Wednesday, December 23, 2009

CONSPIRACY OF THE RICH

Looking for a jolt to start the new year?

Pick up a copy of Robert Kiyosaki's Conspiracy of the Rich, a fascinating and fast-paced read that discusses the conditions that led to the stock market collapse of 16 months ago and talks about what you can do to better prepare yourself for the choppy economic waters ahead.

Financial education in this country is woefully inept, according to Kiyosaki, and if you don’t know the difference between investing for capital gains and investing for cash flow, you need to slow down and really come to understand these important distinctions.

Most capital gains from the past decade have been the result of easy credit, which created an asset bubble which caused real estate and stocks to become overvalued. Now that the credit bubble has popped, those who invest in real estate or the markets need to rethink their strategies to focus on cash flow and sustainability in an economy that will not be going back to what we knew (and grew too comfortable with) just a few years ago.

Kiyosaki also talks about the corruption of our political systems, of how President Nixon’s decision to take America off the gold standard in 1971 essentially unleashed a new, debt based (as opposed to “production based”) economy that enriched banks and catapulted average Americans into a debt spiral that finally came unraveled over the past 24 months.

The book warns of hyperinflation in the years to come, showing how the amount of currency in circulation has essentially doubled in the past eighteen months. This around-the-clock printing strategy will ultimately drive the prices of commodities higher (think $5 per gallon gasoline and $3 per head lettuce), eroding savings and pushing much of the middle class into a lower standard of living. Demands for government services will rise, taxes will increase, and high unemployment will become the new norm.

It’s a scary assessment, but to protect and prepare for your financial future, you need to consider the possibilities. There will be opportunities and shelters in every economy, but they will be fewer and it will take a better understanding of economics to identify them.

Now is the time for raising your financial IQ. If you know that interest rates are going up, taxes are going up, unemployment is likely to stay high and the stock market is likely to stagnate, is it a good time to buy a house? Is it a good time to buy two??

With better education, your thinking will be clearer.

Since the onset of the stock market crash 16 months ago, I have subscribed to the notion that the only way out is to forget about the government and for YOU to get better. For YOU to improve your skills. For YOU to become more financially literate, better educated and adaptable to a changed economy.

Whether or not you agree with the author's assessment of our economic condition, this book will challenge you to look critically at what's going on. And that alone makes it worth the read.