Rich Dad, Poor Dad author Robert Kiyosaki — a member of the panel of investment professionals Lear Capital founder Kevin DeMeritt has assembled to provide helpful updates on the economy and investing — is advising U.S. consumers to consider the advantages gold and silver assets can potentially offer.
In a new video shared via YouTube and TikTok, Kiyosaki says he feels the U.S. government’s currency production practices have had an extremely detrimental effect on the U.S. dollar’s value — essentially rendering it as worthwhile as toilet paper.
Gold and silver instead, Kiyosaki says, could help investors gain financial freedom.
How the Dollar Lost Its Value
Decades ago, the U.S. dollar was backed by gold and silver, which allowed consumers to redeem bills for precious metals.
When the world was operating under the Bretton Woods international fixed exchange rate system, foreign currencies’ external value was set in relation to the U.S. dollar, which had a congressionally determined value of $35 an ounce.
However, a surplus of U.S. dollars was in existence by the 1960s, due to factors such as foreign aid, investment and military spending — and the U.S. lacked the sufficient gold reserves to back the amount of dollars in circulation at the $35-per-ounce rate, resulting in an overvaluation of the dollar.
Attempts to sustain the Bretton Woods system through disincentivizing foreign investments, monetary reform and other actions failed to achieve the desired outcome. Amid runs on the dollar and concerns its overvaluation was harming the country’s trading abilities, the U.S. president who was in office at the time, Richard M. Nixon, met with economic advisers and established a new policy that included tax cuts, a freeze on wages and prices, and suspending the dollar’s ability to be exchanged for gold.
In 1971, a group of nations known as the G10 agreed to accept a revised set of fixed exchange rates based on the devalued dollar; this was known as the Smithsonian Agreement, but it didn’t last.
By February 1973, the dollar was devalued further, and in March, the G10 signed off on an arrangement that involved several members of the European community linking their currencies, which were collectively floated against the U.S. dollar — essentially replacing the fixed exchange rate system with a floating exchange rate structure, which is still in use today.
Without a need to maintain gold or silver quantities that are equivalent to the amount of bills in circulation, the government can print money whenever it wants to — and since 2008, has created a whopping $22 trillion in currency, according to Kevin DeMeritt, who also serves on the Lear Capital panel of financial and investment professionals he established earlier this year.
“We’re living the outcome,” he says. “You print up $22 trillion, it’s a tremendous amount of money — that money is chasing too few goods. That increase in money is going to make inflation much worse.”
A Compelling Case for Gold
During the COVID-19 pandemic, the Federal Reserve, which determines how much money is created each year, printed and poured trillions into government securities — an approach, according to USA Today, intended to keep credit access and the markets from stalling.
That type of cash infusion, though, can create bubbles throughout the economy, Kevin DeMeritt says, particularly in areas such as the stock market.
“You have so much money that it’s going to go in different asset classes and create some sort of bubble somewhere,” the Lear Capital founder explains. “It happened in 2000 with internet stocks; it happened in 2008 with real estate. The bubbles happen, then the Fed raises interest rates, and you get a crash. The height of the cycle and the subsequent crash is going to be much bigger when you print up this much money.”
If inflation had remained at the 8% level it reached last year, for example — on its climb to an eventual 9.1% high — your purchasing power would be cut in half in seven or so years, according to Kevin DeMeritt, potentially prompting some investors to look for a more stable investment option.
“Each year that goes by, if I’m losing 8% of the value of my paper money’s purchasing power, I need something to offset that,” DeMeritt says. “Gold is going to be a great alternative.”
Historically, precious metal prices have often risen over time, even despite economic difficulties. During the peak of inflation in 1980, for example, gold was worth $850 an ounce — compared to $50 an ounce just six years before — and the price of silver jumped 557%, according to data cited in Lear Capital’s The Double Play Opportunity guide.
Gold has also been known to rise in value when the U.S. dollar weakens, due to the effect of variations in the exchange rate between the dollar and other currencies, because gold is priced in U.S. dollars.
Yet that doesn’t necessarily mean investors will have to scramble to sell off their gold assets if the dollar strengthens. In recent years, gold has also risen when the dollar performed well. Last year, the U.S. dollar appreciated more than 12%; in September, gold reached a high point that hadn’t been seen in two decades.
Even with the dollar’s strong performance in 2022, the annual global investment in precious metal coins and bars grew by 10%, according to the World Gold Council, and the demand for gold among central banks reached its highest level since 1950.
In addition to rumors the BRICS nations — Brazil, Russia, India, China and South Africa — might someday introduce a collective currency that could serve as competition for the U.S. dollar as the world’s reserve currency, continued uncertainty about the U.S. government’s monetary production practices has made some investors, including Robert Kiyosaki, hesitant to view the dollar as a high-value item.
The bestselling author is a professional entrepreneur and investor, yet he says he doesn’t own any stocks, bonds, or mutual funds. Kiyosaki has instead opted to focus on physical precious metal asset-based investments.
“The stock market jumped up as soon as they cut off the debt ceiling,” Kiyosaki says. “The reason the stock market went up is because they could print more. Just look at the national debt — they estimated it at $260 trillion; that is a lot of debt we can’t pay back.”
Gold, however, has been having a robust year. In the second quarter of 2023, total gold demand rose 7% year over year, and the LBMA gold price average reached a new high point, $1,976 per ounce.
“[With] every dollar you print, the money we hold that’s already out there becomes worth less and less,” Kevin DeMeritt says. “But you can only mine so much gold per year. If you add an increase in demand from paper money onto that physical supply that’s fairly limited, usually, you’re going to find prices go up over time; it’s economics 101. Paper money is probably going to continue to fall as they print more of it — it has for hundreds of years now — and the price of gold is probably going to continue to increase.”