Robert T. Kiyosaki is one of the most respected voices on growing wealth in the world. He is best known as the author of Rich Dad Poor Dad. This is the #1 personal finance book of all time, which has challenged and changed the way tens of millions of people around the world think about money.
The Global Townhall is honored to have Robert join us to discuss the financial concepts that you really need to know, to grow your personal wealth…
Robert T. Kiyosaki: The financial crisis is so complex. I spend most of my time doing my best to simplify it and make it easier to understand so people can take action accordingly. So that's part of my job, and it's not that easy because it's changing every day now.
Gabrielle Reilly: Well, that's right. It is changing so much. For example, Tony Robbins' made an interesting point in his recent financial book. He pointed out that bonds were always considered so secure but in 2008 bonds went down with the stock market as well. Is it worth investing in bonds at such a low return if they go down at the end of the day now anyway?
What are your thoughts on investing in bonds at the moment? Do you still think they're a good investment for people heading into retirement?
Robert T. Kiyosaki: Gabrielle, you're talking to the wrong guy on that one because I’m really an entrepreneur and professional investor, and so I don't touch bonds at all.
The reason is the returns are too low, the leverage is too low, and the tax is too low. They have no tax advantages to them, and so why would I put my money there? I can do better as an entrepreneur.
What I invest in then are businesses, real estate, and commodities. I stay away from what I call paper assets, which is considered stocks, bonds, mutual funds, and cash. I think saving money is the most stupid thing you can do today.
Gabrielle Reilly: Right, not save money? So what are your thoughts on Dave Ramsey’s financial philosophies?
Robert T. Kiyosaki: Dave Ramsey, he is a good friend of mine. Tony Robins is a good friend of mine too, but we just don't see eye-to-eye on how we manage our money. Dave Ramsey is this guy who is, "Get out of debt," and I am deeply in debt, Gabrielle. But there's good debt and bad debt.
What I'm saying here is that most people really have no financial education, and that kind of affects the way they look at the world of money. I wouldn't touch a bond for anything today.
Gabrielle Reilly: There are so many people in bad debt, not good debt, in America now. What advice do you give to them?
Robert T. Kiyosaki: Gabrielle, I think the biggest problem facing not only the U.S., but the world, is our education system. Our education system is obsolete, out of touch. You know when you go to the supermarket and you buy a quart of milk? There's an expiration date on the quart of milk. Well, there's also an expiration date on the information you put in your head. Will you actually check the expiration date on the ideas in your head?
Many people are making decisions based upon obsolete economic conditions. Let me ask you this. Why would you save money when the government is buying bonds? Management has no idea what that means.
Like Dave Ramsey. He and I agree to disagree. He says we should get out of debt, and I'm the guy saying we should get into debt.
Dave Ramsey says don't get into debt, and I'm in debt up to my eyeballs.
I just refinanced $200 million worth of debt, and the average interest rate came from 5% at $200 million down to 3%.
Gabrielle Reilly: Wow. That's quite a difference.
Robert T. Kiyosaki: I made a fortune. The bond guys lose, and guys like me win.
Gabrielle Reilly: In your original book you talk about C-corporations. What are your thoughts on C-corporations now?
Robert T. Kiyosaki: I was talking about asset protection more than the corporate structure. There's C's, S's, LLC's. A lot has changed since I first wrote that book. I used to use C-corporations until they came up with what's called the LLC.
Gabrielle Reilly: You don't recommend them as strongly today then?
Robert T. Kiyosaki: No, no. Gabrielle, I don't recommend anything. I tell people they've got to find competent advisors. Your financial situation is different than mine, and my strategies are different than yours. But I would say business and investing are team sports, and you've got to find a great accountant, the right attorneys, the right CEOs and all that to be on your team.
The real reason I write is because I could see this economic crisis coming. That's why I wrote Rich Dad, Poor Dad, and I warned people. I said, number one, the rich don't work for money; number two, savers are losers; and number three, your house is not an asset. I was saying that in 1997. Then, ten years later, in 2007, the markets came crashing down. Savers became losers. Your house was not an asset. And the rich got richer. That's what I support. But most people do not do what I do, but they can do parts of what I do.
Gabrielle Reilly: Why do you think they can't do what you do?
Robert T. Kiyosaki: Because they don't invest in education.
You know, Einstein said it best. He says “you cannot solve a problem using the same mindset that caused the problem.” Most people are trying to solve their problems with the same mindset that got them into the problem. That's why I talked to you about the expiration date on your education. Most people are using obsolete information.
All the rules have changed.
Gabrielle Reilly: So what do you do to keep up to date with all of the information?
Robert T. Kiyosaki: I'm studying. When you ask what I do, I don't do seminars. I'm constantly studying - constantly.
Gabrielle Reilly: What do you study?
Robert T. Kiyosaki: Well, I talk to different guys who are in the marketplace, like my scouts in the marketplace who tell me what's going on for example.
