creating wealth

Creating Wealth 102 – The Other Golden Rule

When your goal is creating wealth, you must know and understand the Golden Rule.  Most people assume the Golden Rule is to do onto others as you would have done onto you.  That is one definition of this term.  But when creating wealth, you need to understand this Golden Rule: he who has the Gold makes the rules.

Back in 1910 – exactly 100 years ago – a secret meeting was held among the wealthiest bankers and politicians in our country in a remote, isolated location (Jekyll Island) in order to create a “scientific currency system for the United States”, which birthed the present Federal Reserve System.  It was a system created by the bankers and for the bankers.  And although called the Federal Reserve, it is not Federal (it is privately owned and operated), and nor does it maintain a reserve (they charge the US Treasury for creating our money plus interest!?!).  Today it has more power over the US economy than any other institution, bar none.  The Fed controls interest rates, the money supply, inflation or deflation – they even have more power than the President or Congress.

You might be asking, what do I care about the Federal Reserve – what does it have to do with my creating wealth?

The answer is everything.

To have success or win at any game, you must first know and understand the rules.  It’s like hoping you can take the Wimbledon trophy just because you can hit a tennis ball better than anyone else – you still have to know how and where to serve, how to keep score, what is in and what is out, how the net affects play and the qualifications you have to meet to even be able to play in the tournament!  Without knowing the rules, you simply cannot win!  And that goes for creating wealth as well.

Here’s the point: you must have a good understanding and working knowledge of the investing and economic environment when you’re creating wealth.  If you’re in Phoenix, Arizona or Denver, Colorado or a host of other cities plagued with a horrific number of foreclosures, investing in single family homes a few years back at the height of the housing bubble, you might have thought that you were on track to reaching your dreams.  Then the sub-prime mess and banking issues hit the scene with foreclosures taking off, dropping housing values across most of the country.  If you had leveraged anything less than 50%, you not only would have lost all your equity in your home but you would have been upside down, unable to sell but still left with a hefty mortgage payment.

However, had you understood the market fundamentals and that a price correction was long overdue for many reasons, you would have either waited to purchase those homes or perhaps invested in another asset favorable to the economic climate (like gold investing or silver investing) to continue creating wealth.  Again, it’s knowing the rules of the game, understanding the market climate, the fundamentals, the macro-economic picture and the emerging trends by educating yourself and staying informed.

(Side note: If you want to know the best financial resource I have found to stay up to date and informed each week on the most crucial market moves and hot emerging trends for FREE, sign up for my FREE newsletter at the top right of this page)

Today, the Fed controls the gold therefore they make the rules.  They decide what the interest rates will be, what the value of the dollar will be, how much money to flood the market with… Essentially they dictate which direction the economy will go.  Understanding this and by following the speeches of current Fed Chairman Ben Bernanke and his desire to avoid deflation at all cost, one could easily deduce that we will experience as much money printing and inflation as he deems necessary in order to avoid deflation (seeing as how he has already lowered interest rates to virtually zero).  Therefore, looking at the big picture you can see that with the amount of crippling debt we are under and the rapid devaluation of the dollar among many other factors, gold investing and silver investing would be a wise approach to creating wealth in this climate.

Now let’s contradict that knowledge with a different approach.  Hoping and praying or assuming that something will always go up in value because it has for the last 30 years is not a smart approach to creating wealth.  That is gambling.  Sure you can make money doing that, by why risk losing when you can simply learn the rules of the game to minimize your risk and invest with the tide?  Like they say, at high tide all boats float.  So why not ride the tide in?  Don’t just jump on any boat or investment because the tide had always been going one direction.  Understand the tides, the markets, the cycles.

