Banking / Economics - News, Updates, Images & Quotes

All human action, so far as it is rational, appears as the exchange of one condition for another. Men apply economic goods and personal time and labour in the direction which, under the given circumstances, promises the highest degree of satisfaction, and they forgo the satisfaction of lesser needs so as to satisfy the more urgent needs. This is the essence of economic activity—the carrying out of acts of exchange.

— Ludwig von Mises view

Once the principle is admitted that it is duty of government to protect the individual against his own foolishness, no serious objections can be advanced against further encroachments.

— Ludwig von Mises; Human Action view

Government means always coercion and compulsion and is by necessity the opposite of liberty.

— Ludwig von Mises; Human Action view

Whoever wants lastingly to establish good government must start by trying to persuade his fellow citizens and offering them sound ideologies. . . . There is no hope left for a civilization when the masses favor harmful policies.

— Ludwig von Mises; Omnipotent Government view

It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a 'dismal science.' But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.

— Murray Rothbard view

First, the scope of government must be limited. Its major function must be to protect our freedom both from the enemies outside our gates and from our fellow-citizens: to preserve law and order, to enforce private contracts, to foster competitive markets.

— Milton Friedman; Capitalism and Freedom view

The free man will ask neither what his country can do for him nor what he can do for his country. He will ask rather "What can I and my compatriots do through government" to help us discharge our individual responsibilities, to achieve our several goals and purposes, and above all, to protect our freedom? And he will accompany this question with another: How can we keep the government we create from becoming a Frankenstein that will destroy the very freedom we establish it to protect? Freedom is a rare and delicate plant. Our minds tell us, and history confirms, that the great threat to freedom is the concentration of power. Government is necessary to preserve our freedom, it is an instrument through which we can exercise our freedom; yet by concentrating power in political hands, it is also a threat to freedom. Even though the men who wield this power initially be of good will and even though they be not corrupted by the power they exercise, the power will both attract and form men of a different stamp.

— Milton Friedman; Capitalism and Freedom view

In a much quoted passage in his inaugural address, President Kennedy said, "Ask not what your country can do for you -- ask what you can do for your country." It is a striking sign of the temper of our times that the controversy about this passage centered on its origin and not on its content. Neither half of the statement expresses a relation between the citizen and his government that is worthy of the ideals of free men in a free society. The paternalistic "what your country can do for you" implies that government is the patron, the citizen the ward, a view that is at odds with the free man's belief in his own responsibility for his own destiny. The organismic, "what you can do for your country" implies that government is the master or the deity, the citizen, the servant or the votary. To the free man, the country is the collection of individuals who compose it, not something over and above them. He is proud of a common heritage and loyal to common traditions. But he regards government as a means, an instrumentality, neither a grantor of favors and gifts, nor a master or god to be blindly worshiped and served. He recognizes no national goal except as it is the consensus of the goals that the citizens severally serve. He recognizes no national purpose except as it is the consensus of the purposes for which the citizens severally strive.

— Milton Friedman; Capitalism and Freedom view

Nevertheless, the success of capitalism has always bred a certain number of malcontents who, among other things, believe that they are insufficiently rewarded by the capitalist system, are envious of other's success, have a compulsion to use politics to control other people's behavior (and their wealth), deny the reality of human inequalities, believe that personal freedom is overrated, and resent the power that ordinary consumers have over the economy. Many of these anticapitalists are ignorant of basic economics, but that does not stop them from assaulting capitalism at every opportunity.

— Thomas Sowell; How Capitalism Saved America view

As these studies clearly convey, capitalism is the best-known source of upward economic mobility. And, despite the oft-repeated claims of anticapitalists, capitalism actually reduces income inequalities within a nation as well. While there will always be inequalities of incomes—this is only natural, for every human being has different aptitudes, priorities, and interests—the economic opportunity in a capitalist economy enables those at the bottom of the economic ladder to ascend to the middle and the top. Over time, income inequalities diminish as more and more people take advantage of job opportunities, work hard, learn skills, educate themselves, save their money, get married and raise families, and start up their own businesses.

— Thomas DiLorenzo; How Capitalism Saved America view

The freedom to engage in international commerce expands the size of markets in a capitalist economy and makes competition more vigorous. This, in turn, generally leads to higher-quality and lower-priced products for consumers.

— Thomas DiLorenzo; How Capitalism Saved America view

Taxation, price controls, regulation in general, and government control of production with government-run enterprises all shrink the private sector as well. When the government causes inflation it makes it difficult for capitalists to make economic calculations. After all, the entrepreneur must assess whether his investment in resources is producing a product or service that consumers value more than the resources themselves—that is, whether his revenues exceed his costs. And inflation complicates this critical calculation, which harms capitalism.

— Thomas DiLorenzo; How Capitalism Saved America view

The overall size of government as a percentage of an economy is important because every dollar that government spends must necessarily come from the private sector. If the government taxes, it takes money out of the pockets of consumers; if it borrows, it crowds out private borrowers (individuals, families, and businesses) and puts upward pressure on interest rates, which makes borrowing more expensive for private borrowers (individuals, families, and businesses) and puts upward pressure on interest rates, which makes borrowing more expensive for private citizens; and if it prints money to finance its programs, it creates inflation, which reduces the value of all privately held wealth. Except for spending to protect property rights, enforce the law, and protect citizens from foreign aggressors, all government spending crowds out private spending and weakens the vitality of capitalism.

— Thomas DiLorenzo; How Capitalism Saved America view

Any discussion of economic freedom must consider degrees of freedom, for neither the United States nor any other nation has ever had an economy that was genuinely free of government interference— that is, free of taxes and regulations. Rut overwhelming evidence indicates that the more economic freedom a nation has, the more economic opportunity there will be and the more vibrant that nation's economy will be. And the opposite is also true: the more regulations, controls, taxes, government-run industries, protectionism, and other forms of interventionism that exist, the poorer a country will be. The strongest evidence comes from several annual ''economic freedom indexes" calculated and published by the Fraser Institute in Canada and by the Wall Street Journal and the Heritage Foundation in the United States. These indexes show a strong; correlation between the degree of economic freedom in a country and economic growth. And in fact the studies show more than just a correlation; they explain why a higher degree of economic freedom (that is, a more capitalistic society) causes more prosperity.

— Thomas DiLorenzo; How Capitalism Saved America view

The important feature of entrepreneurship is not so much the ability to break away from routine as the ability to perceive new opportunities which others have not yet noticed. Entrepreneurship... is not so much the introduction of new products or of new techniques of production as the ability to see where new methods of production have, unknown to others, become feasible.

— Thomas DiLorenzo; How Capitalism Saved America view

Entrepreneurial freedom in general is a prerequesite for capitalistic success. It is entrepreneurs who take risks, invest their money, start up new businesses, create new products, and employ most of the workforce in the United States. Entrepreneurs have created whole new industries by filling market niches that were ignored by other businesses. They have created competition for older, more established businesses, which is always good for the consumer. Entrepreneurs are also the main source of experimentation in the business world, for in trying to find profit opportunities that others have missed they are constantly experimenting with newer products. These products sometimes become revolutionary, as in the case of personal computers, the automobile, and thousands of other products and services.

— Thomas DiLorenzo; How Capitalism Saved America view

Not all entrepreneurs are successful, of course; many lose money and go bankrupt. But this is another strength of free-market capitalism, where the consumer is king. If one capitalist uses his resources in a way that does not please consumers and therefore cuts back on resources or goes out of business, more successful entrepreneurs will take up those resources and use them more efficiently. Indeed, in many cases a company that goes bankrupts is purchased by a more successful competitor in the same industry who knows better how to manage those resources and produce products and services that are more to the liking of consumers. The freedom to fail is an important ingredient of capitalist success.

— Thomas DiLorenzo; How Capitalism Saved America view

Competition never lets entrepreneurs rest on their laurels.

— Thomas DiLorenzo; How Capitalism Saved America view

On the other hand, if a product catches on and more consumers want to buy it, they will bid up the price of the product. That in turn will once again provide the correct incentive to producers: to produce more. More entrepreneurs will enter the business, as long as there are no government-imposed barriers to competition, such as protectionism, monopoly franchises, and onerous licensing regulation -- all things that, as we will see in the next chapter, impede capitalism. The additional production and competition will eventually bring the price back down, perhaps even to a lower level than the original price. The process of competition also tents to improve the quality of the product, benefiting the consumer even more.

— Thomas DiLorenzo; How Capitalism Saved America view

When it comes down to it, what are being traded in a capitalist economy are property rights -- the ownership rights in goods and services. Trade and exchange will be minimal without reasonably secure property rights. And it is these trades and exchanges (supply and demand) that determine free-market prices. Prices in a capitalistic economy reflect the relative scarcity of a good or service as well as the amount and intensity of consumer demand. Free-market prices are the only viable means of a rational economic calculation. If a good or service becomes in shorter supply, for whatever reason, its price will rise, all other things being equal. The higher price will give consumers the proper incentive to do what is needed whenever anything becomes scarcer: conserve, or cut back on consumption. At the same time, the higher price gives producers an incentive to supply more to the market (since it is more profitable to do so), while others are given financial incentives to create and market substitutes for the higher-priced item.

— Thomas DiLorenzo; How Capitalism Saved America view

It is no coincidence, then, that capitalism grew from the fifteenth century onward after the creation of commercial law and commercial law courts designed to enforce and protect property rights.

— Thomas DiLorenzo; How Capitalism Saved America view

Because government in poorer countries has failed to enforce property rights, the people of these countries lack the ability, on any large scale, to create capital and become entrepreneurs. And without capital there can be no capitalism.

— Thomas DiLorenzo; How Capitalism Saved America view

Coca-Cola, for example, uses considerably less aluminum in its cans than it did several decades ago. Coca-Cola did this not because it became more environmentally sensitive but because it wanted to increase its profits.

— Thomas DiLorenzo; How Capitalism Saved America view

One of the more famous demonstrations of the complexities of an economic system came in an essay about what goes into making a seemingly simple product: a pencil. In “I, Pencil,” Leonard Read, the founder of the Foundation of Economic Education in Irvington, New York, discussed the many materials necessary to produce a pencil: wood, metal, zinc, rubber, paint, and dozens of other things. But that is just the beginning, for there is an entire industry to produce each of those materials—a lumber industry to get the wood, a mining industry to get the zinc, and so on. Moreover, engineering and tool-making businesses are required to supply all of those industries. Finally, neither the pencils themselves nor the various elements needed to manufacture pencils could be transported without the oil and shipping industries.

All told, making the most simple of objects, a pencil, involves thousands of people who possess very detailed knowledge and information about their day-to-day jobs, whether they are in the lumber industry, the rubber industry, or elsewhere. And these people come from all over the world. No central planner or “pencil czar”—even with access to the most powerful computer imaginable—could possibly possess and utilize all the detailed and constantly changing information that goes into making pencils. And yet we still have our pencils. How? Because of private property and the free-market capitalism it enables. Under a free-market system, all of these thousands of people, very few of whom actually know each other, have an economic incentive to cooperate with each other under a division of labor and produce pencils. There’s no magic or invisible hand involved. It is the common sense of everyday life under capitalism. As long as there is a consumer demand for pencils—and thus the potential for profit—people will cooperate with others to figure out a way to produce and market pencils. Consumers get the pencils they want, and the people who produce them improve the standard of living for themselves and their families. Property rights and the capitalist system make all of this possible.

The more complex an economy becomes, the more essential it is to rely on free-market capitalism. Indeed, Leonard Read’s pencil example emphasizes just how misguided government planning of the economy is: no group of experts could possibly possess the knowledge required to produce a simple pencil, let alone “plan” an entire economy. The delusion that a single person or group of government planners could possibly possess such information and manage an entire economy is what Nobel laureate economist Friedrich Hayek called the “pretense of knowledge” or the “fatal conceit.”Central planning inevitably leads to economic chaos.

— Thomas DiLorenzo; How Capitalism Saved America view

And because they create the ability to profit from one's own productive endeavors, property rights are the keystone of modern capitalism and of civilization itself. (That’s why Marx and Engels wrote in big capital letters in The Communist Manifesto that a prerequisite for socialism was abolition of private property.)

— Thomas DiLorenzo; How Capitalism Saved America view

Private property also provides powerful incentives for wise stewardship of property. Property owners who do not take good care of their property bear the full cost of their actions when their property—that is, their wealth—depreciates in value. The opposite is also true: those who take care of and improve their property reap the rewards when their property value goes up. This is why private homes are so much better maintained than government housing projects, for example, or why private lakes and streams are carefully maintained while government-owned ones are often overfished and overused, or why private forests that are harvested are often replanted with trees that mature in twenty-five years while public forests are not.

— Thomas DiLorenzo; How Capitalism Saved America view

[...] people are free to choose their occupations, but subject to the demands of consumers.

— Thomas DiLorenzo; How Capitalism Saved America view

Modern governments actually spend relatively little on programs and systems that benefit all citizens, such as national defense or the judicial system; mainly they are concerned with infringing on the property rights of one (less politically powerful) group of citizens for the benefit of another (more politically powerful) group.

— Thomas DiLorenzo; How Capitalism Saved America view

Private ownership of the means of production is the only way to ensure a workable system of human cooperation and division of labor.

— Thomas DiLorenzo; How Capitalism Saved America view

Neither the entrepreneurs nor the farmers nor the capitalists determine what has to be produced. The consumers do that. If a businessman does not strictly obey the orders of the public as they are conveyed to him by the structure of market prices, he suffers losses, he goes bankrupt. . . . Other men who did better in satisfying the demand of the consumers replace him. . . . The consumers . . . make poor people rich and rich people poor. They determine precisely what should be produced, in what quality, and in what qualities. They are merciless egoistic bosses, full of whims and fancies, changeable and unpredictable. . . . They do not care a whit for past merit and vested interests. . . . In their capacities as buyers and consumers they are hard hearted and callous, without consideration for other people.

— Ludwig von Mises; quoted by Thomas DiLorenzo view

Ludwig von Mises wrote, "Every advance first comes into being as the luxury of a few rich people, only to become, after a time, the indispensable necessity taken for granted by everyone. Luxury consumption provides industry with the stimulus to discover and introduce new things."

[...] The result is that the average American working person today lives better in many ways than kings did several hundred years ago, with his automobiles, central heating and air conditioning, swimming pools and hot tubs, inexpensive food, and all the other "necessities" of modern life that those kings would have considered miracles.

— Thomas DiLorenzo; How Capitalism Saved America view

A common myth spread by anticapitalists is that the wealthiest capitalists profit at the expense of the rest of the society, particularly the working classes.

— Thomas DiLorenzo; How Capitalism Saved America view

The biggest and most common talking point when the police fire at someone is counting how many bullets they fired. There are politicians, media people and— above all— community activists who can work themselves into a rage over how many bullets were fired.

If we stop and think— which of course the demagogues hope we will never do— it is hard to see any moral difference between killing someone with one bullet or with dozens of bullets.

People who have never fired a gun in their lives say that they cannot understand why the police fired so many bullets. If it is something that they have never experienced, there is of course no reason why they should be expected to understand.

But, even after confessing their ignorance, such people often proceed to spout off, just as if they knew what they were talking about.

It is very easy for a pistol shot to miss, even in the safety and calm of a firing range, much less in a desperate situation where a decision must be made in a split second that can cost you your life or end someone else's life.

— Thomas Sowell; Dismantling America view

Indeed, most exceptionally wealthy people amassed their fortunes precisely because they provided valued products to millions of people all around the world.

— Thomas DiLorenzo; How Capitalism Saved America view

Here Smith clearly explained some of the most important elements of capitalism—the division of labor, social cooperation, and free exchange. The division of labor is a natural, and beneficial, consequence of the fact that each human being is unique in a thousand different ways—in motivation, intelligence, interests, physical attributes and abilities, preferences, goals, skill levels, age, formal and informal education, worldly experiences, family history and culture, psychology, and much more. So, for example, people who happen to live in a fertile part of the world are more inclined to specialize in farming than, say, people who live in the arid Middle East. But because of this specialization, we rely daily on thousands of people whom we don't even know for the basic necessities of life. This breeds social cooperation. The farmer in the American Midwest can sell food to Middle Easterners and use some of the money he earns from that to purchase, for instance, petroleum products that are generated in the Middle East. Imagine how poor we would all be if we were to live under what is called economic autarky - where we all had to grow our own food, build our own houses, make our own clothing, manufacture and fuel our own cars, and so on.

— Thomas DiLorenzo; How Capitalism Saved America view

In civilized society [man] stands at all times in need of the cooperation and assistance of great multitudes, while his whole life and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is far their own advantage to do for him what he requires of them. Whoever offers to another a bargain of any kind, proposes to do this. Give me that which I want, and you shall have this which you want, is the meaning of every such offer; and it is in this manner that we obtain from one another the far greater part of those good offices which we stand in need of. It is not from the benevolence of the butcher, brewer, or the baker, that we expect our dinner, but from their regard to their own interest.... Nobody but a beggar chuses to depend chiefly upon the benevolence of his fellow citizens.

— Adam Smith; The Wealth of Nations quoted by Thomas DiLorenzo view

Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.

— Ayn Rand; Capitalism: The Unknown Ideal quoted by Thomas Dilorenzo view

Free-market capitalism is a network of free and voluntary exchanges in which producers work, product, and exchange their products for the products of others through prices voluntarily arrived at.

— Murray Rothbard; Capitalism versus Statism quoted by Thomas Dilorenzo view

As we will see, the fact is that true capitalism - that is, capitalism absent excessive government regulation and taxation - has not existed to any significant degree in America in many, many years.

— Thomas DiLorenzo; How Capitalism Saved America view

A careful review of our nation's history reveals a long series of myths that demonize capitalism—and just how pernicious such myths are. Capitalism supposedly harmed the working class during the industrial revolution; is prone to monopolization; harms consumers with dangerous products; generates macroeconomic instability; harms the environment; exploits the Third World; breeds discrimination; is a cause of war; and on and on.

This is all untrue.

— Thomas DiLorenzo; How Capitalism Saved America view

The most important point that the anticapitalists overlook or ignore is this: overwhelming evidence indicates that the more regulations, controls, taxes, government-run industries, protectionism, and other forms of interventionism that exist, the poorer a country will be. Big government invariably causes higher unemployment, higher prices, shortages of goods and services, and myriad other problems that can be eliminated only by more, not less, voluntary exchange on the free market—that is, by capitalism. Excessive government controls are precisely why the countries of western Europe lag so far behind the United States economically.

— Thomas DiLorenzo; How Capitalism Saved America view

Nor is the threat of a jail sentence the only deterrent to corporate fraud. The anticapitalists who call for more government regulation also ignore what Congressman Paul calls "the natural restraints placed on market excesses that capitalism and sound markets impose." Businesspeople have great incentives not to commit fraud because they know that sooner or later no one would want to do business with them if they were somehow manipulating the market, and that they would ultimately lose money or even go bankrupt. And these "natural restraints" are much weaker, perhaps even nonexistent, in the government sector. Thus, if fraud were a problem it would probably be a much bigger problem in the government regulatory agencies than in the businesses they are supposed to be regulating.

— Thomas DiLorenzo; How Capitalism Saved America view

Sure enough, in the wake of the corporate accounting scandals that became public starting in the late 1990s, anticapitalist dema-goguery has become pervasive. Pundits, politicians, and intellectuals have argued that such fraud is an inherent and unique feature of capitalism and that, therefore, the government needs to impose more regulations on financial markets, the accounting profession, and corporations in general. But fraud is not a feature unique to capitalism: we find wrongdoers not just in the corporate world but also in government, in charities, in religion, and everywhere else. In addition, there are laws against fraud, and those who commit fraud quire often end up in jail; thus it is ridiculous and irresponsible to wage a general political campaign against capitalism when the laws already in place address the problem of wrongdoing.

— Thomas DiLorenzo; How Capitalism Saved America view

These myths are inflicting great costs on the American economy and society. The more Americans feel that capitalism needs to be reined in, or that the public has no say in an economy that is largely in the hands of "plutocrats," the more the government is called on to regulate the economy. Congressman Ron Paul, Republican of Texas, is exactly right: Because of a widespread misunderstanding of what capitalism is, our leaders—and also much of the general public—incorrectly blame capitalism for any economic problems we face. Consequently, they are all too quick to recommend bigger government as the "solution."

— Thomas DiLorenzo; How Capitalism Saved America view

In his famous treatise The Wealth of Nations, Smith neatly summed up the essence of how capitalism works: "Give me that which I want, and you shall have this which you want." In other words, commerce is what economists call a "positive-sum game." The act of buying and selling always benefits both buyer and seller; otherwise they wouldn't trade with each other. Voluntary exchange in the free market is mutually advantageous.

— Thomas DiLorenzo; How Capitalism Saved America view

Ignorance, as well as disapproval for the natural restraints placed on market excesses that capitalism and sound markets impose, cause our present leaders to reject capitalism and blame it for all the problems we face. If this fallacy is not corrected and capitalism is even further undermined, the prosperity that the free market generates will be destroyed.

— Ron Paul; U. S. House of Representatives Speech, July 9, 2002 view

The word capitalism was coined by none other than Karl Marx, who hoped that it would help in his crusade to denigrate the system of private property and free enterprise and to promote socialism. Marx insinuated that the only beneficiaries of capitalism were the capitalists. Of course, nearly every one of Marx's assumptions (government would wither away under communism, capitalism would make workers poorer, etc.) turned out to be wrong, including this one. Free-market capitalism, based on private property and peaceful exchange, is the source of civilization and human progress. Human beings have a natural propensity to "truck, barter, and exchange," as Adam Smith said more than two centuries ago, and free-market capitalism is by far the best-known means by which this can be accomplished.

— Thomas DiLorenzo; How Capitalism Saved America view

Have we been financially brainwashed? I believe we have. The primary reason why most people cannot see the daily cash heist happening all around them is because we have been financially programmed, turned into Pavlov's dogs, to steal from ourselves via our words. We mindlessly repeat mantras that cost us our wealth.

As I've said, words have the power to make us rich - or keep us poor.

Our school system does a good job training people for the E and S quadrants. During our formative years, our families and our schools teach us to repeat what they believe to be words of financial wisdom, but in reality they are words that train us to steal from ourselves. These words are mantras drilled into our consciousness, conditioning us to submissively surrender our hard-earned money to those on the B and I side of the quadrant. Without a solid financial education you remain a prisoner of the E and S quadrants.

Our leaders don't encourage us to change or to seek ways to move from the E and S side of the quadrant to the B and I side. Rather, our leaders teach us to live below our means instead of expanding our means. In my opinion, living below your means kills your spirit. That's no way to live.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

We buy in areas where there are jobs.

We own property where there are natural or government constraints.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Building a business and investing is not necessarily risky. Being financially uneducated is risky. Therefore, the first and best step to minimize risk is education. For example, when I wanted to learn to fly, I took flying lessons. If I had just climbed into a plan and taken off, I would have probably crashed and died.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Once you decide which asset class is best for you, and which asset class you are most interested in, then I suggest studying that asset class and investing your time before investing your money. The reason I say this is because it is not the asset itself that makes you rich. You can lose money in any of the asset classes. Rather, it is your knowledge of each asset class that makes you rich. Never forget that your greatest asset is your mind.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Since most investors have little financial education, most people invest in paper assets.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Real estate is a management-intensive asset, is illiquid, and if mismanaged can cost you a lot of money. After a business, real estate requires the second highest level of financial intelligence. Many people lack the proper financial IQ to invest well in real estate. That is why most people who invest in real estate invest in real estate mutual funds called REITs.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Businesses are "people intense." By that I mean that you have to manage employees, clients, and customers. People skills and leadership skills, as well as talented people who can work as a team, are essential for a business to be a success. In my opinion, of all four asset classes, a business takes the most financial intelligence and experience to be successful.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

One of the lessons I learned from Ken is that there are three parts to a great deal. They are:

<ol>
<li>Partners</li>
<li>Financing</li>
<li>Management</li>
</ol>

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Rich dad often said, "The way to find a good partner is to know a bad partner."

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

You may notice that the product is the smallest or least important part of the B-I Triangle. The reason so many people fail when starting a business is because they focus on the product, not the entire B-I Triangle. The same is true in real estate. Many investors look only at the property rather than the entire B-I Triangle.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Technical investing is measuring the emotions or moods of the markets by using technical indicators. Technical investors may not care about the fundamentals of a business.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

A stock investor also understands the power of cash flow, or dividend yields, as cash flow is called in the stock market. The higher the dividend yield, the better the value of a stock. For example, a dividend yield of 5 percent of the stock's price signals a great stock at a great price. A dividend yield of less than 3 percent of the stock price means the stock is priced too high and will probably fall in value.

In October 2007, the stock market hit an all-time high of 14,164. Suckers jumped into the market, betting on stocks going higher (capital gains). The problem was that the Dow had a dividend yield of only 1.8 percent of its total value, which means that stocks were too expensive, and professional investors began to sell.

In March 2009, the Dow hit a low of 6,547, and many people jumped back into the market, thinking the worst was over. The problem was that the dividend yield was still only 1.9 percent, which to a professional investor meant the price of stocks was still too high and the stock market would probably go lower and long-term investors would probably lose even more of their money as cash flowed out of the market.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

As Warren Buffett has said, "The dumbest reason in the world to buy a stock is because it is going up."

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Assets put money in your pocket without you working, and liabilities take money from your pocket, even when you're working.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

In theory, if everyone paid off his or her debt, modern money would disappear.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

In 1971, the dollar stopped being money and became a currency. The word currency comes from the word current, like an electrical current or an ocean current. In other words, a currency must keep moving or it loses value. To retain value, a monetary currency must move from one asset to another. After 1971, people who parked their money in a savings bank or in the stock market lost money because their currency stopped moving. Savers became losers and debtors became winners as the U.S. government printed more and more money, increasing debt and inflation.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

1971: President Nixon, without permission from Congress, took the U.S. dollar off the gold standard. When this happened, the U.S. dollar became a derivative of debt - not of gold. After 1971, the U.S. economy could only increase by increasing debt,and that's when the bailouts started. In the 1980s, the bailouts were in the millions; in the 1990s, they were in the billions; and today they are in the trillions and growing. This change in the rules of money, one of the biggest financial events in world history, allowed the United States to print money at will by creating more and more debt, known as U.S. bonds. Never in the history of the world had all the world's money been backed by one nation's debt, an IOU from U.S. taxpayers.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

1944: The Bretton Woods Agreement was made. This international currency agreement created the World Bank and the International Monetary Fund (IMF). The agreement replicated the Federal Reserve System globally and, in effect, installed the U.S. dollar as the reserve currency of the world. Basically, while the world was involved in a world war, the world's bankers were hard at work changing the world. This meant that all currencies worldwide were now essentially backed by the U.S. dollar, which was pegged to gold. As long as the U.S. dollar was backed by gold, the world economy would be stable.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

1929: The Great Depression. Following the crisis of the Great Depression, the U.S. government created many government agencies such as the Federal Deposit Insurance Corporation (FDIC), the Federal Housing Administration (FHA), and Social Security; and the government took more control over our financial lives via taxes. This led to an acceptance of increased government intervention via social programs and agencies. Many of these government programs and agencies, such as the FHA, Fannie Mae, and Freddie Mac, are at the eye of today's subprime crisis. Today, unfunded government liabilities such as Social Security and Medicare are estimated to be $50 to $60 trillion time bombs that will eventually blow up and dwarf our current subprime crisis. In other words, government efforts created to solve the Great Depression will probably cause a bigger depression in the future.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

1913: The Federal Reserve is formed. The Federal Reserve is not American, not federal, has no reserves, and is not a bank. It is controlled by some of the richest and politically influential families in the world. It has the power to create money out of thin air.

Institutions like the Federal Reserve have been staunchly opposed by designers of the Constitution, and by presidents such as George Washington and Thomas Jefferson.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Today, money is no longer a tangible object like chickens, gold, or silver. Today, modern money is simply an idea backed by the faith and trust of a government. The more trustworthy the country, the more valuable the money, and vice versa. This evolution of money from a tangible object into an idea is one reason why the subject of money is so confusing. It is difficult to understand something we can no longer see, touch, or feel.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

1903: I believe the U.S. education system was taken over when the General Educatoin Board, founded by John D. Rockefeller, decided what kids should learn. This put the influence of education in the hands of the ultrarich, and the subject of money was not taught in school. Today, people go to school to learn to work for money, but they learn nothing about how to have money work for them.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

The primary reason most people are afraid of changing is because they are afraid of making mistakes, especially financial mistakes. Most people cling to job security because they are afraid of failing financially. The reason most people turn their money over to financial planners is because they hope the financial planner will not make mistakes, which, ironically, is a mistake.

To me, our education system's biggest problem is that it teaches kids not to make mistakes. If children do make mistakes, the system punishes them rather than teaching them to learn from their mistakes. An intelligent person knows that we learn by making mistakes. We learn to ride a bicycle by falling off the bike and climbing back on. We learn to swim by jumping in the water. How can people learn about money if they are afraid of making mistakes.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

We have none of our own money in any of our properties. [...] we choose our tenants carefully and have professional management teams making sure our tenants are happy.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

The keys to this investment working are:

<ol>
<li>Improvements to the property</li>
<li>A good location - real estate is only valuable if there are jobs nearby</li>
<li>Good financing and/or investors</li>
<li>Good property management</li>
</ol>

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

With real estate, our business plan is to use debt, other people's money, to achieve an infinite return and print our own money. The following is an overly simplified real-life example.

Purchase: We buy a two-bedroom, one-bath house in a great neighborhood for $100,000.

Financing: We pay $20,000 as a down payment and borrow $100,000 for the house and extra money for improvements from a bank and/or investors.

Improve property: We improve the property by adding on an extra bedroom and a bathroom.

Increase rents reflecting increased property value: We raise the rent from $600 a month (what two-bedroom, one-bath houses rent for in the market) to $1,200 a month (the market rent for three-bedroom, two-bathroom houses).

Refinance property at new appraised value of $150,000: When we refinance the house, the banker gives us a loan of $120,000 (80 percent of new value). We get back $20,000, plus get an extra $20,000 to invest in a new property.

Costs: The loan interest at 6 percent costs approximately $600 a month. Expenses are another $300 a month, which puts a net $300 a month in our pocket in the form of cash flow.

Key: The new loan and expenses are financed by rent from the tenant.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Kim and I started the Rich Dad Company at our kitchen table. Rather than use our own money, we raised $250,000 from investors. Again, that is a benefit of investing time in learning how to sell. In this case, we sold our business idea to our investors. In less than three years, thanks to the growth of our business and the profits it provided, we returned 100 percent of our investors' money, plus interest, and an additional 100 percent on their money to buy their shares back. Today, the Rich Dad Company puts millions of dollars in our pockets, even though we have none of our own money invested in the business. By definition, that is an infinite return. In other words, our business prints our own money.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

When you talk to most bankers, financial planners, or real estate brokers, they will tell you that a 5 percent to 12 percent ROI is a good return on your money. Those are returns for a person without much of a financial education. Another fairy tale or fear tactic they will say is, "The higher the return, the higher the risks." That is absolutely not true - if you have a solid financial education. I always look to achieve infinite returns with my investments.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Rather than send a part of our income to Wall Street every month, Kim and I invest our own money, and that money puts more money in our pockets. Why rick investing for the long term in the stock market and lose control of your investment when you can invest with less risk and receive more income every month, as well as pay less in taxes, use debt to become richer, and have inflation increase your cash flow?

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Kim and I do not count gold and silver as cashflow assets since they do not put money in our pockets. Rather, we hold gold and silver much like a person would keep money in a savings account. Gold and silver are liquid, and when politicians are printing more and more money, gold and silver have a better chance of retaining their purchasing power.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

When you leave school, your banker does not ask you for your report card. Your banker does not care if you had good grades or bad grades. All the banker wants to see is your financial statement, because your financial statement is your report card when you leave school.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

There are three basic types of taxable income in the United States: earned, portfolio, and passive. Earned income is derived from labor and is taxed highest of all incomes. Portfolio income is general income from capital gains earned by buying an asset low and selling it high. It is the second-highest taxed income. Passive income is generally income from cash flow and is the lowest taxed of the three incomes.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

The primary cause of inflation is the government printed money, which increases the money supply. Inflation is caused by the purchasing power of your money going down as more and more dollars flood the existing pool of money, which means prices of many essential products, such as food, fuel, and services, go up as more dollars chase the same amount of goods. Inflation is often called "the invisible tax," which is hardest on the poor, elderly, savers, low-income workers, and fixed-income retirees.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

As in any bubble, the crooks and con men of gold and silver are already out in droves, running ads on television, online, and in print. Once again, the little pigs who did not prepare for the crisis will have their hard-earned money taken away with the sweet reassuring words of the smooth-talking, silver-tongued, big bad wolf. As with all investments, you need to be educated about gold and silver before you invest in them.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Gold may be above $3,000 an ounce, and silver may someday be the same price as gold because it is an industrial precious metal in short supply.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

In simple terms, life is about to become more expensive all over the world.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Because the United States is printing money, all other countries will probably have to print money. If other countries do not print, then their countries' currency will become too strong against the dollar and exports to the United States will slow down, causing a slowdown in the exporting country’s economy. This probably means inflation in every country that trades with the United States.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

The road to success is always under construction.

— Anonymous view

Like it or not we live in a world of rules. Success comes with understanding the rules and working as efficiently as possible in accordance with those rules—which is why it's smart to have a good lawyer on your team! Without rules, civilization crumbles. For example, as an American, if I decide to follow American driving rules in England, a country where they drive on the other side of the road, chances are I will wind up in jail or in the hospital.

Problems occur in a person's life when he or she does not follow the rules. For example, if a person smokes, eats, drinks, and does not exercise, violating the rules of his body, the person will have health problems. The same is true with money. If a person robs a store, the chances are that the person will wind up in jail. If a person cheats on his or her spouse, that person will have severe personal problems. Breaking the rules is not good for life, families, businesses, or nations.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

If a person's product is bad, poor in quality, slow, or obsolete, that person suffers financially. [...] Also, if a product is not in line with a person's mission, that person may suffer.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

The way to become a leader is to first learn to be a team member. When I later joined the Marine Corps after the military academy, my leadership and teamwork development continued. Today, as a leader of my businesses, my leadership development continues. One way to be a great leader is to keep learning and keep accepting feedback from your team—even if it's not feedback you like. Some of the best training in leadership I have ever received was through blunt, in-your-face feedback.

You may have seen pictures of a Marine drill instructor screaming in a young recruit's face. That recruit is learning to accept feedback. The real world is a feedback mechanism. When you climb on the bathroom scale and find you are twenty pounds overweight, that is feedback. If you are fired, broke, or divorced, that, too, is feedback. Accepting feedback is essential to being a leader. Unfortunately, many of our business, labor, political, and educational leaders don't accept or learn from the feedback they receive in the form of messages from the world economy. They don't seem to get it.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

There is an old saying that goes, "No man is an island." When it comes to business and investing, there is nothing more important than assembling a team of experts—lawyers, accountants, etc.—to help you achieve your goals. A team makes you stronger by complementing your weaknesses and enhancing your strengths. A team also keeps you accountable and pushes you forward.

One of the problems I had with school was that it trained us to take tests alone. If I were to collaborate or ask for help from my classmates on a test, that was called cheating. I believe that this line of thinking causes millions of people to operate as islands, afraid of cooperating with others because they are trained that cooperation is somehow akin to cheating.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Today, corporate giants such as AIG, Lehman Brothers, Merrill Lynch, Citibank, Bank of America, GM, and Chrysler are crashing to the ground. The world is finding out that the corporate giants we thought were made of bricks were really made of straw and sticks. As these giant houses crumble, the shock wave is taking smaller businesses and individuals with them.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Remember: Focus more on selling and less on buying. The reason so many millions of people are in financial trouble is because they love to buy and hate to sell. If you want to be rich, you must sell much more than you buy.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

In the world of money the rich are sellers and the poor and middle class are buyers. The buyers are on the E and S side, and the sellers are on the B and I side.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

One big reason why so many people struggle financially is because they have little to sell, don't know how to sell, or both. So if you are struggling financially, find something to sell, learn to sell better, or both.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

When I asked him [Rich Dad] for guidance to become a B and I, he simply said, "You must learn to sell."

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Another reason why I mentioned Greg is because Greg sells "tickets" to the state of California. The more schools he owns, the more tickets he can sell. His teachers sell their labor. They can only sell one ticket: themselves. My point is that people who sell many tickets (a product or service) make more money than people who only sell one ticket (their labor). In the movie industry, a movie star who can sell the most movie tickets makes the most money. The same is true for music stars. Musicians who sell the most derivatives (CDs, tickets, or downloads) make the most money. In sports, the promoters of the Super Bowl or Wimbledon make a lot of money because they can sell many tickets and media rights. In simple terms, if you can't sell "tickets" (derivatives of you), you have to sell your labor. I sell millions of "tickets" in the form of books, games, and special events, which are derivatives of me. My ability' to sell "tickets" is one reason why I prosper even during this financial crisis.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

There are three different types of education required for success today. They are:

<ol>
<li>Academic education: the ability to read, write, and do math.</li>
<li>Professional education: learning to work for money.</li>
<li>Financial education: learning how to make money work for you.</li>
</ol>

Our school system does an adequate job with the first two types of education, but fails miserably at providing financial education. Millions of well-educated people have lost trillions of dollars because the school system has left out financial education.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

If you think of the definition of a Ponzi scheme and its implications, then you might conclude that Social Security is the biggest Ponzi scheme in U.S. history. The Social Security system only works if younger workers keep putting money into the pot. Most people understand that the Social Security fund is empty, yet people keep pumping money into what I consider a government-sponsored Ponzi scheme, hoping there will at least be enough for their retirement.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

And I don't think Social Security is the only Ponzi scheme still in operation today. I found it amusing that during George W. Bush's presidential term he pushed legislation for younger workers to put money into the stock market rather than Social Security. I think he wanted younger workers to put their money into one of the biggest Ponzi schemes of all: the stock market. In the stock market, investors only make money as long as stock prices rise— as long as new money is being pumped into the market. If money is pulled out of the marker, stock prices fall and investors lose their money.

This is why knowing the difference between capital gains and cash flow is important. All Ponzi schemes are based on capital gains. For prices to go up, new money must come in. That is why I consider the stock market to be a Ponzi scheme. If no new money comes in, the market crashes. The same is true with real estate or the bond markets. As long as cash flows in, the Ponzi scheme of capital gains keeps the boats floating. But if people want their cash back, prices drop, and there is not enough to pay everyone back.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

In 2009, one of the biggest problems facing mutual fund companies is outgoing cash flow. Today, many mutual fund companies are having trouble raising enough money to pay investors who are leaving. Investors are now finding out that most mutual funds are legalized Ponzi schemes.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

The term Ponzi scheme was named after Charles Ponzi, an Italian immigrant to America, who was charged for deceiving investors in 1920. A Pony scheme means a fraudulent investment that pays investors from their own money or pays investors from subsequent investor money. In simple terms, it means "Robbing Peter and Paul to pay Ponzi."

[...]

Because few people understand what a Ponzi scheme is, they don't see that the biggest Ponzi schemes are still in operation today.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

I listen to many financial advisors, but only follow the advice of a few. One advisor I follow religiously is Richard Russell, an expert on the stock market. This is what Richard Russell says about investing for the long term in stocks: "[Stock] Markets can be compared with gambling at Las Vegas. When you gamble at Vegas, you are bucking the house odds. Which is why if you play long enough at Vegas, you will always lose your money."

Russell also says this about people who invest in fairytales: "Investing in the stock market is a long-term tax on people who want something [profits] without doing any real work for those imaginary profits."

The problem with most financial advisors is they are in the E and S quadrant and work for the B and I quadrants. Most financial advisors are not in the B and I quadrant, nor are they rich people. Most are called brokers—stockbrokers, real estate brokers, insurance brokers. As my rich dad often said, "The reason they are called brokers is because they are broker than you."

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

In the Cashflow Quadrant:

E stands for employee

S stands for small business or specialist such as a doctor or lawyer

B stands for big business (over 500 employees)

I stands for investor

You may notice that the school system does a very good job or producing E's and S's, the left side of the quadrant, the side where security is cherished.

The B and I quadrants, the right side of the quadrant, is where freedom is cherished. Due to a lack of financial education, the B and I quadrants remain a mystery to most people. That is why most people say starting a business or investing is risky. Anything is risky, if you lack education, experience, and guidance to do it correctly and well.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

My rich dad valued financial freedom. That is why he believed so strongly in financial education. He often said, "The people with the most security are in prison. That is why it's called 'maximum security."' He also said, "The more security you seek, the less freedom you have."

