Sharing Daily Discoveries About Personal Finance And Business Topics

Chapter 3

financial literacy

The Shrinking Middle Class

The theme of this chapter revolved around how people’s financial intelligence, which they refer to as “financial IQ”, is not up to par and as a result the middle class is shrinking and making society into a two-class demographic consisting of the very rich and the very poor. They used this diagram to explain this:

Shrinking Middle Class

The interesting note from Robert Kiyosaki’s point of view is how America has been investing into Social Security and Medicare which he classifies as a Ponzi Scheme. For those who don’t know, a Ponzi Scheme is where people invest their money into some kind of business/company with the assumption that you will generate income from the profits of the business, but in reality there is no business and your funds are simply being used to generate funds through other means.

A quick example of a Ponzi Scheme would be say me convincing you to invest in my oil company for $1,000,000 and in return you can expect to make at least $5,000 a month continuously with the option to take back your one million whenever you want. Imagine me doing this to about thirty other people. Now with my thirty million dollars, I will place it into a special high interest account and with the money I earn there I will simply give a portion of it back to everyone else. Basically, I don’t really have an oil company and am deceivingly using your money to generate profits by others mean.

Kiyosaki then briefly goes over how the rich often does not want others to know their secrets and strategies in creating financial independence which is a part of the problem. In retrospect, Trump and Kiyosaki wants to teach people to take care of themselves financially and have no problems sharing as much as they can.

Donald Trump’s concerns were similar in regards to the shrinking middle class. In his writing, he also attributes this problem to knowledge and used China and India as examples as they are growing their middle class suggesting that America can learn something from that. Some interesting examples he used to demonstrate the growing economy in China is how Starbucks opened up there two years ago and now there are more Starkbucks stores in China than in the US. Shanghai also had only one skyscraper back in the 1970’s and today it has almost 800.

For India, Trump used a lot of examples to demonstrate its knowledge and potential with facts such as how India invented the number system, 38% of doctors and 12% of scientists in the United States come from an Indian descent and that out of all the ethnic groups in the United States they are the wealthiest. With all these facts, he considers China and India as a force to be reckoned with and that we can learn so much from them.

I think this chapter gave a lot of educational and thought-provoking facts to think about in terms of growing an economy and becoming better financially. For myself, as interesting as it was to read, I personally didn’t really get anything out of it directly. I’m getting a little concerned so far that the rest of the book will be similar in the sense that it will provide general information on what’s good or bad and then leaving you on a wild goose chase to figure things out for yourself. If I was to put my business owner hat/mentality on, reading it did make me think and so in that sense I guess what was written was effective. If I was to think like a hopeful willing to learn on what steps I would need to take, I’d probably be getting a bit anxious by now as I wouldn’t have the experience to see things with that kind of perspective and would need something to get me going.

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