Robert Kiyosaki, known as Rich Dad sent the following newsletter.
Hey,
It’s all around you.
You use it everyday. You can’t live without it. But do you really know what it is?
I’m talking about money.
If you want to be rich, then it would follow that you need to know what money is and how money works. Unfortunately, many people think that they know these things, but in reality they don’t.
And that is one of the reasons why they never get rich.
The first thing you must understand when you ask the question, “What is money?” is that money has evolved over time.
“Money” was originally in the form of barter, such as…
- Chickens
- Milk
- Shells
- Beads
- Gold
- Silver
- Copper coins
They were physical objects that were deemed to have tangible value, and thus were traded for other items of a similar value.
Today, most money is paper money, an IOU from a government, also known as a fiat currency. Paper money is worthless in and of itself. It is simply a derivative of the value of something else.
In the past, the dollar was a derivative of gold; now it is a derivative of debt, an IOU from taxpayers of a country.
Today, money is no longer a tangible object like chickens, gold, or silver. Today, modern money is simply an idea backed by the faith and trust of a government. The more trustworthy the country, the more valuable the money, and vice versa.
This evolution of money from a tangible object into an idea is one reason why the subject of money is so confusing. It is difficult to understand something we can no longer see, touch, or feel.
Today, what most people call money I would call “fake money”.
| It’s not that fake money isn’t useful. It is. It’s just that today’s money, which is really currency, has no intrinsic value in and of itself, unlike gold or silver, which has value and has always had value. Unfortunately, most people do not understand this. They believe that money such as dollars are actually of value. This is why so many people think that it is financially smart to save money. But if you’ve read much of my writing, you know that savers are losers. If you want to be rich, you have to understand how money as it is called today works. Today’s money is a currency. It is a representation of the faith economies have in a country’s economy rather than something of value like gold. This is because in 1971 President Nixon took the US dollar off the gold standard. This is when it became fake. It was only based on the “full faith and credit” of the US…a giant IOU. Other countries followed suit. The word currency derives from the word current. Like a current, today money must keep moving in order to survive. However, the value of fake money always goes to zero relative to real money. |
| This is partially because governments can print as much as they want since it is tied to nothing of value…it is just paper. The rich understand this, so they always keep their money moving into things with tangible value: assets. Additionally, they invest their money in assets that produce more money in the form of cash flow, which they can use to invest in more assets. So, ask yourself – what asset are you going to build? |
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