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Rather than live below your means, dream big and start small. Start with tiny steps. Be smart, get financially educated, create a plan, find a coach, and go for your dreams. As a young man playing Monopoly, rich dad saw his dreams on the game board—the plan for his life and his plan out of poverty. He started with little green houses on the Monopoly board and dreamed of his big hotel on Waikiki Beach. It took him about twenty years, but his dream did come true. Thanks to rich dad, my mentor and my coach, once I got serious, I achieved my dream of financial freedom after ten years of perseverance. It wasn't easy. I made many mistakes. I was scolded more often than I was praised. I lost money and made money. I met many good people, a few great people, and some very, very bad people. From each person I gained wisdom not taught in school or learned from books. My journey was not so much about the money, but who I became in the process. I became a rich person who does not let money, or the lack of it, dictate the boundaries of my life.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

He often said, "Take away a person's dreams, and you take away their life."

Rich dad often said, "You may never reach the stars, but they will guide you on your path through life."

He constantly reminded me that "the world treats you as you treat yourself."

He often said, "When you don't have money, think and use your head. Never give in to the poor person inside you."

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Question: Why do mice have small balls ?
Answer: Because mice don't sell many tickets.

What Were You Thinking?

I can hear some of you moaning and groaning from that joke. Some of you may not get it. Some may be wondering what kind of balls I am talking about. As much as I hate to explain the joke, the balls I am talking about are charity or inaugural balls—lavish parries. I know some of you were thinking of different kinds of balls such as soccer balls, or vulgar things, which I won't get into.

My reason for talking about mice having small balls is to illustrate the power of words and how words can have multiple meanings, cause misunderstandings, deceive, and/or mislead. Many financial words of advice can actually damage a person's life. I call these words of financial deception the financial fairytales.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

One reason our current financial crisis is so large is because in 2004 the Securities and Exchange Commission (SEC) allowed the five biggest investment banks to step up their fractional reserve from about 10 to as high as 40. In other words, if you put $100 in the bank, the biggest banks could lend out $4,000, and then the hundreds of banks that borrowed that money could lend out ten times that $4,000. All that money had to be placed somewhere, and soon mortgage brokers were looking for anyone who could sign their name. The subprime mess expanded and then exploded—bringing down the entire world economy.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

A broad definition of a derivative is: a substance that can be made from another substance. For example, orange juice is a derivative of an orange. One definition of a financial derivative is: having a value from an underlying variable asset. By way of example, a share of common stock is a derivative of an existing company, such as Apple Computers. Simply said, when you buy a share of Apple, you are buying a derivative of Apple the company. And when you buy a share of a mutual fund, you are buying a derivative of that fund, which is a derivative of stocks—a derivative of a derivative.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

There are four basic investment categories. They are:

<ol>
<li>Businesses. The rich often own many businesses providing passive income, while an average person may have many jobs providing earned income.</li>
<li>Income-producing investment real estate. These are properties that provide passive income every month in the form of rent. Your home or your vacation home doesn't count, even if your financial planner tells you they're assets.</li>
<li>Paper assets—stocks, bonds, savings, annuities, insurance, and mutual funds. Most average investors have paper assets because they are easy to buy, require little management, and are liquid—meaning they are easy to get out of.</li>
<li>Commodities—gold, silver, oil, platinum, etc. Most average investors do not know how or where to buy commodities. In many cases, they don't even know how or where to buy physical gold or silver.</li>
</ol>

A sophisticated investor invests all four categories. That is true diversification. The average investor believes they are diversified, but most are only in category three, paper assets. That is not diversification.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

As the old saying goes, "Never ask an insurance salesman if you need insurance." You know what the answer will be. Two reasons why financial planners recommend diversification are because they can sell you more paper assets, and because it spreads their risk in case they are wrong. Often, they don't have your best interests at heart.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

A mutual fund by definition is already diversified—in paper assets. It is a fund made up of a diversified group of stocks. To make matters worse, there are more mutual funds than individual stocks. Therefore, many mutual funds contain the same stocks. A mutual fund is like a multiple vitamin. Buying three mutual funds is like taking three multiple vitamins. You may take three different pills, but in the end you are taking many of the same vitamins—and possibly even overdosing on those vitamins!

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

A financial planner will say you are diversified if you are invested in different sectors. For example, you may invest in a mutual fund of small cap stocks, large cap stocks, growth stocks, precious metal stocks, real estate investment trusts (REITs), exchange-traded funds (ETFs), bond funds, money market funds, and emerging market funds. While you are technically diversified into other sectors, the reality is you are not diversified because you arc in only one asset class—paper assets. When the stock market tanked in 2007, all paper assets associated with the stock market tanked. Being "diversified" was of little use to those diversified in solely paper assets.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Rather than use the words long term, a sophisticated investor would use the words exit strategy.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

On top of that, there are thousands of mutual funds, but less than 30 percent of them actually beat the S&P 500. In other words, all you have to do is invest in an S&P Index Fund and you will beat over 70 percent of all mutual fund managers - all with less money and higher returns.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Mutual funds are simply an unintelligent investment designed for the financially unintelligent.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

When the 401(k) program was implemented in the United States, my rich dad warned me to stay clear.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

There are a number of reasons why most people invest for capital gains, and not cash flow. Some of the reasons are:

<ol>
<li>Most people do not know the difference.</li>
<li>When the economy was growing, it was easy to play the capital gains game. People automatically assumed their house and stock portfolio would go up with inflation.</li>
<li>Cash flow investing requires more financial sophistication. Anyone can buy something and hope the price will increase. Finding cash-flowing deals takes knowledge of both potential income and expenses, and how to project the performance of the investment based on those variables.</li>
<li>People are lazy. They live for today and ignore tomorrow.</li>
<li>People expect the government to take care of them. This was my poor dad's attitude, and he died a poor man. For my poor dad, it was easier to expect someone else take care of him. Today, there are over 60 million Americans, my fellow baby boomers, who are about to follow my poor dad's footsteps.</li>
</ol>

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

I would have made a lot more money if I had invested for capital gains, and if I flipped real estate. It was hard to invest for cash flow while everyone else was investing for capital gains. In 2009, however, I appreciate rich dad's lessons more and more. I know why he insisted on teaching me to focus on cash flow and not to get sucked into the frenzy of buying low and selling high.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Monopoly is not a game about flipping. Monopoly is not a game about buying low and selling high. It is not about diversification. Monopoly is about focus, planning, patience, and long-term control. The first objective is to control one of the four sides of the board game. The second objective is to improve the properties on the side you control, adding green houses and eventually a red hotel. The ultimate investment strategy is to have only red hotels on your side of the board. Then you sit and wait as the other players round the corner hoping not to land on one of your properties. The final objective is to bankrupt the other players and take all their money. In 2009, many people are going bankrupt in the real game of Monopoly.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

"Good," said rich dad sternly. "Don't ever forget that. Invest for cash flow, and you'll never worry about money. Invest for cash flow, and you will not be wiped out in boom and bust markets. Invest for cash flow, and you'll be a rich man."

"But," I began, "it's easier to make more money with capital gains. Real estate prices are skyrocketing. Finding investments that create cash flow is hard."

"'I know," said rich dad. "Just hear what I am saying. Don't let greed and easy money interfere with becoming a rich and financially wise man. Never confuse capital gains with cash flow."

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Patiently, rich dad reminded me of the differences between capital gains and cash flow. It was a good reminder. Every time I flipped a property, I was investing for capital gains. Rich dad informed me that the tax laws were different for capital gains and cash flow, just as they are today. "Invest for cash flow were rich dad's words. "Remember the lessons I taught you years ago from Monopoly. Investing for capital gains is gambling."

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

In 1980, gold hit $850 an ounce and silver went to $50 an ounce as inflation blasted off.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

In 1994 we had approximately $120,000 in annual cash flow (passive income) from our investments. Today, our annual cash flow is over ten times that amount, even during this financial crisis, because we continued to invest for cash flow.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Rather than use net worth, I use cash flow to measure my wealth. The money my investments bring in every month is true wealth—not some perceived notion of value that may or may not be true.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Today, the term mark to market is simply another way of saying net worth for corporations and banks. Companies loved mark to market when the economy was strong, because it made their balance sheets look good. Now that the market is tanking, however, mark to market is putting many companies under as their net worth becomes worth less and less every day.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

People who play the game of capital gains are often hoping the price of their home will go up or that the stock market will go up. However, someone who invests for cash flow does not really care if the market or the price of a house goes up or down.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

<strong>Words of a Poor Person</strong>

It is easy to tell whether a person is poor just by their words. For example:

<ol>
<li>"I'll never be rich."</li>
<li>"I'm not interested in money."</li>
<li>"The government should take care of people."</li>
</ol>

<strong>Words of a Middle-Class Person</strong>

The middle class employs a different set of words:

<ol>
<li>"I've got a high-paying, secure job."</li>
<li>"My home is my biggest investment?"</li>
<li>"I'm investing in a well-diversified portfolio of mutual funds."</li>
</ol>

<strong>Words of a Rich Person</strong>

Just like the poor and the middle class, the rich have words that set them apart:

<ol>
<li>"I'm looking for good employees to work for me."</li>
<li>"I'm looking for a cash flowing 100-unit apartment house to buy."</li>
<li>"My exit strategy is to take my company public via an IPO."</li>
</ol>

Can you tell the difference between these words? What kind of reality does each set of words reveal? Repeating the lesson from Sunday school, "And the word became flesh." We do become our words.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

When I hear, "It takes money to make money," I reply, "No, money begins with words, and words are free."

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

For years, I have been critical of mutual funds. They are horrible investment vehicles designed for financially average people. Over the years, many financial experts have fought back against me because they are sponsored by mutual fund companies. On TV programs and in popular financial publications, you will see these mutual fund pushers offering the same old advice: "Invest in a well-diversified portfolio of mutual funds for the long term." This is average advice for average investors; it is not good advice.

One of my heroes is John Bogle, founder of The Vanguard Group. As the inventor of the index fund, which keeps fees low by reducing management overhead, he too is an outspoken critic of traditional mutual funds. In an interview with SmartMoney, he said that the mutual fund investor puts up 100 percent of the money, takes 100 percent of the risk, and earns only 20 percent of the gains—if there are gains. The mutual fund companies take 80 percent of the profits via fees and expenses. To make matters worse, in 2009, because so much cash has flowed out of the stock market, mutual funds are beginning to raise fees and expenses. This means more cash flowing out of investors' pockets.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Today, there are many great products, services, or businesses that could save the world, but without cash flowing from the consumer to the rich, those products or businesses are not funded. If you are going to launch a new product or start a new business, you must be very aware of cash flow. If your business only provides enough cash flow for you, chances are that your business will not attract investors or grow.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

A good education is not enough. Many students, or their parents, are deeply in debt with college loans. Additionally, in college, students are able to sign up for credit cards, which contribute to more bad debt piling up. When a student takes out loans and signs up for a credit card, cash flows out of the student's pocket for years to pay off the debt from the loans and credit cards. The conspiracy loves students because students are a great source of cash flow. They are usually financially naive, and often think of credit cards as free money. Many students learn that that isn't true the hard way—and of course, most never learn. School is a great place to train people to have cash flow out of their pockets and into the pockets of the rich.

Students graduate heavily in debt, enter the job market, find a good job, rack up more debt, and watch their cash flow to the government via income taxes. The more they earn the higher percentage they pay in taxes. To save money, they eat at McDonalds, and cash flows to McDonalds. They deposit their paycheck in their bank, and cash flows to the bank in the form of fees each time they use an ATM to get their money. They buy a car, and cash flows to the car company, finance company, gas industry, auto insurance, and, of course, to the government for an auto license. They buy a house, and cash flows out of their pockets to pay for the mortgage, insurance, cable TV, water, heat, electricity, and government for property taxes. Every month cash flows to Wall Street to invest in mutual funds for retirement plans, and cash flows from mutual funds to fund managers in the form of commissions and fees. Later in life, when people are old and feeble, cash flows to the nursing home. And when they die, cash flows to pay taxes on what they left behind. For most people, their entire lives are spent trying to keep up with their outgoing cash flow.

[...]

School does not teach kids about cash flow. If schools do have financial education classes, they usually only teach kids to save money in a bank and to invest in mutual funds— again, training them to send their cash to the rich.

If I ran the school system, I would have classes on how to control outgoing cash flow and how to create incoming cash flow.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Rich or poor, educated or uneducated, working or unemployed, we are all involved in the game of cash flow. The difference, however, is that some are playing the game, and some are pawns in the game.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

In business, a good rule of thumb is that 80 percent of your business comes from 20 percent of your customers—so take good care of them.

My rich dad took this rule a step further. He believed that, "Ninety percent of all money is earned by 10 percent of the people." He called it the 90-10 rule of money. For example, if you look at the game of golf, I would say that 10 percent of the golfers earn 90 percent of the money. In America today, approximately 90 percent of the wealth is owned by 10 percent of the people.

If you want to win the game of money, you cannot be average. You need to be in the top 10 percent.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

One reason why 90 percent of people are financially average is because they follow average advice, for example:

<ol>
<li>"Go to school."</li>
<li>"Get a job."</li>
<li>"Work hard."</li>
<li>"Save money."</li>
<li>"Your house is an asset and your biggest investment."</li>
<li>"Live below your means."</li>
<li>"Get out of debt."</li>
<li>"Invest for the long term in a well-diversified portfolio of stocks, bonds, and mutual funds."</li>
<li>"Retire, and the government will support you."</li>
<li>"Live happily ever after."</li>
</ol>

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Question: What advice do you have for the average person?
Answer: Don't be average.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

<ol>
<li>Are you being paid by the month, the hour, the minute, or the second?</li>
<li>Are you earning money eight hours a day or 24/7?</li>
<li>If you stop working, will money continue to come in?</li>
<li>Do you have multiple sources of income?</li>
<li>If you are an employee, are you working for an employer who is being left behind?</li>
<li>Are your friends and family moving forward or being left behind financially?</li>
</ol>

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Debt is not bad. Misuse of debt is bad. Debt can make you rich, and debt can make you poor. If you want to get ahead financially, you need to learn to use debt, not abuse it.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

In my opinion, it matters little what the politicians do to save the economy. In the end, they are going to save the rich in the name of bailing out the economy.

What really matters is what you are going to do to save yourself. You do not need to outrun the bear; you just have to out run those who are waiting to be saved.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Today, most college graduates are obsolete the minute they receive their diploma.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Technology is invisible and relatively inexpensive. Today businesses can do more business with fewer employees and thus become more profitable. This will lead to more unemployment.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

There is a growing mood in this country to "get" the rich. This sentiment is embodied in the action of Congressman Jerry McNerney (D-CA), asking for a 90 percent tax rate on wealthy people. Yet the mobs are out to punish the working rich—those who pay taxes, create jobs, and make charitable donations. The real rich, those who influence the politicians and the Federal Reserve, are untouched.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

As the United States continues to print trillions of dollars, our kids and grandkids will pay for this mess with rising taxes. Taxes often punish producers and reward the crooked, lazy, or incompetent.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

I have a lot of classmates who were much smarter than me, but I make more money than they do. One reason is because I am an entrepreneur and they became employees working for big companies. Another reason is because they went to work for the wrong industry. They went to work for dying industries.

— Donald Trump; quoted by Robert Kiyosaki view

In the Industrial Age, the rich nations of the world controlled the world's natural resources such as oil, metals, lumber, and food. As the Information Age grows, no longer will the rich and powerful nations have a monopoly on the world's true natural resource— our minds. In the invisible world of the Internet, the genius of the world will be unleashed, and class lines that are centuries old will be erased. A new mega-rich will rise.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

History is full of success stories of those who ignored conditioned responses and forged their own path. The Wright Brothers and Henry Ford never finished high school. Bill Gates, Michael Dell, and Steve Jobs never finished college. Sergey Brin of Google suspended his PhD studies at Stanford. Mark Zuckerberg started Facebook in his dorm room at Harvard, traveled to California, and never returned to finish his education. All of these world-changers dropped out of school because they no longer needed to look for a job. They had an idea and the courage to act on that idea. They started businesses and created jobs for others. Today, entrepreneurship is exploding all over the world. More important, the most successful entrepreneurs understand that we are in the information age. They have the vision to see the changes happening that most do not.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Ivan Pavlov won a Nobel Prize in 1904 in Physiology and Medicine for his research on the digestive system of dogs. Today, when we hear the term Pavlov's dogs, it refers to conditioned response. Going to school to get a high-paying job, saving your money for a house, and investing in a diversified portfolio of stocks and mutual funds is an example of a conditioned response. Many people cannot articulate why they do these things. They simply do it because it is what they were taught, a conditioned response.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

During the dark days of American slavery, slaves were forbidden to be educated. In some states, it was a crime to teach slaves to read and write. An educated slave class was a dangerous slave class. Today, we fail to teach kids to be financially literate. It is another way of creating slaves—wage slaves.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

There are two primary differences between my classmates and me. The first difference is that most of my work is 90 percent mental and most of theirs is 90 percent physical. They have to sail ships to get paid. I make money even when I'm sleeping. The second difference is the rate of transaction speed. My classmates work five days a week and get paid by the month. I work 24/7, 365 days a year, and I get paid by the minute. Even if I stopped working, money would still come in.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Today, people are being run over and made obsolete by technological innovations they cannot see and that they do not understand. Millions of people are unemployed because their skill set is no longer needed. They are obsolete.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

The crash of 2007 is different than the crash of 1987. I do not know if the markets will come back the way they have in the past. Many of the industries that caused the last boom in 1954 are now dying. This time things are different.

The big difference between the 1987 crash and the 2007 crash is the rise of the Internet. The Internet is changing everything. Along with a toxic dollar and bankrupt government, the Internet is one of the primary causes of people being left behind, causing unemployment to increase.

I believe the Internet is bringing a shift to the world a million times more profound than Columbus discovering America in 1492. Just as explorers like Columbus opened the world to new wealth, the Internet is opening even larger worlds of wealth to today's explorers.

Yet there is significant difference between Columbus and the Internet. People could see the changes that Columbus brought. They could see ships, cargoes of plundered wealth, and drawings of natives and their land.

We cannot see the world of the Internet with our eyes. The world of the Internet is invisible, and we have to see it with our minds. And that is why people are being left behind. They cannot see the changes that are remaking their world. In their blindness, they are becoming obsolete.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

<strong>The New Economy in 1954</strong>

As we discussed earlier in the book, the U.S. economy didn't recover from the Great Depression until 1954, when the DOW finally reached its previous high of 381. A few reasons why the economy improved in 1954 are:

<ol>
<li>The World War II generation was settling down. When the war ended, soldiers came home, went to college, got married, and had kids. By the 1950s a housing and baby boom was on.</li>
<li>The first credit card was introduced in 1951, and shopping became a national sport. With the advent of the suburbs, shopping centers sprung up like weeds.</li>
<li>Interstate highways were built, and the auto industry boomed. Drive-ins became the place where kids hung out, and the fast-food industry was born. In 1953, McDonald's began franchising and became the shining star of the new fast-food industry.</li>
<li>Television became a national phenomenon, and the baby boomers were the first generation raised by TV. The Beatles came to life on The Ed Sullivan Show, and sports stars became the new mega-rich. Advertising took on a whole new dimension in people's daily lives.</li>
<li>Boeing introduced the 707, and the jet age arrived. Being a pilot or a flight attendant suddenly became a glamour job. Larger airports were built to accommodate increased demand for air travel, and mega airports became an industry unto themselves. Hotels and destination resorts sprung up to meet the demand of road-weary travelers, and tourism thrived. My rich dad became very rich as lower fares and faster travel brought tourists to Hawaii.</li>
<li>Workers could expect company pensions and healthcare for life. Without the expense of retirement savings and healthcare premiums, workers could spend money more freely.</li>
<li>China was a poor communist country.</li>
<li>America was the new financial and military power.</li>
</ol>

<strong>Fifty Years Later</strong>

In 2009, many of the factors that spurred on the new economy fifty years ago are now fading:

<ol>
<li>Baby boomers are retiring and beginning to collect Social Security and Medicare alongside their World War II-generation parents.</li>
<li>The suburbs are ground zero for the subprime mess. As suburbs struggle, major shopping centers face trouble and retailers close their doors while online shopping is taking off.</li>
<li>Our highways and bridges arc in need of major repair. The auto industry is dying and outdated. An old saying goes, "As GM goes, so goes the nation." That saying is truer today than ever.</li>
<li>Television networks are losing advertisers - many of which are leaving for the web.</li>
<li>Major airlines such as Pan American are history, and giants such as United Airlines are on life support. Today, people can sit at their desk and visit with people all over the world via the Internet.</li>
<li>People are living longer, but many are overweight and in poor health. Diabetes is the new cancer, and our medical system is going broke. The high cost of healthcare is causing many businesses to close, which costs more jobs.</li>
<li>Pension plans are going broke. Few workers have company pensions or health care coverage after they retire. This will be a disaster for government programs as 78 million baby boomers become dependent upon America's Medicare and Social Security system.</li>
<li>China will soon be the richest country on Earth. China is now asking that the U.S. dollar no longer be the reserve currency of the world. If that happens, America is toast.</li>
<li>America is now the biggest debtor nation on Earth, and its military is overextended.</li>
</ol>

So, again, is the economy coming back? I don't think so. The boom economy that pulled us out of the last depression is dying. Millions of people arc being left behind as they wait for the old economy to come back. Unemployment is rising as people's jobs are becoming obsolete, often replaced by technology or outsourced to a nation with a cheaper labor pool. This means there will be an even greater divide between the haves and have-nots, the rich and the poor. The middle class will shrink like the polar ice caps.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Today, people are asking, "Is the crisis over? Is the economy coming back?"

My reply is, "No, the economy is not coming back. The economy has moved on, and the people asking if it's coming back are being left behind."

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

I have one final point about history. The Founding Fathers opposed central banks like the Federal Reserve. President George Washington experienced the pain of government-made money when he had to pay his troops with the Continental, a currency that eventually went to its true value—zero. Thomas Jefferson adamantly opposed the creation of a central bank. Yet today central banks control the financial world, and we've granted them the power to solve our financial crisis for us, the very crisis they helped create.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Simply stated, the concept of a secure retirement is a dying reality.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

The fact of the matter is that Goldman Sachs is doing well financially not because of sound financial decisions but because, as the New York Times reports, it was bailed out by the Fed via payments to AIG.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Since electricity is generated mostly by burning coal, has anyone calculated how much pollution is created by electric cars, even though none of that pollution comes out of their tailpipes?

— Thomas Sowell; Dismantling America view

One of the painful signs of years of dumbed-down education is how many people are unable to make a coherent argument. They can vent their emotions, question other people's motives, make bold assertions, repeat slogans-- anything except reason.

— Thomas Sowell; Dismantling America view

Climate statistics show that, with all the "global warming" hysteria today, our temperatures are still not as high as they were back in medieval times. Those medieval folks must have been driving a lot of cars and SUVs.

— Thomas Sowell; Dismantling America view

When I think of the people with serious physical or mental handicaps who nevertheless work, I find it hard to sympathize with able-bodied men who stand on the streets and beg. Nor can I sympathize with those who give them money that subsidizes a parasitic lifestyle which allows such men to be a constant nuisance, or even a danger, to others.

— Thomas Sowell; Dismantling America view

In a democracy, we have always had to worry about the ignorance of the uneducated. Today we have to worry about the ignorance of people with college degrees.

— Thomas Sowell; Dismantling America view

The beauty of doing nothing is that you can do it perfectly. Only when you do something is it almost impossible to do it without mistakes. Therefore people who are contributing nothing to society except their constant criticisms can feel both intellectually and morally superior.

— Thomas Sowell; Dismantling America view

"We are a nation of immigrants," we are constantly reminded. We are also a nation of people with ten fingers and ten toes. Does that mean that anyone who has ten fingers and ten toes should be welcomed and given American citizenship?

— Thomas Sowell; Dismantling America view

Doing 90 percent of what is required is one of the biggest wastes because you have nothing to show for all your efforts. But doing 110 percent of what is expected is one of the smartest investments because it can pay off with a big reputation for just a little more effort.

— Thomas Sowell; Dismantling America view

The reason so many people misunderstand so many issues is not that these issues are so complex, but that people do not want a factual or analytical explanation that leaves them emotionally unsatisfied. They want villains to hate and heroes to cheer-- and they don't want explanations that do not give them that.

— Thomas Sowell; Dismantling America view

The adage "follow the money" will be hard to apply in the current administration, when there is so much money going in all directions that it is doubtful whether anybody can follow it.

— Thomas Sowell; Dismantling America view

One of the scariest aspects of our times is how easy it is for glib loudmouths to turn us against each other, weakening the whole framework of society, on which we all depend.

— Thomas Sowell; Dismantling America view

We all enter the world knowing nothing but, by the time we are teenagers, we know it all. Sometimes it is decades later before we know enough to realize how little we know.

— Thomas Sowell; Dismantling America view

Why is marriage considered to be any of the law's business in the first place? Because the state asserts an interest in the outcomes of certain unions, separate from and independent of the interests of the parties themselves.

In the absence of the institution of marriage, the individuals could arrange their relationship whatever way they wanted to, making it temporary or permanent, and sharing their worldly belongings in whatever way they chose.

Marriage means that the government steps in, limiting or even prescribing various aspects of their relations with each other -- and still more their relationship with whatever children may result from their union.

In other words, marriage imposes legal restrictions, taking away rights that individuals might otherwise have. Yet "gay marriage" advocates depict marriage as an expansion of rights to which they are entitled.

— Thomas Sowell; Dismantling America view

All sorts of groups in all sorts of countries have been demonstrably better than other groups at particular things, whether economic, intellectual, political or military. This fact is so blatant that only people with great cleverness can manage to deny the obvious. That cleverness is what creates the tangled web of confusion that has plagued civil right cases for decades.

Does anybody seriously doubt that blacks usually play basketball better than whites? Does anybody seriously doubt that the leading cameras and lenses in world have long been produced by Germans and Japanese? Or that Jews have been over-represented among the top performers in various intellectual fields?

— Thomas Sowell; Dismantling America view

The original Civil Rights Act of 1964 was very straightforward in forbidding discrimination. But, even before that Act was passed, there were already people demanding more than equality of treatment. Some wanted equality of end results, some wanted restitution for past wrongs, and some just wanted as much as they could get.

— Thomas Sowell; Dismantling America view

The left's jihad against gun ownership by law-abiding citizens has produced a flood of distorted information. International comparisons almost invariably compare the United States with some country with stronger gun control laws and lower murder rates.

But, if facts really mattered, you could just as easily compare the United States to countries with stronger gun control laws and higher murder rates -- Brazil and Russia, for example.

You could compare the United States with countries with more widespread gun ownership -- Switzerland and Israel, for example -- and lower murder rates. But that's only if facts are regarded as more important than the dogmas of the left.

— Thomas Sowell; Dismantling America view

Self-defense against criminals is anathema to the left in both Britain and the United States but in Britain the left has greater predominance. Britons who have caught burglars in their homes and held them at gunpoint until the police arrived have found themselves charged with a crime -- even when it was only a toy gun.

Given the prevailing view in the British criminal justice system that burglary is a "minor" offense and the fierce hostility to guns, even toy guns, the homeowner is far more likely to end up behind bars than the burglar is.

— Thomas Sowell; Dismantling America view

Not only is there no hard evidence that mixing and matching black and white kids in school produces either educational or social benefits, there have been a number of studies of all-black schools whose educational performances equal or exceed the national average, even though most black schools fall far below the average.

My own study of successful all-black schools was published 30 years ago in The Public Interest quarterly. Since then, there have been other studies of similar schools across the country, published by the Heritage Foundation in Washington and by scholars Abigail and Stephan Thernstrom, among others.

There have also been all-Chinese-American schools that exceeded national norms. How have such schools managed to succeed and excel without the "compelling" need for a racial mixing of students?

[...]

Hard evidence shows that students of all races can succeed or fail in schools that are racially mixed or racially unmixed.

— Thomas Sowell; Dismantling America view

[Justice] Holmes wrote that he did not "think it desirable that the judges should undertake to renovate the law." If the law needed changing, that was what the democratic process was for. Indeed, that was what the separation of powers in legislative, executive and judicial branches by the Constitution of the United States was for.

"The criterion of constitutionality," he said, "is not whether we believe the law to be for the public good." That was for other people to decide. For judges, he said: "When we know what the source of the law has said it shall be, our authority is at an end."

One of Holmes' judicial opinions ended: "I am not at liberty to consider the justice of the Act."

Some have tried to depict Justice Holmes as someone who saw no need for morality in the law. On the contrary, he said: "The law is the witness and external deposit of our moral life." But a society's need to put moral content into its laws did not mean that it was the judge's job to second-guess the moral choices made by others who were authorized to make such choices.

Justice Holmes understood the difference between the rule of law and the rule of lawyers and judges.

— Thomas Sowell; Dismantling America view

If you were going to have open heart surgery, would you want to be operated on by a surgeon who was chosen because he had to struggle to get where he is or by the best surgeon you could find— even if he was born with a silver spoon in his mouth and had every advantage that money and social position could offer?

— Thomas Sowell; Dismantling America view

Teenage pregnancy had been going down for years. So had venereal disease. Rates of infection for syphilis in 1960 was half of what it had been in 1950. There were similar trends in crime. The total number of murders in the United States in 1960 was lower than in 1950, 1940, or 1930 -- even though the population was growing and two new states had been added. The murder rate, in proportion to population, in 1960 was half of what it had been in 1934.

Every one of these beneficial trends sharply reversed after liberal notions gained ascendancy during in the 1960s. By 1974, the murder rate had doubled. Even liberal icon Sargent Shriver, head of the agency directing the "war on poverty," admitted that "venereal disease has skyrocketed" even though "we have had more clinics, more pills, and more sex education than ever in history."

Liberals looking back on the 1960s take special pride in their role on racial issues, for civil rights laws and the advancement of blacks out of poverty. Those riots that threatened to tear the country apart were race riots -- and supposedly the liberals saved us all.

But what do the facts show?

Both the Civil Rights Act of 1964 and the Voting Rights Act of 1965 had a higher percentage of Congressional Republicans voting for their enactment than the percentage of Congressional Democrats.

You can check it out in The Congressional Record.

— Thomas Sowell; Dismantling America view

If "marriage" can mean anything, then it means nothing.

— Thomas Sowell; Dismantling America view

Marriage and family are also barriers to the left's desire to create a society built to their own specifications. Friedrich Engels' first draft of the Communist Manifesto proclaimed the end of families but Karl Marx thought better of it and took that out.

— Thomas Sowell; Dismantling America view

The latest in a long line of New York Times editorials disguised as "news" stories was a recent article suggesting that most American women today do not have husbands. Partly this was based on census data — but much more so on creative definitions.

The Times defined "women" to include females as young as 16 and counted widows, who of course could not be widows unless they had once had a husband. Wives whose husbands were away in the military, or in prison, were also counted among women not living with a husband.

With such creative definitions, it turned out that 51 percent of "women" were not living with a husband. That made it "most" women and created a "news" story suggesting that these women were not married. In reality, only one fourth of women have never married, even when you count girls as young as 16.

While the data quoted in the New York Times story were about women who were not living with a husband, there were quotes in the story about women who rejected marriage.

What was the point? To show that marriage is a thing of the past. As a headline in the San Francisco Chronicle put it: "Women See Less Need for Ol' Ball and Chain."

In other words, marriage is like a prison sentence, complete with the old-fashioned leg irons with a chain connected to a heavy metal ball, so that the prisoner cannot escape.

This picture of marriage and a family as a burden is not peculiar to the New York Times or the San Francisco Chronicle. It is common among the intelligentsia of the left.

— Thomas Sowell; Dismantling America view

If a child is not autistic to begin with, almost anything will "cure" him with the passage of time.

[...]

Parents need to be spared the emotional trauma of false diagnoses and children need to be spared stressful treatments that follow false diagnoses. Yet the "autism spectrum" concept provides lots of wiggle room for those who are making false diagnoses.

Real autism may not get as much money as it needs if much of that money is dissipated on children who are not in fact autistic. But money is money to those who are running research projects— and a gullible media helps them get that money.

— Thomas Sowell; Dismantling America view

During the 1930s, some of the leading intellectuals in America condemned our economic system and pointed to the centrally planned Soviet economy as a model-- all this at a time when literally millions of people were starving to death in the Soviet Union, from a famine in a country with some of the richest farmland in Europe and historically a large exporter of food.

[...]

More than half a century later, when the archives of the Soviet Union were finally opened up under Mikhail Gorbachev, it turned out that about six million people had died in that famine-- about the same number as the people killed in Hitler's Holocaust.

— Thomas Sowell; Dismantling America view

"Global warming" hysteria is only the latest in this long line of notions, whose main argument is that there is no argument, because it is "science." The recently revealed destruction of raw data at the bottom of the global warming hysteria, as well as revelations of attempts to prevent critics of this hysteria from being published in leading journals, suggests that the disinterested search for truth— the hallmark of real science— has taken a back seat to a political crusade.

— Thomas Sowell; Dismantling America view

Working in a homeless shelter is widely regarded as "community service"— as if aiding and abetting vagrancy is necessarily a service, rather than a disservice, to the community.

Is a community better off with more people not working, hanging out on the streets, aggressively panhandling people on the sidewalks, urinating in the street, leaving narcotics needles in the parks where children play?

This is just one of the ways in which handing out various kinds of benefits to people who have not worked for them breaks the connection between productivity and reward, as far as they are concerned.

— Thomas Sowell; Dismantling America view

Slavery is too serious for an apology and somebody else being a slaveowner is not something for you to apologize for. When somebody who has never owned a slave apologizes for slavery to somebody who has never been a slave, then what began as mushy thinking has degenerated into theatrical absurdity— or, worse yet, politics.

Slavery has existed all over the planet for thousands of years, with black, white, yellow and other races being both slaves and enslavers. Does that mean that everybody ought to apologize to everybody else for what their ancestors did? Or are the only people who are supposed to feel guilty the ones who have money that others want to talk them out of?

— Thomas Sowell; Dismantling America view

Many of today's "educators" not only supply students with conclusions, they promote the idea that students should spring into action because of these prepackaged conclusions— in other words, vent their feelings and go galloping off on crusades, without either a knowledge of what is said by those on the other side or the intellectual discipline to know how to analyze opposing arguments.

When we see children in elementary schools out carrying signs in demonstrations, we are seeing the kind of mindless groupthink that causes adults to sign petitions they don't understand or— worse yet— follow leaders they don't understand, whether to the White House, the Kremlin or Jonestown.

A philosopher once said that the most important knowledge is knowledge of one's own ignorance. That is the knowledge that too many of our schools and colleges are failing to teach our young people.

— Thomas Sowell; Dismantling America view

It was once the proud declaration of many educators that "We are here to teach you how to think, not what to think." But far too many of our teachers and professors today are teaching their students what to think, about everything from global warming to the new trinity of "race, class and gender."

— Thomas Sowell; Dismantling America view

The experiences of life can help people outgrow whatever they were indoctrinated with.

— Thomas Sowell; Dismantling America view

A woman with a petition went among the crowds attending a state fair, asking people to sign her petition demanding the banning of dihydroxymonoxide. She said it was in our lakes and streams, and now it was in our sweat and urine and tears.

She collected hundreds of signatures to ban dihydroxymonoxide — a fancy chemical name for water. A couple of comedians were behind this ploy. But there is nothing funny about its implications. It is one of the grim and dangerous signs of our times.

This little episode revealed how conditioned we have become, responding like Pavlov's dog when we hear a certain sound— in this case, the sound of some politically correct crusade.

— Thomas Sowell; Dismantling America view

Many people would consider it a handicap to be a black orphan, born in the Jim Crow South during the Great Depression of the 1930s. But the home into which I was adopted had four adults and I was the only child. Many years later, when I was a parent and asked one of the surviving members of that family how old I was when I started walking, she said: "Oh, Tommy, nobody knows when you could walk. Somebody was always carrying you."

You can't buy that. A leading historian of education has said that the New York City public schools were the best in the country during the 1940s. That was when I went to school there. That was enough piece of sheer good luck that came my way. Today the classes are smaller, the buildings more modern— but the education itself is a disaster. I got the kind of education that people have to go to expensive private schools to get today.

Perhaps more important, nobody told me that I couldn't make it because I was poor and black, or that I ought to hate white people today because of what some other white people did to my ancestors in some other time.

Nobody sugar-coated the facts of racial discrimination. But Professor Sterling Brown of Howard University, who wrote with eloquent bitterness about racism, nevertheless said to me when I prepared to transfer to Harvard: "Don't come back here and tell me you didn't make it 'cause white folks were mean."

He burned my bridges behind me, the way they used to do with armies going into battle, so that they had no place to retreat to, and so had to fight to win.

— Thomas Sowell; Dismantling America view

Blacks are to the left today what the working class were to Marx in the 19th century — pawns in an ideological game.

— Thomas Sowell; Dismantling America view

Progress in general seems to hold little interest for people who call themselves "progressives." What arouses them are denunciations of social failures and accusations of wrong-doing.

— Thomas Sowell; Dismantling America view

Those who want more power have known for centuries that giving the people somebody to hate and fear is the key.

In 18th century France, promoting hatred of the aristocracy was the key to Robespierre's acquiring more dictatorial power than the aristocracy had ever had, and using that power to create a bigger bloodbath than anything under the old regime.

In the 20th century, it was both the czars and the capitalists in Russia who were made the targets of public hatred by the Communists on their road to power. That power created more havoc in the lives of more people than czars and capitalists ever had combined.

— Thomas Sowell; Dismantling America view

It is not even that the average corporate CEO makes as much money as any number of professional athletes and entertainers. The average pay of a CEO of a corporation big enough to be included in the Standard & Poor's index is less than one-third of what Alex Rodriguez makes, about one-tenth of what Tiger Woods makes and less than one-thirtieth of what Oprah Winfrey makes.

But when has anyone ever accused athletes or entertainers of "greed"?

— Thomas Sowell; Dismantling America view

The left has never understood why property rights are a big deal, except to fat cats who own a lot of property. Through legislation and judicial rulings, property rights have been eroded with rent control laws, expansive concepts of eminent domain, and all sorts of environmental restrictions.

Some of the biggest losers have been people of very modest incomes and some of the biggest winners have been fat cats who are able to use political muscle and activist judges to violate other people's property rights.

Politicians in cities around the country violate property rights regularly by seizing homes in working-class neighborhoods and demolishing whole sectors of the city, in order to turn the land over to people who will build shopping malls, gambling casinos, and other things that will pay more taxes than the homeowners are paying.

That's why property rights were put in the Constitution in the first place, to keep politicians from doing things like that. But the adolescent intellectuals of our time have promoted the notion that property rights are just arbitrary rules to protect the rich.

— Thomas Sowell; Dismantling America view

To a small child, the reason he cannot do many things that he would like to do is that his parents won't let him. Many years later, maturity brings an understanding that there are underlying reasons for doing or not doing many things, and that his parents were essentially conduits for those reasons.

The truly dangerous period in life is the time when the child has learned the limits of his parents' control, and how to circumvent their control, but has not yet understood or accepted the underlying reasons for doing and not doing things. This adolescent period is one that some people — intellectuals especially — never outgrow.

— Thomas Sowell; Dismantling America view

But criteria exist precisely to have a disparate impact on those who do not have what these criteria exist to measure. Track meets discriminate against those who are slow afoot. Tests in school discriminate against students who did not study.

Disregarding criteria in the interest of "fairness"— in the sense of outcomes independent of inputs— adds to the handicaps of those who already have other handicaps, by lying to them about the reasons for their situation and the things they need to do to make their situation better.

— Thomas Sowell; Dismantling America view

Society may lavish thousands of dollars per year on schooling for a youngster who does not bother to study, and yet when he or she emerges as a semi-literate adult, it is considered to be society's fault if such youngsters cannot get the same kinds of jobs and incomes as other youngsters who studied conscientiously during their years in school.

— Thomas Sowell; Dismantling America view

Those with that vision do not want to even discuss evidence that students from different groups spend different amounts of time on homework and different amounts of time on social activities. To admit that inputs affect outputs, whether in education, in the economy or in other areas, would be to undermine the vision and agenda of the left, and deprive those who believe in that vision of a moral melodrama, starring themselves as defenders of the oppressed and crusaders against the forces of evil.

Redistribution of material resources has a very poor track record when it comes to actually helping those who are lagging, whether in education, in the economy or elsewhere. What they need are the attitudes, priorities and behavior which produce the outcomes desired.

But changing anyone's attitudes, priorities and behavior is a lot harder than taking a stance as defenders of the oppressed and crusaders against the forces of evil.

— Thomas Sowell; Dismantling America view

As with most equalization crusades, whether in education or in the economy, it is about equalizing downward, by lowering those at the top.

— Thomas Sowell; Dismantling America view

Some years ago, for example, there was a big outcry that various mental tests used for college admissions or for employment were biased and "unfair" to many individuals or groups. Fortunately there was one voice of sanity-- David Riesman, I believe-- who said: "The tests are not unfair. LIFE is unfair and the tests measure the results."

If by "fair" you mean everyone having the same odds for achieving success, then life has never been anywhere close to being fair, anywhere or at any time. If you stop and think about it (however old-fashioned that may seem), it is hard even to conceive of how life could possibly be fair in that sense.

Even within the same family, among children born to the same parents and raised under the same roof, the first-borns on average have higher IQs than their brothers and sisters, and usually achieve more in life.

