Is saving money still the best strategy to become rich?

nospam@example.com (Ams Team) — Tue, 15 Mar 2011 12:45:00 +1100

All of the paper money in your wallet or bank account is
really debt. In earlier times, paper money was backed by gold or silver.
After 1971, money became an IOU from the government. Today, money
doesn’t exist unless someone borrows money.

Source: Richdad.com

Lets use a credit card for a simple example of how money is created.
When you receive a credit card in the mail, the money you can borrow
with it doesn’t exist. All you have is a piece of plastic. But let’s say
you go to the store and charge $100 on your new card. At that moment,
$100 brand new dollars is created. It didn’t exist until the moment you
used the card. And when you pay the $100 off, the $100 disappears from
the economy.

When financial experts say to you, “Cut up your credit cards, pay off
your debt, and live below your means,” and you do so, you’re actually
making the financial crisis worse.

The primary reason why most developed nations are keeping interest
rates near zero is because they want you and me to borrow money. They
also want us to pull the money out of our savings account, because
interest rates are low, and risk the money in the stock market instead.

One reason we had such a massive bubble between 2004 and 2007 is
because the big banks were pushing No Income No Job loans, a.k.a.
subprime loans, on poor people. The banks then took these subprime loans
(debt), packaged them as securities, had them rated as AAA, and sold
them to pension and sovereign wealth fund as assets. The more debt that
was created, the more housing prices went up, causing people to use
their credit cards more and to use their home equity to pay off those
credit cards. The more people spent, the more the economy boomed. Of
course, we all know what happened when credit was finally maxed–the
bubble burst.

The reason this crisis is not over is because the system is the same.
The Central Banks wants and needs you and me to borrow more money so
that more money will be created in the economy. If the Fed tried to
change the system, let’s say back to the old system of the gold
standard, which I doubt will ever happen, there would be a bigger
crisis. So far now, as long as people think the crisis is over, more and
more people will slowly come out of hiding and begin to use their
credit cards again, and hopefully the crisis will end.

Rather than wait for the crisis to end you should aggressively
increase your financial education. Maybe take a real estate investment
course, hire a coach, start to use debt now, while the bargains are
plentiful, and emerge richer if and when the economy does return.

These are very difficult times. These can also be times of great opportunity.

Amit Sharma - Economic

Is saving money still the best strategy to become rich?