There Are No Crystal Balls
I am often asked what I think will happen in the future. My response is always that there
is no crystal ball. A lot of people are looking for a quick way to get rich. They’re looking
for that next tip that will help them reach pay dirt. More often than not, those are the
same people who lose big time when markets crash.
That being said, it is possible to prepare for the future and to be better prepared to
prosper. The past is the best crystal ball we have for the future. By analyzing trends and
equipping ourselves with knowledge, we stand a better chance for doing well financially
in the future.
The following are three concepts that I believe will be essential to prospering in 2010.
#1 – The Dollar is Toast
Many people think of the dollar as money. It is not. It is a currency. As I explained in my
new book, Conspiracy of the Rich: The 8 New Rules of Money, in 1971, President Nixon
took the dollar off the gold standard, making the dollar, the reserve currency of the world,
a fiat currency that was backed by nothing but the good faith and credit of the United
In order for a currency to stay alive, it must keep moving. A good example of this is an
electrical current, which must move from one point to another point or else it dies.
Today, the dollar operates the same way. It must keep moving or it dies. Many people
who are financially ignorant buy wholesale into the so-called expert advice that savers
are winners and that prudent investors invest for the long-term in stocks, bonds, and
That is financial insanity. It is poor advice for poor people.
Today, the dollar is toast.
The Fed is scared to death that we will experience another depression. In order to hold off
a depression, the Fed is pumping trillions of dollars into the economy. To top it off, they
are keeping interest rates at near zero percent in an effort to stimulate lending. But
because of market uncertainty, banks aren’t lending. That money is piling up.
There will be a time when confidence is restored and all the money that the Fed is
printing starts to move. When that happens, we may very well see hyperinflation. Other
countries, such as China, are already making moves to distance themselves from the
#2 – Knowledge is the New Money
In Conspiracy of the Rich, the very first new rule of money is: Knowledge is the new money. That is the most important concept one can understand on their path to financial freedom. In a volatile economy like the one we are in today, you’re toast without knowledge about money, both its history and how it works.
Because the dollar is a currency it is only valuable if it moves from one asset to another. To be a successful investor you must have the knowledge necessary to find, analyze, and stay ahead of the financial trends.
For instance, if you invested in gold in the early eighties, you would have been wiped out. Gold was at its peak and the stock market was in such shambles that most people had all but abandoned it. While people continued to pile money into gold, creating a bubble, the smart and financially intelligent investors quietly moved their money back into the stock market. When the stock market took off, and the gold bubble popped, billions of dollars were transferred from the financially ignorant to the financially smart. Those that had stayed ahead of the curve looked like geniuses.
In the end, it was not their money that made the winners rich…it was their financial knowledge and their ability to act on that knowledge that made them rich. In 2010, it is essential that you increase your financial knowledge so that you can recognize the opportunities that await you. We are in the midst of the biggest wealth transfer in history. Now is your time to get rich.
#3 – Watch the Fed
In 2010 it will be crucial to keep you eye on the actions of the Federal Reserve. We are in an unprecedented moment in modern financial history. The Federal Reserve is wielding tremendous influence on the economy and on the dollar.
In Conspiracy of the Rich, I write about how there are two kinds of depressions – deflationary and inflationary. The Great Depression was a deflationary depression, meaning that prices dropped as the dollar became stronger.
The reason this happened was because the dollar was still pegged to gold and only so much money could be printed. As people stopped spending, asset prices dropped. In Weimer Germany, on the other hand, because their currency was fiat and not pegged to gold, they were able to print as much as they wanted. As the country faced mounting war debts, they sent the printing presses into overdrive. They experienced an inflationary depression. By 1923, the German Mark was worth one-trillionth its value in 1914. The middle-class was wiped out.
The decisions that the Fed makes will determine how you should invest. As I’ve stated, I believe they will continue to print money like its going out of style. If that is true, that means we will experience hyperinflation. As such, I’m bullish on hard commodities such as gold, silver, and oil. I’m also big on cash-flowing real estate, since right now prices are low, debt is cheap, and rents rise with inflation.
If, however, the Fed decides to back policies that strengthen the dollar such as raising interest rates to extremely high levels, then we may see deflation. If that were the case, you would need to invest differently. Many people choose to invest in bonds or save in deflationary economies since the interest rates are high. Whatever the case, the dividing line between investors who win and those who lose will be their financial knowledge.
Learn to Win
As 2010 comes upon us, I want to again stress that Knowledge is the new money. Whatever you do, make sure to focus on increasing your financial knowledge through books, seminars, investment clubs, and other venues. In doing so, you will learn to win no matter the economic conditions. If you increase your financial knowledge in 2010, you will prosper.