— Thomas Sowell; Dismantling America view

Economic issues are approached in the same way. People with low incomes are seen as a problem for other people to solve. Studies which follow the same individuals over time show that the vast majority of working people who are in the bottom 20 percent of income earners at a given time end up rising out of that bracket.

Many are simply beginners who get beginners' wages but whose pay rises as they acquire more skills and experience. Yet there is a small minority of workers who do not rise and a large number of people who seldom work and who— surprise!— have low incomes as a result.

— Thomas Sowell; Dismantling America view

No small part of the current confusion between "health care" and medical care comes from failing to recognize that Americans can have the best medical care in the world without having the best health or longevity because so many people choose to live in ways that shorten their lives.

— Thomas Sowell; Dismantling America view

Education is usually discussed in terms of the money spent on it, the teaching methods used, class sizes or the way the whole system is organized. Students are discussed largely as passive recipients of good or bad education.

But education is not something that can be given to anybody. It is something that students either acquire or fail to acquire. Personal responsibility may be ignored or downplayed in this "non-judgmental" age, but it remains a major factor nevertheless.

After many students go through a dozen years in the public schools, at a total cost of $100,000 or more per student— and emerge semi-literate and with little understanding of the society in which they live, much less the larger world and its history— most discussions of what is wrong leave out the fact that many such students may have chosen to use school as a place to fool around, act up, organize gangs or even peddle drugs.

— Thomas Sowell; Dismantling America view

The fall of the Roman Empire was not just a matter of changing rulers or political systems. It was the collapse of a whole civilization— the destruction of an economy, the breakdown of law and order, the disappearance of many educational institutions.

— Thomas Sowell; Dismantling America view

The writings of Karl Marx— especially The Communist Manifesto— had the longest lasting effect on me as a young man and led me to become and remain a Marxist throughout my twenties. I wouldn't recommend The Communist Manifesto today either, except as an example of a masterpiece of propaganda.

There was no book that changed my mind about being on the political left. Life experience did that— especially the experience of seeing government at work from the inside.

— Thomas Sowell; Dismantling America view

The average American today has a standard of living that includes things that only the upper crust could have afforded in times past -- and some things that even the rich didn't have in past generations, like personal computers.

But are the people who made that possible even mentioned, much less publicized and praised?

There is not an inventor, scientist, medical researcher, or industrialist who is as well known as loudmouths like Rosie O'Donnell or Jesse Jackson.

Any bimbo who exposes her body can get more attention than someone who finds ways to reduce the cost of housing for millions of people.

In California, the bimbo can get favorable attention while the developer is condemned.

In short, the problem is not that particular people do particular things to get attention. The problem is that the society at large no longer has standards by which to deny or rebuke attention-seekers who have nothing to contribute to society.

Do not expect sound judgments in a society where being "non-judgmental" is an exalted value. As someone has said, if you don't stand for something, you will fall for anything.

— Thomas Sowell; Dismantling America view

The problem is not just with people who want to get attention by the way they dress, act, talk, or show off in innumerable other ways. The more fundamental problem is that the society around them pays its attention to such superficial and often childish stuff.

The media attention lavished on Anna Nicole Smith and Paris 24/7, while paying little attention to Iran's movement toward nuclear weapons that can change the course of history irrevocably, is one of the most painful signs of our times.

— Thomas Sowell; Dismantling America view

When you achieve something, you don't need gimmicks.

— Thomas Sowell; Dismantling America view

Even if we assume, for the sake of argument, that students are being indoctrinated with the correct conclusions on current issues, that would still be irrelevant educationally. Hearing only one side does nothing to equip students with the experience to know how to sort out opposing sides of other issues they will have to confront in the future, after they have left school and need to reach their own conclusions on the issues arising later.

— Thomas Sowell; Dismantling America view

Elementary as it may seem that we should hear both sides of an issue before making up our minds, that is seldom what happens on politically correct issues today in our schools and colleges. The biggest argument of the left is that there is no argument— whether the issue is global warming, "open space" laws or whatever.

— Thomas Sowell; Dismantling America view

Slavery was cancerous but does anybody regard cancer in the United States as an evil peculiar to American society? It is a worldwide affliction and so was slavery.

Both the enslavers and the enslaved have included people on every inhabited continent — people of every race, color, and creed.

More Europeans were enslaved and taken to North Africa by Barbary Coast pirates alone than there were African slaves taken to the United States and to the colonies from which it was formed.

Yet throughout our educational system, our media, and in politics, slavery is incessantly presented as if it were something peculiar to black and white Americans.

What was peculiar about the United States was that it was the first country in which slavery was under attack from the moment the country was created.

What was peculiar about Western civilization was that it was the first civilization to destroy slavery, not only within its own countries but in other countries around the world as well.

— Thomas Sowell; Dismantling America view

History is full of nations and even whole civilizations that have fallen from the heights to destitution and disintegration.

The Roman Empire is a classic example, but the great ancient Chinese dynasties, the Ottoman Empire and many others have met the same fate.

These were not just political "changes." They were historic catastrophes from which whole peoples did not recover for centuries.

It has been estimated that it was a thousand years before Europeans again achieved as high a standard of living as they had in Roman times. The Dark Ages were called dark for a reason.

— Thomas Sowell; Dismantling America view

Our national motto, "E Pluribus Unum" — from many, one — has been turned upside down as educators, activists and politicians strive to fragment the American population into separate racial, social, linguistic and ideological blocs.

— Thomas Sowell; Dismantling America view

There is nothing automatic about the way of life achieved in this country. It is very unusual among the nations of the world today and rarer than four-leaf clovers in the long view of history.

It didn't just happen. People made it happen — and they and those who came after them paid a price in blood and treasure to create and preserve this nation that we now take for granted.

— Thomas Sowell; Dismantling America view

We all have a tendency to take for granted what we are used to, and to regard it as somehow natural or automatic — and to be unduly impressed by what is unusual.

— Thomas Sowell; Dismantling America view

Cultures do change, however, and - like other changes - these may be for better or for worse. Many of the cultural changes in contemporary America, and in Western civilization in general, have been for the worse.

— Thomas Sowell; Dismantling America view

War is not the only arena where culture is decisive. A culture pervaded by corruption will keep a country poor, even if it has an abundance of rich natural resources. Youngsters from a culture that puts a high value on education outperform youngsters from a culture that does not, even when they live at the same economic level, in the same neighborhoods and sit side-by-side in the same schools.

— Thomas Sowell; Dismantling America view

Race may be visible on the surface but culture goes deep. Americans are not a race but the American culture is what has made Americans different from the various races of Europe, Asia and Africa from which Americans are derived. People of the same race will slaughter each other when they come from different cultures.

— Thomas Sowell; Dismantling America view

Politics, economics and war are all exciting, but culture is often quietly decisive.

— Thomas Sowell; Dismantling America view

For example, the Federal Deposit Insurance Corporation, which guarantees bank accounts, has only a fraction of the money that it is supposed to have on hand to see that people's life savings don't get wiped out when a bank fails.

— Thomas Sowell; Dismantling America view

A survey has shown that 85 percent of the economists in Canada and 90 percent of the economists in the United States say that minimum wage laws reduce employment. But you don't need a Ph.D. in economics to know that jacking up prices leads fewer people to buy. Those people include employers, who hire less labor when labor is made artificially more expensive.

— Thomas Sowell; Dismantling America view

Minimum wage laws appear to give low-income workers something for nothing— and appearances are what count in politics. Realities can be left to others, so long as appearances get votes.

People with low skills or little experience usually get paid low wages. Passing a minimum wage law does not make them any more valuable. At a higher wage, it can just make them expendable. Raising the minimum wage in the midst of a recession was guaranteed to increase unemployment among the young— and it has.

— Thomas Sowell; Dismantling America view

But making workers more expensive means that fewer are likely to be hired.

During an economic recovery, employers can respond to an increased demand for their companies' products by hiring more workers— creating more jobs— or they can work their existing employees overtime. Since workers have to be paid time-and-a-half for overtime, it might seem as if it would always be cheaper to hire more workers. But that was before politicians began mandating more benefits per worker.

When you get more hours of work from the existing employees, you don't need to pay for additional mandates, as you would have to when you get more hours of work by hiring new people. For many employers, that makes it cheaper to pay for overtime. The data show that overtime hours have been increasing in the economy while more people have been laid off.

— Thomas Sowell; Dismantling America view

Let's go back to square one. What does it take to create a job? It takes wealth to pay someone who is hired, not to mention additional wealth to buy the material that person will use.

But government creates no wealth. Ignoring that plain and simple fact enables politicians to claim to be able to do all sorts of miraculous things that they cannot do in fact. Without creating wealth, how can they create jobs? By taking wealth from others, whether by taxation, selling bonds or imposing mandates.

However it is done, transferring wealth is not creating wealth. When government uses transferred wealth to hire people, it is essentially transferring jobs from the private sector, not adding to the net number of jobs in the economy.

— Thomas Sowell; Dismantling America view

Ironically, it is politicians who have already made medical insurance so expensive that many people refuse to buy it. Insurance is designed to cover risk. But politicians have mandated that insurance cover things that are not risks and that neither the buyers nor the sellers of insurance want covered.

In various states, medical insurance must cover the costs of fertility treatments, annual checkups and other things that have nothing to do with risks. What many people most want is to be insured against the risk of having their life's savings wiped out by a catastrophic illness.

But you cannot get insurance just for catastrophic illnesses when politicians keep piling on mandates that drive up the cost of the insurance. These are usually state mandates but the federal government is already promising more mandates on insurance companies— which means still higher costs and higher premiums.

All this makes a farce of the notion of a "public option" that will simply provide competition to keep private insurance companies honest. What politicians can and will do is continue to drive up the cost of private insurance until it is no longer viable. A "public option" is simply a path toward a "single payer" system, a euphemism for a government monopoly.

— Thomas Sowell; Dismantling America view

The "uninsured" are another big talking point for government medical insurance. But the incomes of many of the uninsured indicate that many— if not most— of them choose to be uninsured. Poor people can get insurance through Medicaid.

— Thomas Sowell; Dismantling America view

Price controls create lower prices for open and legal transactions— but also black markets where the prices are higher than they were before, because the risks of punishment for illegal activity has to be compensated. Price controls also lead to shortages and quality deterioration.

But politicians who take credit for lower prices blame all these bad consequences on others. Diocletian did this in the days of the Roman Empire, leaders of the French Revolution did this when their price controls on food led to hungry and angry people, and American politicians denounced the oil companies when price controls on gasoline led to long lines at filling stations in the 1970s. It is the same story, whatever the country, the times or the product or service.

— Thomas Sowell; Dismantling America view

One of the strongest talking points of those who want a government-run medical care system is that we simply cannot afford the high and rising costs of medical care under the current system.

First of all, what we can afford has absolutely nothing to do with the cost of producing anything. We will either pay those costs or not get the benefits. Moreover, if we cannot afford the quantity and quality of medical care that we want now, the government has no miraculous way of enabling us to afford it in the future.

If you think the government can lower medical costs by eliminating "waste, fraud and abuse," as some Washington politicians claim, the logical question is: Why haven't they done that already?

Over the years, scandal after scandal has shown waste, fraud and abuse to be rampant in Medicare and Medicaid. Why would anyone imagine that a new government medical program will do what existing government medical programs have clearly failed to do?

— Thomas Sowell; Dismantling America view

For those who live by talking points, one of their biggest talking points is that Americans do not get any longer life span than people in other Western nations by all the additional money we spend on medical care.

Like so many clever things that are said, this argument depends on confusing very different things— namely, "health care" and "medical care." Medical care is a limited part of health care. What we do and don't do in the way we live our lives affects our health and our longevity, in many cases more so than what doctors can do to provide medical care.

Americans have higher rates of obesity, homicide and narcotics addiction than people in many other Western nations. There are severe limits on what doctors and medical care can do about that.

If we are serious about medical care— and we should be serious, since it is a matter of life and death— then we should have no time for clever statements that confuse instead of clarifying.

If we want to compare the effects of medical care, as such, in the United States with that in other countries with government-run medical systems, then we need to compare things where medical care is what matters most, such as survival rates of people with cancer.

The United States has one of the highest rates of cancer survival in the world— and for some cancers, the number one rate of survival. We also lead the world in creating new life-saving pharmaceutical drugs. But all of this can change— for the worse— if we listen to clever people who think they should be running our lives.

— Thomas Sowell; Dismantling America view

You can even save money by cutting down on medications to relieve pain, as is already being done in Britain's government-run medical system. You can save money by not having as many high-tech medical devices like CAT scans or MRIs, and not using the latest medications. Countries with government-run medical systems have less of all these things than the United States has.

But reducing these things is not "bringing down the cost of medical care." It is simply refusing to pay those costs— and taking the consequences.

— Thomas Sowell; Dismantling America view

In the United States, the government has already reduced payments for patients on Medicare and Medicaid, with the result that some doctors no longer accept new patients with Medicare or Medicaid. That has not reduced the cost of medical care. It has reduced the availability of medical care, just as buying a pint of milk reduces the payment below what a quart of milk would cost.

— Thomas Sowell; Dismantling America view

Although it is cheaper to buy a pint of milk than to buy a quart of milk, nobody considers that to be lowering the price of milk. Although it is cheaper to buy a lower quality of all sorts of goods than to buy a higher quality, nobody thinks of that as lowering the price of either lower or higher quality goods. Yet, when it comes to medical care, there seems to be remarkably little attention paid to questions of both quantity and quality, in the rush to "bring down the cost of medical care."

There is no question that you can reduce the payments for medical care by having either a lower quantity or a lower quality of medical care. That has already been done in countries with government-run medical systems.

— Thomas Sowell; Dismantling America view

There are some ways in which the real costs of medical care can be reduced but the people who are leading the charge for a government takeover of medical care are not the least bit interested in actually reducing those costs, as distinguished from shifting the costs around or just refusing to pay them.

— Thomas Sowell; Dismantling America view

Britain has had a government-run medical system for more than half a century and it has to import doctors, including some from Third World countries where the medical training may not be the best. In short, reducing doctors' income is not reducing the cost of medical care, it is refusing to pay those costs. Like other ways of refusing to pay costs, it has consequences.

— Thomas Sowell; Dismantling America view

Providing free lunches to people who go to hospital emergency rooms is one of the reasons for the current high costs of medical care for others. Politicians mandating what insurance companies must cover is another free lunch that leads to higher premiums for medical insurance-- and fewer people who can afford it.

Despite all the demonizing of insurance companies, pharmaceutical companies or doctors for what they charge, the fundamental costs of goods and services are the costs of producing them.

— Thomas Sowell; Dismantling America view

There is a fundamental difference between reducing costs and simply shifting costs around, like a pea in a shell game at a carnival. Costs are not reduced simply because you pay less at a doctor's office and more in taxes-- or more in insurance premiums, or more in higher prices for other goods and services that you buy, because the government has put the costs on businesses that pass those costs on to you.

— Thomas Sowell; Dismantling America view

As a purely factual matter, prices do tend to be higher -- and the quality of service and products lower -- in stores in low-income neighborhoods. But the knee-jerk assumption that this represents "exploitation" or "racism" ignores the economics of the situation.

— Thomas Sowell; Dismantling America view

Most Americans in the top fifth, the bottom fifth, or any of the fifths in between, do not stay there for a whole decade, much less for life. And most certainly do not remain permanently in the top one percent or the top one-hundredth of one percent.

Most income statistics do not follow given individuals from year to year, the way Internal Revenue statistics do. But those other statistics can create the misleading illusion that they do by comparing income brackets from year to year, even though people are moving in and out of those brackets all the time.

That especially includes the top one percent, who have become the focus of so much angst and so much rhetoric.

— Thomas Sowell; Dismantling America view

Among corporate CEOs, those who cash in stock options that they have accumulated over the years get a big spike in income the year that they cash them in. This lets critics quote inflated incomes of the top-paid CEOs for that year. Some of these incomes are almost as large as those of big-time entertainers — who are never accused of "greed," by the way.

— Thomas Sowell; Dismantling America view

Americans in the top one percent, like Americans in most income brackets, are not there permanently, despite being talked about and written about as if they are an enduring "class" — especially by those who have overdosed on the magic formula of "race, class and gender," which has replaced thought in many intellectual circles.

At the highest income levels, people are especially likely to be transient at that level. Recent data from the Internal Revenue Service show that more than half the people who were in the top one percent in 1996 were no longer there in 2005.

Among the top one-hundredth of one percent, three-quarters of them were no longer there at the end of the decade.

— Thomas Sowell; Dismantling America view

People who are in the top one percent in income receive far more than one percent of the attention in the media. Even aside from miscellaneous celebrity bimbos, the top one percent attract all sorts of hand-wringing and finger-pointing.

— Thomas Sowell; Dismantling America view

The heady notion of "rights" -- and especially the notion that your rights over-ride other people's rights, when those other people belong to some suspect class called "bosses" -- is an all too familiar feature of modern welfare state notions.

French Prime Minister Dominique de Villepin, who supports the new labor law, has seen his approval rating drop to 36 percent. That is what happens when you try to talk sense to people who prefer to believe nonsense.

— Thomas Sowell; Dismantling America view

Student riots in Paris remind us that education at elite academic institutions is not enough to teach either higher morals or basic economics.

— Thomas Sowell; Dismantling America view

Abraham Lincoln once asked an audience how many legs a dog has, if you called the tail a leg? When the audience said "five," Lincoln corrected them, saying that the answer was four. "The fact that you call a tail a leg does not make it a leg."

— Thomas Sowell; Dismantling America view

What we have very seldom seen or heard in such parading of statistics are other statistics-- which are readily available-- showing that (1) whites are turned down for mortgage loans more often than Asian Americans, (2) whites resort to subprime loans more often than Asian Americans, (3) whites have been laid off more in a downturn than Asian Americans, and (3) the children of white mothers have higher infant mortality rates than the children of mothers of Filipino or Mexican ancestry, even though these mothers receive less prenatal care than white mothers.

In other words, numbers do not "speak for themselves." Politicians, the media and others speak for them-- very loudly, very cleverly and often very wrongly.

— Thomas Sowell; Dismantling America view

Many observers who say that they cannot understand how anyone can be worth $100 million a year do not realize that it is not necessary that they understand it, since it is not their money.

All of us have thousands of things happening around us that we do not understand. We use computers all the time but most of us could not build a computer if our life depended on it -- and those few individuals who could probably couldn't grow orchids or train horses.

In short, we all have grossly inadequate knowledge in other people's specialties.

The idea that everything must "justify itself before the bar of reason" goes back at least as far as the 18th century. But that just makes it a candidate for the longest-running fallacy in the world.

Given the high degree of specialization in a modern economy, demanding that everything "justify itself before the bar of reason" means demanding that people who know what they are doing must be subject to the veto of people who don't have a clue about the decisions that they are second-guessing.

It means demanding that ignorance override knowledge.

The ignorant are not just some separate group of people. As Will Rogers said, everybody is ignorant, but just about different things.

Should computer experts tell brain surgeons how to do their job? Or horse trainers tell either of them what to do?

— Thomas Sowell; Dismantling America view

In an era when our media and even our education system exact emotions, while ignoring facts and logic, perhaps we should not be surprised that so many people explain economics by "greed."

Today there are adults - including educated adults - who explain multimillion-dollar corporate executives' salaries as being due to "greed."

Think about it: I could become so greedy that I wanted a fortune twice the size of Bill Gates' - but this greed would not increase my income by one cent.

If you want to explain why some people have astronomical incomes, it cannot be simply because of their own desires - whether "greedy" or not - but because of what other people are willing to pay them.

The real question, then, is: Why do other people choose to pay corporate executives so much?

— Thomas Sowell; Dismantling America view

When it comes to lifting people out of poverty, redistribution of income and wealth has a much poorer and more spotty track record than the creation of wealth. In some places, such as Zimbabwe today, attempts at a redistribution of wealth have turned out to be a redistribution of poverty.

While the creation of wealth may be more effective for enabling millions of people to rise out of poverty, it provides no special role for the political left, no puffed up importance, no moral superiority, no power for them to wield over others. Redistribution is clearly better for the left.

Leftist emphasis on "the poor" proceeds as if the poor were some separate group. But, in most Western countries, at least, millions of people who are "poor" at one period of their lives are "rich" at another period of their lives -- as these terms are conventionally defined.

How can that be? People tend to become more productive -- create more wealth -- over time, with more experience and an accumulation of skills and training.

That is reflected in incomes that are two or three times higher in later years than at the beginning of a career. But that too is of little or no interest to the political left.

— Thomas Sowell; Dismantling America view

Senator Humphrey was not unique in that respect. In fact, our present economic crisis has developed out of politicians providing solutions to problems that did not exist-- and, as a result, producing a problem whose existence is all too real and all too painful.

What was the problem that didn't exist? It was a national problem of unaffordable housing. The political crusade for affordable housing got into high gear in the 1990s and led to all kinds of changes in mortgage lending practices, which in turn led to a housing boom and bust that has left us in the mess we are now trying to dig out of.

— Thomas Sowell; Dismantling America view

The housing market collapse was set off when the Federal Reserve returned interest rates to more normal levels, but it was a financial house of cards that was due to collapse, sending shock waves through the economy. It was just a matter of when, not if.

— Thomas Sowell; Dismantling America view

Mortgage loans with no down payment, no income verification and other "creative" financial arrangements abounded. Although this was done under pressures begun in the name of the poor and minorities, people who were neither could also get these mortgage loans.

— Thomas Sowell; Dismantling America view

It should also be noted that the same statistical sources from which data on blacks and whites were obtained usually contained data on Asian Americans as well. But those data on Asian Americans were almost never mentioned.

Whites were turned down for mortgage loans more often than Asian Americans. But saying that would undermine the reasoning on which the whole moral melodrama and political crusades were based.

— Thomas Sowell; Dismantling America view

What was lacking in the housing market, they say, was government regulation of the market's "greed." That makes great moral melodrama, but it turns the facts upside down.

It was precisely government intervention which turned a thriving industry into a basket case.

— Thomas Sowell; Dismantling America view

Differences in the number of people per household from one ethnic group to another is why Hispanics have higher household incomes than blacks, while blacks have higher individual incomes than Hispanics.

— Thomas Sowell; Dismantling America view

More than 40 years ago, President John F. Kennedy got Congress to cut tax rates, with the idea that this would provide incentives to change economic behavior in a way that would increase economic growth and individual incomes, and therefore lead to even more tax revenue coming into the Treasury than had been the case under the higher tax rates. That is exactly what happened.

Years later, Ronald Reagan made the same argument and his "tax cuts for the rich" produced the same result. Tax receipts during every year of the 1980s were higher than they had ever been in any year before. Moreover, taxes paid specifically by "the rich" were higher than before, because their incomes rose so much as the economy boomed that they paid more total taxes despite the reduced tax rate.

— Thomas Sowell; Dismantling America view

Most of the graduates of even our most prestigious universities leave these illustrious campuses utterly ignorant of economics. Even distinguished professors in other fields are often not only ignorant, but misinformed, about the most basic principles of economics. Harvard's eminent historian, Professor Arthur M. Schlesinger, Jr., admitted that he had no real interest in economics, though that did not stop him from concluding that President Franklin D. Roosevelt's administration saved the American economy during the Great Depression of the 1930s.

— Thomas Sowell; Dismantling America view

Economics and politics deal with the same fundamental problem: What everyone wants always adds up to more than there is. Economics can give no solution to that problem, and can at best offer various ways that trade-offs may be made, in order to try to optimize the inherently limited possibilities. But politics offers solutions every day - however illusory, counterproductive or even disastrous those solutions may turn out to be. In the short run, which is when elections are held, politicians are a lot more popular than economists.

— Thomas Sowell; Dismantling America view

Economics was long ago called "the dismal science," and for a very good reason. It poured cold water on all sorts of wonderful-sounding ideas.

— Thomas Sowell; Dismantling America view

In a country where everything imaginable is bought and paid for on credit, why is it suddenly a national crisis if some people cannot pay cash up front for medical treatment?

— Thomas Sowell; Dismantling America view

There was a time, within living memory, when most Americans did not have health insurance-- and it was not the end of the world, as so many in politics and the media seem to be depicting it today.

As someone who lived through that era, and who spent decades without medical insurance, I find it hard to be panicked and stampeded into bigger and worse problems because some people do not have medical insurance, including many who could afford it if they chose to.

What did we do, back during the years when most Americans had no medical insurance? I did what most people did. I depended on a "single payer"-- myself. When I didn't have the money, I paid off my medical bills in installments.

— Thomas Sowell; Dismantling America view

Both legal and illegal immigrants have come here primarily to work and make a better life for themselves and their families. But a country requires more than workers. It requires people who are citizens not only in name but in commitment.

Americanization did not happen automatically in earlier times and it will not happen automatically today. Immigrants in an earlier era had leaders and organizations actively working to transform them into Americans -- the Catholic Church with the Irish and numerous organizations among the Jews, for example.

Today's immigrant activists and the politicians who kowtow to them have just the opposite agenda, to keep foreigners foreign and to make other Americans accept and adjust to that. It will be a national tragedy if they succeed.

— Thomas Sowell; Dismantling America view

Nuclear power is not on the green zealots' approved list, even though nuclear power is widely used in other countries.

Some say nuclear power is not safe. But nothing is categorically "safe." The only serious question is how its safety compares to that of alternative ways of generating energy.

— Thomas Sowell; Dismantling America view

Plausible as this might sound, tax rates are not tax revenues. The two things have moved in opposite directions too many times, over too many years, for us to take these clever talking points at face value.

This administration is not the first one in which a reduction in tax rates has been followed by an increase in tax revenues. The same thing happened during the Reagan administration, the Kennedy administration and the Coolidge administration.

Tax rates and tax revenues have moved in opposite directions many times, not only at the federal level, but also at state and local levels, as well as in foreign countries.

How many times does it have to happen before people stop equating tax rates with tax revenues? Do the tax-and-spend politicians and their media supporters not know any better — or are they counting on the rest of us not knowing any better?

— Thomas Sowell; Dismantling America view

The idea of paying the kind of money that would attract the kind of people we need in government runs against many prejudices. Just plain envy is one. Some people feel that those they elect should not make so much more than they do.

But think about it: If your child had some life-threatening condition that required some very demanding surgery, would you worry about whether the surgeon who saves your child's life had an annual income that was several times what you make?

Members of Congress have not only trillions of dollars of our tax money in their hands, they also have in their hands our lives and the lives of our children and our nation. Are you going to worry about their incomes or about what caliber of people we can attract to make the momentous decisions that have to be made?

Yes, it would be nice if all public officials were self-sacrificing individuals who had no other thought than doing their best for their country. It would also be nice if voters watched elected officials 24/7. But the best is the enemy of the good. The road to Utopia has repeatedly turned out to be the road to hell, in countries around the world.

— Thomas Sowell; Dismantling America view

We need laws written by people who have confronted life in the real world, not in the sheltered world of trust fund recipients or the insulated cocoon of academia. Nor do we need people who have nothing to offer in the private sector that would earn them more than what they currently receive in Congress.

— Thomas Sowell; Dismantling America view

There is another aspect to supply and demand. As countries like China and India have in recent years begun allowing more market transactions to replace government controls, their economies have begun growing much more rapidly.

Growing economies mean rising demand for food, for shelter, for more of the amenities of life. That in turn means a rising demand for oil, leading to rising oil prices around the world.

— Thomas Sowell; Dismantling America view

However much economists rely on supply and demand to explain price movements, politicians need villains, so that the pols can play hero. Big Oil is a favorite villain and has been for decades.

[...]

It so happens that Big Government takes more money in taxes out of a gallon of gas than Big Oil takes out in profits.

— Thomas Sowell; Dismantling America view

The Supreme Court's recent [2006] unanimous decision shot down a claim that oil companies were colluding in setting prices. That claim was upheld by the far-left 9th Circuit Court of Appeals but neither liberals nor conservatives on the Supreme Court were buying it.

The unanimous vote should also tell us something about those politicians who are forever blaming rising gasoline prices on oil company collusion and "greed." There is no point exposing a lie unless we learn to be skeptical the next time the liars come out with the same story.

— Thomas Sowell; Dismantling America view

Edmund Burke understood that, no matter what form of government you had, in the end the character of those who wielded the powers of government was crucial. He said: "Constitute government how you please, infinitely the greater part of it must depend upon the exercise of the powers which are left at large to the prudence and uprightness of ministers of state."

— Thomas Sowell; Dismantling America view

A Gallup poll last week showed that far more Americans describe themselves as "conservatives" than as "liberals." Yet Republicans have been clobbered by the Democrats in both the 2008 elections and the 2006 elections.

In a country with more conservatives than liberals, it is puzzling-- in fact, amazing-- that we have the furthest left President of the United States in history, as well as the furthest left Speaker of the House of Representatives.

Republicans, especially, need to think about what this means. If you lose when the other guy has all the high cards, there is not much you can do about it. But, when you have the high cards and still keep taking a beating, then you need to re-think how you are playing the game.

— Thomas Sowell; Dismantling America view

It has long been recognized that those on the political left are more articulate than their opponents. The words they choose for the things they are for or against make it easy to decide whether to be for or against those things.

Are you for or against "social justice"? A no-brainer. Who is going to be for injustice?

What about "a living wage"? Who wants people not to have enough money to live on?

Then there is "affordable housing" and "affordable health care." Who would want people to be unable to afford to put a roof over their heads or unable to go to a doctor when they are sick?

In real life, the devil is in the details. But the whole point of political rhetoric is to make it unnecessary for you to have to go into the specifics before taking sides.

You don't need to know any economics to be in favor of "a living wage" or "affordable housing." In fact, the less economics you know, the more you can believe in such things.

— Thomas Sowell; Dismantling America view

Back in 1954, when there were no restrictions on owning shotguns in England and there were far more owners of pistols then than there were decades later, there were only 12 cases of armed robbery in London.

By the 1990s, after stringent gun controls laws were imposed, there were well over a thousand armed robberies a year in London. In the late 1990s, after an almost total ban on handguns in England, gun crimes went up another ten percent.

The reason-- too obvious to be accepted by the intelligentsia -- is that law-abiding people became more defenseless against criminals who ignored the law and kept their guns.

— Thomas Sowell; Dismantling America view

The big cities with the tightest rent control laws in the nation are New York and San Francisco. The nation's highest rents are in New York and the second-highest are in San Francisco.

There is a very straightforward explanation for that. Strong rent control laws can bring residential building to a screeching halt. Once politicians have milked the political advantages of passing rent control laws, they have to avoid a backlash if all building of apartments stops.

That leads to an escape hatch in the rent control law. Luxury apartments with rents above a certain level are exempted. That leads to the shifting of resources away from building affordable housing to building housing that is unaffordable.

— Thomas Sowell; Dismantling America view

Some of our biggest political fallacies come from accepting words as evidence of realities. "Rent control" laws do not control rent and "gun control" laws do not control guns.

— Thomas Sowell; Dismantling America view

Inflation also means that all the talk about how higher taxes will be confined to "the rich" is nonsense. Inflation is a hidden tax that takes away the value of money held by everyone at every income level.

— Thomas Sowell; Dismantling America view

If you cannot tolerate imperfections, be prepared to kiss your freedom goodbye.

— Thomas Sowell; Dismantling America view

If insurance covered only those things that most people are most concerned about-- the high cost of a major medical expense-- the price would be much lower than it is today, with politicians piling on mandate after mandate.

Since insurance covers risks, there is no reason for it to cover annual checkups, because it is known in advance that annual checkups occur once a year. Automobile insurance does not cover oil changes, much less the purchase of gasoline, since these are regular recurrences, not risks.

— Thomas Sowell; Dismantling America view

What is also the price of freedom is the toleration of imperfections. If everything that is wrong with the world becomes a reason to turn more power over to some political savior, then freedom is going to erode away, while we are mindlessly repeating the catchwords of the hour, whether "change," "universal health care" or "social justice."

— Thomas Sowell; Dismantling America view

Various empirical studies have indicated that blacks succeed best at institutions where there is little or no difference between their qualifications and the qualifications of the other students around them.

This is not rocket science but it is amazing how much effort and cleverness have gone into denying the obvious.

— Thomas Sowell; Dismantling America view

For people on the left, however, blacks are trophies or mascots, and must therefore be put on display. Nowhere is that more true than in politics.

— Thomas Sowell; Dismantling America view

FDR himself said that "Dr. New Deal" had been replaced by "Dr. Win-the-War." But those today who are for big spending like to credit wartime big spending for bringing the Great Depression to an end. They never ask the question as to why previous depressions had always ended on their own, much faster than the one under FDR, and without government intervention or massive government spending.

— Thomas Sowell; Dismantling America view

It was, after all, Franklin D. Roosevelt's brilliant "brains trust" advisers whose policies are now increasingly recognized as having prolonged the Great Depression of the 1930s, while claiming credit for ending it. The Great Depression ended only when the Second World War put an end to many New Deal policies.

— Thomas Sowell; Dismantling America view

Among the differences between the parties is that Democrats are more articulate.

Admittedly, the Democrats have an easier case to make. It takes no great amount of thought, nor much in the way of persuasive powers, to sell the idea of government handing out benefits hither and yon. It is only when you stop and think about the consequences, for this generation and generations to come, that some grim questions arise.

But if Republicans don't raise those awkward questions, and don't take the trouble to explain what is wrong with government playing Santa Claus, then the Democrats can soar on a cloud of euphoria.

Sometimes it doesn't matter that you have a better product, if your competitors have better salesmen.

— Thomas Sowell; Dismantling America view

The most politically painless way to hand out goodies, without taking responsibility for their costs, is to pass a law saying that somebody else must provide those goodies at their expense, while the politicians take credit for generosity and compassion.

Employers are ideal targets for such mandates, since there are always more employees than employers, and that is what counts on Election Day. Whether it is health insurance, time off with pay or whatever, these mandates on employers can be washed down with a little rhetoric about business’ “social responsibilities.”

Where those “social responsibilities” come from is not a problem. It sounds good, and that is good enough for politics.

— Thomas Sowell; Dismantling America view

A recent news story told of three young men who chipped in a total of $33,000 to buy a home in San Francisco that cost nearly a million dollars. Why would a bank lend that kind of money to them on such a small down payment? Because the loan was insured by the Federal Housing Administration.

The bank wasn't taking any risk. If the three guys defaulted, the bank could always collect the money from the Federal Housing Administration. The only risk was to the taxpayers.

— Thomas Sowell; Dismantling America view

Does the Federal Housing Administration have unlimited money to bail out bad loans? Actually there have been so many defaults that the FHA's own reserves have dropped below where they are supposed to be. But not to worry. There will always be taxpayers, not to mention future generations to pay off the national debt.

— Thomas Sowell; Dismantling America view

Many of the things the government does that may seem stupid are not stupid at all, from the standpoint of the elected officials or bureaucrats who do these things.

The current economic downturn that has cost millions of people their jobs began with successive administrations of both parties pushing banks and other lenders to make mortgage loans to people whose incomes, credit history and inability or unwillingness to make a substantial down payment on a house made them bad risks.

Was that stupid? Not at all. The money that was being put at risk was not the politicians' money, and in most cases was not even the government's money. Moreover, the jobs that are being lost by the millions are not the politicians' jobs-- and jobs in the government's bureaucracies are increasing.

— Thomas Sowell; Dismantling America view

No one will really understand politics until they understand that politicians are not trying to solve our problems. They are trying to solve their own problems - of which getting elected and re-elected are number one and number two. Whatever is number three is far behind.

— Thomas Sowell; Dismantling America view

Politicians don't get elected by saying "No" to voters.

— Thomas Sowell; Dismantling America view

But it is well worth noting that most of these men [U.S. Founding Fathers] were not career politicians.

— Thomas Sowell; Dismantling America view

Too often voting is conceived as some sort of expressive outlet for the voters, rather than as a solemn responsibility to pick the best people to lead the country. The emphasis is on getting as high a voter turnout as possible, even if that means pulling into the process people who have only the most meager knowledge or interest in the issues at hand.

Such people cannot preserve freedom, or perhaps even survival, in the face of politicians looking out solely for their advantages of the moment.

— Thomas Sowell; Dismantling America view

One of the trends that can become part of a perfect storm of disasters for American society has been a decades-long dumbing down of education, producing a citizenry poorly equipped to see through political rhetoric, and even more poorly supplied with facts and the ability to analyze opposing arguments.

Thousands of students graduate each year, from even the most prestigious schools and colleges in the country, with no real knowledge of history and no real analytical skills at dissecting opposing views. It was once the proud boast of educators that "We are here to teach you how to think, not what to think." But today, all too many educators see the classroom as a golden opportunity for them to indoctrinate a captive audience.

The specifics of their indoctrination are not the biggest problem. Quite aside from the merits or demerits of the specific indoctrination - whether "global warming" or the new trinity of "race, class and gender" - what the indoctrination process does is get students used to hearing one side of issues and being urged to reach conclusions and act on that grossly inadequate basis. Such an "education" sets them up to become victims of the next skilled demagogue who comes along and who knows what kinds of rhetoric will get them to respond as automatically as Pavlov's dog.

— Thomas Sowell; Dismantling America view

To expect politicians to put the public interest above their own personal interests is to defy thousands of years of history, in countries around the world.

— Thomas Sowell; Dismantling America view

If you took all the deception and fraud out of politics, there might not be a lot left.

— Thomas Sowell; Dismantling America view

The baby boomers, who are beginning to turn sixty, are unlikely to get back all the money they paid into Social Security, with or without strings. The illusion that Social Security can provide pensions more cheaply than a private annuity or other retirement plan is the grand something-for-nothing political triumph.

— Thomas Sowell; Dismantling America view

People who think that they are getting something for nothing, by having government provide what they would otherwise have to buy in the private market, are not only kidding themselves by ignoring the taxes that government has to take from them in order to give them the appearance of something for nothing. They are also ignoring the strings that are going to be attached to their own money when it comes back to them in government benefits.

That is not even counting the fact that government programs are usually less efficient than similar services provided by private enterprises.

Compare the service you get at the Department of Motor Vehicles with the service you get at Triple-A. No one who belongs to the American Automobile Association is likely to go to the DMV for a service that is also available through Triple-A.

Yet the illusion of something for nothing has kept the welfare state going -- and expanding. If there is something for sale in the marketplace for ten dollars and you would not pay more than five dollars for it, some politician can always offer to get it for you free -- as a newly discovered "basic right," or at least at a "reasonable" or "affordable" price.

Suppose that the "reasonable" or "affordable" price is three dollars. How do you suppose the government can produce something for three dollars that private industry cannot produce for less than ten dollars? Greater efficiency in government? Give me a break!

The fact that you pay only three dollars at the cash register means nothing. If it costs the government twelve dollars to produce and distribute what you are getting for three dollars, then the government is going to have to get another nine dollars in taxes to cover the difference.

One way or another, you are going to end up paying twelve dollars for something you were unwilling to buy for ten dollars or even six dollars. But so long as you think you are getting something for nothing, the politicians' shell game has worked and the welfare state can continue to expand.

— Thomas Sowell; Dismantling America view

In short, money with strings is worth less than money without strings - sometimes a lot less.

— Thomas Sowell; Dismantling America view

Americans tend to be more obese, consume more drugs and have more homicides. None of that is going to change with "universal health care" because it isn't health care. It is medical care.

When it comes to things where medical care itself makes the biggest difference - cancer survival rates, for example - Americans do much better than people in most other countries.

No one who compares medical care in this country with medical care in other countries is likely to want to switch. But those who cannot be bothered with the facts may help destroy the best medical care in the world by pursuing a political mirage.

— Thomas Sowell; Dismantling America view

Medical care is what doctors can do for you. Health care includes what you do for yourself - such as diet, exercise and lifestyle.

— Thomas Sowell; Dismantling America view

Insurance is not medical care.

— Thomas Sowell; Dismantling America view

People who believe in "universal health care" show remarkably little interest - usually none - in finding out what that phrase turns out to mean in practice, in those countries where it already exists, such as Britain, Sweden or Canada.

For one thing, "universal health care" in these countries means months of waiting for surgery that Americans get in a matter of weeks or even days.

In these and other countries, it means having only a fraction as many MRIs and other high-tech medical devices available per person as in the United States.

In Sweden, it means not only having bureaucrats deciding what medicines the government will and will not pay for, but even preventing you from buying the more expensive medicine for yourself with your own money. That would violate the "equality" that is the magic mantra.

— Thomas Sowell; Dismantling America view

Crowds cheer when Barack Obama declares dramatically that he is going to "bring down the cost of health care," as if price controls were some bright new idea.

There were price controls back in Roman times - and in ancient Babylon before that.

Price controls have had the same bad effects for literally thousands of years. But now they are suddenly the latest "new" formula for salvation.

— Thomas Sowell; Dismantling America view

One of the painful consequences of studying history is that it makes you realize how long people have been doing the same foolish things with the same disastrous results.

— Thomas Sowell; Dismantling America view

Ironically, the United States is moving in the direction of the kind of economy that China has been forced to move away from. China once had complete government control of medical care, but eventually gave it up as the disaster that it was.

