Robert Kiyosaki: Go For Gold And Silver - Cash Is Trash

“Rich Dad, Poor Dad” author Robert Kiyosaki expects the USD to become worthless very soon. In other words, he thinks the world’s reserve currency will resemble Zimbabwean dollars in terms of value. Many central banks, but most importantly the Federal Reserve, are trapped printing more and more money to create the feeling their economies are doing fine. In Robert Kiyosaki’s opinion, in order to avoid losing your savings, it is necessary to “buy something”. But don’t get me wrong. It does not mean you should just spend your money on what is often promoted on Reddit as an easy way to make money.

Rather the opposite is true. Kiyosaki, a renowned investor and a financial guru, believes the markets are in a mania, not even in an asset bubble. Many private speculators are getting crazy buying the likes of dogecoin, Tesla and meme stocks. They simply ignore the fundamentals whilst buying these asset classes. Although he approved Redditors back in January who managed to kick “the butts of institutional investors”, it does not mean you should buy the most speculative assets.

His favorite asset classes are gold, silver, Bitcoin and real estate. But there are problems with the two latter asset classes. The famous investor is quite bullish on Bitcoin but he admits the asset is not well tested. At the same time, he considers Bitcoin to be an alternative to the US dollar in terms of liquidity. What is more, Bitcoin, he argues, is not controlled by any central bank that keeps printing money. So, the USD’s devaluation is not a threat to this cryptocurrency.

We all know that Robert Kiyosaki earned his fortune mostly by investing in real estate. He still considers that asset class to be a reasonable buy. However, in his view, lots of houses and apartments simply look far too overvalued right now. So, after a stock market collapse, which, in his opinion, will come sooner rather than later, overvalued property will fall in value.  This is not the only disadvantage real estate has. It is also highly illiquid. In plain terms, if you own a house and all of a sudden you end up urgently needing cash, you will end up selling your property at a substantial discount.

Gold and silver, on the other hand, are highly liquid. They do not just act as inflation hedge. Throughout history they have been used as money. The two precious metals have a track record of over 6,000 years. This is something that cryptocurrencies obviously lack. 

Robert Kiyosaki twitted in mid-May the stock market is going to crash since the Fed would raise the interest rates. Sounds like a contradiction to his excessive money supply thesis, does not it? But it is not. After stock market crashes central banks ease the monetary policy. That is because market crashes are often accompanied by recessions and deteriorating macroeconomic indicators.  So, in order to normalize these things, the Fed lowers the interest rates and restarts its quantitative easing (QE) program. This raises the money supply, thus contributing to higher demand for precious metals. The bigger the next crash will be, the more the Fed will have to ease and print more money.

One of the biggest problems is the USA’s national debt. It is rising exponentially. In order to service it at a reasonably low cost, the US needs low interest rates. If the Fed hikes the interest rates significantly, it will have to print even more money to pay the debt back, thus devaluing the dollar even further. At the same time, low interest rates do not allow the Fed to fight inflation since they facilitate higher money supply. So, either way the Fed is trapped.

Robert Kiyosaki even compares the current American macroeconomic situation to the post-World War I period in Germany. Germany had to pay plenty of money as reparations as the result of the Versailles Treaty. The German government abandoned the gold standard and started recklessly printing money. So, from 1919 to 1923, Germany’s money supply rose from 29.2 billion marks to 497 quadrillion marks. That is an extremely high increase. Quite expectedly, the value of the mark, Germany’s national currency at the time, plunged to almost zero. The pace of money-printing in the US is not that high just yet, of course. What is more, the USD is the world’s reserve currency at the moment. But this won’t probably last forever, if the Fed just keeps printing money.

One more indicator that gold and silver are good buys right now is the fact the general public currently is not particularly interested in these two metals, says Kiyosaki. Good signs of an overvalued asset are many amateur investors, or better-said, speculators buying this asset with both hands. This does not seem to be the case right now with silver and gold.

Ordinary investors underappreciate their value for now. But Robert Kiyosaki believes this will change sooner rather than later.

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