The truth about becoming rich is that it takes MONEY….the more you have, the easier it is to get rich, and the less you have the harder it becomes. For this reason the rich get richer and the poor get poorer.
The system is rigged in favor of those who are already rich…they get the lions share of the income, and they get more opportunities to build wealth. They are not affected by the ravages of economic depressions, and can make money when everyone else loses. They have INDEPENDENCE.
The poor on the other hand are at a disadvantage. Most of their money goes toward staying alive, and what little they have left often gets wiped out by sickness, accident, or other disaster. They have no assets and are entirely dependent on others for their support…whether it is from family, charity, or employment.
The middle class are more comfortable than the poor. They can afford better food, housing, and entertainment. They may buy fancy clothes and drive an expensive car. However, they are no less dependent than the poor. They rely on their employer for all these things, and if they lose their job they could lose everything.
The struggling rich have large amounts of wealth, but receive low income relative to their expenses. They may have made some bad investments, or they might be carrying heavy debt. In any case, they don’t make enough money from their assets to not work. In many cases they may have to work even HARDER than the middle-class to keep what they have.
The Economic Weather
Another secret to getting rich is that each quadrant needs to pursue different strategies based on the “economic weather”…macro-trends that move entire markets up and down like the waves of the sea. The truly rich know these trends and switch strategies accordingly. They ride the waves and make money regardless of whether a market goes up or down. Sadly, the poor do not and get pounded by the surf when they choose the wrong strategy at the wrong time.
To choose the right strategy, we must first learn to read the macro-trends that drive economic activity. These forces determine the kinds of opportunities that are available to build wealth and become rich. They include:
- Money Supply: how much money is available in a given market
- Trade Imbalance: the flow of money and goods between locations
- Technology Advancement: the development of tools that increase efficiency
- Employment Level: how many people find work
- Political Action: moves made on and by the government
Changes in each of these forces has its own unique impact on the different quadrants of the wealth-income matrix. Each group must employ strategies that take advantage of the opportunities these changes present. Unfortunately, some changes may benefit one group at the expense of another.
The Truly Rich have one additional advantage…they can use their wealth to change the economic weather. Money is power, and those who are financially independent can use their wealth to make themselves richer at others expense. They can bribe government officials, spread financial lies in the media, or create lucrative self-fulfilling financial prophecies. With enough money and influence, the rich can undermine democracy and rule nations with an iron fist that could rival any dictator.
The Poor are entirely at the mercy of the financially independent. If they do not know how to predict and ride out the financial waves the economic giants create, they will find themselves sunk in a sea of broken dreams. Reading these indicators is a MATTER OF SURVIVAL if the poor ever hope to see a day when they can rise to a comfortable standard of living.
The Middle Class are a little better off in that during good weather they can move toward financial independence. However, they also need to watch out, because the same financial storms that sink the poor can bring them down as well. In addition, the middle class is often fed bad financial advice by the rich to make money at their expense. This is crucial because the middle class is so large that collectively they have the ability to shift the financial weather by their actions. The middle class is the greatest threat to the power of the independently wealthy.
The Struggling Rich are semi-independent and are not hit as hard by financial shocks as the poor or middle-class. However, they still need to work HARD to maintain their status, and if they make the wrong move their budding wealth can be lost. They also need to know how to read the economic weather and which financial strategies to pursue to keep their wealth and income growing through difficult times. Sometimes, they are subject to the same kind of bad economic advice that is fed to the middle class. However, in their haste to become truly rich, they may also resort to selling bad advice to others.
The Cycle of Money
Class Warfare is Self-Destructive. To build sustainable wealth, money must flow from producers to consumers and back again. Consumers desire a product and pay producers to make it. Producers need labor and pay consumers to work. So long as consumers receive a fair wage and producers get paid a reasonable price, the system runs smoothly and everyone is happy. However, class warfare breaks this cycle.