Gabrielle Reilly: And so what newspapers and what media do you watch to just keep up to date, in general, or what could you recommend or suggest people do to keep up-to-date?
Robert T. Kiyosaki: Well, I subscribe to a thing called “Newsletters.” They're more expensive, like $500 to $1,000 a year. I'm reading from guys who are into the market every single day. That's how fast things are changing… moment-to-moment. By the time I read it in a newspaper or see it on TV, it's almost too late. If you look at my predictions, my predictions have come true, but I am ahead of this.
When I said your house is not an asset, I got crucified. Then ten years later, the housing market collapses. It wasn't because of the bond market. It was because of a thing called derivatives, you know, the false swaps and mortgaged backed securities, MBS's and the like. But that's what I'm watching constantly. I'm watching what the big bankers are doing with money.
Gabrielle Reilly: I remember watching Alan Greenspan back in 2003 when he decided to keep the interest rates so low. Americans were already so far in bad debt as a nation, how can spending on borrowed consumables that fill the landfills help? What were your thoughts on the lead up to that with the interest rates and how that played with the market on people getting too much bad debt?
Robert T. Kiyosaki: Well, one of the reasons is who Greenspan works for. First of all, the Federal Reserve Bank is not federal, has no reserves, is not U.S… and it's not a bank. Greenspan works for the richest guys on earth, so he was trying to save the wealth of the rich. What happened was -- I forget the exact date -- in the 1990s there was a thing called a repeal of the Glass-Steagall Act, which allowed banks to lend more and more money out, the big banks only. And so, when they got in trouble, Greenspan had to keep the interest rates low so the banks could get their money back. So it's not as they say.
Gabrielle Reilly: Yeah. At that point I just thought we're heading to disaster keeping the interest rates low so that the consumers, considering the amount of bad debt in the country, you just couldn't keep that rate up without a financial crisis coming at some point. I would like to see that system questioned. In some ways it's really good that they have the capability the Federal Reserve does because, for example, in Australia home owners cannot lock the interest rates on their home loan for more than a maximum of five years.
Robert T. Kiyosaki: Right.
Gabrielle Reilly: So it's chaos in the system when the interest rates turn from 7% to 17%, like they did in 1987, in Australia. That meant that basically everyone's mortgage payment doubled overnight. In the average household, that's tremendous. So, some of the systems here in America are so much more sophisticated, but then you question those choices on interest rates.
Do you know if there's ever been an investigation into any of that?
Robert T. Kiyosaki: I doubt it. Like I said, the Federal Reserve Bank is not American. It's not federal. There are no reserves. It's not a bank. And, it controls the world economy, or attempts to.
But that's failing today because that's what's going on in the Middle East right now and between China and Russia because people are sick and tired of the U.S. dollar. But they mess with it, the stronger the dollar gets for some reason, so that's why it's not really a bond issue or a real estate issue or a stock market issue.
It's just the basic manipulation of the monetary system. That's what I watch. I don't watch the stock market or real estate market.
I don't personally think the U.S. dollar will last much longer, which is not good for the world.
Gabrielle Reilly: And so what currency do you think it's going to go to then?
Robert T. Kiyosaki: It's going to go to what I call "knowledge is the new money." You have to be smart today. It really doesn't make a difference if markets are going up or the market is coming down. If you're smart, you'll do well. But if you're just sitting around listening to people who give financial advice, you'll probably get wiped out within five to ten years. That's my concern. But the good news is the rich will get richer. But you have to be rich.
Gabrielle Reilly: One last question on market confidence. Part of America’s success story has been market confidence. What do you think the impact is if our political leaders air all the dirty laundry out to the world like happened with the government shutdown last year? How do you think that impacts the markets?
Robert T. Kiyosaki: Well, I think it's the end as we know it. It's the end of the American empire. What I'm saying is that our political leaders have no power anymore. There's a new book that came out. It was endorsed by Mark Zuckerberg to read. I just read it. It's called End of Power, and he's talking about the lies of micro-power. Micro-power on the bad side are guys like ISIS and Al Qaeda. And so what that means is big power, which will always be around, they're losing power. It's called the decay of power.
What's happening in politics right now is they're obsolete. Their expiration date is over. I'm not republican. I'm democrat, but I don't really pay much attention to what they're doing because I have more power than they do to maintain or to direct my own financial well-being and stability. I don't need the government, but most people are so dependent upon the Fed or the government, that's why they don't have any power.
I write up on all this in my latest book. It's called Second Chance. It's in Australia right now. It's called Second Chance, so that people can relook at the way power is diversing. Second Chance is in picture, so you can look at the pictures. Then you can make up your mind what's best for you.
You see, I plan on getting richer when this whole thing crashes down. Unfortunately, most people will get poorer, and that's why I'm concerned. You've got to be careful. You shouldn't listen to me, Tony Robbins, or Dave Ramsey. You should listen to yourself.
Gabrielle Reilly: Absolutely. I think it's important to collect information from everyone and assess what you need to do with your own investments.
Robert T. Kiyosaki: Amen.