What’s a better long-term investment, real estate or precious metals?
Richard Kiyosaki, famed author of the Rich Dad, Poor Dad series, discussed this matter during one of his investment seminars. One would think that Kiyosaki, a businessman who champions passive income investments and real estate, might opt for real estate, as neither gold nor silver provide yield.
But what may come as a surprise to many is that Kiyosaki finds more value in metals, particularly silver, than in real estate! He bases his valuation on just two things: the intrinsic value of gold and silver, and the potential for the metals to rise significantly as demand for them surpasses their limited supply.
Later in the seminar, his team outlines a game plan for converting gold and silver into real estate. We’ll cover this later in this post.
Savers are Losers, Cash is Trash
If you’ve read any of Kiyosaki’s books, you’ll recognize his mantra that “savers are losers.” This not only advances the notion that money is something that ought to be invested--that money should work for you versus you working for your money--but it also proposes that “cash” is a poor investment for the very fact that its intrinsic value is artificial.
Kiyosaki makes the distinction between money and cash at the opening of his seminar: gold and silver are “God’s money,” whereas cash is “man-made money.” In other words,“money” and “fiat currency” are not the same thing.
He states how, in 1971, the US did something unprecedented: not only did it get rid of “God’s money,” but the US convinced the rest of the world to do the same! Paper money, according to Kiyosaki, is the driving force behind the world’s financial volatility. And this has been the case throughout history: “Every time [governments] have taken God’s money--silver and gold--and replaced it with man-made money, there’s been economic volatility.”
Kiyosaki sees this happening to the US dollar, which he believes is near collapse. He adds, “All of you savers out there, you’re gonna lose big time.”
No political party is capable of maintaining the “value” of cash
Contrary to what people may think, electing the right politicians or the right party will do very little to save the US dollar. Kiyosaki explains this in simple terms: although people accuse Democrats of “taxing and spending,” Republicans are equally guilty for “borrowing and spending.” In the end, “government prints trash...cash is trash,” says Kiyosaki.
Every currency undergoes a currency cycle--the dollar is no different
The Rich Dad, Poor Dad seminar team states that every currency goes through a five-part lifecycle (most of which begin at step 2).
- Barter: members of a society begin trading goods directly until the need for an indirect means of exchange arises.
- Free market money: the need to exchange things indirectly prompts a society to agree on a uniform unit of exchange; one that is durable, portable, divisible, and intrinsically valuable.
- Government steps in to regulate money: laws are imposed to control trade, and to impose taxes and penalties. A society’s economic foundation moves away from the “free-market” and toward a government-controlled monetary system.
- Government monopolizes money: government gives itself the sole right to control the creation and distribution of money.
- Government debases money: to sustain its growth, government must tax its citizens. To avoid dissent that comes with exorbitant taxes and asset seizures, government debases the value of money. Historically, governments have shaved coins, issued smaller coins, or issued new coins with reduced gold/silver content. In our day and age, government simply prints more money. This last step is the issuance of promissory notes that can no longer be redeemed in gold or silver.
At this point, money no longer has any value other than that of government’s promise to pay.
After years of QE, stagnant wage growth, inflated asset prices, and to top it all off, government’s war on cash, we’re well past the starting point of the last stage in the dollar’s lifecycle. The global de-dollarization trend and the aggressive moves by China and Russia to subvert the US dollar’s reserve currency status provide external evidence for this domestic weakness.
So what should we do?
History has shown that when a currency has lost its purchasing power, gold and silver automatically revalue themselves to bring robustness back into the financial system.
Most people don’t know that America had already experienced a period of hyperinflation. Ever heard the saying “it’s as worthless as a Continental”? America’s first fiat currency was hyperinflated out of existence. During the Civil War, when the Union needed to pay its soldiers, Lincoln issued the Greenback...but this fat currency was backed by gold.
During the period between 1971 - 1980, when markets were moving sideways, and real estate’s boom kept up with the inflating money supply, gold rose 24 times its price while silver was up 39 times its price.
If you had just 10% of your net worth in gold from 1971 - 1980, and if you lost the other 90%, by 1980 you would still be 2.4 times richer than you were in 1971!
Gold is always a sound investment. But the real opportunity, as Richard Kiyosaki points out, is in silver:
“Silver is the biggest opportunity I have ever seen...BIGGER THAN REAL ESTATE...bigger than anything else...There’s less than 10 years supply worth of silver on planet Earth...gold is hoarded, but silver is consumed…[this] is not a crystal ball...it is pure supply and demand, economics, fundamentals…”
The Rich Dad, Poor Dad Team Game Plan for Metals and Real Estate
So here is their simple plan of action:
- Buy gold--40 ounces worth; or
- Buy silver--500 ounces worth
- HOLD until median home prices is equivalent to either under 40 oz.'s of gold, or 500 oz.'s of silver.
- Once the prices converge with your gold or silver holdings, sell your metals and convert them into real estate
When the dollar falls, as all fiat currencies eventually do, gold and silver will do their accounting...this is what they have done for centuries at the end of currency cycles. Real estate is a valuable asset to own, but its value rests on the intrinsic value that only real money can provide.
And as Kiyosaki repeatedly emphasizes, gold and silver are the only monies to have survived the destruction of economies, the fall of empires, and the end of historical eras. It’s, as he says, “God’s money.”