"BE CAREFUL! This Is Serious..." - Robert Kiyosaki's Last WARNING

the date of today is important date and the reason that's important is just yesterday at Davos Switzerland the IMF stood up and said the world economy is hitting into the worst economic headwinds since World War II the worst and that's why it could be bad news but depending how you look at it it could be very good news this is about its macro environment as I've ever seen and I think most people's read on it is probably wrong right now I'm going to go take you through a history lesson today why I'm concerned yeah so why World War II World War II is a fascinating period because like kovid the entire world had basically been stuck at home or been on battlefields everyone came back there was no supply of Commodities and goods Global Supply chains were broken and everybody came back and started consuming again and guess what inflation went up to 13 or something maybe even higher and that period was fascinating because interest rates went up and the first thing that happened was the economy went straight back into recession and inflation went negative because it was a massive tightening of monetary conditions you raised the cost of goods on people and didn't raise their salaries enough people couldn't get the goods they wanted exactly like now and everything collapsed so we went back into recession and then eventually some better times and I'll come back into the 1940s and 50s because I think it's a really important parallel that most people misunderstand the next time we saw anything remotely like this was 1974 a lot of people tell you it's the 70s again inflation inflation well the inflation episode we had in the late 70s was driven by demographics that was the Baby Boomers entering the workforce all at the same time it was the largest demand Shock the World had ever seen and we had a supply shock of this oil crisis of the Arab Oil Embargo that's not repeating now what is actually more similar is 197 74. 1974 was the Arab Oil Embargo the price of oil tripled and interest rates went up inflation shot up and the immediate effect was the economy went down the toilet Almost Do not pass go the stock market fell 50 and the ism survey which is a good Guide to the business cycle anytime it crosses below 50 suggests the economy is getting weak a recession comes at about 47 it hit 30 which was the lowest in all history and it happened in a space of four months based on exactly the same kind of setup we've got now so you're saying that the 70s are now pretty close yes and inflation fell in 1974 afterwards people are still thinking inflation goes on forever it did not and it did not in the 1940s either then the next one up is 1984. we saw an issue where global trade there was a huge amount of trade disputes the dollar was pretty strong like it is now interest rates were going up and inflation was high and everybody was fearing looking back and saying oh we don't want the early 80s late 70s again the inflation inflation so volcker was tightening rates too much and the economy collapsed it didn't go to recession because the FED quickly started cutting rates but the dollar went up a lot more and created a lot more problems when we ended up with the plaza record in 1985 when everybody had to stop the dollar going up from destroying the global economy so then the next time we see something similar was 2008. if you remember the oil price was at 147 inflation was six percent the FED had been cutting into that because the economy was imploding 2018 exactly the same oil prices High inflation High the FED for hiking rates trying to tighten the balance sheet and what happened is the economy rolled over really quickly again okay so what's going on here why does this phenomena keep happening everyone extrapolates inflation out forever what actually happens is that consumption Falls because we've tightened monetary conditions so tightening muncher conditions to Ordinary People means the cost of your mortgage has gone up at the fastest Pace in history over a one year period mortgage rates have never risen this fast so any money you've borrowed has suddenly got much more expensive your wages haven't kept up with a cost of just basic services like food so you're actually feeling poorer so you can't consume as much and you start not consuming other things people overextended on housing because they rushed into housing in 2020 and 2021 and the rates have gone up for them also just the rise in things like the cost of oil has meant that you know gas prices all of this stuff and then the rise in the dollar which is a planetary tightening all of these things get together would suggest that the ism is going back to 30 which is as it was in 1974 which is a terrifying full and it's suggesting that if we're not careful we could have a very sharp nasty recession meaning kind of a negative five percent GDP recession it might be short depending what the FED does we'll come on to that in a bit so we've got the setup that we've seen many times in the past we've got the forward-looking indicators this monetary tightening suggesting we've got some real pain to come then the anecdotal evidence we're seeing all the tech companies who were bulletproof laying off stuff and giving earnings warnings because everybody can't raise prices enough so their margins are falling and people have overextended Amazon said we've hired too many