History Repeats Itself?

Back in 1998, Robert Kiyosaki in The CASHFLOW Quadrant wrote, "Historically, if people lived to be 75 years of age, they live through two recessions and one depression. As baby boomers we have gone through two recessions, but we have not yet seen that depression. Maybe there will never be a depression again. But history does not say that."

He further said, " Just as there are waves on the ocean, there are great waves in markets. Instead of the wind and sun driving the waves of the ocean, the waves of the financial markets are driven by two human emotions: greed and fear.

I do not think that depressions are things of the past because we are all human beings and we all have emotions of greed and fear. And when greed and fear collide, and a person loses badly, the next emotion is depression. ... Economic depressions are emotional depressions."

Wow! What an explanation. Is he an economics history professor? Economics philosopher? Economics prophet, or what?

Forbes magazine wrote, "In the year 2010, the first baby boomers turn 65. In the year 2010, instead of adding money to the stock market, baby boomers will begin withdrawing money from the stock market ... if not earlier."

From the above, it appears that the present economic tsunami and financial meltdown is not something that is unexpected.

The U.S.A. is the world's number one international debtor. Numero Uno! Just servicing the debt amounts to some $250 billion! That is just the interest payment, baby! Not the principal.

The principal is some $40 trillion! People like Robert Kiyosaki have said, "The world will realise that the U.S. will not be able to borrow its way out of ... problems." It also means, without any new policy or financial invention, the U.S.A. may go bankrupt. Sooner or later. So, you better be careful where you put your money!

I attended a 4-week training program on 'Oil and Gas Accounting' in 1985. The American professor who conducted the training had a similar view.

Is 2008's global financial turmoil (starting with the U.S. sub-prime loan crisis), the manifestation of what some economists have been aware all along, all these years?

The manifestation of greed, with which the sub-prime loan crisis has been attributed to. And the manifestation of fear, which has led to the credit crunch when even banks have no trust (or confidence) in another bank's ability to pay. For fear that the other bank may collapse completely. And no wonder - 25 U.S. banks failed in 2008 compared to 3 in 2007. With even the likes of Lehmann Brothers going bankrupt, and global Citibank needing a U.S. government bail-out.

There appear to be many around the world who are still in denial about the present global economy going to be in a depression. Perhaps it is politically incorrect (or dangerous) to say that you will be facing a depression soon.

Perhaps afraid of a self-fullfilling prophesy? I guess it's a little bit too late now for such a thing.

The moral of the story? Understanding history is important because it indicates where you have been. And where you will likely be going.

All indications for the year 2009 (as prophesied by Robert Kiyosaki and similar like-thinking economists and businessmen) is that you are going to experience a global depression. Maybe worse than the 1930s!?!

If you follow the Boy Scouts' motto "Be Prepared", you have nothing to worry. If not, then may the Good Lord be with you.

There is a silver lining in the clouds, though. If you are a true investor, this is the opportunity in the crisis. Everyone will be selling (stocks, real estate, etc). In a fire-sale (arising from people being emotionally depressed), the calm investor will go for the bargain.

Are you a calm investor? Then, strike when you are ready!

I wish you Success in your undertakings and Good Health and Wealth to you and your family. Take care!

P.S. It now appears that for $3000 (or less), you can buy a house in some parts of the United States. The banks have to sell the houses (almost for free) so that they are not burdened with maintenance charges and local taxes. (The other big reason is that banks are not in the home realty business, but in the money-lending business, so they do not want to keep any foreclosed house on their accounts). Of course you may need another $15,000 - $20,000 for repairs. Or you can just demolish the house and build a brand new one. The land, for one property with 0.38 acres, is certainly worth more than the $3,000 plus the demolition costs.

P.P.S. On 29/Jan/2009 I read that the International Labour Organisation (ILO) forecasts that(for a worst case scenario) global unemployment could rise (by the end of 2009) by 51 million people, to 230 million (7.1% of the world's labour force). The worst recession since the Second World War.