today will slip through our fingers, and many of the challenges we face will continue for a long time.
My plea to you is to build your financial education. Start great companies. Make great investments. Be part of changing the culture of managerial capitalists by becoming true capitalists today.
You’ll be better off for it—and so will America.
Editor, Rich Dad Poor Dad Daily