people and one of the biggest employees in the United States okay this is not good but the answer to higher prices is higher prices and that's what's happened and everybody's looking around found himself saying well what's going to break when stuff like this happens the market goes down something's going to break you know we're looking what bank is it what hedge fund is it the actual answer is it's the economy the economy has just broken and the FED are going to have to Pivot and that's what the IMF is saying yesterday they're saying and it's dead right the monetary conditions that we've imposed on corporates and people is the biggest tightening in all history we've also got China slowing down very fast because the a lockdowns but also they've been in recession and Europe with a war and having to deal with this energy transition so we've got no leg of global growth here now the question is how bad does this get let's talk some scenarios let me ask when people use the word recession that means tooth back to back quarters of negative growth that's the technical definition of a recession so you and me I think it means a loss of jobs and a loss in your net worth because it's the falling of asset prices that comes with a recession what's the possibility of sliding to a depression so depression I would suggest is a much longer more extended period I don't think that can happen right now now I don't say that with certainty I never do talking probabilities the reason being is there's one piece of Magic the FED balance sheet the FED balance sheet disguises all bad things because what it does is when they print money it lowers the purchasing power of the dollar and most of the central banks at the same time do it and people always think it's going to be inflation is what it leads to it leads to something much more pernicious and evil which is the debasement of currency and what that does how it manifests itself is all of these scarce assets equities real estate gold crypto go up a lot but all they're doing is reflecting the devaluation of the fiat currency itself so that optically can change everything because suddenly all of these things go up everybody feels okay and it changes the outcome people are still working off generally but it's a trick and so I think that trick gets played again pretty soon this time I think the trick gets played in a different way which was the other Genie that came out of the bottle in 2020 which the Europeans are doing now some states in the US are doing Japan is doing India is doing which is direct transfer payments to individuals when I heard you talking about the hurt roll I thought you went to the dark side man mmt Ubi and all that stuff which is too many Marxist but you're also looking from the humanitarian side regardless of what our political or economic views are this is what is going to happen so we have to judge it with that lens not how we would like it to be but what it will be and what the probabilities are a look at the emptying office spaces because people are not going back to work I mean this is not an ordinary recession you know the Apple says they're not going to go back to work you look all the Office Buildings empty and you know residential real estate depends upon jobs you know what I mean if you're saying recession means a loss of jobs which Amazon's laying off what happens to real estate wherever they have an Amazon office this is the ripple effect which is why I'm saying that was one of the biggest announcements I ever heard that the IMF is saying that we're all faces one of the biggest economic challenges since World War II but one thing that you'd mentioned talked about debasement of currency so here's a penny it's copper and in 1964 I was looking at the quarters and die items same color do you know what I mean it's the same color so basically in 1964 dimes quarters and half dollars became copper and that's what you were talking about the basement and I think we're paying the price for it because I'm really glad you started with history because macroeconomics is history you have to look back in time and every time people did this first was the Chinese they printed paper money and the Chinese Empire collapsed and then when the Romans did the same thing debase the currency the Roman Empire collapsed we're looking at the end of the American Empire I think it's going to happen at a shocking speed so in 1974 we went from everything looks okay to the worst recession since World War II in four months I'm thinking it's going to look similar because of the speed of the monetary tightening the speed of the rise of prices so I think we are going to have a very ugly few months both economically and for markets the question is what comes next and that's the key point if my base case comes into play which is the Fed pivot they stop raising rage they already started suggesting maybe we'll pause in September my guess is June will be the last hike and after that they will say well we're just going to see and we'll see the economy start going down the toilet and they will start thinking well we're not going to do QT now either so they're not going to start shrinking the FED balance sheet and before you know it we're going to be talking about rate Cuts but we don't have many rates to cut you know rates of nowhere so the only outcome is they're gonna have to print money the credit Market's already starting to dry up