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Robert Kiyosaki: ‘Biggest’ market crash likely in 2016

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.

MONEY MATERIAL. 'We need to teach our kids about money, we don't do that because our school system is corrupt,' says Kiyosaki.

Photo by Franz Lopez/Rappler

Tech-savvy entrepreneurs

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