— Thomas Sowell; Dismantling America view

Even the totalitarian governments of the 20th century eventually learned the hard way the limits of what could be accomplished by power alone. Chine still has a totalitarian government today but, after the death of Mao, the Chinese government began to loosen its controls on some parts of the economy, in order to reap the economic benefits of freer markets.

— Thomas Sowell; Dismantling America view

At more mundane levels, such tasks as diving operations in the Carolina swamps required a level of discretion and skill far in excess of that required to pick cotton the the South or cut sugar cane in the tropics. Slaves diving in the Carolina swamps had financial incentives and were treated far better. So were slaves working in Virgina's tobacco factories.

The point of all this is that when even slaves had to be paid to get certain kinds of work done, this shows the limits of what can be accomplished by power alone.

— Thomas Sowell; Dismantling America view

Securities based on risky mortgages are what toppled financial institutions but it was the government that made the mortgages risky in the first place, by making home-ownership statistics the holy grail, for which everything else was to be sacrificed, including commonsense standards for making home loans.

— Thomas Sowell; Dismantling America view

One important clue may be a recent statement by President Obama's chief of staff, Rahm Emanuel, that "A crisis is a terrible thing to waste."

This is the kind of cynical revelation that sometimes slips out, despite all the political pieties and spin. Crises have long been seen as great opportunities to expand the federal government's power while the people are too scared to object and before any opposition can get organized.

— Thomas Sowell; Dismantling America view

If all this sound and fury in Washington was about getting an economic crisis behind us, tax cuts could do that a lot faster.

— Thomas Sowell; Dismantling America view

Using long, drawn-out processes to put money into circulation to meet an emergency is like mailing a letter to the fire department to tell them that your house is on fire.

— Thomas Sowell; Dismantling America view

The government is putting money into banks, even when the banks don't want it, in hopes that the banks will put it into circulation. But the latest statistics show that banks are lending even less money now than they were before the government dumped all that cash on them.

— Thomas Sowell; Dismantling America view

However, thanks to the United Nations, there is a place where political leaders can go to do nothing, with a flurry of highly visible activity - and the media will cover it in detail, with a straight face, so that people will think that something is actually being done.

— Thomas Sowell; Dismantling America view

According to an official document of the U.S. Department of Homeland Security, right-wing extremists include "groups and individuals that are dedicated to a single issue, such as opposition to abortion or immigration." It also includes those "rejecting federal authority in favor of state or local authority."

— Thomas Sowell; Dismantling America view

Study after study, not only here but in other countries, show that the most affordable housing is where there has been the least government interference with the market - contrary to rhetoric.

— Thomas Sowell; Dismantling America view

It is amazing how fast people learn when they are not insulated from the consequences of their decisions.

— Thomas Sowell; Dismantling America view

Who hasn't been out of work at some time or other, or had an illness or accident that created unexpected expenses? The old and trite notion of "saving for a rainy day" is old and trite precisely because this has been a common experience for a very long time.

What is new is the current notion of indulging people who refused to save for a rainy day or to live within their means. In politics, it is called "compassion" - which comes in both the standard liberal version and "compassionate conservatism."

The one person toward whom there is no compassion is the taxpayer.

— Thomas Sowell; Dismantling America view

The word repeated endlessly in these political charades is "deregulation." The idea is that it was a lack of government supervision which allowed "greed" in the private sector to lead the nation into crises that only our Beltway saviors can solve.

What utter rubbish this all is can be found by checking the record of how government regulators were precisely the ones who imposed lower mortgage lending standards - and it was members of "Congress (of both parties) who pushed the regulators, the banks and the mortgage-buying giants Fannie Mae and Freddie Mac into accepting risky mortgages, in the name of "affordable housing" and more home ownership. Presidents of both parties also jumped on the bandwagon.

— Thomas Sowell; Dismantling America view

Poverty is obscene. It is poverty that needs to be reduced - and increasing a country's productivity has done that far more widely than redistributing income by targeting "the rich."

— Thomas Sowell; Dismantling America view

One of the most audacious attempts to take away our freedom to live our lives as we see fit has been the so-called "health care reform" bills that were being rushed through Congress before either the public or the members of Congress themselves had a chance to discover all that was in them.

For this, we were taught to resent doctors, insurance companies and even people with "Cadillac health insurance plans," who were to be singled out for special taxes. Meanwhile, our freedom to make our own medical decisions - on which life and death can depend - was to be quietly taken from us and transferred to our betters in Washington.

— Thomas Sowell; Dismantling America view

If eternal vigilance is the price of freedom, incessant distractions are the way that politicians take away our freedoms, in order to enhance their own power and longevity in office. Dire alarms and heady crusades are among the many distractions of our attention from the ever increasing ways that government finds to take away more of our money and more of our freedom.

Magicians have long known that distracting an audience is the key to creating the illusion of magic. It is also the key to political magic.

Alarms ranging from "overpopulation" to "global warming" and crusades ranging from "affordable housing" to "universal health care" have been among the distractions of political magicians. But few distractions have had such a long and impressive political track record as getting people to resent and, if necessary, hate other people.

The most politically effective totalitarian systems have gotten people to give up their own freedom in order to vent their resentment or hatred at other people - under Communism, the capitalists; under Nazis, the Jews.

— Thomas Sowell; Dismantling America view

Among the people appointed as czars by President Obama have been people who have praised enemy dictators like Mao, or who have seen the public schools as places to promote sexual practices contrary to the values of most Americans, to a captive audience of children.

Those who say that the Obama administration should have investigated those people more thoroughly before appointing them are missing the point completely. Why should we assume that Barack Obama didn't know what such people were like, when he has been associating with precisely these kinds of people for decades before he reached the White House?

Nothing is more consistent with his lifelong patterns than putting such people in government - people who reject American values, resent Americans in general and successful Americans in particular, as well as resenting America's influence in the world.

— Thomas Sowell; Dismantling America view

Separating words from realities is one of the most important steps toward evaluating government policies, whether domestically or internationally.

— Thomas Sowell; Dismantling America view

People who say that the government has to "do something" when there is an economic downturn almost never compare what actually happened when the government did something, as in the wake of the 1929 stock market crash, compared to what happened when the government did nothing after a comparable stock market crash in 1987 - or in fact after a number of other crashes before 1929. Facts seem to have become irrelevant, for all too many people, who rely instead on visions and rhetoric.

— Thomas Sowell; Dismantling America view

Government policies can be judged by what they promise or by what they do. While it might seem to be obvious that the latter is what is relevant, many people nevertheless assume that rent control laws control rent, gun control laws control guns, stimulus spending stimulates the economy and jobs bills create jobs. Moreover, few people seem to find it necessary to check any of these assumptions against facts. For example, the fact that cities like New York and San Francisco, with a long history of very strong rent control laws, have some of the highest rents in the country might suggest that such assumptions need a lot closer attention than either the public or the media give them.

— Thomas Sowell; Dismantling America view

The really painful surprise is that so many people based their hopes on his [Barack Obama] words, rather than on the record of his deeds. What that means is that, even if we somehow manage to survive this man's reckless economic policies at home and his potentially fatal foreign policy actions and inactions, the gullibility and fecklessness of those voters who put him in the White House will still be there to be exploited by the next master of glib demagoguery and emotional images, who can lead us into another vortex of dangers, from which there is no guarantee that we will emerge as a free people or even as a viable society.

— Thomas Sowell; Dismantling America view

But that such an administration could be elected in the first place, headed by a man [Barack Obama] whose only qualifications to be President of the United States at a dangerous time in the history of the world were rhetoric, style and symbolism - and whose animus against the values and institutions of America had been demonstrated repeatedly over a period of decades beforehand-speaks volumes about the inadequacies of our educational system and the degeneration of our culture.

— Thomas Sowell; Dismantling America view

It has been estimated that a thousand years passed before the standard of living in Europe rose again to the level it had achieved in Roman times. The collapse of civilization is not just the replacement of rulers or institutions with new rulers and new institutions. It is the destruction of a whole way of life and the painful, and sometimes pathetic, attempts to begin rebuilding amid the ruins.

Is that where America is headed? I believe it is. Our only saving grace is that we are not there yet—and that nothing is inevitable until it happens.

— Thomas Sowell; Dismantling America view

Most people who know the rules of the game of the rich are not in financial trouble today. For the most part, it is only those people who have a low financial intelligence and live by the old rules of money who are hurting financially.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

When I am asked, "What would you teach people about money to increase a person's financial intelligence and financial literacy?" My reply is, "I'd begin with history, because through the lens of the past you can better see the future."

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

At the beginning of this chapter we talked about how money has evolved from barter to digital money—money at the speed of light. Today, one reason why we have people making billions and others still working for $7 an hour is caused by a differential in speed. Today, the faster a person can transact business, the more money he or she will make. For example, a typical medical doctor can see one patient at a time. A high school kid with a global Web business, transacting business to unlimited customers 24/7, can potentially earn much, much more than a medical doctor. The difference, as I will talk about in the next chapter is that one type of work is metaphysical (Web business) and the other is physical (medical doctor). One type of work creates wealth exponentially; the other creates wealth linearly.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Back in 1791, Thomas Jefferson was very much against a central bank for the very reasons we are all experiencing today. It was Jefferson who pointed out that the Constitution did not grant to Congress the power to create a bank or anything else. He went on to say that even if the Constitution had granted such a power, it would be an extremely unwise thing to utilize because allowing banks to create money could only lead to national ruin. In fact, it was not uncommon for Jefferson to compare banking to the dangers of standing armies.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Senator Phil Gramm, in 1997 and 1998, helped repeal the Glass-Steagall Act, an act that was written during the last depression to prevent savings banks from mixing savings and investments. Once the Glass-Steagall Act was gone, the bank heist took on epic proportions. It is interesting to note that Senator Gramm, the chairman of the Senate Banking Committee, collected $2.6 million in campaign contributions from the banking, brokerage, and insurance industries. Fed Chairman Greenspan, President Clinton, and his Treasury Secretaries Robert Rubin, Larry Summers, and Geithner (today's treasury secretary), were all part of repealing the Glass-Steagall Act, which led to the formation of Citigroup. Coincidentally, Rubin immediately left the White House to become the head of that newly formed company.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

But a more important question is: Why should an insurance company like AIG receive bailout money in the first place? Isn't bailout money reserved for banks? The Wall Street Journal, citing confidential documents, reported that $50 billion of AIG bailout money went to firms such as Goldman Sachs, Merrill Lynch, Bank of America, and a number of European banks. In other words, the reason AIG received bailout money is because it owed the biggest of banks in the world a lot of money and didn't have the cash to pay up. In the last quarter of 2008, AIG posted the biggest loss in corporate history—some $61.7 billion. That is $27 million for every hour.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Today, we hear the word bailout over and over. In reality, not all banks are bailed out. Bailouts are only for the biggest banks.

If a smaller bank goes bust, the FDIC generally uses a payout to fix the situation. For example, if you and I owned a small bank, and we made too many bad loans, the FDIC would simply close the bank, pay off the depositors, and we and our investors would lose the equity we put in to start the bank. A payout is often the remedy for small bankers with no political clout.

A second option is a sell-off. A sell-off occurs when a large banks steps in to take over a struggling bank. This has happened a number of times during the recent financial crisis, most notably with JP Morgan's purchase of Washington Mutual. It is an easy way for a larger bank to gain market share. The FDIC takes over the troubled bank on Friday and reopens it on Monday as a branch of the bigger bank. Again, this is a sell-off not a bailout.

Bailouts are generally reserved only for big banks and bankers with political clout—and for banks that took the greatest risk and thus have the greatest chance of severely damaging the economy, banks that are too big to fail. As Irvine Sprague, a former director of the FDIC, writes in his book bailout, "In a bailout, the bank does not close, and everyone—insured or not—is fully protected, except management which is fired and stockholders who retain only greatly diluted value in their holdings. Such privileged treatment is accorded by the FDIC only rarely to an elect few."

This means bailouts are only for the rich. If a big bank such as JP Morgan Chase or Citibank gets in trouble, the taxpayers pay for all losses. This means the $250,000 limit does not apply. If a bank in Europe has millions on deposit, or a rich man from Mexico has millions in savings, their money is 100 percent covered. Taxpayers pick up the tab.

If you and I took the risks that the biggest banks did, we would lose everything. We would not be bailed out. In overly simply terms, the FDIC is a smoke screen protecting the biggest banks. If a big bank gets caught, the government bails it out.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Deposit insurance protects the bankers—not savers. In America we have the Federal Deposit Insurance Corporation (FDIC) to protect our savings, but its primary purpose is to protect big banks like Citigroup, Bank of America, and JP Morgan Chase—the very banks that helped cause this crisis.

When savers line up en masse to withdraw their savings, it is known as a bank run. The FDIC exists to make sure that runs don't happen on banks. During the Savings and Loan Crisis of the 1980s, savings were insured up to $50,000. When the savings and loans got into trouble, deposit insurance was increased to $100,000. When the financial crisis of 2007 began, the insurance was increased to $250,000. These increases were put in place to create confidence that even if a bank fails, depositors won't lose their money. From 2007 to 2009 there have been very few runs on the banks even though the numbers of failed banks is increasing. One reason is because savers feel secure that the FDIC will protect them.

Although the FDIC does a lot of good, it also protects incompetent, greedy, and dishonest bankers. By giving a sense of security—a financial backstop—the FDIC rewards bankers for taking greater and greater risks with depositors' money. And while the FDIC claims the banks pay for their insurance, the truth is that the FDIC docs not have enough money to cover today's losses—so the taxpayer will have to cover them, in the form of bailouts. The bankers get away with billions of dollars. We get stuck with the bill.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

The reason these quasi-insurance companies used the word swap rather than insurance is because a company is required to have money behind the insurance policy. Swaps have no money backing them, which is a major reason why companies such as AIG crashed when the mortgage market crashed.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Assuming a 12-to-l reserve limit (the ratio can change depending on economic conditions), when you deposit $100 in your bank, your local bank is allowed to lend up $1,200 in loans tied to that $100. When that happens, your money has been shaved and diluted, and inflation increases.

For example, let's say the bank pays you 5 percent interest per year on your $100, equating to $5 per year in interest payments to you. The bank can then extend $1,200 in loans at 10 percent interest, generating $120 in interest payments to them. The bank has robbed you of your wealth by debasing your money through fractional reserve, and it has made $120 in interest on your $100. You have made $5.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Gresham's law states that when bad money enters into circulation, good money goes into hiding.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

When money was commodity money, especially gold and silver coins, it was pretty easy to know when you were being robbed. In early Roman times, con men would try to trick people by shaving the edges of coins. That is why most Roman coins are irregular and oddly shaped. And that is why many modern coins have grooves on the edge of the coin. If you receive a U.S. quarter whose edges are smooth and irregularly shaped, you would immediately know that someone had filed some metal from the coin and that the coin is worthless. Someone had stolen your money. When it comes to money people are smart—but only if they can see, touch, and feel it.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Fiat money is simply money backed by government's good faith and credit. If anyone messes with the government's and central bank's monopoly on money, the government has the power to put that group or person in jail for fraud and counterfeiting. Fiat money means all bills payable to the government, such as taxes, must be paid in that nation's currency. You cannot pay your taxes with chickens.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Technically, prior to 1971, the U.S. dollar was a derivative of gold. After 1971, the U.S. dollar became a derivative of debt. Severing the dollar from gold was bank robbery of ungodly proportions.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Before central banks, such as the Federal Reserve, many smaller banks issued their own money. Many of these banks went bust when they got greedy and began lending out much more fractional receipt money than they had in gold, silver, and gems in their vaults, and they were unable to cover withdrawal requests. This is one reason why central banks, such as the Bank of England and the Federal Reserve, were created. They wanted only one form of money—their money—and they wanted to regulate the fractional reserve system.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

As wealth increased through trade, banker's vaults became filled with precious commodities such as gold, silver, and gems. Bankers soon realized that their customers had little use for the gold, silver, and gems themselves. Receipts were much more convenient for transacting business. Receipts were much lighter, safer, and easier to carry. To make more money, bankers transitioned from storing wealth to lending wealth. When a customer came in wanting to borrow money, the banker simply issued another receipt with interest. In other words bankers realized that they did not need their own money to make money. Bankers began effectively printing money.

The financial term in kind is derived from the German word kinder; which simply means child. This is where the word kindergarten comes from—literally, a garden of children. The financial term in kind was created when a borrower used cattle as collateral, security, to borrow money from the banker. If the borrower's cattle had calves while being held as collateral, the banker kept the calves as a part of loan agreement. This was the start of interest payments, or as bankers say, payments in kind.

Since bankers made money from interest payments, payments in kind, it was not long before bankers then began making more loans for more money than they had in their vault. This is where the magic show begins. This is where the bankers pull rabbits out of hats. For example, they might have had $1,000 in gold, silver, and gems in their vault, but they could have $2,000 in receipts in circulation that could lay claim to that $1,000 in valuables. In this example, they created a fractional reserve of 2 to 1—two dollars in receipts for every one dollar in gold, silver, and gems in their vault. The amount of money in the bank was only a fraction of the receipts in circulation. The bankers collected interest on money they technically did not have. If you and I did this, it would be considered fraud or counterfeiting—yet, it is perfectly legal for banks to do.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

The core business of banking was best described by the third Lord Rothschild as "facilitating the movement of money from point A, where it is, to point B, where it is needed."

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Today, gold and silver remain the commodities that are internationally accepted as money. This is the lesson I learned in Vietnam: Paper money was national, but gold was international, accepted as money, even behind enemy lines.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

On a side note, however, if the economy continues to slide downward and money remains tight, you will see barter increase. One good thing about barter is that it is hard for the government to tax barter transactions. The tax department does not accept chickens.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

People have a tough time understanding money today. If you are an honest, hardworking person, it probably doesn't make much sense to you how banks create magic money. The conspiracy of the rich diminishes our financial intelligence through a monetary system that honest people don't understand. Owning a bank is not only a license to print money—it is also license to steal money, legally.

I am not calling your banker a crook. Most bankers are honest people, too, and have no idea how this robbery is accomplished. Many bankers are unaware of how they are used to steal the wealth of their customers. Bankers are not much different than a financial planner or real estate agent who reaches out to shake your hand, saying, "How may I help you?" Most bankers are simply doing a job, earning a living like the rest of us. It is the system of money creation that steals our wealth. The same system also makes some people very rich.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

When I was a kid, I also believed in magic. Eventually, I learned there was no such thing as magic—just tricks, just sleight of hand. Unfortunately, this is really how money is created today—by sleight of hand. It is a magic show. The U.S. Treasury issues a bond in the form of a T-bill, the Federal Reserve writes a magic check for the bond, and the check is deposited into commercial banks, which then issue checks to regional banks, which then issue checks to smaller banks.

But this is not the full bag of tricks. The real magic is that the money supply increases at each bank. For every dollar a bank receives, it can in effect print even more money thanks to the sleight of hand known as fractional reserve banking, something we'll discuss in more detail later in this chapter. Every bank can do this trick. All a bank has to do is find people like you and me who are desperate for money and are willing to sign our life away by borrowing the magic money—and the more desperate you are, the higher the interest rate.

All banks, big or small, are effectively granted the license to print money. You don't need a mask to rob banks. All you need to do is own one.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Just as people do, money evolves. One of the reasons so many people are in financial crisis today is because our money evolved but we did not evolve with it. One reason why we did not evolve is because there has been a conspiracy against our financial intelligence. Our evolution has been stunted.

When it comes to money, most people are smart. Even a ten-year-old child knows the difference between a five dollar bill and a fifty dollar bill. If offered the choice between the five and the fifty, most kids would go for the fifty.

To diminish our natural financial smarts, we had to be financially dumbed down. This was achieved through banking, a complex and confusing system by which money is created. In many ways the modern monetary system makes no sense to a logical person. For instance, how can it create trillions of dollars out of thin air?

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

It may well be that there is no depression. It may be that President Obama has the power to unify the world, and that the world can go on forever printing money out of thin air. Maybe the countries of the world will continue to accept the United States' number-one export— debt—in payment for their goods and services. As long as the world is willing to accept our debt, T-bills, and bonds as money, the merry-go-round will keep turning. But if the world stops accepting the U.S. dollar, the music will stop, and the depression that follows will be greater than the last great depression.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Roosevelt asked the American public to turn in their gold in 1933, for which they were paid $20.22 per ounce in paper money. He then raised the price of gold to $35 an ounce. In other words, for every $20.22 in gold that was turned in, the public was cheated out of about $15, a 58 percent heist. If anyone was caught holding gold coins, the punishment was a $10,000 fine and ten years in jail. One reason for doing this was to get the public used to paper money as the sole currency of the world. Another reason was to cover up the fact that the U.S. government had printed too many paper dollars and did not have enough gold in reserve to back them—in other words the U.S. government was broke.

In 1975, President Gerald Ford allowed the American public to own physical gold once again—only after Nixon had permanently severed the link between the dollar and gold. Who cared about gold when those who controlled our government and our banks could now print money at will?

Today, most people are only used to paper money. Most Americans have no idea where to buy gold and silver coins, or even why they should be buying gold and silver coins. All they can see are jobs disappearing, their home values declining, and their retirement savings going down with the stock market. Many desperately want government bailout money, which probably means they are unknowingly choosing hyperinflation over deflation.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

It is also important to note that prior to 1913, there was no income tax in America. The income tax was established to provide the government with enough cash to pay the interest due to the Federal Reserve. So, in essence, the Fed is responsible for both the silent tax of inflation and the overt income tax that takes money out our pockets and puts it into the pockets of the rich.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

One of the original founders of the Federal Reserve was Paul Warburg, who represented the Rothschild and Warburg families of Europe. He was a member of M. M. Warburg and Company, which had offices in Germany, Amsterdam, and the Netherlands. His brother Max Warburg was the financial advisor to the Kaiser before World War II and was director of the Reichsbank of Germany. Both Warburgs were anti-gold. They argued for an elastic money supply that could be expanded and contracted to accommodate the needs of business. They were for fiat money. Of course, this generally leads to inflation, which is a silent tax on the middle class and savers. The devastating results of the Warburg monetary philosophy was historically displayed in Germany. Max, a Jewish man, fled Germany in 1938—but only after hyperinflation had set in. The brothers' philosophy of currency is playing out today in America as the Fed pumps trillions of dollars into our economy.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Throughout history there have been two basic types of depressions:

<ol>
<li>Depressions caused by deflation</li>
<li>Depressions caused by inflation</li>
</ol>

The last depression in the United States was caused by deflation. During exactly the same time period, Germany experienced a depression caused by inflation.

One of the reasons the U.S. depression was caused by deflation was because the U.S. dollar technically still had real value. It was money backed by gold and silver: receipt money. Receipt money was basically a paper receipt for gold or silver supposedly held in the vault of the U.S. Treasury.

After the stock market crashed in 1929, fear spread, American people hung on to their dollars, the economy deflated, businesses closed, people lost their jobs, and depression set in. The government did not print money to solve the problem because it was technically illegal to do so—although the government did stretch some rules. Savers were winners in this case because money was scarce and still had tangible value. A depression was caused as deflation set

The reason the German depression was caused by inflation was because Germany's money was no longer real money. It was Monopoly money, IOUs from the government—fiat money created out of thin air.

Since the German Reichsmark was merely Monopoly money—a piece of paper with some ink on it, backed by nothing—the German government just kept the printing presses running. It was the German government's way of solving its financial problems. Savers were losers because money was worth less and less as more and more of it was pumped into the system. A depression was caused as inflation set in.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

In 1944, the world essentially adhered to the dollar standard, making the U.S. dollar the reserve currency of the world. This meant that the world had to trade in U.S. dollars, just as the U.S. citizen has to pay his or her taxes in U.S. dollars. The reason the United States is such a rich country today is because we can pay our debts and trade with U.S. dollars we've printed - legalized counterfeit money. If other countries like Argentina or China were allowed to have their currencies as the reserve currency of the world, they too would be rich. The danger of this all is that if the dollar loses too much credibility, countries like China may indeed choose to create a new reserve currency. If this happens, America is toast. We will not be able to live off counterfeit money any longer.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

In 1971, when the dollar was severed from gold, the IMF and the World Bank required the rest of the world to separate from the gold standard, as well, or be excluded from their club. Today's global crisis spread because the world economy is floating on Monopoly money.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

In 1944, just as World War II was about to end, a meeting of international banking leaders was held at a resort in Bretton Woods, New Hampshire—the United Nations Monetary and Financial Conference. This conference resulted in the creation of the International Monetary Fund (IMF) and the World Bank. While popular perception is that these two agencies were created for the good of the world, they have actually resulted in a lot of harm—foremost of which is the spread of a flat monetary system throughout the world.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Unemployment insurance was created in 1935. Typically, a person can receive insurance benefits for twenty-six weeks. When things get really bad, the federal government can extend the number of weeks for which a person can collect benefits. In June 2008, Congress added thirteen more weeks just as the number of layoffs accelerated.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

The FHA led to politics taking control of housing, as well as the creation Fannie Mae and Freddie Mac, two government-sponsored enterprises that are at the heart of the subprime mess and have cost the taxpayers billions of dollars. Today, Fannie Mae is proving to be a financial problem bigger than even AIG.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

The FDIC protects bankers more than it protects savers. Because deposits are insured, the FDIC rewards bankers who take greater risks, punishes bankers who are prudent, and covers up banking fraud. Deposit insurance gives savers a false sense of security while their savings are put at greater risk. The FDIC helped cause the banking crisis and credit meltdown.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

The FDIC protects bankers more than it protects savers. Because deposits are insured, the FDIC rewards bankers who take greater risks, punishes bankers who are prudent, and covers up banking fraud. Deposit insurance gives savers a false sense of security while their savings are put at greater risk. The FDIC helped cause the banking crisis and credit meltdown.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Today these creations [Social Security, Medicare, and Medicaid] are a $65 trillion problem and growing.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Stepping back and looking at the past seventy-five years, you can make a case that the last depression never ended. Many of today's financial problems stem from issues from the last depression that were never solved. The problems were simply pushed forward onto our generation. For example, Social Security was created in 1933, and the price for that government program will explode, as 75 million baby boomers began retiring in 2008. A solution created to combat the last depression has grown into a mega problem today. Social Security also led to the creation of Medicare and Medicaid, which arc financial problems five times bigger than Social Security. The Federal Housing Administration led to the creation of Fannie Mac and Freddie Mac, and those two agencies arc at the center of today's subprime mess. In other words, stepping back and looking over the past seventy-five years, the last depression never ended; the socialist solutions created to keep it at bay just keep getting more expensive.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Stepping back and looking at the past seventy-five years, you can make a case that the last depression never ended. Many of today's financial problems stem from issues from the last depression that were never solved. The problems were simply pushed forward onto our generation. For example, Social Security was created in 1933, and the price for that government program will explode, as 75 million baby boomers began retiring in 2008. A solution created to combat the last depression has grown into a mega problem today. Social Security also led to the creation of Medicare and Medicaid, which arc financial problems five times bigger than Social Security. The Federal Housing Administration led to the creation of Fannie Mac and Freddie Mac, and those two agencies arc at the center of today's subprime mess. In other words, stepping back and looking over the past seventy-five years, the last depression never ended; the socialist solutions created to keep it at bay just keep getting more expensive.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

If the United States were a true capitalist nation, we would let the economy fall, not prop it up with bailout upon bailout. Bear markets, market crashes, and depressions are the economy's way of hitting the reset button. Recessions and depressions correct the mistakes made and reveal the crimes committed during the boom rimes.

Today, instead of hitting the reset button, trillions of dollars are handed out to the incompetent, the fraudulent, and the obsolete. Bear markets exist to clean out the faults, scams, and inefficiencies that grew from a preceding bull market. Rather than let the bear market do its work, we let the government pay billions of dollars in bailout money to bankers who loaded the world with fraudulent debt when we should be sending those bankers to jail. Businesses like General Motors that grew too fat and lazy during the good times to compete in the bad times are saved from bankruptcy. Executives who are firing thousands of workers are given cash bonuses and golden parachutes as the businesses they were entrusted with protecting and growing instead contract and, as the company's share price drops, investors lose their money.

That is not capitalism. Today's bailout government is socialism—for the rich. In many ways, it is worse than Marxism or communism, because at least those systems had the illusion of being for the people. Those systems at least preached the redistribution of money from the rich to the poor, even if they didn't practice it. Our bailouts, however, rake money from the poor in the form of taxes and give it to the rich. I am not pointing the finger at President Obama. This cash heist has been going on for years. It has become a practice for the very rich to use our government to take from the poor and middle class and to give to the rich. Today, we've made it a practice to tax those who produce and to reward the lazy, the crooked, and the incompetent.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Socialism took control during the last depression. Massive government welfare programs were created. Rather than teaching people to fish, we gave people fish—even rich people.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

My poor dad grew up to become a socialist. He was school smart but not street smart. He strongly believed the government should take care of people for life.

My rich dad grew up to become a capitalist. He did not finish school, but he did become street smart. He believed in building businesses that provided stable income for his family and his workers' families. He believed that people should learn to take care of themselves. As a capitalist, he believed in teaching people to fish.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

If you use the stock market as a measurement, the last depression lasted twenty-five years. In September 1929, the Dow hit an all time high of 381. By July 8, 1932, the market had lost a staggering 89 percent of its value. On that day, the volume on the New York Stock Exchange contracted to around one million shares traded, and the Dow sunk to a low of 41 points. That low was the bottom of the bear market, and from there the market soared bullishly—even in the middle of a depression. Still, even with a bull market, it took twenty-five years, from 1929 to 1954, for the Dow to pass its high of 381.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

One reason my investments remain strong is because my partners and I buy apartment houses where there are jobs—in areas where people and money are flowing. In simple terms, real estate is not worth much if there are no jobs, because jobs attract people, and where people are flowing, cash is flowing.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

In 1952, the ratio of household debt to disposable income was less than 40 percent. In other words, if you had $1,000 after taxes, only $400 went to debt. By 2007, it was 133 percent. Since wages were not going up, people were living on credit cards and home equity loans. Today Americans carry over $2.56 trillion in consumer debt.

Even our best and brightest bankers fell for the ruse. In 1980, bank debt was around 21 percent of the total out put of the United States (GDP). By 2007, it was 116 percent.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

You may notice that today, when banks foreclose on a property, they do not want the house. Homes are not assets. You are the asset - or rather your ability to pay the interest on the loan is the asset.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

The government's greatest fear is deflation, and the one way to combat deflation is by inflation.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Simply said, bad debt takes money out of your pocket, and good debt puts money into your pocket.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

If we as a people knew that our money was debauched, Monopoly money, we might not be in the financial mess we are in today. If people had a financial education, there would be more than one person in a million who could diagnose our financial problem. If people had more financial education, they would not blindly believe that their house is an asset, that saving money is smart, that diversification would protect them from risk, and that investing for the long term in mutual funds is a smart way to invest. But because of our lack of financial education, the powers that be are able to continue with their destructive monetary policies. It is to their benefit that you and I are in the dark. This is why the rich had to first take over our educational system before they could flood the world with debt. This is why our schools do not teach us about money.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Historically, every time governments have printed their own money, fiat money, that money eventually reverted to its true value: zero. That's because paper money is a zero-sum game. Will the same happen to the U.S. dollar, the yen, the peso, the pound, and the euro? Will history repeat itself?

Now, I can hear many proud, red-blooded Americans saying, "This will not happen in America. Our money will never go to zero." Unfortunately it already has—many times. During the Revolutionary War, the American government printed a currency known as the "continental" After the government printed too many continentals, our money became a joke, giving birth to the phrase, "Not worth a continental." The same thing happened to the Confederate dollar. When I need a reminder of money going to zero, all I have to do is think about the woman fruit vendor in Vietnam and her aversion to the piaster. That was not that long ago. It's not ancient history.

Today, the entire world is running on Monopoly money. But what if the party is over? Will bailouts save us? Ironically, every time there is a bailout our national debt grows bigger, we pay more in taxes, the rich get richer, and our money's value edges closer to zero. Every time our governments print more money, our money becomes less valuable. We work harder for less and less, and our savings are worth less and less.

I am not saying today's Monopoly money will go to zero. I'm not saying it won't either. Yet, if history does repeat itself, and if the U.S. dollar goes to zero, the worldwide chaos will be cataclysmic. It will be the biggest wealth transfer in world history. The rich will get richer. And the poor will most definitely get poorer. The middle class will be wiped out.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

In very simple terms, the central banks of the world can only do two things. They are:

<ol>
<li>Create money out of thin air, just like the rules of Monopoly allow—something they are doing today by the trillions.</li>
<li>Lend money they do not have. When you borrow money from a bank, the bank does not need to have that money in the vault.</li>
</ol>

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Some people say the creation of the Federal Reserve was unconstitutional. They think the Fed's creation has harmed the world economy—and it has. There are others who say the Federal Reserve System is the best thing that has ever happened to the world. They say that it has helped bring wealth to the world like never before—and it has.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

I found out that regardless of where I was in the world, the price of gold was the same.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

When I lost everything after my first business failed, I did not let fear, frustration and doubt stop me from doing what I needed to do. I simply picked up the pieces and got back to work rebuilding my business. Learning from my business mistakes was the best business school I could have attended. And I am still in that school today.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

One reason why people ignored the advice of Keynes, Nixon's 1971 change, and others on the destruction of money is because debauching the currency suddenly made people feel rich. Credit cards came in the mail, and shopping became the national sport. Many in the middle class became pseudo-millionaires, as their homes seemed to magically increase in value. They came to believe their retirement would be financed by profits in the stock market. People took out home equity loans to pay for family vacations. Rather than one car, families had a Mercedes, a mini-van, and an SUV. Kids went to college and were strapped with student loans that take years to pay off. The middle class celebrated their new found wealth by dining in fancy restaurants, dressing in designer clothes, driving Porches, and living in McMansions—all financed by debt.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.

— John Maynard Keynes view

The Bank "never goes broke." If the Bank runs out of money, the Banker may issue as much as needed by writing on any ordinary paper.

— Monopoly Rules view

As we face the future, the prognosis for the dollar and for the international monetary system is grim indeed. Until and unless we return to the classical gold standard at a realistic gold price, the international money system is fated to shift back and forth between fixed and fluctuating exchange rates with each system posing unsolved problems, working badly, and finally disintegrating. And fueling this disintegration will be the continued inflation of the supply of dollars and hence of American prices which show no sign of abating. The prospect for the future is accelerating and eventually runaway inflation at home, accompanied by monetary breakdown and economic warfare abroad. This prognosis can only be changed by a drastic alteration of the American and world monetary system: by the return to a free market commodity money such as gold, and by removing government totally from the monetary scene.

— Murray Rothbard; What Has Government Done to Our Money? view

While a world-wide paper unit and Central Bank remain the ultimate goal of world’s Keynesian-oriented leaders, the more realistic and proximate goal is a return to a glorified Bretton Woods scheme, except this time without the check of any backing in gold.

— Murray Rothbard; What Has Government Done to Our Money? view

The far higher gold price is an indication of the calamitous deterioration of the dollar since “modern” economists had their way and all gold backing was removed.

— Murray Rothbard; What Has Government Done to Our Money? view

On August 15, 1971, at the same time that President Nixon imposed a price-wage freeze in a vain attempt to check bounding inflation, Mr. Nixon also brought the postwar Bretton Woods system to a crashing end. As European Central Banks at last threatened to redeem much of their swollen stock of dollars for gold, President Nixon went totally off gold. For the first time in American history, the dollar was totally fiat, totally without backing in gold. Even the tenuous link with gold maintained since 1933 was now severed. The world was plunged into the fiat system of the thirties—and worse, since now even the dollar was no longer linked to gold. Ahead loomed the dread spectre of currency blocs, competing devaluations, economic warfare, and the breakdown of international trade and investment, with the worldwide depression that would then ensue.

— Murray Rothbard; What Has Government Done to Our Money? view

As the 1950s and 1960s wore on, the United States became more and more inflationist, both absolutely and relatively to Japan and Western Europe. [...] But Europe did have the legal option of redeeming dollars in gold at $35 an ounce. And as the dollar became increasingly overvalued in terms of hard money currencies and gold, European governments began more and more to exercise that option.

— Murray Rothbard; What Has Government Done to Our Money? view

The new system was essentially the gold-exchange standard of the 1920s but with the dollar rudely displacing the British pound as one of the “key currencies.” Now the dollar, valued at 1/35 of a gold ounce, was to be the only key currency. The other difference from the 1920s was that the dollar was no longer redeemable in gold to American citizens; instead, the 1930’s system was continued, with the dollar redeemable in gold only to foreign governments and their Central Banks. No private individuals, only governments, were to be allowed the privilege of redeeming dollars in the world gold currency. [...] Since the dollar was artificially undervalued and most other currencies overvalued in 1945, the dollar was made scarce, and the world suffered from a so-called dollar shortage, which the American taxpayer was supposed to be obligated to make up by foreign aid. In short, the export surplus enjoyed by the undervalued American dollar was to be partly financed by the hapless American taxpayer in the form of foreign aid.

— Murray Rothbard; What Has Government Done to Our Money? view

The United States remained on the gold standard for two years, and then, in 1933–34, went off the classical gold standard in a vain attempt to get out of the depression. American citizens could no longer redeem dollars in gold, and were even prohibited from owning any gold, either here or abroad. But the United States remained, after 1934, on a peculiar new form of gold standard, in which the dollar, now redefined to 1/35 of a gold ounce, was redeemable in gold to foreign governments and Central Banks. A lingering tie to gold remained. Furthermore, the monetary chaos in Europe led to gold flowing into the only relatively safe monetary haven, the United States.

— Murray Rothbard; What Has Government Done to Our Money? view

Secretary of State Cordell Hull repeatedly pointed out that these monetary and economic conflicts of the 1930s were the major cause of World War II.

— Murray Rothbard; What Has Government Done to Our Money? view

The point of the gold-exchange standard is that it cannot last; the piper must eventually be paid, but only in a disastrous reaction to the lengthy inflationary boom. As sterling balances piled up in France, the United States, and elsewhere, the slightest loss of confidence in the increasingly shaky and jerry-built inflationary structure was bound to lead to general collapse. This is precisely what happened in 1931; the failure of inflated banks throughout Europe, and the attempt of “hard money” France to cash in its sterling balances for gold, led Britain to go off the gold standard completely. Britain was soon followed by the other countries of Europe.

— Murray Rothbard; What Has Government Done to Our Money? view

Now when Britain inflated, and experienced a deficit in its balance of payments, the gold standard mechanism did not work to quickly restrict British inflation. For instead of other countries redeeming their pounds for gold, they kept the pounds and inflated on top of them. Hence Britain and Europe were permitted to inflate unchecked, and British deficits could pile up unrestrained by the market discipline of the gold standard. As for the United States, Britain was able to induce the United States to inflate dollars so as not to lose many dollar reserves or gold to the United States.

— Murray Rothbard; What Has Government Done to Our Money? view

The gold-exchange standard worked as follows: The United States remained on the classical gold standard, redeeming dollars in gold. Britain and the other countries of the West, however, returned to a pseudo-gold standard, Britain in 1926 and the other countries around the same time. British pounds and other currencies were not payable in gold coins, but only in large-sized bars, suitable only for international transactions. This prevented the ordinary citizens of Britain and other European countries from using gold in their daily life, and thus permitted a wider degree of paper and bank inflation. But furthermore, Britain redeemed pounds not merely in gold, but also in dollars; while the other countries redeemed their currencies not in gold, but in pounds. And most of these countries were induced by Britain to return to gold at overvalued parities. The result was a pyramiding of United States on gold, of British pounds on dollars, and of other European currencies on pounds—the “gold-exchange standard,” with the dollar and the pound as the two “key currencies.”

— Murray Rothbard; What Has Government Done to Our Money? view

How could the British try to have their cake and eat it at the same time? By establishing a new international monetary order which would induce or coerce other governments into inflating or into going back to gold at overvalued pars for their own currencies, thus crippling their own exports and subsidizing imports from Britain. This is precisely what Britain did, as it led the way, at the Genoa Conference of 1922, in creating a new international monetary order, the gold-exchange standard.

— Murray Rothbard; How an Economy Grows and Why It Crashes view

If the classical gold standard worked so well, why did it break down? It broke down because governments were entrusted with the task of keeping their monetary promises, of seeing to it that pounds, dollars, francs, etc., were always redeemable in gold as they and their controlled banking system had pledged. It was not gold that failed; it was the folly of trusting government to keep its promises. To wage the catastrophic war of World War I, each government had to inflate its own supply of paper and bank currency. So severe was this inflation that it was impossible for the warring governments to keep their pledges, and so they went “off the gold standard,” i.e., declared their own bankruptcy, shortly after entering the war.

— Murray Rothbard; What Has Government Done to Our Money? view

So while the classical gold standard of the nineteenth century was not perfect, and allowed for relatively minor booms and busts, it still provided us with by far the best monetary order the world has ever known, an order which worked, which kept business cycles from getting out of hand, and which enabled the development of free international trade, exchange, and investment.