In real estate, that’s your local market’s job growth numbers and trends, demographics, government tax incentives for small and big business, affordability, future projects planned, the overall business climate and other factors.  For gold investing and silver investing it involves knowing the level of uncertainty in the market, the market’s belief in the government’s ability to manage its own affairs, the amount of investment and industrial demand versus supply, the threat of inflation, production capacity, spot prices, futures prices, etc.  For stocks it involves unemployment figures, job creation numbers, company earnings reports, P/O ratios, market cycles, Dow theory, etc.  Bonds has to do with interest rates, our foreign creditors demands, money printing, investors concern for a safe investment, etc.

As you can see each investment market has its own set of rules you need to know and understand.  It’s not just about buy low and sell high.  As demonstrated by the housing example above, you can do everything right and position yourself for a profit but if the market is against you, you will still lose and even lose big.  You must know the rules and who creates and can change the rules.   By knowing this and studying trends, history, cycles and increasing your financial education you can use the Golden Rule to your advantage and you’ll be creating wealth regardless of which way the tide or the markets go.

creating wealthIf you’d like to learn more on this topic of creating wealth and increasing your financial education, I’d highly suggest you get a copy of the book by G. Edward Griffin: The Creature from Jekyll Islandclick here for more info

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  • Andrei@online pawn shop says:

    “Golden Rule: he who has the Gold makes the rules.” <- True. But it is more true if we also have the knowledge. I think it is hard to manage if we only have wealth and no leadership skills and no knowledge about the business.

  • I like your example of someone thinking he can win the Wimbledon trophy just because he can hit the ball better than anyone else. I see this all the time in blogging… in fact, I was guilty of it myself. Thinking I could blog for business just because I can write, when there is so much MORE to learn. SEO, keywords, backlinks, syndicating, etc. etc. etc. Being able to write well isn’t even a prerequisite for doing well with blogging. Nice… makes it easier… but not a prerequisite.


  • Hi Hans,

    The idea that you have to know the rules in order to win is quite true. Good strategies can win over good skills or talent. This is specially true when it comes to business.

    • Hey Calli. Yes, it’s kind of hard to win a football match if you don’t know how to play – you wouldn’t be expected to win. Many people get frustrated, and a lot of that has to do with the fact that they never learned the rules of how to play. Business and investing is a team sport. But you can’t expect to win without knowing the rules. Thanks for your comment!

  • Ben says:

    Very interesting post Hans.
    I have wondered for a long time who decides how much a Dollar/Rand/Yen is worth.
    It sounds like “the Creature” might hold the answer for me.
    Will definitely keep an eye open for it

  • Rick Salas says:

    Hey Hans, I’ve found this a very interesting subject and helps people choose if they want to try other ways to help out their current situation. Thanks for the resources. They are really needed!

    Rick Salas

  • Really interesting article Hans! I now realize just how little I know about the Federal Reserve and this is the first I ever read about how it was created. Thanks also for the book recommendation, I am definitely going to look into it – sounds like a good read. Hope it doesn’t piss me off too much.

  • James Bennett @ Fun History Facts says:

    Great post, Hans. Currently reading “The Creature..” Right now actually.

    It is amazing what the founders of the FED did and still do to control the supply of money.

    I heard it put this way once about the FED- There’s nothing Federal and their certainly aren’t any reserves.

    It is amazing, up until not too long ago, I didn’t know much of the truth…. It is amazing that probably a majority of American’s don’t even know about the private cartel that operates our currency.

    Glad you shared this and hope that many people read it.


    • James, it is amazing at how well the “cartel” has pulled off this scheme. Like you say, most people do not even know anything about this, yet we hear about the FED, Ben Bernanke and formerly Alan Greenspan, etc nearly every day. I suppose since people believe we are much better off than other countries, they don’t feel their is even reason to learn more about the system. In their eyes, it works. My whole point is to understand HOW it works so that as things change – as they are doing right now – I can make sure it’s working for me as well. Because the Federal Reserve system sure works well for those bankers who own it! Imagine what the interest is on those trillions of dollars our treasury instructs them to print for us… Thanks for your comments and for helping get this vital information out to more people!