Real Wealth is in people, places and the things we do for each other. Not the measuring stick.
There are things, people, places in this world making you poorer every day. They go largely unnoticed, nibbling away at your foundations until the building you’ve worked hard to build is sitting on loose clay.
You would think that such insidious sections of our society would be rooted out and destroyed. Booted off our land and told not to come back. But instead, we voted for them.
This is not a diatribe against politicians, because that’s like giving out to an untrained dog for going to the toilet on your slippers. It’s your fault and they really don’t know any better. They do not know what they do. Where I live, the average politician was a schoolteacher in their former life. They know next to nothing about money (and sometimes that’s why they get in to office).
Let run some scenarios.
A country is doing pretty badly and the next election is coming up. The economy is weak, people are getting angry that their government isn’t looking after them. One politician promises loads of free stuff and wins the hearts and minds of the population and wins the next election. This politician goes into office and says “Let’s hand out that free stuff I promised everyone.”
At this point, I want you to ask yourself if you believe that the government has some sort of pit/vault/underground cavern full of money that politicians gain access to when they go into office. Do you believe something to this effect?
Or how about that if they only taxed those meanie rich people and gave all of their money to the lower rungs of society we’d be doing great?
There are forces in this world making you poorer.
Another scenario.
A country is doing pretty badly and the next election is coming up. The economy is weak, people are getting angry that their government isn’t looking after them. One politician promises to leave you alone with more of your hard-earned money and wins the hearts and minds of the population and wins the next election. This politician goes into office and says “Let’s stop taking people’s money like I promised everyone.”
At this point, I want you to ask yourself if you believe that lowering taxes is the key to it all. Just lower our taxes and leave us with our money because it’s ours.
But what about everything the government already has to pay for? How will these things be paid for as well as giving a tax-cut?
There are forces in this world making you poorer.
So far we’ve been living in reality fairly well. If there are 100 barrels of salted meat in this kingdom for everyone to get through Winter, we had better go easy and make sure we have enough to eat during the dark periods of the year.
That is to say, there is only a certain amount of real stuff in a place at any one time. Real stuff, like people, goods and services.
But in magical government land there is not a certain amount of real stuff. There is a magic machine that means it does not matter that free stuff has been promised that does not exist or that tax-cuts have been promised that are required to pay the bills.
Enter the printing press. Money printing. Currency creation. Debt creation. Indentured servitude.
There are forces in this world making you poorer.
I’m hardly saying anything new here. This has happened many many times throughout history. So how does it make you poorer? Inflation, deflation, distortion of free market price discovery.
When a government is not constrained in its spending and begins to create currency by debasing it’s money supply, it makes you poorer.
It makes the government richer because when they magically create currency, they get the first go at spending it. This means they get the full purchasing power of those currency units just as they’ve been added to the pool of currency. This is called the Cantillion Effect, named after the Irish-French economist Richard Cantillon. Prices do not rise proportionately or simultaneously when currency is created. This leaves the people who are the furthest from the creation to get the least benefit.
If you’ve ever felt like there’s something amiss in the prices of things, this is why. Why were my parents able to buy a house with what it will cost me to put down a deposit? And why did that amount of money only represent 2 times their annual household income at the time? How was my grandmother able to stay at home and look after the kids when my grandfather was only a middle manager? How dd they afford it?
Distorted relative prices bid up asset prices and leaves consumer prices and wages in the dirt. So when a politician says that they have a magical money tree just for you, you know where to shove it.
But it’s not all doom and gloom. Understanding how inflation robs you and everyone who is playing by the rules gives you the power back. Now you can use the information to win your financial freedom.
I have great respect for Robert Kiyosaki and his series of Rich Dad Poor Dad books and classes. They have challenged me to pay myself first and change my mindset around money.
Robert is a big proponent of giving away first in order to receive later. That’s why Robert is giving away his Rich Dad Summit for $1.
The Rich Dad Summit is a watch on-demand 2-day virtual event full of expert speakers giving you everything you need you need to kickstart your financial journey. Gain access for $1.
This is for you if you want to:
- Make more money
- Have that money make more money
- Set up systems to do it all for you – passively
- Live life on your terms because you’re sick and tired of living paycheck to paycheck!