— Murray Rothbard; What Has Government Done to Our Money? view

One of the reasons for the growth and prosperity of the United States has been the fact that we have enjoyed one money throughout the large area of the country. We have had a gold or at least a single dollar standard within the entire country, and did not have to suffer the chaos of each city and county issuing its own money which would then fluctuate with respect to the moneys of all the other cities and counties.

— Murray Rothbard; What Has Government Done to Our Money? view

Many people believe that the free market, despite some admitted advantages, is a picture of disorder and chaos. Nothing is “planned,” everything is haphazard. Government dictation, on the other hand, seems simple and orderly; decrees are handed down and they are obeyed. In no area of the economy is this myth more prevalent than in the field of money. Seemingly, money, at least, must come under stringent government control. But money is the lifeblood of the economy; it is the medium for all transactions. If government dictates over money, it has already captured a vital command post for control over the economy, and has secured a stepping-stone for full socialism. We have seen that a free market in money, contrary to common assumption, would not be chaotic; that, in fact, it would be a model of order and efficiency.

— Murray Rothbard; What Has Government Done to Our Money? view

In short gold is no longer the world’s money; it is now the governments’ money, used in payments to one another.

— Murray Rothbard; What Has Government Done to Our Money? view

It became clear to governments that they could not afford to allow people to own and keep their gold. Government could never cement its power over a nation’s currency, if the people, when in need, could repudiate the fiat paper and turn to gold for their money. Accordingly, governments have outlawed gold holding by their citizens. Gold, except for a negligible amount permitted for industrial and ornamental purposes, has generally been nationalized. To ask for return of the public’s confiscated property is now considered hopelessly backward and old-fashioned.

— Murray Rothbard; What Has Government Done to Our Money? view

When a currency changes its character from gold-receipt to fiat paper, confidence in its stability and quality is shaken, and demand for it declines.

— Murray Rothbard; What Has Government Done to Our Money? view

One thing is often forgotten: deflation can only take place after a previous inflation; only pseudo-receipts, not gold coins, can be retired and liquidated.

— Murray Rothbard; What Has Government Done to Our Money? view

In addition to removing the checks on inflation, the act of establishing a Central Bank has a direct inflationary impact. Before the Central Bank began, banks kept their reserves in gold; now gold flows into the Central Bank in exchange for deposits with the Bank, which are now reserves for the commercial banks. But the Bank itself keeps only a fractional reserve of gold to its own liabilities! Therefore, the act of establishing a Central Bank greatly multiplies the inflationary potential of the country.

— Murray Rothbard; What Has Government Done to Our Money? view

America finally “solved” its pesky problem of bank failures when it adopted Federal Deposit Insurance in 1933. The Federal Deposit Insurance Corporation has only a negligible proportion of “backing” for the bank deposits it “insures.” But the public has been given the impression (and one that may well be accurate) that the federal government would stand ready to print enough new money to redeem all of the insured deposits. As a result, the government has managed to transfer its own command of vast public confidence to the entire banking system, as well as to the Central Bank.

— Murray Rothbard; What Has Government Done to Our Money? view

A Central Bank attains its commanding position from its governmentally granted monopoly of the note issue. This is often the unsung key to its power. Invariably, private banks are prohibited from issuing notes, and the privilege is reserved to the Central Bank. The private banks can only grant deposits. If their customers ever wish to shift from deposits to notes, therefore, the banks must go to the Central Bank to get them. Hence the Central Bank’s lofty perch as a “bankers’ bank.” It is a bankers’ bank because the bankers are forced to do business with it. As a result, bank deposits became redeemable not only in gold, but also in Central Bank notes. And these new notes were not just plain bank notes. They were liabilities of the Central Bank, an institution invested with all the majestic aura of the government itself. Government, after all, appoints the Bank officials and coordinates its policy with other state policy. It receives the notes in taxes, and declares them to be legal tender.

As a result of these measures, all the banks in the country became clients of the Central Bank.12 Gold poured into the Central Bank from the private banks, and, in exchange, the public got Central Bank notes and the disuse of gold coins. Gold coins were scoffed at by “official” opinion as cumbersome, old-fashioned, inefficient—an ancient “fetish,” perhaps useful in children’s socks at Christmas, but that’s about all. How much safer, more convenient, more efficient is the gold when resting as bullion in the mighty vaults of the Central Bank! Bathed by this propaganda, and influenced by the convenience and governmental backing of the notes, the public more and more stopped using gold coins in its daily life. Inexorably, the gold flowed into the Central Bank where, more “centralized,” it permitted a far greater degree of inflation of money-substitutes.

— Murray Rothbard; What Has Government Done to Our Money? view

Central Banks are often nominally owned by private individuals or, as in the United States, jointly by private banks; but they are always directed by government-appointed officials, and serve as arms of the government. Where they are privately owned, as in the original Bank of England or the Second Bank of the United States, their prospective profits add to the usual governmental desire for inflation.

— Murray Rothbard; What Has Government Done to Our Money? view

The first step, taken firmly by every sizeable government, was to seize an absolute monopoly of the minting business. That was the indispensable means of getting control of the coinage supply. The king’s or the lord’s picture was stamped upon coins, and the myth was propagated that coinage is an essential prerogative of royal or baronial “sovereignty.” The mintage monopoly allowed government to supply whatever denominations of coin it, and not the public, wanted. [...] Having acquired the mintage monopoly, governments fostered the use of the name of the monetary unit, doing their best to separate the name from its true base in the underlying weight of the coin. This, too, was a highly important step, for it liberated each government from the necessity of abiding by the common money of the world market. Instead of using grains or grams of gold or silver, each State fostered its own national name in the supposed interests of monetary patriotism: dollars, marks, francs, and the like. The shift made possible the preeminent means of governmental counterfeiting of coin: debasement.

— Murray Rothbard; What Has Government Done to Our Money? view

At first, when prices rise, people say: “Well, this is abnormal, the product of some emergency. I will postpone my purchases and wait until prices go back down.” This is the common attitude during the first phase of an inflation. This notion moderates the price rise itself, and conceals the inflation further, since the demand for money is thereby increased. But, as inflation proceeds, people begin to realize that prices are going up perpetually as a result of perpetual inflation. Now people will say: “I will buy now, though prices are ‘high,’ because if I wait, prices will go up still further.” As a result, the demand for money now falls and prices go up more, proportionately, than the increase in the money supply. At this point, the government is often called upon to “relieve the money shortage” caused by the accelerated price rise, and it inflates even faster. Soon, the country reaches the stage of the “crack-up boom,” when people say: “I must buy anything now—anything to get rid of money which depreciates on my hands.” The supply of money skyrockets, the demand plummets, and prices rise astronomically. Production falls sharply, as people spend more and more of their time finding ways to get rid of their money. The monetary system has, in effect, broken down completely, and the economy reverts to other moneys, if they are attainable—other metal, foreign currencies if this is a one-country inflation, or even a return to barter conditions. The monetary system has broken down under the impact of inflation.

This condition of hyper-inflation is familiar historically in the assignats of the French Revolution, the Continentals of the American Revolution, and especially the German crisis of 1923, and the Chinese and other currencies after World War II.

— Murray Rothbard; What Has Government Done to Our Money? view

By creating illusory profits and distorting economic calculation, inflation will suspend the free market’s penalizing of inefficient, and rewarding of efficient, firms. Almost all firms will seemingly prosper. The general atmosphere of a “sellers’ market” will lead to a decline in the quality of goods and of service to consumers, since consumers often resist price increases less when they occur in the form of downgrading of quality.4 The quality of work will decline in an inflation for a more subtle reason: people become enamored of “get-rich-quick” schemes, seemingly within their grasp in an era of ever-rising prices, and often scorn sober effort. Inflation also penalizes thrift and encourages debt, for any sum of money loaned will be repaid in dollars of lower purchasing power than when originally received. The incentive, then, is to borrow and repay later rather than save and lend. Inflation, therefore, lowers the general standard of living in the very course of creating a tinsel atmosphere of “prosperity.”

— Murray Rothbard; What Has Government Done to Our Money? view

Inflation has other disastrous effects. It distorts that keystone of our economy: business calculation. Since prices do not all change uniformly and at the same speed, it becomes very difficult for business to separate the lasting from the transitional, and gauge truly the demands of consumers or the cost of their operations. For example, accounting practice enters the “cost” of an asset at the amount the business has paid for it. But if inflation intervenes, the cost of replacing the asset when it wears out will be far greater than that recorded on the books. As a result, business accounting will seriously overstate their profits during inflation—and may even consume capital while presumably increasing their investments.3 Similarly, stockholders and real estate holders will acquire capital gains during an inflation that are not really “gains” at all. But they may spend part of these gains without realizing that they are thereby consuming their original capital.

— Murray Rothbard; What Has Government Done to Our Money? view

Inflation, then, confers no general social benefit; instead, it redistributes the wealth in favor of the first-comers and at the expense of the laggards in the race. And inflation is, in effect, a race—to see who can get the new money earliest. The latecomers—the ones stuck with the loss—are often called the “fixed income groups.” Ministers, teachers, people on salaries, lag notoriously behind other groups in acquiring the new money. Particular sufferers will be those depending on fixed money contracts—contracts made in the days before the inflationary rise in prices. Life insurance beneficiaries and annuitants, retired persons living off pensions, landlords with long term leases, bondholders and other creditors, those holding cash, all will bear the brunt of the inflation. They will be the ones who are “taxed.”

— Murray Rothbard; What Has Government Done to Our Money? view

Taxation, however, is often unpopular, and, in less temperate days, frequently precipitated revolutions. The emergence of money, while a boon to the human race, also opened a more subtle route for governmental expropriation of resources. On the free market, money can be acquired by producing and selling goods and services that people want, or by mining (a business no more profitable, in the long run, than any other). But if government can find ways to engage in counterfeiting—the creation of new money out of thin air—it can quickly produce its own money without taking the trouble to sell services or mine gold. It can then appropriate resources slyly and almost unnoticed, without rousing the hostility touched off by taxation. In fact, counterfeiting can create in its very victims the blissful illusion of unparalleled prosperity.

— Murray Rothbard; What Has Government Done to Our Money? view

What have we learned about money in a free society? We have learned that all money has originated, and must originate, in a useful commodity chosen by the free market as a medium of exchange. The unit of money is simply a unit of weight of the monetary commodity—usually a metal, such as gold or silver. Under freedom, the commodities chosen as money, their shape and form, are left to the voluntary decisions of free individuals. Private coinage, therefore, is just as legitimate and worthwhile as any business activity. The “price” of money is its purchasing power in terms of all goods in the economy, and this is determined by its supply, and by every individual’s demand for money. Any attempt by government to fix the price will interfere with the satisfaction of people’s demands for money. If people find it more convenient to use more than one metal as money, the exchange rate between them on the market will be determined by the relative demands and supplies, and will tend to equal the ratios of their respective purchasing power. Once there is enough supply of a metal to permit the market to choose it as money, no increase in supply can improve its monetary function. An increase in money supply will then merely dilute the effectiveness of each ounce of money without helping the economy. An increased stock of gold or silver, however, fulfills more nonmonetary wants (ornament, industrial purposes, etc.) served by the metal, and is therefore socially useful. Inflation (an increase in money substitutes not covered by an increase in the metal stock) is never socially useful, but merely benefits one set of people at the expense of another. Inflation, being a fraudulent invasion of property, could not take place on the free market.

In sum, freedom can run a monetary system as superbly as it runs the rest of the economy. Contrary to many writers, there is nothing special about money that requires extensive governmental dictation. Here, too, free men will best and most smoothly supply all their economic wants. For money as for all other activities of man, “liberty is the mother, not the daughter, of order.”

— Murray Rothbard; What Has Government Done to Our Money? view

Inflation may be defined as any increase in the economy’s supply of money not consisting of an increase in the stock of the money metal.

— Murray Rothbard; What Has Government Done to Our Money? view

It should be clear that the exchange rate and the purchasing powers of the units of the two metals will always tend to be proportional. If prices of goods are fifteen times as much in silver as they are in gold, then the exchange rate will tend to be set at 15:1. If not, it will pay to exchange from one to the other until parity is reached. Thus, if prices are fifteen times as much in terms of silver as gold while silver/gold is 20:1, people will rush to sell their goods for gold, buy silver, and then rebuy the goods with silver, reaping a handsome gain in the process. This will quickly restore the “purchasing power parity” of the exchange rate; as gold gets cheaper in terms of silver, silver prices of goods go up, and gold prices of goods go down.

— Murray Rothbard; What Has Government Done to Our Money? view

It is very possible that the market, given free rein, might eventually establish one single metal as money. But in recent centuries, silver stubbornly remained to challenge gold. It is not necessary, however, for the government to step in and save the market from its own folly in maintaining two moneys. Silver remained in circulation precisely because it was convenient (for small change, for example). Silver and gold could easily circulate side by side, and have done so in the past. The relative supplies of and demands for the two metals will determine the exchange rate between the two, and this rate, like any other price, will continually fluctuate in response to these changing forces. At one time, for example, silver and gold ounces might exchange at 16:1, another time at 15:1, etc. Which metal will serve as a unit of account depends on the concrete circumstances of the market. If gold is the money of account, then most transactions will be reckoned in gold ounces, and silver ounces will exchange at a freely-fluctuating price in terms of the gold.

— Murray Rothbard; What Has Government Done to Our Money? view

Yet, if creditors and debtors want to hedge against future changes in purchasing power, they can do so easily on the free market. When they make their contracts, they can agree that repayment will be made in a sum of money adjusted by some agreed-upon index number of changes in the value of money.

— Murray Rothbard; What Has Government Done to Our Money? view

People will almost always say, if asked, that they want as much money as they can get! But what they really want is not more units of money—more gold ounces or “dollars”—but more effective units, i.e., greater command of goods and services bought by money. We have seen that society cannot satisfy its demand for more money by increasing its supply—for an increased supply will simply dilute the effectiveness of each ounce, and the money will be no more really plentiful than before. People’s standard of living (except in the nonmonetary uses of gold) cannot increase by mining more gold. If people want more effective gold ounces in their cash balances, they can get them only through a fall in prices and a rise in the effectiveness of each ounce.

— Murray Rothbard; What Has Government Done to Our Money? view

An increase in the money supply, then, only dilutes the effectiveness of each gold ounce; on the other hand, a fall in the supply of money raises the power of each gold ounce to do its work. We come to the startling truth that it doesn’t matter what the supply of money is. Any supply will do as well as any other supply. The free market will simply adjust by changing the purchasing power, or effectiveness of the gold-unit. There is no need to tamper with the market in order to alter the money supply that it determines.

— Murray Rothbard; What Has Government Done to Our Money? view

What is the effect of a change in the money supply? Following the example of David Hume, one of the first economists, we may ask ourselves what would happen if, overnight, some good fairy slipped into pockets, purses, and bank vaults, and doubled our supply of money. In our example, she magically doubled our supply of gold. Would we be twice as rich? Obviously not. What makes us rich is an abundance of goods, and what limits that abundance is a scarcity of resources: namely land, labor, and capital. Multiplying coin will not whisk these resources into being. We may feel twice as rich for the moment, but clearly all we are doing is diluting the money supply. As the public rushes out to spend its new-found wealth, prices will, very roughly, double—or at least rise until the demand is satisfied, and money no longer bids against itself for the existing goods.

— Murray Rothbard; What Has Government Done to Our Money? view

What happens, then, if the supply of gold increases, demand for money remaining the same? The “price of money” falls, i.e., the purchasing power of the money-unit will fall all along the line. An ounce of gold will now be worth less than 100 loaves of bread, 1/3 of a television set, etc. Conversely, if the supply of gold falls, the purchasing power of the gold-ounce rises.

— Murray Rothbard; What Has Government Done to Our Money? view

Thus, suppose that a television set costs three gold ounces, an auto sixty ounces, a loaf of bread 1/100 of an ounce, and an hour of Mr. Jones’s legal services one ounce. The “price of money” will then be an array of alternative exchanges. One ounce of gold will be “worth” either 1/3 of a television set, 1/60 of an auto, 100 loaves of bread, or one hour of Jones’s legal service. And so on down the line. The price of money, then, is the “purchasing power” of the monetary unit—in this case, of the gold ounce. It tells what that ounce can purchase in exchange, just as the money-price of a television set tells how much money a television set can bring in exchange.

What determines the price of money? The same forces that determine all prices on the market—that venerable but eternally true law: “supply and demand.”

— Murray Rothbard; What Has Government Done to Our Money? view

Changes in the total gold stock will be governed by the same causes as changes in other goods. Increases will stem from greater production from mines; decreases from being used up in wear and tear, in industry, etc. Because the market will choose a durable commodity as money, and because money is not used up at the rate of other commodities—but is employed as a medium of exchange—the proportion of new annual production to its total stock will tend to be quite small. Changes in total gold stock, then, generally take place very slowly.

— Murray Rothbard; What Has Government Done to Our Money? view

First, the total stock, or supply, of money in society at any one time, is the total weight of the existing money-stuff.

— Murray Rothbard; What Has Government Done to Our Money? view

Despite never-ending harassment by governments, making conditions highly precarious, private coins have flourished many times in history. True to the virtual law that all innovations come from free individuals and not the state, the first coins were minted by private individuals and goldsmiths. In fact, when the government first began to monopolize the coinage, the royal coins bore the guarantees of private bankers, whom the public trusted far more, apparently, than they did the government. Privately-minted gold coins circulated in California as late as 1848.

— Murray Rothbard; What Has Government Done to Our Money? view

Opponents of private coinage charge that fraud would run rampant. Yet, these same opponents would trust government to provide the coinage. But if government is to be trusted at all, then surely, with private coinage, government could at least be trusted to prevent or punish fraud. It is usually assumed that the prevention or punishment of fraud, theft, or other crimes is the real justification for government. But if government cannot apprehend the criminal when private coinage is relied upon, what hope is there for a reliable coinage when the integrity of the private market place operators is discarded in favor of a government monopoly of coinage? If government cannot be trusted to ferret out the occasional villain in the free market in coin, why can government be trusted when it finds itself in a position of total control over money and may debase coin, counterfeit coin, or otherwise with full legal sanction perform as the sole villain in the market place? It is surely folly to say that government must socialize all property in order to prevent anyone from stealing property. Yet the reasoning behind abolition of private coinage is the same.

Moreover, all modern business is built on guarantees of standards. The drug store sells an eight ounce bottle of medicine; the meat packer sells a pound of beef. The buyer expects these guarantees to be accurate, and they are. And think of the thousands upon thousands of specialized, vital industrial products that must meet very narrow standards and specifications. The buyer of a 1/2 inch bolt must get a 1/2 inch bolt and not a mere 3/8 inch.

— Murray Rothbard; What Has Government Done to Our Money? view

The standard objection [to private coinage] is that it would be too much trouble to weigh or assay bits of gold at every transaction. But what is there to prevent private minters from stamping the coin and guaranteeing its weight and fineness? Private minters can guarantee a coin at least as well as a government mint. Abraded bits of metal would not be accepted as coin. People would use the coins of those minters with the best reputation for good quality of product. We have seen that this is precisely how the “dollar” became prominent—as a competitive silver coin.

— Murray Rothbard; What Has Government Done to Our Money? view

Many people believed, in the days of the gold standard, that coins were somehow more “really” money than plain, uncoined gold “bullion” (bars, ingots, or any other shape). It is true that coins commanded a premium over bullion, but this was not caused by any mysterious virtue in the coins; it stemmed from the fact that it cost more to manufacture coins from bullion than to remelt coins back into bullion. Because of this difference, coins were more valuable on the market.

— Murray Rothbard; What Has Government Done to Our Money? view

If the size or the name of the money-unit makes little economic difference; neither does the shape of the monetary metal. Since the commodity is the money, it follows that the entire stock of the metal, so long as it is available to man, constitutes the world’s stock of money. It makes no real difference what shape any of the metal is at any time. If iron is the money, then all the iron is money, whether it is in the form of bars, chunks, or embodied in specialized machinery. Gold has been traded as money in the raw form of nuggets, as gold dust in sacks, and even as jewelry. It should not be surprising that gold, or other moneys, can be traded in many forms, since their important feature is their weight.

— Murray Rothbard; What Has Government Done to Our Money? view

In a purely free market, gold would simply be exchanged directly as “grams,” grains, or ounces, and such confusing names as dollars, francs, etc., would be superfluous.

— Murray Rothbard; What Has Government Done to Our Money? view

In the first place, most tangible physical goods are traded in terms of weight. Weight is the distinctive unit of a tangible commodity, and so trading takes place in terms of units like tons, pounds, ounces, grains, grams, etc. Gold is no exception. Gold, like other commodities, will be traded in units of weight.

— Murray Rothbard; What Has Government Done to Our Money? view

The establishment of money conveys another great benefit. Since all exchanges are made in money, all the exchange-ratios are expressed in money, and so people can now compare the market worth of each good to that of every other good. If a TV set exchanges for three ounces of gold, and an automobile exchanges for sixty ounces of gold, then everyone can see that one automobile is “worth” twenty TV sets on the market. These exchange-ratios are prices, and the money-commodity serves as a common denominator for all prices. Only the establishment of money-prices on the market allows the development of a civilized economy, for only they permit businessmen to calculate economically. Businessmen can now judge how well they are satisfying consumer demands by seeing how the selling-prices of their products compare with the prices they have to pay productive factors (their “costs”). Since all these prices are expressed in terms of money, the businessmen can determine whether they are making profits or losses. Such calculations guide businessmen, laborers, and landowners in their search for monetary income on the market. Only such calculations can allocate resources to their most productive uses—to those uses that will most satisfy the demands of consumers.

— Murray Rothbard; What Has Government Done to Our Money? view

A most important truth about money now emerges from our discussion: money is a commodity. Learning this simple lesson is one of the world’s most important tasks. So often have people talked about money as something much more or less than this. Money is not an abstract unit of account, divorceable from a concrete good; it is not a useless token only good for exchanging; it is not a “claim on society”; it is not a guarantee of a fixed price level. It is simply a commodity. It differs from other commodities in being demanded mainly as a medium of exchange. But aside from this, it is a commodity—and, like all commodities, it has an existing stock, it faces demands by people to buy and hold it, etc. Like all commodities, its “price”—in terms of other goods—is determined by the interaction of its total supply, or stock, and the total demand by people to buy and hold it. (People “buy” money by selling their goods and services for it, just as they “sell” money when they buy goods and services.)

— Murray Rothbard; What Has Government Done to Our Money? view

This process: the cumulative development of a medium of exchange on the free market—is the only way money can become established. Money cannot originate in any other way, neither by everyone suddenly deciding to create money out of useless material, nor by government calling bits of paper “money.” [...] Thus, government is powerless to create money for the economy; it can only be developed by the processes of the free market.

— Murray Rothbard; What Has Government Done to Our Money? view

Historically, many different goods have been used as media: tobacco in colonial Virginia, sugar in the West Indies, salt in Abyssinia, cattle in ancient Greece, nails in Scotland, copper in ancient Egypt, and grain, beads, tea, cowrie shells, and fishhooks. Through the centuries, two commodities, gold and silver, have emerged as money in the free competition of the market, and have displaced the other commodities. Both are uniquely marketable, are in great demand as ornaments, and excel in the other necessary qualities. In recent times, silver, being relatively more abundant than gold, has been found more useful for smaller exchanges, while gold is more useful for larger transactions. At any rate, the important thing is that whatever the reason, the free market has found gold and silver to be the most efficient moneys.

— Murray Rothbard; What Has Government Done to Our Money? view

Now just as in nature there is a great variety of skills and resources, so there is a variety in the marketability of goods. Some goods are more widely demanded than others, some are more divisible into smaller units without loss of value, some more durable over long periods of time, some more transportable over large distances. All of these advantages make for greater marketability. It is clear that in every society, the most marketable goods will be gradually selected as the media for exchange. As they are more and more selected as media, the demand for them increases because of this use, and so they become even more marketable. The result is a reinforcing spiral: more marketability causes wider use as a medium which causes more marketability, etc. Eventually, one or two commodities are used as general media—in almost all exchanges—and these are called money.

— Murray Rothbard; What Has Government Done to Our Money? view

If one good is more marketable than another—if everyone is confident that it will be more readily sold—then it will come into greater demand because it will be used as a medium of exchange. It will be the medium through which one specialist can exchange his product for the goods of other specialists.

— Murray Rothbard; What Has Government Done to Our Money? view

Yet, direct exchange of useful goods and services would barely suffice to keep an economy going above the primitive level. Such direct exchange—or barter—is hardly better than pure self-sufficiency. Why is this? For one thing, it is clear that very little production could be carried on. If Jones hires some laborers to build a house, with what will he pay them? With parts of the house, or with building materials they could not use? The two basic problems are “indivisibility” and “lack of coincidence of wants.” Thus, if Smith has a plow, which he would like to exchange for several different things—say, eggs, bread, and a suit of clothes—how can he do so? How can he break up the plow and give part of it to a farmer and another part to a tailor? Even where the goods are divisible, it is generally impossible for two exchangers to find each other at the same time. If A has a supply of eggs for sale, and B has a pair of shoes, how can they get together if A wants a suit? And think of the plight of an economics teacher who has to find an egg-producer who wants to purchase a few economics lessons in return for his eggs! Clearly, any sort of civilized economy is impossible under direct exchange.

— Murray Rothbard; What Has Government Done to Our Money? view

Why should exchange be so universal among mankind? Fundamentally, because of the great variety in nature: the variety in man, and the diversity of location of natural resources. Every man has a different set of skills and aptitudes, and every plot of ground has its own unique features, its own distinctive resources. From this external natural fact of variety come exchanges; wheat in Kansas for iron in Minnesota; one man’s medical services for another’s playing of the violin. Specialization permits each man to develop his best skill, and allows each region to develop its own particular resources. If no one could exchange, if every man were forced to be completely self-sufficient, it is obvious that most of us would starve to death, and the rest would barely remain alive. Exchange is the lifeblood, not only of our economy, but of civilization itself.

— Murray Rothbard; What Has Government Done to Our Money? view

Many people—many economists—usually devoted to the free market stop short at money. Money, they insist, is different; it must be supplied by government and regulated by government. They never think of state control of money as interference in the free market; a free market in money is unthinkable to them.

— Murray Rothbard; What Has Government Done to Our Money? view

FEW ECONOMIC SUBJECTS ARE more tangled, more confused than money. Wrangles abound over "tight money" vs. "easy money," over the roles of the Federal Reserve System and the Treasury, over various versions of the gold standard, etc. Should the government pump money into the economy or siphon it out? Which branch of the government? Should it encourage credit or restrain it? Should it return to the gold standard? If so, at what rate? These and countless other questions multiply, seemingly without end.

— Murray Rothbard; What Has Government Done to Our Money? view

Why continue advocating a system that is designed to create cogs instead of free thinkers, and a system designed to suppress financial knowledge rather than create financially literate people who can prosper in a capitalist system?

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

I am an advocate for education. In Asian culture, the most respected profession is the teacher. Yet in Western culture, teachers are the lowest paid of educated professionals. I believe that if we valued education like we say we do, we would pay our teachers more money and build better, safer, schools in bad neighborhoods. To me, it is a crime that in America our real estate taxes determine the quality of education a child receives. In other words, schools in poor neighborhoods receive less tax money than schools in rich neighborhoods. Talk about a conspiracy of the rich!

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

The first new rule of money is: Money is knowledge. Today, you do not need money to make money. You simply need knowledge.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Today, financial information is coming at us from all directions. Without financial education, a person is less able to process financial information into personal meaning. For example, when someone says a stock has a P/E of 6, or that a piece of real estate has a cap rate of 7 percent, what does that mean to you? Or when a financial planner says the stock market goes up an average of 8 percent a year, what docs that make you think? Maybe you ask, "Is that information true, and is 8 percent a year a good or bad return?" Again, without education a person cannot translate information into personal meaning. Information without education is limited in value.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Most school systems do a pretty good job with academic and professional education. They fail when it comes to financial education.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

We live in the Information Age. In the Information Age, money is important. More specifically, knowledge about money is essential in the information age. The problem is our educational system is still in the Industrial Age, and in the minds of most intellectuals and academics, money is not important. Most of these people are operating on old, outdated, and obsolete ideas of money. But money is important. Today money is a key aspect of life. Today financial security is more important than job security.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

All that changed in 1974, when the U.S. Congress passed the Employee Retirement Income Security Act. This act led to what we know as a 401 (k), IRA, Keogh, and other retirement plans. In 1974, money became important, and people had to learn to manage their own money or die poor, living on Social Security, as my dad did after he lost his government job.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Corporations were formed primarily to protect the rich, their investors, and their money. For example, before a ship sailed for the new world, the rich formed a corporation. If the ship was lost and sailors died, the rich were not responsible for the loss of life. All the rich lost was their money.

Today, it is more of the same. If a CEO runs the company onto the rocks, loads the company with excessive debt, pays the executives millions in salaries and bonuses, or steals the employees' retirement funds, the employees lose everything, but the rich are often protected from the losses and liabilities—even the crimes.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

The words real estate literally grew from the term royal estate. That is why we still use the word landlord in reference to the person to whom we pay our rent.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

My poor dad was a great man, an educated, hardworking, honest-to-a-fault teacher and public servant. Yet when it came to money, he was a liar. When he talked about work, teaching, and life, he often said statements like, "I'm not interested in money." Or, "I'm not doing it for the money." Or, "Money is not that important." Every time I heard him make such statements, I would shake my head. To me these were lies. One day I asked him, "If you're not interested in money, why do you accept a paycheck? Why do you often say, 'I'm not paid what I'm worth? Why do you look forward to a pay raise?" He had no reply.

Like my dad, many people are uncomfortable with the subject of money. Many people lie or live in denial about the importance of money in their life. It is often said, "Never discuss sex, money, religion, or politics." These subjects are too volatile and primal in nature. That is why most people talk about the weather, sports, what is on TV, or the latest diet fad. These things are superficial—we can live with or without them. We cannot live without money.

Many people subscribe to the saying we discussed in the Introduction of this book, "The love of money is the root of all evil." What they fail to recognize is that, in the context of that saying, money itself is not the root of all evil. Many people believe that money has the power to corrupt, and it can. Many people believe that if kids knew how to make money, they might not want to get a good education, and that too is possible. Yet, living life takes money, and earning money is one of the facts of life. Most people spend most of their waking hours, and hence their lives, working for money. Many divorces and family breakups are caused by arguments about money.

Keeping people ignorant about money is evil because many people do evil things for money, such as work at a job they do not like, work for people they do not respect, marry people they do not love, take what is not theirs, and expect someone else—like their family or the government—to take care of them when they are capable of taking care of themselves.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

It is estimated that for every $1,000 in taxes you and I pay, less than $200 comes back as a benefit to us.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Saying it another way, weakening people financially via taxes, debt, and inflation allows for a government's greater consolidation of power. When people are struggling financially, they are more willing to have the government save them, unwittingly exchanging their personal freedom for financial salvation.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Big government taking over our banks and solving our personal financial problems through government programs such as Social Security and Medicare is a form of socialism. I believe socialism makes people weaker and keeps them weak. In Sunday school, I was taught to teach people how to fish—not to give people fish. To me, welfare and bailouts are the purest form of giving people fish instead of teaching them how to provide for themselves.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

As Mr. Gatto said to me recently, "The school system was not designed to teach children to think for themselves. Nor was it developed to just support the present-day notion that we can all be free. In actuality, our current school system is based on a Prussian model that was developed to do just the opposite—to teach children to obey orders and do as they're told. Compliant and obedient students become employees who are content to work for the rich or become soldiers who sacrifice their lives to protect the wealth of the rich."

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

One of the first people I came across who shared my suspicions about education is John Taylor Gatto, author of, among other books, Weapons of Mass Instruction and Dumbing Us Down. Mr. Gatto was named New York City Teacher of the Year three times and also New York State Teacher of the Year. In 1991 he quit the teaching profession in an op-ed piece in the Wall Street Journal saying, "I can't teach this way any longer. If you hear of a job where I don't have to hurt kids to make a living, let me know. Come fall I'll be looking for work." He brought to my attention that our current system of education comes from the Prussian System, a system designed to create good employees and soldiers, people who blindly follow orders, waiting to be told what to do, including what to do with their money.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Keep in mind that the General Education Board was founded in 1903 by the Rockefeller Foundation—one of the most powerful and wealthiest foundations of its time. What we see here is an attitude that dates back over a hundred years, one of the elite rich of the United States, and even the world, seemingly orchestrating education curriculum to meet their needs and not necessarily the needs of the student. This is important today, because although these attitudes are over a century old, they have not gone away, and they are the driving force behind your education, my education, and the education of your children. And they are the driving force behind the suppression of financial education even today. You do not need to know about money when you are destined to simply be a cog in someone else's money machine, or a worker on someone else's plantation.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

One of the greatest sins of our current educational system is that it does not teach you about money. Rather, it teaches you how to be a good employee and to know your station in life. Some would say this is by design. For instance, in his book The Creature from Jekyll Island, Griffin quotes from the first occasional paper of The General Education Board, entitled The Country School of To-Morrow, written by Frederick Gates: "In our dream, we have limitless resources, and the people yield themselves with perfect docility to our molding hands. The present educational conventions fade from our minds; and, unhampered by tradition, we work our own good upon a grateful and responsive rural folk . . . For the task we set before ourselves is a very simple as well as a very beautiful one: To train these people as we find them to a perfectly ideal life just where they are ..."

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

So many of us go on to work for the new plantations—the big corporations of the world, the military, or the government. We go to school to get a good job. We are taught to work for the rich, shop at the stores of the rich, borrow money from the banks of the rich, invest in the businesses of the rich via mutual funds in our retirement plans—but not bow to be rich.

Many people do not like hearing they are taught by our school system to be caught in the web, the web of the conspiracy of the rich. People do not like to hear that the rich have manipulated our system of education.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

The purpose of the foundation [General Education Board] was to use the power of money, not to raise the level of education in America, as was widely believed at the time, but to influence the direction of that education . . . The object was to use the classroom to teach attitudes that encourage people to be passive and submissive to their rulers. The goal was—and is—to create citizens who were educated enough for productive work under supervision but not enough to question authority or seek to rise above their class. True education was to be restricted to the son and daughters of the elite. For the rest, it would be better to produce skilled workers with no particular aspirations other than to enjoy life.

— G. Edward Griffin; The Creature From Jekyll Island view

When I am asked what I would teach if I were in charge of financial education for our school system, my answer is: "I would make sure the students understood the relationship between taxes, debt, and inflation before leaving the school system." If they understand that, they will have a more secure financial future. They would be able to make better financial decisions for themselves rather than expect the government or so-called "financial experts" to save them.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

So here we come back to the question posed in the title of this chapter: Can Obama save us? The correct question should be: How we can save ourselves? The answer, and the key to our freedom from the tyranny of our economy, is knowledge. By educating yourself about money and how it works, you unlock the potential within yourself to break free from the mentality of scarcity and see the abundance all around you. For you, these truly can be the best of times.

Personally, I do not expect government or big business to save me. I simply watch what the powers that be actually do, more than what they say or promise, and I respond accordingly to those actions. Knowing how to respond, rather than follow, and taking confident action, rather than waiting to be told what to do, requires courage and financial education.

I believe our financial problem is too big and getting bigger. It is out of control. It is a monetary problem more than a political problem. It is a global problem, not just a U.S. problem. There is only so much Obama can do, and what he can do I fear may not be enough. Worst of all, the people really pulling the strings in the financial world do not answer to the president of the United States. They do not need his approval to do what they do. They are beyond the control of world governments and their elected leaders.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

The difference between those who find it to be the best of times and those who find it to be the worst of times is simply knowledge and financial IQ. The great failure of our education system is that it does not teach people about how money really works, and what it does teach is antiquated and obsolete—the old rules of money. They teach you how to balance a checkbook, but they don't teach you how to grow a balance sheet—or even read one for that matter. They teach you to save your money, but they don't teach you about inflation and how it steals your wealth. They teach you how to write a check, but they don't teach you the difference between assets and liabilities. One wonders if the system is intentionally designed to keep you in the dark.

In today's world, you can be an academic genius but still be a financial imbecile. This goes against the conventional wisdom, especially when we equate people who have high-paying jobs like attorneys or doctors with being financially and academically smart because they make a lot of money. But as we've seen, making lots of money doesn't mean you are financially intelligent, especially when you spend and invest that money unwisely—or turn your money over to people who do not care if you make or lose money. Always remember there is big difference between job security and financial security, and true financial security requires a sound financial education based on the realities of the real world of money.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

As stated, in 1974, the U.S. Congress passed ERISA. This forced Americans to invest in the stock market for their retirement through vehicles like the 401(k), which generally have high fees, high risk, and low-returns, and gave Wall Street control over the country's retirement money.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

This [Inflation] is caused by the Federal Reserve and the U.S. Treasury borrowing money or printing money to pay the government's bills. That's why inflation is often called the "silent tax." Inflation makes the rich richer, but it makes the cost of living more expensive for the poor and the middle class. This is because those who print money receive the most benefit. They can purchase the goods and services they desire with the new money before it dilutes the existing money pool. They reap all of the benefits and none of the consequences. All the while, the poor and the middle class watch as their buck gets stretched thinner and thinner.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

The Federal Reserve System gave politicians the power to borrow money, rather than raise taxes. Debt, however, is a double-edged sword that results in either higher taxes or inflation. The U.S. government creates money, rather than raising taxes, by selling U.S. bonds, IOUs from the taxpayers of the country that eventually have to be paid for with higher taxes—or by printing more money, which creates inflation.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

America was relatively tax-free in its early days. In 1862 the first income tax was levied to pay for the Civil War. In 1895, the U.S. Supreme Court ruled that an income tax was unconstitutional. In 1913, however, the same year the Federal Reserve System was created, the Sixteenth Amendment was passed, making an income tax permanent. The reason for the reinstatement of the income tax was to capitalize the U.S. Treasury and Federal Reserve. Now the rich could put their hands in our pockets via taxes permanently.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

And finally, most people have money taken out of their checks and placed into retirement accounts like a 401(k) before they ever get paid. That money goes directly to Wall Street, where it is "managed'' by someone the employee doesn't even know. On top of that, additional money is skimmed through fees and commissions. And, today, many people do not have enough money to retire because they have lost all their wealth in the stock market crash.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

And then take a moment to think about how much inflation has affected your life. You may recall that not too long ago people began flipping houses because prices were going up so rapidly. During that same period, the prices of gasoline, a college education, food, clothing, and more were climbing steadily—but incomes weren't. Many people did nor save because it was smarter to spend today rather than pay more tomorrow. That was inflation in action.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

In the big picture of personal finance, there are four financial forces that cause most people to work hard and yet struggle financially. They are:

<ol>
<li>Taxes</li>
<li>Debt</li>
<li>Inflation</li>
<li>Retirement</li>
</ol>

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

The primary purpose for government is to be a vehicle for the rich to get their hands into our pockets.

— Buckminster Fuller; quoted by Robert Kiyosaki view

The year 2013 will mark the 100th anniversary of the Federal Reserve System. For nearly one hundred years the Fed has pulled off the biggest cash heist in the world. This cash heist is a bank robbery where the robbers do not wear masks, but rather business suits with American flag pins in the jacket lapels. It is a robbery where the rich take from the poor via our banks and our government.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

If President Obama really wants to make changes in Washington he needs to change this cozy relationship between the Federal Reserve System, the U.S. government, and the rich and powerful.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

The reality of the situation is that the TARP bailout money went straight from our pockets—taxpayers' pockets—into the pockets of the banks and corporations that helped create our financial mess in the first place. We were told the money was given to the banks with a mandate to lend it out, but our government was either unable or unwilling to enforce that mandate—or both.

In mid-December 2008, when USA Today asked banks what they were doing with the bailout money, JPMorgan Chase, a bank that received $25 billion in taxpayer money, replied, "We have not disclosed that to the public. We're declining to." Morgan Stanley, a bank that received $10 billion replied, "We are going to decline to comment on your story." The Bank of New York Mellon responded, "We're choosing not to disclose that." The bank bailout money was really just a rich friend bailout, employed to cover those friends' mistakes and obvious fraud, not to save the economy.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Another reason the Federal Reserve System was created was to protect the biggest banks from failing by providing liquidity to those banks when they were in financial trouble, which protected the wealth of the rich, not of the taxpayers.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

In 1913, the creation of the Federal Reserve System granted the very rich of the world the power to control the money supply of the United States and fulfilled the spirit of Rothschild's sentiments. Many people don't know or understand that the Federal Reserve System is not a government institution or a bank, nor does it have any reserves. Rather, it is a banking cartel run by some of the most powerful men in the financial world. The creation of the Fed was basically a license to print money.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Give me control of a nation's money supply and I care not who makes the laws.