that's usually an indicator the housing Market's rolling over printing money is this stuff here yeah the silver coin you have a copper coin made silver right basically it's called debasing the currency which the Romans and Chinese already did yeah because don't forget the basement currency Works in a simple way if you're really thirsty and I have a bottle of water you'll pay anything for it if you're really thirsty and I've got five bottles of water you're kind of thinking yeah I probably need some of that water I'll buy them all but at a lower price if I say here's a million bottles of water you don't want any of it because there's too much water now it has no scarcity so if you make too much of something it becomes less valuable so if DaVinci had created 50 million pieces of art guess what they're worthless and so it's that concept and what it does is if something gets devalued versus something else so we're not making more shares in the s p actually what we're doing is buying them back making less of them therefore the s p goes up real estate yes there's periods where we try and create new real estate but generally real estate prices go up versus if they're balancing because it's a relatively scarce asset same with gold same with crypto so that's the phenomena it depends how fast they deploy the balance sheet because this balance sheet magic optically changes markets and if markets go up then household net worth stabilizes and spending comes back companies stop laying people off so it's actually a bit of a magic trick it comes down you know they're all saying the ball goes up the stairs the bear goes out the window the bear is about to go out the window the question is when does a ball start climbing again right and we either go through a scenario like 2000 which was a typical old school recession where Equity markets Unwound excesses the bear Market was 18 months or so and then the FED keep cutting rates and eventually it stabilizes but if we look at 2008 which was the next recession as soon as the FED used the FED balance sheet we pretty much stopped on its tracks really quite quick after they did that they cut rates first didn't really help because the banks had seized up then they used the balance sheet then they did it again in 2010 12 16 and then 18 was the FED pivot of howl pivot where they went from hiking to oh my God we need to cut Trump yolded the guy you said you could cut this out you're killing my economy that's right inflation had gone up the power like well I need to do this but the economy cannot take higher rates because everybody's so in debt and everybody's so old that is the problem so here we are at 2022 right where employers not going back to work so all these reads REITs real estate investment trust they own all these Office Buildings and then there never has the FED I think it was a 30 trillion dollars debt now at 200 trillion off balance sheet and they keep cutting rates and all this but but the question is can they keep doing the same thing given the conditions it's going to take us back to the 1940s in a sec but you're going to get destroyed because of the supply chain issues because of covert and all of this and your wages won't keep up so we can destroy household net worth and everything's levered so all that borrowings against houses and all the borrowings against equities and all of the borrowings on top of borrowings and you're going to let the collateral go down and blow the entire thing up but isn't that what they're doing when they say they're going to pay off the student loan debt that's done forgiveness that's mmt right which is coming whether we'd like it or not what they're trying to do is reduce the debt via Financial repression which is you basically have inflation running slightly higher so you have then interest rates so what you want is to reduce the real value of the that so if you think back to your parents how much they paid for a house and the mortgage they had the mortgage seems laughable it's because over time inflation raised the value of the house and the debt doesn't get raised so in the end the debt is nothing so the way that is this stuff here make the money less valuable correct it makes the debt less valuable right so it's okay if you're in debt but if you're lending money it becomes complicated but the point being is you either have a fiscal stimulus which is let's say the Republican view will have a fiscal stimulus cut taxes and we'll put some spending and what happens is is that doesn't go to the people who are the worst off it's creating this issue of one percent versus 99 which everybody can see and nobody knows how to solve the issue is actually the balance sheet because all of the expensive assets keep going up because they keep printing money so let's get richer but doing this blanket fiscal stimulus is hard because the rich get richer again so I think people have thought well maybe we should just try and give it directly to the people who are most affected okay those are the two choices or you do nothing which is too late because there's too much debt so you can't let the system clear anymore the old way would have been you let the system clear it's all okay you just have a recession everyone stops borrowing as much money blah blah blah blah the world is 400 of GDP in debt the world has never been this in debt in all economic history let's go back to the 1940s now and figure