The government also plays an important role in this cycle. Government can take money out of the system through TAXATION, or inject money into the system through SPENDING. Taking money out of the system decreases economic activity because producers have less with which to make stuff and pay wages, and consumers have less with which to buy. Injecting money has the opposite effect.
Unfortunately, too much money in the system can cause INFLATION as there are not enough goods to satisfy everyone who wants them, and so wealthier people start offering more money to get an edge over other buyers. However, TOO LITTLE MONEY IS WORSE because producers cannot hire people, and consumers cannot buy…creating a downward spiral of DEFLATION.
So watch the Money Cycle carefully. Look to see if the money supply is increasing or decreasing…and WHERE. Are producers hiring and paying good wages, or are they cutting their workforce…WHERE? Is the government spending money, or is it raising taxes…on WHAT? Are consumers spending money, or are they investing…WHERE? This will give you a good idea of what to expect when it comes to the Money Supply.
Banks and The Money Supply
Banks also have strong influence over the money supply. They can expand the money supply by loosening lending standards, and creating Bank Credit (a form of money) through the Fractional Reserve System. They can also contract the money supply by tightening lending standards and raising interest rates…calling in loans, and not making new ones. Banks are powerful enough to rival even the government when it comes to their influence over the supply of money.
Banking creates a cycle of economic expansion and contraction…boom and bust…as money is first lent out, and then called back with interest. This is inherently DEFLATIONARY because more money is taken out than was originally put in. The result is that those who borrow are unable to pay back their loans and go BANKRUPT, transferring their wealth to the banks…which they then sell for a fraction of its worth to others for pure profit.
Those who know how to ride these cycles of expansion and contraction can make a fortune while others lose everything. The key is to use one strategy during expansion, and another strategy when the economy contracts. There is a time to save, a time to borrow, and time to invest, and a time to cash out.
Buy Low, Sell High
By watching The Money Supply, you know when to save, when to borrow, when to invest, and when to cash out…and it runs opposite of what most people think. The time to save is when times are GREAT…when the markets are UP and prices are high. You borrow (if you can) and invest when times are BAD…the markets are DOWN and prices are low. Finally, you cash out when times are GOOD…before the market peaks and comes down again.
When the economy contracts, businesses lose money and their stock goes DOWN…people who borrowed are unable to repay, and they go bankrupt. Products that cannot sell drop in price. THIS is the time to buy assets…and many times they go for FAR less than their normal market value. Even the middle class can afford to invest during these times.
Rising From the Bottom
The only way for the poor to rise up from the bottom is to receive help. They have no assets, and the income they receive is too low to invest. Even when times are good, they cannot rise above their station…they live in perpetual poverty.
Lifting the poor also depends upon the Money Supply. When the money supply contracts, opportunities for employment diminish…and can even disappear. The poor need to be fed and cared for during this time, but more importantly they need to be EDUCATED. The poor need to be trained for jobs so that they can move into the middle class. However, to maintain that position, they also need to be taught how to invest and take advantage of The Money Cycle
When times are good and the money supply expands, the poor need to be given opportunities for employment. The rich need to HIRE people, and pay them good wages. Unfortunately, they will only do this if there is:
- Demand for Goods: People want the product
- Ability to Purchase: People have money to buy the product
- Need for Labor: Production requires workers
The process begins with DEMAND. Those with money need to SPEND for jobs to be created and the poor to rise in status. The rich are risk-averse. They will not hire people until they know that a product will sell and make a profit.
The Power of the Middle Class
The engine of the economy is the Middle Class. They are the most productive people because they have the most incentive to work hard, and their combined purchases drive economic demand. Unfortunately money manipulations and class warfare tend to shrink the middle class…pushing them into the ranks of the poor… which starts a downward spiral of destruction that hurts everybody.
When the Money Cycle is broken, the middle class lose their jobs and are unable to buy anything. For a while they can survive on credit, but this eventually makes the situation worse when they cannot pay it back. Without the middle-class to work, generate new wealth, and buy their products, eventually the rich are forced to devour one another. The only way to increase or maintain wealth is to take it from other rich people…accelerating the spiral of destruction.
