Robert Kiyosaki: ‘Biggest’ market crash likely in 2016
MANILA, Philippines – Back in 2002, in between the tech bubble bursting in 2000 and the global financial crisis starting 2007, Rich Dad, Poor Dad author Robert Kiyosaki predicted in his book Rich Dad’s Prophecy that the biggest market crash would come in 2016.
“Well, that’s a month from now. I hope that doesn’t come true but if you look at it, China is now going down, Europe is going down, Japan and South America are going down, so it looks like 2016 might come true,” Kiyosaki said at an event to promote his new book, Second Chance: For Your Money, Your Life and Our World held by National Bookstore on Tuesday, December 1.
“In the first 10 years of the 21st century, we’ve had 3 major crashes, each bigger than the 1929 crash that caused the Great Depression. So everything I wrote in Rich Dad, Poor Dad is now coming true,” he added.
Kiyosaki explained that each time a crash happens, the US Federal Reserve (Fed) simply prints more money to prop up the market, each more than the next, which is eventually setting it up for a major crash.
It is a situation that is mirrored by other central banks throughout the world, he added.
And yet, he lamented, “people are saving money and investing long-term in the stock market and sending their kids to go to school to get a job.“
It was this situation that prompted him to write Rich Dad, Poor Dad in the first place. (READ: Robert Kiyosaki: Traditional school is useless)
“If you listen to people like my poor dad, a college professor, you’re probably going to get wiped out financially in a crash. He was smart, a PhD, but died a poor man because he craved job security and his money was in the stock market so he lost everything,” he said.
For the next 20 years, until about 2035, the world might be in a depression, which means a lot of people will get hurt, Kiyosaki said.
Bubble economy, weak fundamentals
The problem started in America after President Richard Nixon eliminated the gold standard in 1971 which gave governments license to print money without needing it to be backed by gold, and in effect, created a bubble economy, Kiyosaki explained.
“The underlying economy, the gross domestic product, is weak but the stock market is high, he said.
According to Kiyosaki, unemployment in the US is much higher than the official figure. “(President Barack) Obama says its 5%. I say its more like 20% and the discrepancy is due to the way the government counts unemployment,” he said.
He went further to say nothing has changed between now and the period between both crashes in 2000 to 2007.
The only thing that has changed is that we are now using financial derivatives which Warren Buffett himself called "weapons of financial destruction," Kiyosaki pointed out.
Derivatives were behind the housing debt crisis in the US that developed into a global credit crisis.
“In 2007, there was 700 trillion in derivatives, today there’s 1.4 quadrillion in derivatives. All authorities did was step up the debt to give the false appearance that the economy is strong,” he said.
Nothing has changed except the amount of debt has gone up, he added.
“In truth, the gap between the rich and the poor already shows that the economy has crashed,” he said.
“The people making $500,000 (P23.58 million) in the US are becoming poor so there’s a lot of change needed because the base of the economy is weak,” he said.
“The stock market is propped up by Wall Street and the Fed and the government and that’s why it’s a kleptocracy, they’re robbing the poor and the middle classes.”
"This is why we need to teach kids about money, give them a clear view of what the poor middle class and rich people do, and let them decide for themselves which group’s actions to emulate," Kiyosaki added.
Prolonged slowdown instead?
Kiyosaki did concede that this was his personal view and his views on the subject have long been questioned by academics and economists.
One such differing view came from his friend, Richard Duncan, economist and author of The Dollar Crisis, with whom he shared the stage on November 30 at the National Achievers Congress 2015.
While agreeing with Kiyosaki's views in principle, Duncan said that the debt situation in the US and subsequent rebalancing would more likely result in a prolonged slowdown in China, which would in turn affect the rest of the world as seen this year.
Duncan is confident that governments can keep printing money to keep the stock market high, resulting in a transition period instead of a crash, Kiyosaki said.
“My question is… for how long? As long as the underlying fundamentals are weak, why have a high stock market, it's best to bring it down rather than have it crash. I think what will happen is that they will just keep printing money until it crashes,“ he said.
While people get wiped out, crashes can be good if you have the skill to take advantage of them, and "so I get very excited about crashes because they are a great opportunity," Kiyosaki said.
He showed this when the market crashed in 1997 and he made more money than ever before.
People need to be prepared for that possibility and the best way to do that in today’s global economy is to develop entrepreneurial skills, he said.
“Today, with a smartphone, I could live here in the Philippines and market all over the world. So if we train children to learn how to sell to markets and be entrepreneurs they can expand their economies,” he said.
Being tech-savvy is another important factor in today’s world, said Kiyosaki, adding that the new president of his company is only 39.
“Regardless of what business you are in, you have to be in technology. That's the way it's going,” he said.
Kiyosaki shared that he had to spend millions and bring a whole new staff to convert his old company into a tech-adept one. "Since then, I make more in a week than I used to do in 2 to 3 months. Technology is a great leverage,” he said.
In the Philippines, schools teach kids to be doctors or lawyers. But today, kids know that you can access the world, Kiyosaki said.
He gave his personal assistant as an example, saying she makes an extra $5,000 (P235,902) using her smartphone to sell on eBay and Amazon.
“It really is much easier today than ever before to be an entrepreneur except that our schools are teaching us to be employees,” Kiyosaki said. – Rappler.com
$1 = P 47.18