out how bad it was then this was the very similar setup the worst supply chain issues massive inflation everybody coming back in but what happened was the economy collapsed then interest rates came down and they stabilized and they stabilized because the FED stabilized them and inflation was running slightly hot three percent and bond yields are about two percent so real rates meaning you in the property Market are going to make a lot of money so negative real rates become very good for assets and what happened in the 1940s and 50s was a massive economic boom what we actually got was the value of the war debt eroding because of this financial oppression we had the value of assets like housing the equity Market went up 900 over that period of time there was a lot of fiscal stimulus because you had to rebuild after the war and companies were building Factory so if you think of now companies are going to be rebuilding factories in the United States or in Europe and not in China so that's going to add some stimulus yes the jobs are not there it's robots in the factories but it's still stimulus for the economy the government will do some stimulus as we've talked about interest rates will remain relatively low inflation will remain controllable but a little bit higher than it has been and what that sets off is a period of stability and boom because there's so much technology there's a lot of big things happening in the world that could be so that would be my rosy outcome would be that and I think that is still my highest probability that we kind of muddle through this in a way that we don't expect because it feels like the end of the world imagine what it must have felt like in 1948 all you can see is the end of the world and then you get this massive inflation you just think this is the worst thing that could possibly happen what actually came out of it was something very different it was the rise of Technology it was the rise of the us as a big superpower it was a rise of the rebuilding of Europe the rise of Japan it was an incredible period the Bretton Woods agreement where the dollar became the reserve currency of the world and all these really good things happened for America it's the same moment all of those things got built then every one of them from the Geneva Convention to the IMF to the World Bank to the United Nations they all came in that period 47 right at the same time is this what they're kind of alluding to but the great reset is all going to change again yeah it's the fourth turning and that's where we are and this may be the final event of the fourth turning it may be just another phase of pushing this towards it 2008 2020 and maybe now it just keeps moving the world to the direction that we all know it has to go is we need to stop what we're doing and change what we're doing I always say the bond market is the truth the bond market the job of bond market participants is two things only what is the future rate of operation and what's economic growth now in the stock markets like earnings and this and emotion and all that the bond market is simply two things so they usually get it right and this is a structural shift in the global economy if we're right here and you've got cash and we're going to see this big whoosh and it probably means that the economy and asset prices there's certain things it's going to set up for what we're looking for if you want to generate wealth this is the time to step up yeah this is the best time macroeconomics is through history and you know the fall of Empires and all this I think we're falling right now you know that's a huge problem all Cycles go through it's approximately the age of a human being 20 years 20 years 20 years you never said that one also and this matures and the whole thing changes fourth training is always marked by weak leadership and then we have that today but the people that get hammered are the people operating on yesterday's ideas we talked about how bull markets make stupid people look smart you know so you could be really stupid and you put your money on Apple and you got really rich or Bitcoin oh my God I'm rich I'm smart and then the bear Market makes shows you how stupid you are and that's why what Ral is saying is going to come quick all the stupid people who think they're smart are going to find out how stupid they are and it's going to be a very interesting time and when the crash comes it comes so fast on you you don't know what's going to hit I think the most important message from today's lesson is this the bull has been going up the stairs for a while now it's about to go out the window so that's what in Davao Switzerland when the IMF says we're going to face the biggest economic headwinds and voila I can't believe that what a gift

Channel: FREENVESTING

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Keywords: freenvesting, free investing, investing, stocks, stock market, stock market investing, robert kiyosaki, robert kiyosaki interview, robert kiyosaki school system, robert kiyosaki financial education, market crash, stock market crash, market crash coming, market crash 2022, market crash robert kiyosaki, kiyosaki robert, kiyosaki crash, kiyosaki debt, rich dad channel, kiyosaki interview, robert kiyosaki cryptocurrency, will market crash again, is market crash coming, inflation

Id: loWxa5szbvU

Length: 19min 35sec (1175 seconds)

Published: Tue Aug 09 2022