The only way to end the death spiral is for somebody has to put money in the hands of the middle class…and it has to be enough that they can (1) pay off their debts, and (2) purchase enough goods to entice producers to expand production and hire more people. The longer the Money Cycle is broken, the more expensive it will be to fix.
Fast, Cheap, or Easy…Pick Two
Remember, it takes money to make money. Once a person has money…even a small amount…becoming rich is a straight forward process. Everybody wants to get rich fast, cheap, and easy. Unfortunately you can only ever have two out of the three. There are three ways to become rich:
- The Slow Way: Small amounts of money invested over long periods of time.
- The Expensive Way: Invest large amounts of money to buy a working system.
- The Hard Way: Invest in yourself and develop a rare talent or skill, or do something that is extremely risky or dangerous.
Most people lack the money or talent to do things fast. Therefore, for most people it is best to focus on doing things the cheap and easy (SLOW) way….investing small amounts of money and effort over long periods of time. It takes DECADES to become rich this way, but it works every time. Slow and steady is a sure-fire way to become rich.
Delegation, Automation, and Compounding
It may take a long time, but becoming rich does not have to take FOREVER. It is possible to become rich in less than 20 years…or even 10...the key is to find investments that take advantage of three principles:
- Delegation: dividing the work so that people can specialize and produce more
- Automation: making the system run itself so you can do other things
- Compounding: making the system replicate over and over
These accelerate the growth process, making it possible to achieve much higher levels of wealth in far less time. Nearly every business on the planet makes money using one or more of these principles. However, changes in the money supply can overpower even the best business model…WHEN you invest is just as important as WHAT you buy into.
Bubbles vs Waves
Banks create BUBBLES, Business makes WAVES, and Governments do both. Both have the same effect on the money supply…they cause expansion and contraction…but they do it in very different ways.
Banks expand the money supply through LENDING, creating a BUBBLE. The economy expands when the loan is made, but contracts rapidly when the loan and interest are paid back. The initial expansion fuels the Money Cycle and creates economic growth. However, the contraction breaks the cycle causing defaults, bankruptcy, and foreclosure…a depression sets in.
Business on the other hand expand the money supply through HIRING, which makes a WAVE in the economy. The economy expands as people use their wages to make purchases, which stimulates more business activity and investment. This leads to more hiring and higher levels of production. However, businesses eventually contract the money supply by lowering wages to increase profits. This is a more gradual process than bursting a bubble, but can have the same effect.
Governments have the ability to create either bubbles or waves, depending on how fast they add or remove money from the economy. They can lend like a bank, or they can hire like a business. However, they are more powerful than banks or business because they are the only entity that can PRINT money and TAX. Ultimately government is the SOURCE of all money…and its final destination. The government is both cradle and grave for money.
Follow the Money
The bottom line is that to become truly rich, we need to get into a market where there is an expanding money supply, and get out before it contracts. We need to watch the big players…banks, businesses, government…to see where they are moving money. We need to move with the money, investing when a market is down, and selling out when the market is up. We ride the bubbles and the waves to financial INDEPENDENCE.
For the poor, who have no money to invest, understanding these boom and bust cycles tells us when and where jobs will be created. Jobs are created where the Money Supply is expanding and the Money Cycle is strong. Those who are able need to educate and care for the poor when the money supply contracts. They need to help the poor survive recessions, but more importantly to prepare for the jobs that will be created when the economy expands again.
Finally, The Truly Rich need to understand their role in The Money Cycle…to PRODUCE and to HIRE…and that breaking this cycle is self-destructive. The only way for the rich to continually grow their fortunes is for others to buy their products…which can only happen so long as the wealthy pay good wages and the government expands the money supply. Everyone prospers as money flows from producers to consumers and back again…the rich get richer and the poor get a chance at a better life.