— Mayer Amschel Rothschild view

The only candidate who consistently mentioned the economy and the growing financial crisis during the early part of the 2008 presidential campaign was Representative Ron Paul of Texas, a true maverick Republican. Writing for Forbes.com on March 4, 2008, he stated, "Unless we embrace fundamental reforms, we will be caught in a financial storm that will humble this great country as no foreign enemy ever could." Unfortunately, not enough voters cared to listen.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

One reason why Presidents Bush Sr. and Bush Jr. said almost the same words, that a bailout would save the economy and never happen again, is because they are elected to protect the system—not fix it. Could one reason why President Obama has hired virtually the same financial team from the Clinton administration be bccausc he is interested in protecting the same system—a system designed to make the rich get even richer? Only time will tell. Although President Obama is proud of the fact that he did not accept campaign money from lobbyists, the truth remains that his financial team is full of insiders who helped usher in the crisis they are now charged with fixing.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Who do they think they are? Other people, firms, cannot act like this . . . Citicorp and Travelers were so big that they were able to pull this off. They were able to pull off the largest financial conglomeration—the largest financial coming together of banking, insurance, and securities—when legislation was still on the books saying this was illegal. And they pulled this off with the blessings of the president of the United States, President Clinton; the chairman of the Federal Reserve system, Alan Greenspan; and the secretary of the treasury, Robert Rubin. And then, when it's all over, what happens? The secretary of the treasury becomes the vice chairman of the emerging Citigroup.

— Kenneth Guenther; quoted by Robert Kiyosaki view

In overly simple terms, the purpose of the Glass-Steagall Act of 1933, crafted during the last depression, was to separate savings banks, which had access to Federal Reserve funds, from investment banks, which did not. Clinton, Rubin, Summers, and Geithner succeeded in repealing Glass-Steagall in order to legitimize the formation of Citigroup, the biggest "financial supermarket" in U.S. history. Many people do not know this, but at the time of its formation, Citigroup was in violation of the Glass-Steagall Act.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

The main campaign slogan of President Barack Obama was, Change We Can believe In. Given that slogan, we must ask a question: "Why did President Obama hire many of the same people who worked in the Clinton administration?" That doesn't seem like change. It seems like status quo.

During the election, why did Obama consult Robert Rubin, who just recently resigned as head of Citigroup, a company on the verge of its own collapse and that has received some $45 billion in bailout funds, for advice on the economy? Why did he appoint Larry Summers to be director of the White House National Economic Council and Timothy Geithner, former head of the Federal Reserve Bank of New York, to be his secretary of the treasury? All of these men were members of the Clinton economic team and played a part in the repeal of the Glass-Steagall Act of 1933, an act that forbade banks from selling investments. Banks selling investments in the form of derivatives is a big reason why we are in this mess today.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

The crisis threatens not only major corporations and multinational banking conglomerates, but also the security of hardworking families. Today, millions of people who thought they were doing the right thing by following the conventional wisdom of going to school, getting a job, buying a home, saving money, staying free of debt, and investing in a diversified portfolio of stocks, bonds, and mutual funds arc in financial trouble.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

A bailout is used when the rich want the taxpayers to pay for their mistakes or their fraud.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Remember, one of the objectives of the financial industry is to keep people confused.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

The problem is that very few people know what derivatives are. To keep things very simple, I explain derivatives by using the example of an orange and orange juice. Orange juice is a derivative of an orange—just like gasoline is a derivative of oil, or an egg is a derivative of a chicken. It's that simple: If you buy a house, a mortgage is a derivative oif you and the house you buy.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Don't diversify. Take control of your money and focus your investments. During this current financial crisis I took a few hits, but my wealth remained intact. That is because my wealth is not dependent upon market values going up or down (a.k.a. capital gains). I invest almost exclusively for cash flow.

For example, my cash flow decreased a little when the price of oil came down, yet my wealth is strong because I still receive a check in the mail every quarter. Even though the price of the oil stocks, capital gains, came down, Fm not worried because I receive cash flow from my investment. I don't have to worry about selling my stocks to realize a profit.

The same is true with most of my real estate investments. I invest for cash flow in real estate, which means every month I receive checks—passive income. The people who arc hurting today are real estate investors who invested for capital gains, also known as flipping properties. In other words, since most people invested for capital gains, counting on the price of their stock investments or their home to go up in price, they arc in trouble today.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

As Warren Buffctt says, 'Wide diversification is only required when investors do not understand what they are doing." In the end, diversification is a zero-sum game at best. If you are evenly diversified, when one asset class goes down, the other goes up. You lose money in one place and make it in another, but you don't gain any ground. You are static. Meanwhile, inflation, a topic we will also discuss in detail later in the book, marches on.

Rather than diversify, wise investors focus and specialize. They get to know the investment category they invest in and how the business works better than anyone else. For example, when investing in real estate, some people specialize in raw land and others in apartment buildings. While both are investing in real estate, they are doing so in totally different business categories. When investing in stocks, I invest in businesses that pay a steady dividend (cash flow). For example, today I am investing in businesses that operate oil pipelines. After the stock market crash of 2008, the share prices of these companies dropped, making the cash flow dividends bargains. In other words, bad markers offer great opportunities if you know what you are investing in.

Smart investors understand that owning a business that adjusts to the ups and downs of the economy or investing in cash-flowing assets is much better than owning a diversified portfolio of stocks, bonds, and mutual funds—investments that crash when the market crashes.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Today, most people spend a lot of time learning how to earn money. They go to school to get a high-paying job, and then they spend years working at that job to earn money. They then do their best to save it. In the new rules, it is more important that you know how to spend your money, not just earn or save it. In other words, people who spend their money wisely will always be more prosperous than those who save their money wisely.

Of course, by spend I mean invest or convert your money into long lasting value. The rich understand that in today's economy you cannot become wealthy by sticking your money under a mattress—or even worse, in a bank. They know that the key to wealth is investing in cash-flowing assets. Today, you need to know how to spend your money on assets that retain their value, provide income, adjust for inflation, and go up in value—not down. This will be covered in more detail throughout this book.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

It is worth knowing, however, that what used to be the safest investments, U.S. bonds, are now the riskiest.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

In 1913, the Federal Reserve was created, even though the founding fathers, creators of the U.S. Constitution, were very much against a national bank that controlled the money supply. Without proper financial education, few people know that the Federal Reserve is not federal or American, it has no reserves, and it is not a bank. Once the Fed was in place, there were two sets of rules when it came to money: One set of rules for people who work for money, and another set of rules for the rich who print money.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

In 1903, John D. Rockefeller created the General Education Board. It seems this was done to ensure a steady supply of employees who were always financially in need of money, a job, and job security. There is evidence that Rockefeller was influenced by the Prussian System of education, a system designed to produce good employees and good soldiers, people who dutifully follow orders, such as "Do this or be fired," or, "Turn your money over to me for safe keeping, and I'll invest it for you." Regardless of whether this was Rockefeller's intent in creating the General Education Board, the result today is that even those with a good education and a secure job are feeling financially insecure.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Most people leave school not knowing even the basic differences between a stock and a bond, between debt and equity. Few know why preferred stocks are labeled preferred and why mutual funds are mutual or the difference between a mutual fund, hedge fund, exchange traded fund, and a fund of funds. Many people think debt is bad, yet debt can make you rich. Debt can increase your return on investment, but only if you know what you are doing. Only a few know the difference between capital gains and cash flow and which is less risky. Most people blindly accept the idea of going to school to get a good job and never know why employees pay higher tax rates than the entrepreneur who owns the business. Many people are in trouble today because they believed their home was an asset, when it was really a liability. These are basic and simple financial concepts. Yet for some reason, our schools conveniently omit a subject required for a successful life—the subject of money.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

One of causes of this financial crisis is that most people do not know good financial advice from bad financial advice. Most people cannot tell a good financial advisor from a con man. Most people cannot tell a good investment from a bad one. Most people go to school so they can get a good job, work hard, pay taxes, buy a house, save money, and turn over any extra money to a financial planner—or an expert like Bernie Madoff.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Every time an educator brings a banker or a financial planner into their classroom, supposedly in the name of financial education, they arc actually allowing the fox to enter the hen house. I am not saying bankers and financial planners arc bad people. All I am saying is that they are agents of the rich and powerful. Their job is not to educate but to recruit future customers. That is why they preach the doctrine of saving your money and investing in mutual funds. It helps the bank, not you. Again, I reiterate this is not bad. It's good business for the bank. It is no different than Army and Marine recruiters coming on campus when I was in high school and selling students on the glory of serving our country.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

When money and power are at stake, there will always be conspiracies. Money and power will always cause people to commit corrupt acts.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Simply put, war is profitable. War is often about greed, not patriotism.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

In 1971, President Richard Nixon changed the rules of money: Without the approval of Congress, he severed the U.S. dollar's relationship with gold. He made this unilateral decision during a quietly held two-day meeting on Minot Island in Maine, without consulting his State Department or the international monetary system.

President Nixon changed the rules because foreign countries being paid in U.S. dollars grew skeptical because the U.S. Treasury was printing more and more money to cover our debts, and they began exchanging their dollars directly for gold in earnest, depleting most of the U.S. gold reserves. The vault was being emptied because the government was importing more than it was exporting and because of the costly Vietnam War. As our economy grew, we were also importing more and more oil.

In everyday terms, America was going bankrupt. We were spending more than we earned. The United States could not pay its bills—as long as our bills were to be paid in gold. By freeing the dollar from gold, and making it illegal to directly exchange dollars for gold, Nixon created a way for the U.S. to print its way out of debt.

In 1971, the world's rules of money were changed and the biggest economic boom in the history of the world began. The boom continued as long as the world accepted our funny money, money backed by nothing but a promise by U.S. taxpayers to pay the bills of the United States.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

As we all know, the world is filled with conspiracies, some benign, some more sinister. Every time a sports team goes into the locker room at halftime, that act is technically a conspiracy against the opposing team. Wherever there is self-interest, there is a conspiracy.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Is our current economic crisis just an accident, a one-off event? Some say yes. I say no.

Can those in power solve our current economic crisis? Many hope so, but again I say no. How can the crisis be solved when the very people and organizations that created the crises - and profit from it - are still in charge? The problem is that the crisis is getting bigger, not diminishing as some would hope. In the 1980s, government bailouts were in the millions. By the 1990s they were in the billions. And today, they are in the trillions.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

I personally do not think our leaders will change. That means you and I must change instead.

— Robert Kiyosaki; Rich Dad's Conspiracy of The Rich view

Then the government bailed out student loan provider Sallie Mae and essentially took over the entire student loan market.

— Peter Schiff; How an Economy Grows and Why It Crashes view

Policies enacted by the Federal Reserve, the Federal Housing Administration, Fannie Mae, and Freddie Mac (which were always government entities in disguise), and others created advantages for home buying and selling and removed disincentives for lending and borrowing. The result was a credit and real estate bubble that could only grow—until it could grow no more.

Artificially low interest rates (which made the economy appear healthy) invigorated the market for adjustable-rate mortgages and gave birth to the teaser rate, which made overpriced homes scam affordable. Alan Greenspan himself actively encouraged home buyers to partake. Then government agencies and government-sponsored entities compounded the problem by guaranteeing adjustable-rate mortgages based solely on the ability of borrowers to afford the teaser rates. Without such guarantees most of these mortgages never would have been funded.

— Peter Schiff; How an Economy Grows and Why It Crashes view

As a result, the recession of 2002-2005 was one of the shallowest contractions on record. But that benefit came with a heavy long-term cost. The United States ended that recession with greater imbalances than it had before the downturn began. That's not supposed to happen.

Instead of real growth, we kicked off an even bigger asset bubble (in housing) that temporarily overcame the drag of the busted technology bubble. The rising value of housing prices created a great many 'benefits' that masqueraded as economic health. But as we have seen, that vigor was illusory.

The real tragedy is that six years later, when the next crash came, we had failed to learn anything from these mistakes. In diagnosing the causes and prescribing the best cures for the recession of 2008, economists and politicians are gelling it dangerously wrong.

— Peter Schiff; How an Economy Grows and Why It Crashes view

Although the idea of government stimuli as an antidote to the apparent failures of capitalism was born with Keynes, and nurtured with Roosevelt, it wasn't until Alan Greenspan, George Bush, Ben Bernanke, and Barack Obama that the idea really came into its own. Before 2002, we had never seen federal deficits of this magnitude (now exceeding $1.5 trillion annually), and we have never experimented so radically with ultra low interest rates and manipulation of credit markets.

— Peter Schiff; How an Economy Grows and Why It Crashes view

It [Hyperinflation] has happened many times before: France in the 1790s, the Confederate States of America in the 1860s, Germany in the 1920s, Hungary in the 1940s, Argentina and Brazil in the 1970s and 1980s, and Zimbabwe today. In all of these instances the circumstances that led up to the hyperinflation, and the economic devastation that followed, were remarkably similar. The countries satisfied staggering debt by wiping out the value of their currencies. As a result, their own populations were thrown into abject poverty.

The United States today would certainly be the largest and most advanced economy to ever experience hyperinflation. But that doesn't mean it can't happen. Thus far our ace in the hole has been the reserve status of the U.S. dollar. This means that the dollar will continue to be widely accepted no matter how bad the fundamentals get. But if we lose reserve status, our currency would be just as vulnerable as those that went down before.

— Peter Schiff; How an Economy Grows and Why It Crashes view

Throughout history, governments have gotten themselves into trouble by spending more than they have. When the gaps become too big, difficult choices arise.

One option is for the government to increase revenue by raising taxes. This path is never popular with citizens, and in a democracy is hard to push through. Even in authoritarian states (where there are no pesky elections), tax increases are problematic. Higher rates always discourage productivity and deflate economic vitality. There is a limit to how high taxes can go. Raise them enough, and people stop working. Raise them higher, and they may even start rioting.

A far better option is to cut government spending. However, this is often more difficult than raising taxes. Those whose benefits are cut are particularly apt to express their hostility both at the polls and on the street. This is especially true when the recipients feel entitled to the benefits. Politicians make lots of promises to secure their elections and voters rarely consider the ability of taxpayers to actually foot the bills.

To avoid either of these politically unpopular options, some governments choose to default instead. In this option a country simply tells its creditors that it can't pay the full amount of its debt obligations. If the debt is largely owed to foreigners, the decision is that much easier to make. Politically speaking, it is better to stiff a foreigner than to raise taxes on, or deny benefits to, a country's own citizens.

For political leaders, default can be rather embarrassing, as it amounts to an official acknowledgment of insolvency. To avoid this, many opt to simply print money to pay debts, effectively repudiating their obligations by inflating them away. Since inflation is usually the easiest choice to make, it is often the most likely. But while it may seem easy at first, it ultimately exacts the harshest toll.

Inflation allows governments to avoid hard choices and dispose of their debt on the sly. By printing money governments can nominally pay back all that they owe, but they do so by diluting their currency. Creditors get paid, but what they get isn't worth much, and if inflation turns into hyperinflation, it's worth nothing.

Inflation is simply a means to transfer wealth from anyone who has savings in a particular currency to anyone who has debt in the same currency. With hyperinflation, the value of savings gets completely wiped out and the burden of debt is removed. (Those who own hard assets do okay, because, unlike savings in currency, assets will rise in nominal value when inflation flares up.)

— Peter Schiff; How an Economy Grows and Why It Crashes view

With more than 50 percent of our government debt currently sold to foreign governments, who will pick up the slack when they stop buying? With very little domestic savings to tap into, Americans alone won't be able to do it.

When that day comes, we will have two choices: default or inflation. Both options will violently force American living standards downward through lost purchasing power and higher interest rates.

— Peter Schiff; How an Economy Grows and Why It Crashes view

The policy goals of both the Bush and Obama administrations have been to encourage consumers to spend as they had before the housing crash. But how? If unemployment rose, and incomes and home prices fell, where would consumers get the money?

Economists have declared that if the people can't spend, the government needs to step up and do it for them. But the government doesn't have any money. All it has is what it collects in taxes and what it borrows or prints.

For now, this process is just creating massive public debt ($1.6 trillion per year and counting). And although the numbers look bad, we are still able to sell most of this debt on the open market, primarily to foreigners.

But our "good fortune" can't last forever. Ultimately the U.S. government will have only two options: default (tell our creditors that we can't pay, and negotiate a settlement) or inflate (print money to pay off maturing debt). Either option will lead to painful consequences. Default, which does offer the possibility of a real reckoning and a fresh beginning, is actually the better alternative. Unfortunately, while inflation is worse, it is also the more politically expedient.

— Peter Schiff; How an Economy Grows and Why It Crashes view

In his book <em>Irrational Exuberance</em> economist Robert Shiller determined that in the 100 years between 1900 and 2000, home prices in the United States increased by an average of 3.4 percent per year (which is just slightly higher than the average rate of inflation). There were good reasons for this. Prices were firmly tied to people's ability to pay, which is a function of income and credit availability.

But form 1997 to 2006 national home prices gained an astounding 19.4 percent per year on average. Over that time incomes barely budged. So why could people pay so much? The difference was credit, which government policy made much cheaper and easier to get. But credit could not expand forever, and eventually conditions tightened. When they did, there was nothing to hold prices up.

So when the market crested, the easy money that for years had poured into the economy stopped flowing. Even if there had been no other economic reversals that followed the housing bust (which there were), the economy would have had to shrink without all the free cash. A recession was not only inevitable but absolutely necessary to rebalance the economy.

But when the economy started to contract, lawmakers and economists treated the development not as the inevitable consequence of years of easy money and overspending, but as the problem itself. In other words, they mistook the cure for the disease.

— Peter Schiff; How an Economy Grows and Why It Crashes view

It's hard to overstate the impact the housing boom made on the economy as a whole. During the height of the mania, the financing, construction, and furnishing of homes had become the central dynamo of the U.S. economy. And while everyone acknowledged the good fortune, few spared much concern about the future costs.

In addition to the profits made by real estate "flippers" (those who serially bought and sold properties), homeowners extracted hundreds of billions of dollars per year from their homes. The process turned houses into tax-free ATM machines. People used the money to renovate their homes, take vacations, pay for college, buy cars and electronics, and just generally live better than they would have if their homes had not appreciated in value.

But the wealth was simply a mirage.

— Peter Schiff; How an Economy Grows and Why It Crashes view

The last thing the island needed was more huts. There were already too many huts. Any energy or resources spent building more huts would be wasted.

Similarly, hut prices were still too high. They had been bid up to ridiculous levels by a combination of factors that would never return. Trying to keep them from falling was like trying to keep a bridge from collapsing after all the supports had been knocked away.

Despite the fact that many islanders were upset for overpaying for their huts, the island economy would actually be better off if hut prices came down and building ceased altogether, at least until real demand returned. That way people could spend less on huts and have more to spend on things the economy lacked - like new businesses and carts that could be pulled by just one donkey. Resources used for new hut construction, like bamboo and rope, could be used for new businesses instead.

Unfortunately, government interventions would prevent this natural reallocation of resources from occurring.

— Peter Schiff; How an Economy Grows and Why It Crashes view

Even after the collapse of the mortgage market, people still don't understand how home prices are influenced by government policies.

— Peter Schiff; How an Economy Grows and Why It Crashes view

Although these loan policies appeared to be a win-win for all involved, in truth, the system created great dangers. The Senate had distorted the credit market by imposing incentives that favored hut loans and education loans over other loans that had no guarantees. Loans were now being made not because they were necessarily the best use of savings, but because the senators had a political stake in encouraging hut ownership and education.

— Peter Schiff; How an Economy Grows and Why It Crashes view

From the beginning of recorded history, humanity has used all sorts of things as money. Salt, shells, beats, livestock - all had their day. But over time metals, particularly gold and silver, have emerged as the most widely used forms of money. This is not an accident. Precious metals have all the qualities that make money valuable and useful: scarcity, desirability, uniformity, durability, and malleability.

Even if people didn't want the metal as money, it still had value based on its other uses and relative scarcity.

In contrast, paper money has value only as long as enough people agree to take it in exchange for goods and services. But that makes its value completely subjective. Since it can be produced at will, and has no intrinsic value itself, the paper can become worthless if enough people lose faith in it.

— Peter Schiff; How an Economy Grows and Why It Crashes view

A country with a trade surplus, in that it sells more abroad than it buys, will create an international demand for its currency. If you want its stuff, you need its currency. As a result, strong trading positions tend to strengthen a country's currency. The opposite is true with countries with weak trading positions. If no one wants your stuff, no one really needs your currency.

But when a country's currency rises, its products become more expensive. This gives a competitive opportunity to countries with weak currencies to start selling some of their products into that market. When they sell more, demand for their currencies rises. This currency counterweight should keep runaway trade imbalances in check. But the dollar's reserve status, and the decision of the Chinese government to maintain the currency peg, has gummed up the machinery and has allowed the situation to grow dangerously out of kilter.

— Peter Schiff; How an Economy Grows and Why It Crashes view

During the 1970s and 1980s these deficits were on the magnitude of $10 billion to $50 billion per year—large, but manageable. In the 1990s, the figures started hitting the $100 billion mark. Although the extras digits were alarming, the gap was still relatively small in comparison to our massive economy. But with the new millennium, things started to get silly.

For the first decade of the twenty-first century, which corresponded with the rise of China as an export economy, the U.S. trade deficit averaged around $600 billion per year, topping out at a staggering $763 billion in 2006. That's more than $2,500 for even man, woman, and child in the United States.

— Peter Schiff; How an Economy Grows and Why It Crashes view

The dollar's reserve status has played a significant role in allowing this deficit to grow unchecked. Without the built-in demand for dollars made possible by the global economic system, no country could long sustain such imbalances. Companies and governments would simply refuse to trade goods for a currency with which it couldn't buy anything.

— Peter Schiff; How an Economy Grows and Why It Crashes view

Over the past decade, the problem of global imbalances has been a perennial topic at all the most important economic events. But despite the speeches and the acres of newsprint devoted to the topic, there has been absolutely no progress made toward resolving the problem.

The most visible statistic that charts the phenomenon is the U.S. trade deficit. For most of our history the United States exported much more than it imported, resulting in trade surpluses. In some years, especially toward the middle of the twentieth century, these surpluses were truly massive. We used the excess funds to build more capital at home, and to buy up more capital abroad. In the process we became the richest country on the planet. But in the late 1960s the trade balance started to change, and by 1976 the United States began running persistent trade deficits.

— Peter Schiff; How an Economy Grows and Why It Crashes view

By holding their currency to a strict peg against the U.S. dollar, the Chinese authorities have essentially required that their citizens hold at least some of their savings in U.S. dollars.

Without these savings from China and other nations, everyone in the United States including the government would have a much more difficult time borrowing, and they would likely have to pay much higher interest rates for the privilege. High interest rates and scarce credit would be a lethal combination for a debt-fueled economy.

As current American leaders come into increasing conflict with China, this lifeline needs to be clearly understood, before it is callously cast adrift. Of course, since this relationship cannot last forever,t he sooner it ends the less painful it will be, particularly for Americans. The longer you eat for free, the harder it is to feed yourself when the free food stops coming.

— Peter Schiff; How an Economy Grows and Why It Crashes view

Many of these dollars held by foreigners are typically deposited in American banks, where they can be borrowed by Americans. That way we can spend even if we don't save.

— Peter Schiff; How an Economy Grows and Why It Crashes view

For years, economists have mischaracterized the relationship between the United States and China. Most see it as a mutually beneficial system whereby the United States gets cheap products and cheap loans, and China gets manufacturing jobs. But is such an arrangement really a benefit to both parties?

The Americans do well: they get stuff without producing it and they get to borrow money without having to save. For their part, the Chinese get to work without consuming what they produce.

Where's the benefit there?

— Peter Schiff; How an Economy Grows and Why It Crashes view

Governments now reflexively fight recession by creating money. If they go too far, they can produce inflation and recession simultaneously, leading to a condition called "stagflation," which flourished in the 1970's. Conveniently forgetting that episode in the 1970's, economists now insist that inflation and unemployment can't co-exist. They argue that when people lose their jobs, demand falls and proces follow. They forget the other side of the equation. When fewer people are working, less stuff is produced, reducing supply. When things are scarce, prices rise. Adding more money into the mix could cause prices to soar.

— Peter Schiff; How an Economy Grows and Why It Crashes view

But during a recession prices need to fall in order to rebalance the economy. Recessions should be deflationary. Falling prices will cushion the blow of low employment. Somehow, modern economists see falling prices as a never ending abyss toward demand destruction. They forget that when prices fall far enough, people start spending again. The process allows unneeded inventories to be worked off, and for prices to fall to a level justified by underlying supply and demand.

— Peter Schiff; How an Economy Grows and Why It Crashes view

One of the reasons that economics have been so successful is obscuring the source of inflation is that they have short-circuited the very definition of the word. Nearly everyone believes that rising prices means inflation. So if prices aren't rising, there must be no inflation.

But rising prices are merely the results of inflation! The inflation is the expansion of the money supply.

— Peter Schiff; How an Economy Grows and Why It Crashes view

During the Depression, President Roosevelt decided to devalue the dollar against gold. In order to pull this off, the government had to control the entire gold market, and for a time the government made it illegal to own gold coins. Later on the ability to redeem the notes for gold was restricted to just banks, then to just foreign banks, and then finally to no one.

We are left with a currency that has no real value and can be expanded at will. This has prevented the government from ever having to make hard choices about spending and taxes, and has set us on a path that will eventually destroy the remaining value of the dollar.

— Peter Schiff; How an Economy Grows and Why It Crashes view

The Fed, as the Federal Reserve is known, was originally given the mission of establishing an "elastic money supply." The idea would be that the Fed could expand or contract the amount of money in circulation to correspond with economic activity. It was thought that such movements could hold prices steady through good times and bad.

Even if such a mission were a good idea to begin with, it's easy to see that the Fed has utterly failed in accomplishing it.

Over the past 100 years, the dollar has lost more than 95 percent of its value. So much for price stability! The truth is that the Fed now exists for the sole purpose of providing the inflation necessary to allow the government to spend more than it collects in taxes.

— Peter Schiff; How an Economy Grows and Why It Crashes view

Along the way, some senators made the emotional case that the Constitution's original linkage between tax payment and voting eligibility was fundamentally undemocratic. Out of a spirit of progressivism, this restriction was removed, bringing to the polls a great many voters who were far less interested in government budgetary prudence.

— Peter Schiff; How an Economy Grows and Why It Crashes view

As production expanded, businesses profited, prices steadily fell, and purchasing power rose.

— Peter Schiff; How an Economy Grows and Why It Crashes view

Over time, that clarity of vision has been blurred. In times of crisis enough people become convinced that government needs more power and that people can get by with fewer liberties. In our current economic crisis, this trend has unfortunately gathered a great deal of steam.

It our desire to make the pain of economic contraction go away, we have forgotten that freedom involves risk. If government is obligated to cure all hardships, then no one is really free in the first place. Take away the freedom to fail and you have obliterated the freedom to succeed.

— Peter Schiff; How an Economy Grows and Why It Crashes view

In the early days after the War of Independence, in exchange for the establishment of a national government, which many Americans did not want, the U.S. Constitution was conceived as a masterfully designed cage that would prevent the "beast" of government from running amok. The Constitution not only protected people from government, but it also protected minorities from the tyrannies of majorities.

The Constitution deliberately sought to segment powers in the different branches of the federal government to decentralize authority into the many states, and most importantly to prevent the federal government from taking any power it decided to take.

The result was a nation where individuals could be secure in their personal liberty and possessions, and who were not prevented from disposing of their assets in any way they saw fit. The fact that these rights, unfortunately, did not apply to all inhabitants of the new country, does not diminish the audacity of the idea, which had never previously been codified in any other country.

— Peter Schiff; How an Economy Grows and Why It Crashes view

It's a shame how few modern Americans really understand how our country was founded on a radical experiment in strictly limited government. Steeped in the transformative philosophies of freedom, reason, and science that flourished in the seventeenth and eighteenth centuries, the Founding Fathers sought to create a completely new relationship between people and government, whereby sovereignty rested with the individual, whose rights where inviolable.

— Peter Schiff; How an Economy Grows and Why It Crashes view

It was also understood that taxes reduced the available pool of savings on the island and limited the supply of investment capital. But most island residents agreed that the commercial benefits that flowed from increased island security, fewer canoe wrecks, and a court system that enforced contracts and disputes, more than compensated for the lost savings.

— Peter Schiff; How an Economy Grows and Why It Crashes view

Because the islanders understood that government spending was really the same as taxpayer spending, they believed that it should be the taxpayers who decided how to money was spent. As a result, voting was restricted to those who paid tax.

— Peter Schiff; How an Economy Grows and Why It Crashes view

Trade suffers from similar misconceptions. In their quest to protect American jobs from overseas competition, the opponents of free trade ignore the benefits of imports and the hidden costs to consumers that result from restricted choice.

For instance, if a foreign manufacturer can deliver T-shirts to the United States that sell for less than domestically produced alternatives, then Americans can spend less on T-shirts.

The money saved would be available to be spent on other things....skateboards perhaps. This would benefit the skateboard companies that may still be located in the United States and that can deliver the most valuable product in their category.

But what about the workers of the domestic T-shirt manufacturers who lose their jobs? If their employers cannot find ways to compete more effectively in the T-shirt business, it is true that the workers will have to find other work. But it is not the aim of an economy to provide jobs. The goal is simply to maximize productivity.

Society as a whole is not helped by perpetuating inefficient use of labor and capital. If the United States no longer has a competitive advantage in T-shirts, it must find something else in which it does.

If trade barriers were erected to protect those jobs, the cost of T-shirts would stay high. People would have less money to spend on skateboards (for instance), and those manufacturers would suffer. And so while its easy to put your finger on the job that is saved, it's far more difficult to see the job that is lost.

It makes no sense to waste our labor making things that can be produced more efficiently abroad. If we focus on the things that we can make more efficiently than anyone else, then we can trade those products for the things that others produce better. In the end we'll have more stuff.

Of course, the problem is that because of our artificially high currency, high taxes, and restrictive wage and labor laws, we just are not competitive in enough product categories. That has to change.

— Peter Schiff; How an Economy Grows and Why It Crashes view

When a government project experiences cost overruns or poor service, free market discipline does not come to the rescue. The government simply raises taxes to fill the gap. In so doing, it wastes societal resources, and living standards drop.

— Peter Schiff; How an Economy Grows and Why It Crashes view

These days, it's very easy to convince voters that large public amenities—like sewers, highways, canals, and bridges that are meant to benefit everyone—need to be run by the government. Politicians have successfully argued that private companies, which are motivated solely by profit, would exploit the public at the earliest opportunity.

The evidence supporting these claims is largely emotional. What is far more certain is that the government's monopoly control of public projects and services almost always leads to inefficiency, corruption, graft, and decay.

— Peter Schiff; How an Economy Grows and Why It Crashes view

For much of the early history of the United States, projects like the Water Works were often private sector initiatives. But given the inherent unpredictability about the success of these projects, in our age of nearly universal government control it seems inconceivable that such an undertaking could be funded, built, and operated equitably by profit-driven private companies. But in those days they were.

For example, the New York City subways were largely built by private companies and were operated outside of city control for almost four decades. Despite the staggering construction costs, the railroads were able to operate at a profit. What's more, the fare never went up in 40 years.

— Peter Schiff; How an Economy Grows and Why It Crashes view

Just as the principles of mathematics don't change with the size of the problem, basic economic principles do not change with the size of the economy. They're just harder to see because of the many layers that exist between savers and borrowers. Buy the direct relationship among self-sacrifice, savings, credit, investment, economic incentive, and social and economic progress are always the same.

— Peter Schiff; How an Economy Grows and Why It Crashes view

When allowed to flourish unhindered, free trade benefits everyone.

— Peter Schiff; How an Economy Grows and Why It Crashes view

In addition to distorting the credit market by passing laws that favor certain types of loans and certain types of borrowers, government also influences the flow of credit in a more fundamental manner: through its control of interest rates. For almost 100 years, the Federal Reserve (in theory a private bank, but in practice an extension of the Treasury Department), has set the base level for interest rates upon which the entire rate structure rests.

By setting its "federal funds" rate higher or lower, the Fed (as the bank is known) does not dictate the particular rate any bank offers for every loan, but it does move the entire market up or down. Banks will always charge a higher rate to the public than they pay the Fed to borrow money. So when the Fed raises or lowers its rates, businesses and individuals will pay more, or less, to borrow.

The Fed was given this authority in order to keep the economy running smoothly in good times and bad. The theory goes that the collective wisdom of Fed economists could help keep the economy on track by determining the optimal interest rate for any particular moment in time.

For instance, the Fed could boost a struggling economy by lowering interest rates to the point where businesses and consumers would be more inclined to borrow. In very good times, when overconfidence often leads to foolishness, the Fed is supposed to do the opposite and raise rates so that people will think twice about taking out loans.

This system has two massive flaws.

First, it assumes that a small group of people at the Fed can make better decisions than millions of people making independent decisions (also known as "the marketplace") about the proper level of interest rates. But, the Fed has "no skin in the game," as the saying goes. It does not generate the savings and will not suffer if loans go bad. The people saved the money and the bank's profits depend on its wise stewardship. Without this connection, lending is inherently inefficient.

Second, the Fed's decisions are always determined by political, rather than economic, considerations. As low rates tend to make the economy appear better on the surface, push down the cost of servicing mortgages and other loans, and help financial firms make money, there are a great many people who want lower rates. Presidents seeking reelection will always bang the drum for lower rates, and they will pressure the Fed to help out. On their part, Fed policy makers naturally want to be seen as the good guys who help the economy, not the tight-fisted Scrooges who push it into recession.

The members of society who would favor high rates, most notably the savers, have no well-organized interest group. Their voices are never heard. As a result, there is a consistent bias toward holding rates too low, rather than too high. Remember, low rates encourage borrowing and discourage saving. Not surprisingly, the United States has been transformed from a nation of savers to a nation of borrowers.

— Peter Schiff; How an Economy Grows and Why It Crashes view

When Plasma TV's first came out, few Americans bought them. Although just about everyone wanted one, not many could come up with the $10,000 needed to bring one home. However, as prices fell more people took the plunge and profits rose as higher volumes made up for lower prices.

It takes a gifted economist to argue that consumers are hurt by falling prices. Would lower food and energy prices really be so bad? Would more affordable health care or education require government to protect us from the danger?

Despite all the exculpatory evidence, deflation remains economic enemy number one. This is because inflation (the opposite of deflation), is every politician's best friend. More about this later.

— Peter Schiff; How an Economy Grows and Why It Crashes view

Modern economists mistakenly assume that spending drives growth, and that when deflation is present, people tend to defer purchases (to allow prices to fall); and when they do spend, the diminished price makes less of an economic impact. This is absurd.

As we've said before, it's not the spending that means anything. It's the production that counts!

People do not need to he persuaded to spend. Given that human demand is essentially endless, if people don't want something there is likely a good reason. Either the product is no good or the consumer simply cannot afford to buy it. Either way, the act of deferring a purchase, or saving instead of spending, is made for rational reasons and tends to benefit the economy as a whole.

In fact, if consumers are not spending, the best way to spur demand is to allow prices to fall to more affordable levels. Sam Walton made billions with this simple concept.

— Peter Schiff; How an Economy Grows and Why It Crashes view

Yet despite the obvious benefits of lower prices, we still fear deflation. We are told that if prices were to fall, people would stop buying, companies would stop spending, workers would lose their jobs, and we would all return to the economic dark ages.

But we all see time and time again how falling prices do not deter particular industries. In the early twentieth century, Henry Ford made a fortune, and his workers became the best paid in the industry, by steadily bringing down the price of cars. More recently the computer industry has made bundles of money despite the fact that its products constantly experience significant price deflation. Yet despite plunging prices the computer revolution continues unabated. As a result of this efficiency in design and manufacture, millions and millions of people each year spend less and less to experience the marvels of digitization.

Despite this, most people assume that deflation is okay if it's confined to just one industry. Why would that be?

— Peter Schiff; How an Economy Grows and Why It Crashes view

There is no greater propaganda victory in economics today than the complete vilification of deflation (and the relative acceptance of inflation). As far as economists and politicians are concerned, deflation, which is defined as the overall decline of prices over time, is the economic equivalent of the bubonic plague. At the slightest whiff of deflation, governments will typically enact policies to push prices back up.

But what's wrong with falling prices? Habituated as we have become to steadily rising prices, it would shock just about everyone to know that prices in the United States fell steadily for almost 150 years...from the late 1700s all the way to 1913! But during that time we experienced some of the fastest economic growth in the history of the planet. This was made possible for the precise reasons described in this chapter: increased efficiency. When combined with a stable supply of money (as existed in the United States until the establishment of the Federal Reserve), efficiency will push prices down.

The vastly increased productivity of the industrial revolution made it possible for working-class people to afford all kinds of goods, like upholstered furniture, tailored clothing, plumbing, and wheeled transportation, that were previously available only to the rich. Deflation meant that $100 saved in 1850 could buy many more goods and services in 1880. Why is this not a good thing? While modern grandparents habitually point out how much cheaper stuff was when they were kids, their own grandparents likely told stories to them about how much more expensive things were in their youth.

— Peter Schiff; How an Economy Grows and Why It Crashes view

As echoed in the preceding tale, falling prices don't hurt Duffy. In fact, as prices for all things come down through similar productivity gains in other industries, the fish he earns will enable him to buy more things.

Innovation is a one-way process. Unless people forget what they already know, efficiency always compounds. As a result, prices tend to come down over time.

Steadily dropping prices also encourage savings as islanders begin to understand they their fish would likely buy more goods in the future than they do in the present. As crazy as it sounds, a fish saved is indeed a fish earned. This encourages savings, thereby swelling the amount of capital available for loans.

— Peter Schiff; How an Economy Grows and Why It Crashes view

An economy in which workers can specialize in a specific trade or service is always better than one where everyone does the same thing. Specialization increases production which in turn raises living standards.

— Peter Schiff; How an Economy Grows and Why It Crashes view

Society had become so good at producing food and tools that some people didn't need to produce anything physical to survive. As a result, a service sector was born.

— Peter Schiff; How an Economy Grows and Why It Crashes view

When the economic headwinds began to pick up in earnest in 2008, politicians and economists reflexively looked for a means to get consumers to spend even more and save even less. They have it backward. Spending for its own sake means nothing. What if you spent $1 million, but bought nothing but air? How would this benefit society? It would surely benefit the person who sold you the air. He would get the million dollars formerly belonging to you. Using our modem methods of economic accounting, such as the measurement of gross domestic product (GDP), such a transaction would certainly look like genuine activity. It would be counted as $1 million worth of growth.

But the act of buying air does not improve the economy as a whole. The air was always there. Something has to be produced to give the spending any value.

Spending is merely the yardstick that we use to measure production. Since everything that is produced will eventually be consumed, why does spending really matter? Even the stuff that no one really wants will be consumed if the price falls far enough. But nothing can be consumed until it is produced. It's production that adds the value.

Saving creates the capital that allows for the expansion of production. As a result, a dollar saved makes more of a positive economic impact than a dollar spent, just don't try to explain this to an economist or a politician.

— Peter Schiff; How an Economy Grows and Why It Crashes view

In the past, the United States was known as a nation of savers. Throughout much of our history American citizens typically saved 10 percent or more of their incomes annually. This discipline not only helped build a huge supply of savings to finance our growing industrial activity, but it also helped families and communities endure unexpected hardships.

However, in recent years, economists have severely downgraded savings on the economic value chain. In fact, as far as many economists are concerned, savings are a drag. Keynesians view savings as detrimental to growth because the act removes money from circulation and decreases spending (which they assume is the crucial element in creating economic growth). Policy makers, influenced by these ideas, have made rules that reward spenders and penalize savers.

As a result, Americans have, for years, spent more than we have earned. In a contained economy, like an island, this would be impossible. But in our modern world, the flow of money across borders and the seemingly magical qualities of the printing press have temporarily blinded many Americans to the simple truth that we can't consume more than we produce, or borrow more than we save...at least not for very long.

— Peter Schiff; How an Economy Grows and Why It Crashes view

Savings are not just a means to increase one's ability to spend. They are an essential buffer that shields economies from the unexpected.

Suppose a monsoon came through the island and wiped out both mega fish catchers? Although many economists today view natural disasters as stimulative to an economy, the truth is floods, fires, hurricanes, and earthquakes destroy wealth and diminish living standards. If the fish catchers were wiped out, the island's fish production would drop, and Able, Baker, and Charlie would have to underconsume again in order to generate savings to rebuild their capital.

But, remember, a pool of spare savings prevents disruption and allows for immediate reconstruction of damaged capital. That is why it is essential that Able, Baker, and Charlie continue to underconsume and save for a rainy day.

— Peter Schiff; How an Economy Grows and Why It Crashes view

A grant by the government of exclusive privilege. [the old definition before it was changed]

— Murray Rothbard; The Founding of the Federal Reserve Video [12:10] view

Loans made to individuals or enterprises that do not succeed in creating a needed innovation or expanding productive capacity tend to weaken the overall economy by wasting the supply of savings.

— Peter Schiff; How an Economy Grows and Why It Crashes view

Unfortunately, it is widely accepted that in order to spur activities that politicians and social theorists deem to be beneficial, government influences how savings are allocated. This has been accomplished by a litany of government loan guarantees and corporate and individual tax credits and penalties.

As a result of these influences, individuals and businesses may be more willing to apply for, and banks may be more willing to grant, certain types of loans. More of society's resources are then directed toward the favored activity, whether it be home building, college attendance, or solar panel manufacturing.

Central to these impulses is the notion that government planners have a better idea of what's good for society than savers themselves. But there is no evidence that this is true. In fact, history is littered with grandiose schemes hatched in government think tanks that have simply not delivered their promise.

— Peter Schiff; How an Economy Grows and Why It Crashes view

When confronted with the possibility of economic contraction, politicians and bankers frequently discuss the need to "expand credit" by increasing the amount of money available to be lent. But can this be done on command? In the case of our fishing friends, how can Able legitimately lend out more fish than he has saved? The island's total supply of credit is limited by its total supply of saved fish.

— Peter Schiff; How an Economy Grows and Why It Crashes view

[...] savings can mean the difference between the life and death of society.

— Peter Schiff; How an Economy Grows and Why It Crashes view

In actuality, loans to consumers that do not fundamentally improve productive capacity are a burden to both the lenders and the borrowers.

— Peter Schiff; How an Economy Grows and Why It Crashes view

Whenever an outside force, such as government, encourages or demands that savers make loans for reasons that may have nothing to do with the actual likelihood of repayment, higher degrees of loss are almost inevitable. Such distortions waste society's savings.

In their zeal to do something good, governments like to influence the way savings are lent out. They pass laws that make some types of loans more appealing than others. But government has no savings; only individuals do! If, as a result of government incentives, the loans go to individuals or businesses that fail to pay off (as they often do), then the loss falls to those individuals who have sacrificially under consumed to create savings!

In fact, Able would be much less inclined to lend in the first place if he were forced to make loans that he felt were excessively risky, such as in the case of fish hypnosis. As a result, he may decide not to work as hard, or not to sacrifice as much to save!

— Peter Schiff; How an Economy Grows and Why It Crashes view

But the fact that there are degrees of wealth has always struck some as being inherently unfair. Central in this unease is the belief that the rich become that way because they take wealth from others, thereby creating the poor. In modern economics, some have even labeled this idea "the labor theory of value," which states that profit is created by paying workers less than they are worth. In this view, entrepreneurs, like Able or giant corporations for that matter, can get rich only if they succeed in making others poor.

This idea has everything to do with moral posturing, and nothing to do with reality. The reason that the rich get that way (at least initially) is that they offer something of value to others. Able offers loans to those who have inadequate savings. If he profits, it's only because the service he provides is valuable to others.

— Peter Schiff; How an Economy Grows and Why It Crashes view

Wealth is always a relative term. In a primitive society where little is produced, even the richest can't match the material well-being available to the poor of an industrialized economy. In the Middle Ages, even the mightiest kings lacked the basic amenities that nearly everyone in the United States now takes for granted... things like central heating, indoor plumbing, and fresh vegetables in the winter.

— Peter Schiff; How an Economy Grows and Why It Crashes view

Some may wonder what would happen if Able turns out to be a really greedy guy, who would use his new wealth just to get richer and richer.

Is this really a danger? If the only way to make his savings grow (without working himself) is to make it available to other members of the community, why would he hoard it?

Otherwise his wealth will stay the same or get smaller as he personally consumes it! The best thing about private capitalism is that it forces those who may only be motivated by personal gain to raise the living standards of others.

— Peter Schiff; How an Economy Grows and Why It Crashes view

Essentially, the lender can benefit only if the borrower benefits.

— Peter Schiff; How an Economy Grows and Why It Crashes view

As a result of Able's willingness, and ability, to make loans, Baker and Charlie now have nets that they didn't own before. With nets available to all, the island's collective fishing capacity has been raised from three fish per day to six. The economy has doubled in size, and the future looks brighter.

But this didn't happen just because the three guys were unsatisfied with their limited lifestyle. Their hunger, which is labeled "demand" in economic terms, was necessary to spur economic growth but not sufficient to achieve it.

Demand for more is natural to all humans. No matter what we have, we always want more. Maybe not more stuff, but certainly more time, more fun, and more choices, all of which requires more capital. Able, Baker, and Charlie likely had the same fish gripes for years. The difference is that they were finally able to expand productivity to meet those demands.

With their extra fish, the islanders can finally eat more than one first per day. But the economy didn't grow because they consumed more. <strong>They consumed more because the economy grew.</strong> This is a simple concept, but it's amazing what modern economists can do with a simple concept.

Most economists think that demand can be increased by giving people more money to spend. But that doesn't change real demand, just how much people can spend on items that have been produced. Only by increasing supply can people actually get more of what they demand.

— Peter Schiff; How an Economy Grows and Why It Crashes view

The simplest definition of <em>economics</em> is the effort to maximize the availability of limited resources (and just about every resource is limited) to meet as many human demands as possible. Tools, capital, and innovation are the keys to this equation.

Keeping this in mind, it is easy to see what makes economies grow: finding better ways of producing more stuff that humans want. This doesn't change... no matter how big an economy eventually gets.

— Peter Schiff; How an Economy Grows and Why It Crashes view

Economist Thomas Woods likes to challenge his students with a simple thought experiment: What kind of economy would we have if all machines and tools disappeared? Cars, tractors, iron smelters, shovels, wheelbarrows, saws, hammers, spears, everything. What if they all went <em>poof</em> and all that we consumed had to be hunted, gathered, grown, and made, WITH OUR BARE HANDS?

Without question, life would be rough. Imagine how hard it would be to eat if we had to bring down game with our teeth, fists, and fingernails. Large game would be out of the question. Rabbits would be within our power to subdue... but you would have to catch them first. What if vegetables had to be planted and picked by hand, and what if we didn't even have sacks in which to carry the harvest? Imagine if we had to make clothes and furniture without factories... without even scissors or nails?

Despite our intelligence, we would be no better off, economically at least, than chimps and orangutans.

Tools change everything and create the possibility of an economy. Spears help us bring down game, shovels help us plant crops, and nets help us catch fist. These devices magnify the efficacy of our labor. The more we can make, the more we can consume, and the more prosperous our lives become.

— Peter Schiff; How an Economy Grows and Why It Crashes view

For all species, except our own, economics really boils down to day-to-day survival. Given the competition for scarce food, the harshness of the elements, the danger of predators, the vulnerability to disease, and the relative rarity of innovation, bare-bones survival (with some time left over for reproduction) is about all animals can attain. We would be in the same boat (as we were in the not-too-distant past) if not for two things: our big brains and our dexterous hands. Using the two together, we have been able to build tools and machines that magnify our ability to get more out of our environment.

— Peter Schiff; How an Economy Grows and Why It Crashes view

By doubling his <strong>productivity</strong> Able is now able to produce more than he needs to consume. From gains in productivity all other economic benefits flow.

Before Able rolled the dice to build his net, the island had no store of savings. His willingness to take a chance and go hungry led to the island's first piece of capital equipment, which in turn produced savings. This spare production is the lifeblood of a healthy economy.

— Peter Schiff; How an Economy Grows and Why It Crashes view

In this simple task, Able is demonstrating a basic economic principle that can lead to an improvement in living standards: He is <strong>underconsuming</strong> and he is taking <strong>risk!</strong>

<strong>Underconsumption:</strong> In order to build his net, Able is unable to fish that day. He has to forgo the income (the fish) that he would have otherwise caught and eaten. It's not that Able lacks the demand for fish. In fact, he loves fish and he will go hungry if he doesn't get one that day. Able has no more or less demand for fish than his two friends. But he is choosing to defer that consumption in order to potentially consume more in the future.

<strong>Risktaking:</strong> Able is also taking risk because he has no idea that his device will actually work, or allow him to catch enough fish to compensate for his sacrifice. In the end, he might just have a bunch of string and an empty stomach. If his idea fails, he can expect no compensation from Baker and Charlie, who did, after all, try to warn him of his folly.

In economic terms, capital is a piece of equipment that is built and used not for its own sake, but for building or making something else that is wanted. Able doesn't want the net. He wants the fish. The net can, maybe, get him more fish. Therefore, the net, a piece of capital, is valuable.

— Peter Schiff; How an Economy Grows and Why It Crashes view

Finally, in 1971 President Richard Nixon closed the window, which severed the dollar's last link to gold. At that point, the global economic system became completely based on worthless money. Over the next decade, the United States experienced the nastiest outbreak of inflation in our history and gold headed towards $800 per ounce.

— Peter Schiff; How an Economy Grows and Why It Crashes view

At the 1944 Bretton Woods Monetary Conference, the United States persuaded the nations of the world to back their currencies with dollars instead of gold. Since the United States pledged to exchange an ounce of gold for every 35 dollars, and it owned 80 percent of the world's gold, the arrangement was widely accepted.

However, 40 years of monetary inflation brought about by Keynesian money managers at the Federal Reserve caused the pegged price of gold to be severely undervalued. This mismatch led to what became known as the "gold drain," a mass run by foreign governments, led by France in 1965, to redeem U.S. Federal Reserve Notes for gold. Given the opportunity to buy gold at the 1932 price, foreign governments were quickly depleting U.S. reserves.

— Peter Schiff; How an Economy Grows and Why It Crashes view

Because it offers the hope of pain-free solutions, Keynesianism was an instant hit with politicians. By promising to increase employment and boost growth without raising taxes or cutting government services, the policies advocated by Keynes were the economic equivalent of miracle weight-loss programs that require no dieting or exercise. While irrational, such hopes are nevertheless soothing, and are definite attraction on the campaign trail.

Keynesianism permits governments to pretend that they have the power to raise living standards with the whir of a printing press.

— Peter Schiff; How an Economy Grows and Why It Crashes view

In his quest to bring the guidance of modern science to the seemingly unfair marketplace, Keynes unwittingly gave cover to central authorities and social utopians who believed that economic activity could be better if planned from above.

At the core of his view was the idea that governments could smooth out the volatility of free markets by expanding the supply of money and running large budget deficits when times were tough.

— Peter Schiff; How an Economy Grows and Why It Crashes view

The disconnect results from the nearly universal acceptance of the theories of John Maynard Keynes, a very smart early-twentieth century English academic who developed some very stupid ideas about what makes economies grow. Essentially Keynes managed to pull of one of the neatest tricks imaginable: he made something simple seem to be hopelessly complex.

— Peter Schiff; How an Economy Grows and Why It Crashes view

Whoever controls the volume of money in any country is absolute master of all industry and commerce... and when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate.

— James Garfield view

The Bank of International Settlements is the central bank for central banks.

— Joe Jakelyn; Patriot Radio News Hour view

Great Britain moved to consolidate her gains. After the treacherous signing away of American rights at the 7-power conference at London in July 1931, which put the Federal Reserve System under the control of the Bank of International Settlements, Great Britain began to tighten the hangman's noose around the neck of the United States. . .

— Louis T. McFadden; as quoted by Dr. John Coleman in The Committee of 300 view

Nothing happens on Wall Street that is not known to the Bank of England, whose instructions are relayed through the Morgan Bank and then put into action through key brokerage houses, whose top executives are ultimately responsible for carrying out Committee directives.

— Dr. John Coleman; The Committee of 300 view

One of the largest assets in the portfolio of Committee of 300 companies is American Express (Amex).

— Dr. John Coleman; The Committee of 300 view

It is easy to understand why gold was demonetized and substituted with paper "dollars" as the world's reserve currency. It is not as easy to black-mail a country holding gold reserves, as it is to blackmail one having its reserves in paper.

— Dr. John Coleman; The Committee of 300 view

It took a lot of research to link the price of gold to the price of opium. I used to tell anyone who would listen, "If you want to know the price of gold find out what the price of a kilo of opium is in Hong Kong."

— Dr. John Coleman; The Committee of 300 view

First, the concept that the Fed is privately owned is legal fiction. [...] The stock cannot be sold or traded. Stockholders have none of the usual elements of control that come with ownership and, in fact, they are subservient to the central board. The seven members of the Board of Governors are appointed by the President and confirmed by the Senate. It is true that the Fed is independent of <em>direct</em> political control, but it must never be forgotten that it was created by Congress and it can be extinguished by Congress. In truth, the Federal Reserve is neither an arm of government nor is it private. It is a hybrid.

— G. Edward Griffin; The Creature From Jekyll Island view

We do <em>not</em> want to merely abolish the Fed and turn over its operation to the Treasury. That is a popular proposal among those who know there is a problem but who have not studied the history of central banking.

— G. Edward Griffin; The Creature From Jekyll Island view

When people purchase government bonds, there is less money available for investment in private industry. It is well known that government credit "crowds out" private credit. The result is that the productive side of the nation is handicapped by unfair competition for investment capital.

— G. Edward Griffin; The Creature From Jekyll Island view

It may come as a surprise to learn that the Federal Reserve holds but a small portion of the national debt, only about 9%. Agencies of the federal government have 28% (this constitutes an IOU for money taken from various "reserve" funds, such as Social Security, and spent for other purposes). Foreign investors own approximately 43% (2002 figures), and private-sector investors in the U.S. hold the balance.

— G. Edward Griffin; The Creature From Jekyll Island view

The biggest doomsday mechanism of all, however, is the Federal Reserve System. It will be recalled that every cent of our money supply - including coins, currency, and checkbook money - came into being for the purpose of being lent to someone. All of those dollars will disappear when the loans are paid back. They will exist only so long as the debt behind them exists.

— G. Edward Griffin; The Creature From Jekyll Island view

Without interest on the national debt, we would save enough to cut our personal income taxes by a third and we could reduce corporate taxes as well.

— G. Edward Griffin; The Creature From Jekyll Island view

On average, over $5,000 is extracted from your family each year, <em>not</em> to provide government services or even to pay off previous debt. Nothing is produced by it, not even roads or government buildings. No welfare or medical benefits come out of it. No salaries are paid by it. The nation's standard of living is not raised by it. It does nothing except pay interest.

— G. Edward Griffin; The Creature From Jekyll Island view

By 2006, gross interest payments on the national debt were running $406 billion per year. That consumed about 17% of all federal revenue. It now represents the government's largest single expense; greater than defense; larger than the combined cost of the departments of Agriculture, Education, Energy, Housing and Urban Development, Interior, Justice, Labor, State, Transportation, and Veterans' Affairs.

— G. Edward Griffin; The Creature From Jekyll Island view

Congress had been assured that the Federal Reserve Act would decentralize banking power away from Wall Street. However, within a few years of its inception, the System was controlled by the New York Reserve Bank under the leadership of Benjamin Strong whose name was synonymous with the Wall Street money trust.

— G. Edward Griffin; The Creature From Jekyll Island view

In banker language, the expansion of credit means the banks have "excess reserves" (bookkeeping entries) which can be multiplied by nine and earn interest for them - if only someone would be kind enough to <em>borrow</em>. It is money <em>waiting</em> to be created.

— G. Edward Griffin; The Creature From Jekyll Island view

In any event, by the end of the war [World War I], Congress had awakened to the fact that it could use the Federal Reserve System to obtain revenue without taxes. From that point forward, deficit spending became institutionalized.

— G. Edward Griffin; The Creature From Jekyll Island view

Bonds purchased by the public do not increase the money supply whereas those purchased by banks do.

— G. Edward Griffin; The Creature From Jekyll Island view

In practice, the Federal Reserve Bank of New York became the fountainhead of the system of twelve regional banks, for New York was the money market of the nation. [...] Under Strong the Reserve System, unsuspected by the nation, was brought into interlocking relations with the Bank of England and the Bank of France.

— Ferdinand Lundberg; America's Sixty Families view

The United States entry into World War I provided the impetus for increasing the power of the Fed. [...] Voters ask fewer questions when their nation is at war.

— G. Edward Griffin; The Creature From Jekyll Island view

From the outset, the national board <em>and</em> the regional branches were dominated by the New York branch. [Benjamin] Strong ruled as an autocrat, determining Fed policy often without even consulting with the Federal Reserve Board in Washington.

— G. Edward Griffin; The Creature From Jekyll Island view

While technically and legally the Federal Reserve note is an obligation of the United States Government, in reality it is an obligation, the sole actual responsibility for which rests on the reserve banks. [...] The government could only be called upon to take them up after the reserve banks had failed.

— Paul Warburg; The Federal Reserve System: Its Origin and Growth view

The dissimilarities [between the Fed and previous central banks in the United States] were in those provisions which gave the Creature <em>more</em> privilege and power than the older central bank. The most important of these was the right to create the official money of the United States. For the first time in our history, the paper notes of a banking institution became legal tender, not only for public debts, but for private ones as well. Henceforth, anyone refusing to accept these notes would be sent to prison. The words "The United States of America" were to appear on the face of every not along with the great seal of the United States Treasury. And, of course, the signature of the Treasurer himself would be printed in a conspicuous location. All of this was designed to convince the public that the new institution was surely an agency of the government itself.

— G. Edward Griffin; The Creature From Jekyll Island view

To convince Congress and the public that the establishment of a banking cartel was, somehow, a measure to protect the public, the Jekyll Island strategists laid down the following plan of action:

<ol>
<li>Do not call it a cartel nor even a central bank.</li>
<li>Make it look like a government agency.</li>
<li>Establish regional branches to create the appearance of decentralization, not dominated by Wall Street banks.</li>
<li>Begin with a conservative structure including many sound banking principles knowing that the provisions can be quietly altered or removed in subsequent years.</li>
<li>Use the anger caused by recent panics and bank failures to create popular demand for monetary reform.</li>
<li>Offer the Jekyll Island plan as though it were in response to that need.</li>
<li>Employ university professors to give the plan the appearance of academic approval.</li>
<li>Speak out <em>against</em> the plan to convince the public that wall Street bankers do not want it.</li>
</ol>

— G. Edward Griffin; The Creature From Jekyll Island view

By 1913, the year in which the Federal Reserve Act was passed, those numbers had swelled to seventy-one per cent non-national banks holding fifty-seven per cent of the nation's deposits. Something had to be done to stop this movement. [...] What the bankers wanted - and what many businessmen wanted also - was a more "flexible" or "elastic" money supply which would allow them to create enough of it at any point in time so as to be able to drive interest rates downward at will. That would make loans to businessmen so attractive they would have little choice but to return to the bankers' stable.

— G. Edward Griffin; The Creature From Jekyll Island view

In the autumn of 1926 a group of bankers, among whom was one with a world famous name, were sitting at a table in a Washington hotel. One of them raised the question whether the low discount rates of the System were not likely to encourage speculation. "Yes," replied the conspicuous figure referred to, "they will, but that cannot be helped. It is the price we must pay for helping Europe."

— H. Parker Willis; The Failure of the Federal Reserve view

The culmination of these discussions took place at a secret meeting in 1927 at which it was agreed that the financial lifeblood of the American people would be donated for a massive transfusion to Great Britain. [...] the purpose of the meeting was to finalize a plan whereby the Governor of the Federal Reserve System was to deliberately create inflation in the U.S. so that American prices would rise, making U.S. goods less competitive in world markets and causing American gold to move to the Bank of England. [...] The purpose of inviting the Germans and the French to the meeting was to enlist their agreement to create inflation in their countries as well. Schacht and Rist would have no part of it and left the meeting early, leaving Strong and Norman to work out the final details between them.

— G. Edward Griffin; The Creature From Jekyll Island view

They [Committee of the League of Nations - which England dominated] were also required to establish what was called the "gold exchange standard," a scheme whereby all countries based their currency, not on gold, but on the pound sterling. In that way, they could all inflate together without causing a disruptive flow of gold from one to the other, and England would act as the regulator and guarantor of the system. In other words, England used the power of her position within the League of Nations to establish the Bank of England as a master central bank for all the other central banks of Europe. It was the prototype for what the Cabal now is doing with [the] Federal Reserve and the World Bank within the framework of the United Nations.

— G. Edward Griffin; The Creature From Jekyll Island view

To deal with the Morgan group, therefore, as opposed to Kuhn Loeb, for example, was in some circles almost a point of national patriotism [as Morgan was not a Jewish banker].

— G. Edward Griffin; The Creature From Jekyll Island view

With an almost unlimited access to cash and credit backed by the Bank of England, Peabody and Morgan were able to wade hip deep through the depreciated stocks and bonds [from the Panic of 1857] that were sold to them at sacrifice prices on Wall Street. Within only a few years, when sanity had been restored to American markets, the assets of the firm had grown to gigantic proportions. [...] If the Rothschilds truly had been competitors, they would have seized upon this opportunity and used their great influence within the Bank of England and the other investment houses in London to squeeze out Peabody, not to assist him. [...] The Rothschilds must have believed that a successful Peabody firm ultimately would be in their own best interest.

— G. Edward Griffin; The Creature From Jekyll Island view

It is no longer surprising, for example, that Peabody & Company was the sole American investment firm to receive a gigantic loan from the Bank of England during the U.S. panic of 1857, a loan which not only saved it from sinking, but made it possible to seize and salvage many other ships that were then capsized on Wall Street.

— G. Edward Griffin; The Creature From Jekyll Island view

[...] in 1854 [...] Junius [Morgan] moved his family to London and became a full partner in the firm which, eventually, became known as Peabody, Morgan & Company. [...] In 1864, Peabody finally retired and completely turned the business over to Junius who immediately changed the firm's name to J.S. Morgan and Company.

— G. Edward Griffin; The Creature From Jekyll Island view

It would appear that Lincoln objected to having the government pay interest to the banks for money they create out of nothing when the <em>government</em> can create money out of nothing just as easily and <em>not</em> pay interest on it. If one ignores the fact that <em>both</em> of these schemes are forbidden by the Constitution and is willing to tolerate the plunder-by-inflation that is the consequence of both, then there is an appealing logic to the argument. The politicians continue to have their fiat money, but at least the <em>banks</em> are denied a free ride.

— G. Edward Griffin; The Creature From Jekyll Island view

In 1862, Congress authorized the Treasury to print $150 million worth of bills of credit and put them into circulation as money to pay for its expenses. [...] By the end of the war, a total of $432 million in greenbacks had been issued.

— G. Edward Griffin; The Creature From Jekyll Island view

The Bank's charter expired in 1836 and it was restructured as a state bank by the Commonwealth of Pennsylvania. After a spree of speculation in cotton, lavish advances to the Bank’s officers, and the suspension of payment in specie, Biddle was arrested and charged with fraud. Although not convicted, he was still undergoing civil litigation when he died. Within five years, the establishment was forced to close its doors forever, and America's third experience with central banking came to a close.

— G. Edward Griffin; The Creature From Jekyll Island view

The turning point [for the removal of the Bank] came when Governor George Wolf of Pennsylvania, the Bank's home state, came out publicly with a strong denunciation of both the Bank and Biddle.

— G. Edward Griffin; The Creature From Jekyll Island view

It is widely believed that panics, boom-bust cycles, and depressions are caused by unbridled competition between banks; thus the need for government regulation. The truth is just the opposite. These disruptions in the free market are the result of government <em>prevention</em> of competition by the granting of monopolistic power to a <em>central</em> bank. In the absence of a monopoly, individual banks may operate in a fraudulent manner only to a limited extent and for a short period of time. Inevitably, they will be exposed by their more honest competitors and will be forced out of business.

— G. Edward Griffin; The Creature From Jekyll Island view

[...] the consequence of the loose monetary policy of the Second Bank of the United States was that America was introduced to her first experience with what now is called the "boom-bust" cycle.

— G. Edward Griffin; The Creature From Jekyll Island view

It is certainly no exaggeration to say that the Second Bank of the United States was rooted as deeply in Britain as it was in America.

— G. Edward Griffin; The Creature From Jekyll Island view

In every respect the new bank [Second Bank of the United States] was a carbon copy of the old [...] The charter required the Bank to raise a minimum of $7 million in specie, but even in its second year of operation, its specie never rose above $2.5 million.

— G. Edward Griffin; The Creature From Jekyll Island view

When the smoke of the battle lifted, the bill for charter renewal had been defeated by <em>one</em> vote in the House and <em>one</em> vote, cast by Vice-President George Clinton to break the tie, in the Senate. And so, on January 24, 1811, the Bank of the United States closed its doors.

— G. Edward Griffin; The Creature From Jekyll Island view

Furthermore, it is apparent that the bank's directors were imbued with a certain amount of enlightened self interest in that they actually <em>wanted</em> to keep the creation of new money with some kind of control. They could profit from the central-bank mechanism only so long as the economy as a whole was productive enough to support it. They did not want to kill the goose that laid the golden egg.

— G. Edward Griffin; The Creature From Jekyll Island view

Under the surface, the Rothschilds long had a powerful influence in dictating American financial laws. The law records show that they were the power in the old Bank of the United States.

— Gustavus Myers; History of the Great American Fortunes view

The blunt reality is that the Rothschild banking dynasty in Europe was the dominant force, both financially and politically, in the formation of the Bank of the United States.

— G. Edward Griffin; The Creature From Jekyll Island view

The total capitalization was specified at $10 million, which means that $8 million as to come from private stockholders. [...] the bank began operations on around $675,000 in hard cash.

— G. Edward Griffin; The Creature From Jekyll Island view

After a year of intense debate, Hamilton's views prevailed and, in 1791, Congress granted a twenty-year charter to the Bank of the United States. It was modelled closely after the Bank of England, which means it was almost an exact replica of the previous Bank of North America. [...] these notes were not forced on the people as legal tender for <em>private</em> debts and contracts, but they <em>were</em> legal tender at face value for all debts to the <em>government</em> in the form of taxes and duties, which made them attractive for use as common money.

— G. Edward Griffin; The Creature From Jekyll Island view

Congress was denied the power to <em>print</em> money, but it was not denied the power to <em>borrow</em> it. [...] That being the case, the monetary and political scientists decided to end run the Constitution. Their plan was to establish a bank, to give that bank the power to create money, to <em>lend</em> most of that money to the government, and then to make sure the IOUs are accepted as money by the public. Congress, therefore, would not be emitting bills of credit. The <em>bank</em> would do that.

Thus the First Bank of the United States was conceived.

The proposal was submitted to Congress in 1790 by Alexander Hamilton who, at that time, was Secretary of the Treasury. Hamilton, incidentally, was a former aide to Robert Morris, founder of the Bank of North America, so in that sense his role in this matter is not surprising.

— G. Edward Griffin; The Creature From Jekyll Island view

It is hard to reconcile the fact that the same men who adopted the brilliant monetary restraints of the Constitution a few years later would have allowed the Bank of North America to exist. It must be remembered, however, that the war was still in progress when the charter was issued, and even the wisest of statesmen are often obliged to follow expediency in such times. One also must conclude that, while the founding fathers were wise on the nature of fiat money created by the government's printing press, they had not yet had extensive experience with the same mechanism hidden behind the obscurities of fractional-reserve banking.

In any even, the Bank was not to have its charter renewed by Congress and it did not survive beyond the end of the war.

— G. Edward Griffin; The Creature From Jekyll Island view

The Bank was organized by Robert Morris [...] He had carefully studied the secret science of money and, by 1781, was widely considered to be the financial wizard of Congress. [...] The Bank of North America was modeled after he Bank of England. [...] unlike the central banks of today, the Bank of North America was not given the power to directly issue the nation's money.

— G. Edward Griffin; The Creature From Jekyll Island view

It is a surprising fact that the United States had its first central bank even before the Constitution was drafted. It was chartered by the Continental Congress in the Spring of 1781 and opened its doors the following year. There were great expectations at that time that the province of Canada would soon join the rebel colonies to form a union extending across the entire North American continent. In anticipation of that, the new financial institution was called the Bank of North America.

— G. Edward Griffin; The Creature From Jekyll Island view

I am sanguine in the belief of the possibility that we may one day become a great commercial and flourishing nation. But if in the pursuit of the means we should unfortunately stumble again on unfunded paper money or any similar species of fraud, we shall assuredly give a fatal stab to our national credit in its infancy.

— George Washington; in a letter to Jabez Bowen, Rhode Island, Jan. 9, 1787 view

George Mason from Virginia told the delegates he had a "mortal hatred to paper money." Previously he had written to George Washington: "They may pass a law to issue paper money, but twenty laws will not make the people receive it. Paper money is founded upon fraud and knavery."

— G. Edward Griffin; The Creature From Jekyll Island view

Then, as now, those who suffered the most from fiat money were those who held the most trust in government. In 1777 these were mostly the Whigs, for it was they who patriotically held paper money and, as a result, lost their livelihoods and their life savings. The Tories, on the other hand, mistrusting both government and its paper money, passed the bills as quickly as possible in trade for real assets, especially gold. Consequently, as a group, they weathered the storm fairly well. But they often were derided by their less prudent neighbors as "Torie speculators," "hoarders," and even "traitors."

All of this was painfully fresh in the memories of the delegates to the Constitutional Convention and, as the opening session convened in Philadelphia in 1787, there were angry mobs in the streets threatening the legislators. Looting was rampant. Businesses were bankrupt. Drunkenness and lawlessness were everywhere to be seen. The fruit of fiat money had ripened, and the delegates did not enjoy its taste.

— G. Edward Griffin; The Creature From Jekyll Island view

There are few historians who would challenge the fact that the funding of World War I, World War II, the Korean War, and the Vietnam War was accomplished by the Mandrake Mechanism through the Federal Reserve System. An overview of all wars since the establishment of the Bank of England in 1694 suggests that most of them would have been greatly reduced in severity, or perhaps not even fought at all, without fiat money. It is the ability of governments to acquire money without direct taxation that makes modern warfare possible, and a central bank has become the preferred method of accomplishing that. [...] there can be no debate over the fact that fiat money <em>in time of peace</em> has no such justification. [...] Therefore, it is not an exaggeration to say that <em>the Federal Reserve System encourages war</em>.

— G. Edward Griffin; The Creature From Jekyll Island view

The banking cartel was able [in World War I], through the operation of the Federal Reserve System, to <em>create</em> the money to give to England and France so they, in turn, could pay back the American banks - exactly as was to be done again in World War II and again in the Big Bailout of the 1980s and the '90s.

— G. Edward Griffin; The Creature From Jekyll Island view

[...] Law 12, U.S.C., exempts the privately owned and controlled Federal Reserve Bank from paying income tax.

— Dr. John Coleman; What You Should Know About the United States Constitution and the Bill of Rights view

Federal Reserve notes are not legal tender because there has not been a constitutional amendment to make them legal tender "in obligation of contracts" as the Constitution says. In short, Federal Reserve notes are the equal of fiat money.

— Dr. John Coleman; What You Should Know About the United States Constitution and the Bill of Rights view

The bottom line is that there is no provision in the Constitution for a central bank and that is what the Federal Reserve Bank is.

— Dr. John Coleman; What You Should Know About the United States Constitution and the Bill of Rights view

Thus, from the very outset there were a few Congressmen who realized that the Federal Reserve Act was a gigantic fraud and that the Federal Reserve banks would be a den if thieves. The vote in favor of the act was strongly opposed by the Democrats. All the Senators and all but two Representatives in the House voted against the act.

— Dr. John Coleman; What You Should Know About the United States Constitution and the Bill of Rights view

When the President signs this act the invisible government by the money power, proven to exist by the Money Trust investigation, will be legalized.

The bill establishes national banks to be owned by other banks. The United States Treasury collects taxes from the people. These it will deposit in the regional banks but with no interest or very little. These banks will be controlled by nine directors -- three of them selected by the Federal Reserve Board and six by the banks. That will give the banks full control, with the privilege of the three other directors to look on and see how slick they will do it. It will work out this way: All taxes collected from the people by the United States officers will be deposited in the regional banks. . .

— Representative Charles Lindberg; as quoted by Dr. John Coleman in What You Should Know About the United States Constitution and the Bill of Rights view

Under the present System, therefore, our leaders cannot allow a serious reduction in either the national or consumer debt.

— G. Edward Griffin; The Creature From Jekyll Island view

Why, then, does the federal government bother with taxes at all? Why not just operate on monetized debt? The answer is twofold. First, if it did, people would begin to wonder about the source of the money, and that might cause them to wake up to the reality that inflation is a tax. Thus, open taxes at some level serve to perpetuate public ignorance, which is essential to the success of the scheme. The second reason is that taxes, particularly progressive taxes, are weapons by which elitist social planners can wage war on the middle class.

— G. Edward Griffin; The Creature From Jekyll Island view

It is a sobering thought that the federal government now could operate – even at its current level of spending – without levying any taxes whatsoever. All it has to do is create the required money through the Federal Reserve System by monetizing its own bonds. In fact, most of the money it <em>now</em> spends is obtained in that way.

— G. Edward Griffin; The Creature From Jekyll Island view

When the Fed creates fiat American dollars to give foreign governments in exchange for their worthless bonds, the money path is slightly longer and more twisted, but the effect is similar to the purchase of U.S. Treasury Bonds.

— G. Edward Griffin; The Creature From Jekyll Island view

The banking cartel holds a monopoly in the manufacture of money. Consequently, money is created only when IOUs are “monetized” by the Fed or by commercial banks. When private individuals, corporations, or institutions purchase government bonds, they must use money they have previously earned and saved. In other words, no new money is created, because they are using funds that are already in existence. Therefore, the sale of government bonds to the banking system is inflationary, but when sold to the private sector, it is not. That is the primary reason the United States avoided massive inflation during the 1980s when the federal government was going into debt at a greater rate than ever before in its history. By keeping interest rates high, these bonds became attractive to private investors, including those in other countries.15 Very little new money was created, because most of the bonds were purchased with American dollars already in existence. This, of course, was a temporary fix at best. Today, those bonds are continually maturing and are being replaced by still more bonds to include the original debt plus accumulated interest. Eventually this process must come to an end and, when it does, the Fed will have no choice but to literally buy back all the debt of the ’80s — that is, to replace all of the formerly invested private money with newly manufactured fiat money — plus a great deal more to cover the interest. Then we will understand the meaning of inflation.

— G. Edward Griffin; The Creature From Jekyll Island view

The previous figures are based on a “reserve” ratio of 10% (a money-expansion ratio of 10-to-1). It must be remembered, however, that this is purely arbitrary. Since the money is fiat with no previous-metal backing, there is no <em>real</em> limitation except what the politicians and money managers decide is expedient for the moment. Altering this ratio is the third way in which the Federal Reserve can influence the nation’s supply of money. The numbers, therefore, must be considered as transient. At any time there is a “need” for more money, the ratio can be increased to 20-to-1 or 50-to-1, or the pretense of a reserve can be dropped altogether. There is virtually <em>no</em> limit to the amount of fiat money that can be manufactured under the present system..

— G. Edward Griffin; The Creature From Jekyll Island view

The Discount Window is merely bankers' language for the <em>loan</em> window. When banks run short of money, the Federal Reserve stands ready as the "bankers' bank" to lend it. [...] their operating margin is extremely thin. [...] Since the banks are required to keep reserves of only about ten per cent, they actually can lend up to <em>nine</em> dollars for each dollar borrowed.

[...] in other words, the bank borrows a million and can almost doubt it in one year. That's <em>leverage</em>! But don't forget the <em>source</em> of that leverage: the manufacture of another $9 million which is added to the nation's money supply.

— G. Edward Griffin; The Creature From Jekyll Island view

There are three general ways in which the Federal Reserve creates fiat money out of debt. One is by making loans to the member banks through what is called the <em>Discount Window</em>. The second is by purchasing Treasury bonds and other certificates of debt through what is called the <em>Open Market Committee</em>. The third is by changing the so-called <em>reserve ratio</em> that member banks are required to hold. Each method is merely a different path to the same objective: taking IOUs and converting them into spendable money.

— G. Edward Griffin; The Creature From Jekyll Island view

The entire function of this machine is to convert debt into money. It's just that simple. First, the Fed takes all the government bonds which the public does not buy and writes a check to Congress in exchange for them. [...] The money created for the bonds is spent by the government, whereas the money created on top of those bonds is the source of all the bank loans made to the nation's businesses and individuals.

— G. Edward Griffin; The Creature From Jekyll Island view

The assumption is that, the more we borrow, the more we <em>have</em> to borrow, and that debt based on fiat money is a never-ending spiral leading inexorably to more and more debt.

This is a partial truth. It is true that there is not enough money created to include the interest, but it is a fallacy that the only way to pay it back is to borrow still more. The assumption fails to take into account the exchange value of <em>labor</em>. [...]

The loop through which it travels can be large or small, but the fact remains all interest is paid eventually by human effort. [...] It is a form of modern serfdom in which the great mass of society works as indentured servants to a ruling class of financial nobility.

— G. Edward Griffin; The Creature From Jekyll Island view

[...] every dollar that exists today, either in the form of currency, checkbook money, or even credit card money - in other words, our <em>entire</em> money supply - exists only because it was borrowed by someone; perhaps not you, but <em>someone</em>. That means all the American dollars in the entire world are earning daily and compounding interest for the banks which created them.

— G. Edward Griffin; The Creature From Jekyll Island view

Let us consider the purchase of a $100,000 home in which $30,000 represents the cost of the land, architect's fee, sales commissions, building permits, and that sort of thing and $70,000 is the cost of labor and building materials. If the home buyer puts up $30,000 as a down payment, then $70,000 must be borrowed. If the loan is issued at 11% over a 30-year period, the amount of interest paid will be $167,806. That means the amount paid to those who loan the money is about 2 1/2 times greater than paid to those who provide all the labor and all the materials. It is true that this figure represents the time-value of that money over thirty years and easily could be justified on the basis that a lender deserves to be compensated for surrendering the use of his capital for half a lifetime. But that assumes the lender actually had something to surrender, that he had earned the capital, saved it, and then loaned it for construction of someone else's house. What are we to think, however, about a lender who did nothing to earn the money, had not saved it, and, in fact, simply created it out of thin air? What is the time-value of nothing?

— G. Edward Griffin; The Creature From Jekyll Island view

The dictionary, therefore, needs a new definition. <em>Usury: The charging of any interest on a loan of fiat money</em>.

— G. Edward Griffin; The Creature From Jekyll Island view

When banks place credit into your checking account, they are merely <em>pretending</em> to lend you money.

— G. Edward Griffin; The Creature From Jekyll Island view

After all, what's <em>wrong</em> with a little debt, prudently used and intelligently managed? The answer is nothing, <em>provided</em> the debt is based on an honest transaction. There is plenty wrong with it if it is based upon fraud.

— G. Edward Griffin; The Creature From Jekyll Island view

If all the bank loans were paid, no one could have a bank deposit, and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial banks. Someone has to borrow every dollar we have in circulation, cash, or credit. If the banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless situation is almost incredible - but there it is.

— Irving Fisher; as quoted by G. Edward Griffin in The Creature From Jekyll Island view

It is difficult for Americans to come to grips with the fact that their total money-supply is backed by nothing but debt, and it is even more mind boggling to visualize that, if everyone paid back all that was borrowed, <em>there would be no money left in existence</em>. That's right, there would not be one penny in circulation - all coins and all paper currency would be returned to bank vaults - and there would be not one dollar in any one's checking account. In short, all money would disappear.

— G. Edward Griffin; The Creature From Jekyll Island view

The first fact that needs to be considered is that our money today has no gold or silver behind it whatsoever. The fraction is not 54% nor 15%. It is 0%. It has travelled the path of all previous fractional money in history and already has degenerated into pure fiat money. The fact that most of it is in the form of checkbook balances rather than paper currency is a mere technicality; and the fact that bankers speak about "reserve ratios" is eye wash. The so-called reserves to which they refer are, in face, Treasury bonds and other certificates of <em>debt</em>. Our money is pure fiat through and through.

— G. Edward Griffin; The Creature From Jekyll Island view

In truth, money is not created until the instant it is borrowed. It is the act of borrowing which causes it to spring into existence. And, incidentally, it is the act of paying off the debt that causes it to vanish.

— G. Edward Griffin; The Creature From Jekyll Island view

The Bank of England was formed in 1694 to institutionalize fractional-reserve banking. As the world's first central bank, it introduced the concept of a partnership between bankers and politicians.

— G. Edward Griffin; The Creature From Jekyll Island view

Lenin is said to have declared the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. [...]

Lenin was right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.

— John Maynard Keynes; as quoted by G. Edward Griffin in The Creature From Jekyll Island view

[...] the central-bank mechanism was so attractive to the political and monetary scientists that it became the model for all of Europe. The Bank of Prussia became the Reichsbank. Napoleon established the Banque de France.

— G. Edward Griffin; The Creature From Jekyll Island view

Then, the inevitable happened: There was a run on the bank, and the Bank of England could not produce the coin.

[...] The Cabal is a <em>partnership</em>, and each of the two groups is committed to protect each other, not out of loyalty, but out of mutual self interest. They know that, if one falls, so does the other. It is not surprising, therefore, that, when there was a run on the Bank of England, Parliament intervened. In May of 1696, just two years after the Bank was formed, a law was passed authorizing it to "suspend payment in specie." By force of law, the Bank was now exempted from having to honor its contract to return the gold.

— G. Edward Griffin; The Creature From Jekyll Island view

The Bank [Bank of England] <em>pretended</em> to make a loan but what it really did was to <em>manufacture</em> the money for government's use. If the government had done this directly, the fiat nature of the currency would have been immediately recognized, and it probably would not have been accepted at full face value in payment for the expenses of war. By creating money through the banking system, however, the process became mystifying to the general public. The newly created bills and notes were indistinguishable from those previously backed by coin, and the public was none the wiser.

The reality of central banks, therefore - and we must not forget that the Federal Reserve System is such a creature - is that, under the guise of purchasing government bonds, they act as hidden money machines which can be activated any time the politicians want. This is a godsend to the political scientists who no longer must depend on taxes or the good credit of their treasury to raise money. It is even easier than printing and, because the process is not understood by the public, it is politically safe.

— G. Edward Griffin; The Creature From Jekyll Island view

When money is created out of nothing, the true interest rate is not 8% or 9% or even 22%, it is <em>infinity</em>.

— G. Edward Griffin; The Creature From Jekyll Island view

In short, since there were not enough private savers willing to finance the deficit, Paterson and his group were graciously willing to buy government bonds, provided they could do so with newly-created out-of-thin-air bank notes carrying a raft of special privileges with them. This was a splendid deal for Paterson and company, and the government benefited from the flimflam of a seemingly legitimate bank’s financing… As soon as the Bank of England was chartered n 1694, King William himself and various members of Parliament rushed to become shareholders of the new money factory they had just created.

— Murray Rothbard; as quoted by G. Edward Griffin in The Creature From Jekyll Island view

[...] the Cabal [political scientists and monetary scientists] met in Mercer's Chapel in London and hammered out a seven-point plan which would serve their mutual purposes:

<ol>
<li>The government would grant a charter to the monetary scientists to form a bank;</li>
<li>The bank would be given a monopoly to issue banknotes which would circulate as England's paper currency;</li>
<li>The bank would create money out of nothing with only a fraction of its total currency backed by coin;</li>
<li>The monetary scientists then would lend the government all the money it needed;</li>
<li>The money created for government loans would be backed primarily by government I.O.U.s;</li>
<li>Although this money was to be created out of nothing and would cost nothing to create, the government would pay "interest" on it at a rate of 8%;</li>
<li>Government I.O.U.s would also be considered as "reserves" for creating additional loan money for private commerce. These loans also would earn interest. Thus, the monetary scientists would collect <em>double</em> interest on the same nothing.</li>
</ol>

— G. Edward Griffin; The Creature From Jekyll Island view

In 1707, the recently created Bank of England was given the responsibility of managing this currency, but the bank found more profit in the circulation of its own banknotes, which were in the form of <em>fractional</em> money and which provided for the <em>collection</em> of interest, not the payment of it. Consequently, the government bills gradually passed out of use and were replaced by banknotes which, by the middle of the eighteenth century, became England's only paper money.

— G. Edward Griffin; The Creature From Jekyll Island view

Generally, the public is unaware of this fact and believes that fractional money can be redeemed in full at any time. When the truth is discovered, as periodically happens, there are runs on the bank, and only the first few depositors in line can be paid.

— G. Edward Griffin; The Creature From Jekyll Island view

No bank can stay in business for very long with a zero reserve. The only way to make people accept such a worthless currency is by government force. That's what legal-tender laws are all about. The transition from fraction-reserve money to fiat money, therefore, requires the participation of government through a mechanism which is called a central bank.

— G. Edward Griffin; The Creature From Jekyll Island view

[...] we can now look back on fractional money and recognize that it really is a transitional form between receipt money and fiat money. [...] When the fraction finally reaches zero, then it has made the complete transition and becomes pure fiat. Furthermore, there is no example in history when men, once they had accepted the concept of fractional money, didn't reduce the fraction lower and lower until, eventually, it became zero.

— G. Edward Griffin; The Creature From Jekyll Island view

The general public was led to believe that, if they approved of putting these supposedly idle funds to work, they would be helping the economy and earning a little profit besides. It was an appealing proposal, and the idea caught on like wildfire.

— G. Edward Griffin; The Creature From Jekyll Island view

First of all, sharing the interest income with the owners of the deposits was not part of the original concept. That only became general practice many years later after the depositors became outraged and needed to be reassured that these loans were in their interest as well. In the beginning, they didn't even know that their coins were being lent out. They naively thought that the goldsmiths were lending their <em>own</em> money.

— G. Edward Griffin; The Creature From Jekyll Island view

In addition to the goldsmiths who <em>stored</em> coins, there was another class of merchants, called "scriveners," who <em>lent</em> coins. The goldsmiths reasoned that they, too, could act as scriveners, but do so with <em>other</em> people's money. [...] They had learned from experience that very few of their depositors ever wanted to removed their coins at the same time. [...] It seemed perfectly safe to lend up to eighty or even eighty-five per cent of their coins. And so the warehousemen began to act as loan brokers on behalf of their depositors, and the concept of banking, as we know it today, was born.

— G. Edward Griffin; The Creature From Jekyll Island view

A nation that resorts to the use of fiat money has doomed itself to economic hardship and political disunity.

— G. Edward Griffin; The Creature From Jekyll Island view

Fiat money is the means by which governments obtain instant purchasing power without taxation.

— G. Edward Griffin; The Creature From Jekyll Island view

Wars are seldom funded out of the existing treasury, nor are they even done so out of increased taxes. If governments were to levy taxes on their citizens fully adequate to finance the conflict, the amount would be so great that many of even its most ardent supporters would lose enthusiasm. By artificially increasing the money supply, however, the real cost is hidden from view.

— G. Edward Griffin; The Creature From Jekyll Island view

Thus, when governments issue fiat money, they always declare it to be legal tender under pain of fine or imprisonment. The only way a government can exchange its worthless paper money for tangible goods and services is to give its citizens no choice.

— G. Edward Griffin; The Creature From Jekyll Island view

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold.... The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the "hidden" confiscation of wealth. Gold stands in the way of the insidious process. It stands as a protector of property rights.

— Alan Greenspan; as quoted by G. Edward Griffin in The Creature From Jekyll Island view

Long-term price stability is possible only when the money supply is based upon the gold (or silver) supply without government interference.

— G. Edward Griffin; The Creature From Jekyll Island view

The human effort required to extract one ounce of gold from the earth will always be approximately equal to the amount of human effort required to provide the goods and services for which it is freely exchanged.

— G. Edward Griffin; The Creature From Jekyll Island view

Let us now suppose that the miners, in their quest for a better standard of living, work extra hours and produce more gold this year than previously [...] Now things are no longer in balance. [...] The result of this expansion of the money supply over and above the supply of available goods is the same as in our game of Monopoly. The quoted prices of the suits go up because the relative value of the gold has gone down.

[...] When the miners see that they are no better off than before in spite of the extra work, and especially when they see the tailors making a greater profit for no increase in labor, some of them decide to put down their picks and turn to the trade of tailoring. [...] When this happens, the annual production of gold goes down while the production of suits goes up, and an equilibrium is reached once again in which suits and gold are traded as before.

— G. Edward Griffin; The Creature From Jekyll Island view

[...] maintaining stable prices is the easiest thing in the world. All we have to do is stop tinkering with the money supply and let the free market do its job. Prices become <em>automatically</em> stable under a commodity money system, and this is particularly true under a gold standard.

— G. Edward Griffin; The Creature From Jekyll Island view

Let us illustrate the point by imagining that we are playing a game of Monopoly. Each person has been given a starting supply of play money with which to transact business. It doesn't take long before we all start to feel the shortage of cash. If we just had more money, we could really wheel and deal. Let us suppose further that someone discovers another game box of Monopoly sitting in the closet, and proposes that the currency from that be added to the game under progress. By general agreement, the little bills are distributed equally among the players. What would happen?

The money supply has now been doubled. We all have twice as much money as we did a moment before. But would we be any better off? There is no corresponding increase in the quantity of property, so everyone would bid up the prices of existing pieces until they became twice as expensive. In other words, the law of supply and demand would rapidly seek exactly the same equilibrium as existed with the more limited money supply. When the quantity of money expands without a corresponding increase in goods, the effect is a reduction in the purchasing power of each monetary unit. In other words, nothing really changes except that the quoted price of everything goes up. But that is merely the quoted price, the price as expressed in terms of the monetary unit. In truth, the real price, in terms of its relationship to all other prices, remains the same. It's merely that the relative value of the money supply has gone down. This, of course, is the classic mechanism of inflation. Prices do not go up. The value of the money goes down.

If Santa Claus were to visit everyone on Earth next Christmas and leave in our stockings an amount of money exactly equal to the amount we already had, there is no doubt that many would rejoice over the sudden increase in wealth. By New Year's Day, however, prices would have doubled for everything, and the net result on the world's standard of living would be exactly zero.

The reason so many people fall for the appealing argument that the economy needs a larger money supply is that they zero in only on the need to increase their supply. If they paused for a moment to reflect on the consequences of the total supply increasing, the nonsense of the proposal becomes immediately apparent.

Murray Rothbard, professor of economics at the University Of Nevada, Las Vegas says:

<blockquote>
We come to the startling truth that it doesn't matter what the supply of money is. Any supply will do as well as any other supply. The free market will simply adjust by changing the purchasing power, or effectiveness of its gold unit. There is no need whatever for any planned increase in the money supply to rise to offset any condition, or to follow any artificial criteria. More money does not supply more capital, is not more productive, does not permit "economic growth."
</blockquote>

— G. Edward Griffin; The Creature From Jekyll Island view

The deeper reality, however, is that the supply is not even important. Remember that the primary function of money is to measure the value of the items for which it is exchanged. In this sense, it serves as a yardstick or ruler of value. It really makes no difference if we measure the length of our rug in inches, feet, yards or meters. [...] no matter what measurement we use, the reality of what we are measuring does not change. Our rug does not become larger just because we have increased the quantity of measurement units by painting additional markers onto our rulers.

If the supply of gold in relation to the supply of available goods is so small that a one ounce coin would be too valuable for minor transactions, people simply would use half-ounce coins or tenth-ounce coins. The amount of gold in the world does not affect its ability to serve as money, it only affects the quantity that will be used to measure any given transaction.

— G. Edward Griffin; The Creature From Jekyll Island view

Even today, in a world where money can no longer be defined, the common man instinctively knows that gold will do just fine until something better comes along. [...] As for quantity, there seems to be just the right amount to keep its value high enough for useful coinage. [...] It is sought for both industry and ornament, thus assuring its intrinsic value under all conditions.

— G. Edward Griffin; The Creature From Jekyll Island view

The reason the Federal Reserve appears to be a complicated subject is because most discussions start somewhere in the <em>middle</em>.

— G. Edward Griffin; The Creature From Jekyll Island view

The IMF bailed out Argentina again for $40 billion in 2001 and another $8 billion in 2002. [...] Suffice it to say that the identical game has been played with teams from Bolivia, Peru, Venezuela, Costa Rica, Morocco, the Philippines, the Dominican Republic, and almost every other less-developed country in the world.

— G. Edward Griffin; The Creature From Jekyll Island view

By 1982, almost every Third-World government was running behind in payments. Mexico led the way by announcing it could not send any more money that year on its $85 billion debt. Federal Reserve Governor Henry Wallich rushed to Switzerland to negotiate an IMF loan of $4.5 billion through the Bank of International Settlements. The central banks of Europe and Japan provided $1.85 billion (about 40%); the rest came from the Federal Reserve.

— G. Edward Griffin; The Creature From Jekyll Island view

The Panama bailout was a unique play. In no other country did we have an income-producing property to give away, so from that point forward the bailout would have to be done with mere money. To pave the way for that, Congress passed the Monetary Control Act of 1980, which authorized the Federal Reserve to "monetize foreign debt." [...] Until then, it was permitted to make money only for the <em>American</em> government. Now, it was able to do it for <em>any</em> government. Since then it has been functioning as a central bank for the entire world.

— G. Edward Griffin; The Creature From Jekyll Island view

The underdeveloped nations, on the other hand, are <em>not</em> being raised up. What <em>is</em> happening to them is that their political leaders are becoming addicted to the IMF cash flow and will be unable to break the habit. These countries are being conquered by money instead of arms.

— G. Edward Griffin; The Creature From Jekyll Island view

Here, finally, are the rules:

1. Commercial banks in the industrialized nations, backed by their respective central banks, create money out of nothing and lend it to the governments of underdeveloped nations. They know that these are risky loans, so they charge an interest rate that is high enough to compensate. It is more than what they expect to receive in the long run.

2. When the underdeveloped nations cannot pay the interest on their loans, the IMF and World Bank enter the game as both players and referees. Using additional money created out of nothing by the central banks of their member nations, they advance "development" loans to the governments which now have enough to pay the interest on the original loans with enough left over for their own political purposes.

3. The recipient country quickly exhausts the new supply of money, and the play returns to point number two. This time, however, the new loans are guaranteed by the World Bank and the central banks of the industrialized nations. Now that the risk of default is removed, the commercial banks agree to reduce the interest to the point anticipated at the beginning. The debtor governments resume payments.

4. The final play is - well, in this version of the game there appears to be no final play, because the plan is to keep the game going <em>forever</em>. To make that possible, certain things must happen that are very final, indeed. They include the conversion of the IMF into a world central bank as Keynes had planned, which then issues an international fiat money. Once that "Bank of Issue" is in place, the IMF can collect unlimited resources from the citizens of the world through the hidden tax called inflation. The money stream then can be sustained indefinitely - with or without the approval of the separate nations - because they will no longer have money of their own.

— G. Edward Griffin; The Creature From Jekyll Island view

Capital for the IMF and the World Bank comes from the industrialized nations, with the United States putting up the most. Currencies, such as the dollar, yen, mark, and franc, are augmented by many times that amount in the form of "credits." These are merely promises by the member governments to get the money from their taxpayers if the Bank gets into trouble with its loans.

The IMF gradually is evolving into a central bank fo the world with the World Bank as its lending arm. It has become the engine for transfer of wealth to underdeveloped countries. This has lowered the economic level of the donating countries but it has not raised the level of the recipients. The money has simply disappeared down the drain of political corruption and waste.

— G. Edward Griffin; The Creature From Jekyll Island view

The IMF and the World Bank were created at a meeting of global financiers and politicians held at Bretton Woods, New Hampshire, in 1944. Their announced goals were to facilitate international trade and to stabilize the exchange rates of national currencies. The unannounced goals were quite different. They were the elimination of the gold-exchange standard as the basis of currency valuation and the establishment of world socialism.

The method by which gold was to be eliminated in international trade was to replace it with a world currency which the IMF, acting as the world central bank, would create out of nothing. The method by which world socialism was to be established was to use the World Bank to transfer money – disguised as loans- to the governments of underdeveloped countries and to do so in such a way as to insure the demise of free enterprise. The money was to be delivered from the hands of politicians and bureaucrats into the hands of other politicians and bureaucrats. When the money comes from government, goes to government, and is administered by government, the result will be expansion of government.

— G. Edward Griffin; The Creature From Jekyll Island view

Before receiving loans from the World Bank, Tanzania was not wealthy, but it fed its own people, and it had economic growth. After receiving more than 3 billion dollars in loans, it nationalized a the nation's farms and industries and converted every business into a government agency. [...] Food was the main export in 1966. Under socialism, food had to be imported - paid for by foreign aid and more loans from the World Bank. The country is hopelessly in debt with no way to repay.

Argentina once had one of the highest standards of living in Latin America. But then it became the recipient of massive loans from the World Bank as well as commercial banks in the United States. Since the money was given to politicians, it was used to build the only system politicians know how to build: socialism. [...] By 1989, inflation was running at an average of 5,000% and, in the summer of that year, topped at 1,000,000%! [...] People were rioting in the streets for food, and the government was blaming greedy shop owners for raising prices.

Brazil is run by the military, and the state controls the economy. [...] By 1990, inflation was running at 5,000%. [...] A new crime was invented called "hedging against inflation," and people were arrested for charging the free-market price for their goods and for using dollars or gold as money.

The experience in Mexico was a carbon copy of that in Brazil, except that the amount of money was larger. [...] The government increased the minimum wage causing more businesses to fail and more unemployment. That led to more welfare and unemployment benefits. [...] In 1995, Mexico's bank loans were once again on the brink of default, and, once again, U.S. taxpayers were thrown into the breach by Congress to cover more than $30 billion at risk. [...]

Thus the saga continues. After pouring billions of dollars into underdeveloped countries around the globe, no development has taken place. In fact, we have seen just the opposite. Most countries are worse off than before the Saviors of the World got to them.

— G. Edward Griffin; The Creature From Jekyll Island view

While Nigeria and Argentina are drowning in debt, billions from the World Bank have gone into building lavish new capital cities to house government agencies and the ruling elite.

— G. Edward Griffin; The Creature From Jekyll Island view

While the top leaders and theoreticians at the IMF and World Bank dream of world socialism, the middle managers and political rulers have more immediate goals in mind. The bureaucracy enjoys a plush life administering the process, and the politicians on the receiving end obtain wealth and power. Ideology is not their concern. Socialism, capitalism, fascism, it makes no difference to them as long as the money flows.

— G. Edward Griffin; The Creature From Jekyll Island view

Nowhere is this pattern more blatant than in Africa. Julius Nyerere, the dictator of Tanzania, is notorious for his "villagization" program in which the army has driven the peasants from their land, burned their huts, and loaded them like cattle into trucks for relocation into government villages. The purpose is to eliminate opposition by bringing everyone into compounds where they can be watched and controlled. Meanwhile the economy staggers, farms have gone to weed, and hunger is commonplace. Yet Tanzania has received more aid per capita from the World Bank than any other nation.

In Uganda, government security forces have engaged in mass detentions, torture, and killing of prisoners. The same is true under the terrorist government in Zimbabwe. Yet, both regimes continue to be the recipients of millions of dollars in World Bank funding.

— G. Edward Griffin; The Creature From Jekyll Island view

The IMF / World Bank is the protege of the Federal Reserve. It would not exist without the flow of American dollars and the benevolence of American leadership. The Fed has become an accomplice in the support of totalitarian regimes throughout the world.

— G. Edward Griffin; The Creature From Jekyll Island view

Thus, the World Bank becomes yet one more conduit from the pockets of taxpayers to the assets of commercial banks which have made risky loans to Third-World countries.

— G. Edward Griffin; The Creature From Jekyll Island view

There is little doubt that the IMF is an influence for world-wide socialism.

— Ken S. Ewert; The International Monetary Fund view

[...] the World Bank is able to go into the commercial loan markets and borrow larger sums at extremely low interest rates. After all, the loans are backed by the most powerful governments in the world which have promised to force their taxpayers to make the payments if the Bank should get into trouble. It then takes these funds and relends them to the underdeveloped countries at slightly higher rates, making a profit on the arbitrage.

The unseen aspect of this operation is that the money it processes is money which, otherwise, would have been available for investment in the private sector or as loans to consumers. It siphons off much-needed development capital for private industry, prevents new jobs from being created, causes interest rates to rise, and retards the economy at large.

— G. Edward Griffin; The Creature From Jekyll Island view

Whereas the International Monetary Fund is evolving into a world central bank which eventually will issue a world currency based on nothing, its sister organization, the World Bank, has become its lending agency. Acting as <em>Savior of the World</em>, it seeks to aid the underdeveloped nations, to feed the hungry, and to bring a better life to all mankind. In pursuit of these humanitarian goals, it provides loans to governments at favorable terms, usually at rates below market, for terms as long as fifty years, and often with no payments due until after ten years.

— G. Edward Griffin; The Creature From Jekyll Island view

The counterfeit options is available only if a country happens to be in the unique position of having its currency accepted as the medium of international trade, as has been the case for the United States. In that event, it is possible to create money out of nothing, and other nations have no choice but to accept it. Thus, for years, the United States has been able to spend more money than it earned in trade by having the Federal Reserve create whatever it needed.

[...] The result is that America has continued to finance its trade deficit with fiat money - counterfeit, if you will - a feat which no other nation in the world could hope to accomplish.

[...] In truth, America is not hurt by a trade deficit at all. In fact, we are the benefactors while or trading partners are the victims. We get the cars and TV sets while they get the funny money. We get the hardware. They get the paperware.

[...] But when the day arrives - as it certainly must - when the dollar tumbles and foreigners no longer want it, the free ride will be over. When that happens, <em>hundreds of billions</em> of dollars that are now resting in foreign countries will quickly come back to our shores as people everywhere in the world attempt to convert them into yet more real estate, factories, and tangible products, and to do so as quickly as possible before they become even more worthless. As this flood of dollars bids up prices, we will finally experience the inflation that should have been caused in years past but which was postponed because foreigners were kind enough to take the dollars out of our economy in exchange for their products.

The chickens <em>will</em> come home to roost. But, when they do, it will not be because of the trade deficit. It will be because we were able to <em>finance</em> the trade deficit with fiat money created by the Federal Reserve. If it were not for that, the trade deficit could not have happened.

— G. Edward Griffin; The Creature From Jekyll Island view

If the IMF were to function as a true world central bank with unlimited issue, the dollar had to be broken away from its gold backing as a first step toward replacing it completely with a bancor, an SDR or something else equally free from restraint.

On August 15, 1971, President Nixon signed an executive order declaring that the United States would no longer redeem its paper dollars for gold. So ended the first phase of the IMF's metamorphosis. It was not yet a true central bank, because it could not create its own world currency. It had to depend on the central banks of its member nations to provide cash and so-called credits; but since these banks, themselves, could create as much money as they wished, from now on, there would be no limit.

[...] So, when the dollar broke loose from gold and there was no longer a ready standard for measuring currency values, the IMF merely changed its goal and continued to expand its operation. The new goals was to "overcome trade deficits."

— G. Edward Griffin; The Creature From Jekyll Island view

The International Monetary Fund appears to be a part of the United Nations, much as the Federal Reserve System appears to be a part of the United Sates government, but it is entirely independent. It is funded on a quota basis by its member nations, almost two hundred in number. The greatest share of capital, however, comes from the more highly industrialized nations such as Great Britain, Japan, France, and Germany. The United States contributes the most, at about twenty per cent of the total. In reality, that twenty per cent represents about twice as much as the number indicates, because most of the other nations contribute worthless currencies which no one wants. The world prefers dollars.

One of the routine operations at the IMF is to exchange worthless currencies for dollars so the weaker countries can pay their international bills. [...] It is a kind of international FDIC [...]

— G. Edward Griffin; The Creature From Jekyll Island view

Two international agencies were created at that meeting[Bretton Woods]: the International Monetary Fund and its sister organization, the International Bank for Reconstruction and Development - commonly called the World Bank.

The announced purposes of these organizations were admirable. The World Bank was to make loans to war-torn and underdeveloped nations so they could build stronger economies. The International Monetary Fund (IMF) was to promote monetary cooperation between nations by maintaining fixed exchange rates between their currencies. But the method by which these goals were to be achieved was less admirable. It was to terminate the use of gold as the basis of international currency exchange and replace it with a politically manipulated paper standard. In other words, it was to allow governments to escape the discipline of gold so they could create money out of nothing without paying the penalty of having their currencies drop in value on world markets.

— G. Edward Griffin; The Creature From Jekyll Island view

Through a complex tangle of bank loans, subsidies, and grants, the Federal Reserve is becoming the "lender of last resort" for virtually the entire planet.

— G. Edward Griffin; The Creature From Jekyll Island view

The savings-and-loan industry, is really a cartel <em>within</em> a cartel. It could not function without Congress standing by to push unlimited amounts of money into it. And Congress could not do that without the banking cartel called the Federal Reserve System standing by as the "lender of last resort" to create money out of nothing for Congress to borrow. [...]

The thrifts [S&Ls] have become the illegitimate half-breed children of the Creature. [...]

If America is to survive as a free nation, her citizens must become far more politically educated than they are at present. As a people, we must learn not to reach for every political carrot dangled in front of us. As desirable as it may be for everyone to afford a home, we must understand that government programs pretending to make that possible actually wreak havoc with our system and bring about just the opposite of what they promise.

— G. Edward Griffin; The Creature From Jekyll Island view

The scam could never work unless the Fed was able to create money out of nothing and pump it into the banks along with "credit" and "liquidity" guarantees. Which means, if the loans go sour, the money is eventually extracted from the American people through the hidden tax called inflation. That's the meaning of the phrase "lender of last resort."

— G. Edward Griffin; The Creature From Jekyll Island view

One of the standard variations of the Final Maneuver is for the government, not always to directly provide the finds, but to provide the credit for the funds. That means to guarantee future payments should the borrower again default. Once Congress agrees to this, the government becomes a co-signer to the loan, and the inevitable losses are finally lifted from the ledger of the bank and placed onto the backs of the American taxpayer.

Money now begins to move into the banks through a complex system of federal agencies, international agencies, foreign aid, and direct subsidies. All of these mechanisms extract payments from the American people and channel them to the deadbent borrowers who then send them to the banks to service their loans. Very little of this money actually comes from taxes. Almost all of it is generated by the Federal Reserve System. When this newly created money returns to the banks, it quickly moves out again into the economy where it mingles with and dilutes the value of the money already there. The result is the appearance of rising prices but which, in reality, is a lowering of the value of the dollar.

The American people have no idea they are paying the bill. They know that someone is stealing their hub caps, but they think it is the greedy businessman who raises prices or the selfish laborer who demands higher wages or the unworthy farmer who demands too much for his crop or the wealthy foreigner who bids up our prices. They do not realize that these groups also are victimized by a monetary system which is constantly being eroded in value by and through the Federal Reserve System.

— G. Edward Griffin; The Creature From Jekyll Island view

Since its [The Fed] inception, it has presided over the crashes of 1921 and 1929; the Great Depression of '29 to '39; recessions in '53, '57, '69, '75, and '81; a stock market "Black Monday" in '87; and a 100% inflation which has destroyed 90% of the dollar's purchasing power.

— G. Edward Griffin; The Creature From Jekyll Island view

Here, then, were the main challenges that faced that tiny but powerful group assembled on Jekyll Island:

<ol>
<li>How to stop the growing influence of small, rival banks and to insure that control over the nation's financial resources would remain in the hands of those present;</li>
<li>How to make the money supply more elastic in order to reverse the trend of private capital formation and to recapture the industrial loan market;</li>
<li>How to pool the meager reserves of the nation's banks into one large reserve so that all banks will be motivated to follow the same loan-to-deposit ratios. This would protect at least some of them from currency drains and bank runs;</li>
<li>Should this lead eventually to the collapse of the whole banking system, then how to shift the losses from the owners of the banks to the taxpayers.</li>
<li>How to convince Congress that the scheme was a measure to protect the public.</li>
</ol>

— G. Edward Griffin; The Creature From Jekyll Island view

Here were representatives of the world's leading banking consortia: Morgan, Rockefeller, Rothschild, Warburg, and Kuhn-Loeb. They were often competitors, and there is little doubt that there was considerable distrust between them and skillful maneuvering for favored position in any agreement. But they were driven together by one overriding desire to fight their common enemy. The enemy was competition.

— G. Edward Griffin; The Creature From Jekyll Island view

The purpose of this meeting on Jekyll Island was not to hunt dicks. Simply stated, it was to come to an agreement on the structure and operation of a banking cartel. The goal of the cartel, as is true with all of them, was to maximize profits by minimizing competition between members, to make it difficult for new competitors to enter the field, and to utilize the police power of government to enforce the cartel agreement. In more specific terms, the purpose and, indeed, the actual outcome of this meeting was to create the blueprint for the Federal Reserve System.

— G. Edward Griffin; The Creature From Jekyll Island view

The Chase National Bank, a predecessor of Chase Manhattan Bank which is now J.P.MorganChase, was named in his [Salmon P. Chase] honor, though he had no financial affiliation with it.

— Wikipedia view

The Lehmans made millions during the Civil War, when they operated as agents and fixers for both belligerents, moving easily back and forth through the zones of war. Paul Manheim was also director of Bankers Trust in New York, and Paramount Pictures in Hollywood. His brother Frank Manheim, also a partner of Lehman Brothers, was a director of Warner Brothers.

— Eustace Mullins; The Curse of Canaan view

Congressional testimony showed that J.P. Morgan and Kuhn Loeb Co. between them controlled ninety-two per cent of all the railroad mileage in the United States. Both of them were fronts for the Rothschild interests.

— Eustace Mullins; The Curse of Canaan view

As Chief Justice of the Supreme Court, Salmon P. Chase, the New Yrok banker, resisted all challenges to the Reconstruction Acts by the captive Southern states, declaring that these Acts were indeed "constitutional." [...] He later founded the Chase Bank, which is now allied with Aaron Burr's Manhattan Company to form the Chase Manhattan Bank.

— Eustace Mullins; The Curse of Canaan view

One of the principle agencies of the Canaanite network has been the Rhodes Trust, which has trained young men in the principles of the Canaanite program for world power for almost a century.

— Eustace Mullins; The Curse of Canaan view

Because no revolutionary faction could obtain any financing after the Bank of England gained control of the money of England, there has never been another civil war or revolution in England.

— Eustace Mullins; The Curse of Canaan view

The Bank of England has its own Freemasonry Lodge (Lodge No 263)...

— David Icke; The Biggest Secret view

This Brotherhood cartel controls every aspect of the global economic network, the banks, insurance companies, raw materials, transportation, factories, finished products, major retail groups (and by market rigging all the rest), the stock and material markets, governments, media, intelligence agencies and so on.

This is coordinated through the secret societies and one of their most important vehicles is the City of London-House of Windsor operation called the Club of the Isles. It was named after King Edward VII, Queen Victoria’s son, who was the first to carry the title Prince of the Isles. The title is held today by Prince Charles. Edward was heavily involved with Black Nobility barons of the Square Mile London financial district and helped them to engineer the Crimean War, the Russia-Japan War, the preparations for the First World War and the Opium Wars with China.

Through the central organization of the Club of the Isles comes the fantastic web of interlocking directorships which hold apparently independent’ companies in a network of common control and common agenda. Some of this web include:

The Bank of England
Anglo-American Corp of South Africa
Rio Tinto
Minorco Minerals and Resources Corp
De Beers Consolidated Mines and De Beers Centenary AG
N.M. Rothchild Bank
Barclays Bank
Lloyds Bank
Lloyds Insurance Market
Midland Bank
National Westminster Bank
Barings Bank
Schroders Bank
Standard Chartered Bank
Hambros Bank
S. G. Warburg
Toronto Dominion Bank
Johnson Matthey
Klienwort Benson Group
Lazard Brothers
Lonrho
J. P. Morgan and Co
Morgan Grenfell Group
British Petroleum
Shell and Royal Dutch Petroleum
Cadbury-Schweppes
BAT Industries
Assicurazioni Generali SpA, (Venice) Italy
Courtaulds
General Electric
Cazeenove and Co
Grand Metropolitan
Hanson plc
HSBS Holdings (Hong Kong and Shanghai Bank)
Imperial Chemical Industries
Inchscape plc
Inco Ltd
ING Group
Jardine Matheson
Peninsular and Oriental Steam Navigation Co (P & 0)
Pilkington Glass
Reuters Holdings
Glaxo Wellcome
SmithKline Beecham
Unilever and Unilever NV
Vickers plc

And that is just a few of them! Each of these corporations have staggering lists of subsidiaries going on for page after page. Lonrho alone at the time of writing has 640 subsidiaries.

— David Icke; The Biggest Secret view

The principal agencies of humanism in the United States are centralized in a small group of billion dollar foundations which were set up to subvert the American Republic. In "The World Order," I traced the history of these foundations back to the Peabody Fund, the chief carpetbagger power in the conquered Southern states after 1865. Peabody, an American who became secretly affiliated with the Rothschild banking house in London, founded his own banking house, Peabody and Co., which later became J.P. Morgan & Co. His carpetbagger Peabody Fund, working closely with the federal military forces, which maintained their occupation of the Southern states until 1877, later became the General Education Board. Still later, it was absorbed by the Rockefeller Foundation. Since World War II, at least four Secretaries of State have been presidents of the Rockefeller Foundation, including John Foster Dulles, Dean Rusk, Cyrus Vance, and Henry Kissinger (the latter was a director).

— Eustace Mullins; The Curse of Canaan view

The manner of execution is often symbolic, intended to convey a warning to other Masons or to outsiders who might know more than is good for them. Such was the execution of Robert Calvi, a principal in the Banco Ambrosiano scandal. Calvi was found hanging from the Blackfriars Bridge in London, the place having been chosen to signify that he had fallen from grace. A warrant was recently issued by a judge in Milan for another principal in this case, Archbishop Paul C. Marcinkus, a native of Chicago, who had been in charge of the Vatican's finances. The bank failure cost the Vatican $250 million, although its liability at one time was estimated to be some $3 billion. Archbishop Marcinkus was in charge of the Instituto per Opere di Religione, the Vatican's Institute for Religious Works, which controlled its finances. The scandal was not really about banking, but about Freemasonry.

— Eustace Mullins; The Curse of Canaan view

Another bank was set up, Banco Privata, which seemed to be a vehicle for funds which had been hidden since World War II, OSS millions which had been stashed in secret hiding places. The principals of Banco Privata would indicate this; they included John McCaffery, the Italian representative of Hambros Bank (Charles Hambro has been head of SOE, British Intelligence in London); he purchased 24.5% of Banco Privata for Hambros; Michael Sindona bought 51%. Sindona later sold Banco Privata to the IOR through Archbishop Marcinkus; the control was shifted to a Sindona firm in Lichtenstein, Fasco A. G. Another holding company, La Centrale Finanzaria, was set up by Sindona, which had Robert Calvi, Evelyn de Rothschild, and Jocelyn Hambro on its board. Sindona was soon moving $49 billion in Eurodollars through this and other bank holding companies which he operated. He netted some $10 million in profits. Banco Ambrosiano was at the vortex of all this activity; it went bankrupt. Gelli withdrew $50 million and fled to Switzerland, where he was arrested. Calvi was found hanging from the Blackfriars Bridge in London. Sindona, who also was involved in the collapse of the Franklin National Bank in New York, was arrested and sentenced to prison. He died in an American prison.

— Eustace Mullins; The Curse of Canaan view

The Venetians control the Federal Reserve System; they lend to us, but we do not lend to them; they are the head, and we are the tail.

— Eustace Mullins; The Curse of Canaan view

After the second Opium War which ended in 1860, the British merchant banks and trading companies established the Hong Kong and Shanghai Corporation as the central bank of the Far East drug industry. According to all research I have read about the drug network, the Hong Kong and Shanghai Bank, with its global connections, continues to be a financial centre for the drug industry to this day. The Hong Kong and Shanghai Bank now calls itself HSBC Holdings since China regained Hong Kong and HSBC owns one of the four British clearing banks, the Midland. This had a long advertising campaign calling itself the “listening bank” and the “bank that likes to say yes”. I don’t remember it mentioning the number of times its owners have said “yes” to laundering the profits of the drug industry which is destroying the lives of so many.

— David Icke; The Biggest Secret view

HSBC Holdings plc is a public limited company incorporated in England and Wales in 1990, and headquartered in London since 1993. As of 2009, it is both the world's largest banking group and the world's 6th largest company according to a composite measure by Forbes magazine. Hong Kong served as the bank¹s headquarters until 1992 when it was forced to move to London as a condition of completing the acquisition of Midland Bank.

— Wikipedia view

Both the World Bank and the World Trade Organization connect with other global financial agencies like the International Monetary Fund and the G-7/G-8 group to impose their will and policies on developing countries in Africa, South and Central America, and Asia, and to ensure they are controlled by the transnational corporations which answer to the same overall leadership.

— David Icke; The Biggest Secret view

The head of the World Bank, the Rothschild partner, James Wolfensohn, and a stream of his predecessors like Robert Strange Macnamara, are Bilderbergers.

— David Icke; The Biggest Secret view

Because once they got the Federal Reserve into position, locked into position illegally, but locked into a position of power, then they could put on the dollar "Annuit Coeptis," "Our Enterprise is now a Success," meaning, "We have now taken over America, and America was sound asleep and didn't even know it." So what I'm saying is that we have all been had.

— Jordan Maxwell; Matrix of Power view

The International Monetary Fund, which is the power behind the Federal Reserve System, which is raping our country and destroying our economy. And these guys are doing it right in front of you, telling you what they are doing, but we just don't see it, Even after they spell it out for us on television. They are even making comedies about it, like Get Smart.

— Jordan Maxwell; Matrix of Power view

Who are the Freemasons? This fraternity is connected to levels that go higher and higher and higher (most members don't know this). It just keeps escalating as it goes up. There is an enormous international building in Switzerland that is divided into three parts, which looks like the Mercedes emblem with the triangle within the circle. That is what this building looks like, a three part building. One third of this building is the United Nations world headquarters, and this is operating in Switzerland. Many people think that the United Nations world headquarters is located in New York. It is not true, it is their field headquarters that is in New York. The main United Nations organization is based in Switzerland, where the banks are located. Then the International Monetary Fund, or the world bankers is in the other third of this building, and the last third belongs to the Freemasons. This was the set up for many years, but as I now understand it, one these groups has since moved out. But the point is for you to understand who is running tilings at the highest levels in world affairs, and why it's been so important to have all three organizations in the same building for many, many years together. It's a matter of convenience for those who hold the true power.

— Jordan Maxwell; Matrix of Power view

They [the bankers] pushed the bill through just before Christmas 1913 when many Congressmen were already at home with their families for the holiday. Now they could control American interest rates and make a fortune lending the government money that doesn’t exist and charging interest on it.

— David Icke; The Biggest Secret view

When the Federal Reserve Bill was going before Congress the bankers who had written the bill vehemently opposed it in public. The bankers were very unpopular by this time and they wanted to give the impression that the bill was bad for them, so increasing the public support for it to be passed.

— David Icke; The Biggest Secret view

1902, the Rothschilds sent their agents, Paul and Felix Warburg, to America to engineer the creation of the Federal Reserve.

— David Icke; The Biggest Secret view

The Bank of the United States caused so much poverty, bankruptcy and rebellion, that it was eventually closed down, but soon after that came its replacement, the Federal Reserve. The Rothschild’s main banking operation in America in the early part of this century was Kuhn, Loeb and Company in New York which was headed by Jacob Schiff.

— David Icke; The Biggest Secret view

One of the Brotherhood’s most important coups was the creation in 1913 of the Federal Reserve, the so-called ‘central bank’ of the United States. It is neither federal nor has any reserve. It is a cartel of private banks owned by the 20 founding families, mostly European, which today decides the interest rates for the United States and lends non-existent money (figures on a screen) to the US Government on which the taxpayers have to pay interest. This is what we call the ‘American Deficit’ - it is fresh air. The Federal Government of the United States does not own a single share in the Federal Reserve and American citizens cannot purchase them.

Profits exceed $150 billion a year and the Federal Reserve has not once in all its history published audited accounts. This income is assured because:

1. the Brotherhood control the US Government (the Virginia Company under another name) which continues to borrow ‘money’ from the ‘Fed’
2. they also control the privately-owned Internal Revenue Service (IRS), the illegal terrorist organization which collects the taxation from the people
3. it controls the media to ensure that people never find out about 1 and 2

— David Icke; The Biggest Secret view

I said that the Virginia Company and King James I decreed that criminal courts in the colonies would be controlled by Admiralty Law, the law of the sea. What Admiralty were they talking about? The British Admiralty, of course. When a court is being run under Admiralty or maritime law, the flag in the court has to have a gold fringe around it. Look in any criminal court in the United States or the united states and you will see it has a gold fringe. The same with many other official buildings.

Those ‘American’ criminal courts are being run under BRITISH admiralty law. The Crown and the Brotherhood families of Britain also control the American criminal courts and the core of that control is with the secret societies based in Temple Bar in London, the former Templar lands, the centre of the British legal profession...

Through this, the British reptile-Aryans control the American judges, lawyers, police, and so on, and through other organizations, like the Council on Foreign Relations and the Trilateral Commission, they manipulate the American political system. The American judges are fully aware that their courtrooms are controlled by British Admiralty Law, but they keep quiet and take the money.

— David Icke; The Biggest Secret view

Patriots believe that the creation of money by the private banks is unconstitutional in the United States because the Constitution says that Congress must create the currency. But it doesn’t say that. Article One, Section 8, says that: “Congress shall have the power to coin money and regulate the value thereof.” It does not say (on purpose) that only Congress shall have that power, nor that they have to use that power. Section 10 says that no State shall coin money and that gold and silver coins shall be the only payment of debts. So paper money must be unconstitutional? No. An area of Maryland was given to the new Congress to create the District, not the State, of Columbia for the new federal capital called Washington DC. Within this district is the privately-owned central bank of America, the Federal Reserve, which issues the nations paper currency. The District of Columbia is effectively isolated from many of clauses in the Constitution which apply to the States. The main Founding Fathers would have known that.

— David Icke; The Biggest Secret view

The main coordinating body between the interconnected central banks is called the Bank of International Settlements, based in the Brotherhood stronghold of Geneva, Switzerland.

— David Icke; The Biggest Secret view

In 1694, William signed the charter for the Bank of England and the Black Nobility, together with the reptile-Aryan aristocracy already well established in Britain, made the City of London-New Troy the centre of global finance, a position it still enjoys.

— David Icke; The Biggest Secret view

The interest on the national debt must be paid, and is paid, by the Treasury of the United States issuing T-Bills and Treasury Notes.

— Lindsey Williams; Interview view