Page 117 - Rich Dad's Increase Your Financial IQ: Get Smarter with Your Money

1. Net worth is often an estimate based upon opinions, not facts. The
value of a home is only an estimate. You will not know the true price

until the house is sold. This means many people overinflate their
home’s estimated value. Only until they sell their home will they
know the facts: the real price and the real value. Unfortunately, many
people may have already borrowed against the perceived value of

their house and may owe more than they can sell the house for.
2. Net worth is often based upon possessions that have a declining
value. When I fill out a credit application, I’m allowed to list most of
my possessions in the asset column. I’m allowed to list my business

suits, shirts, ties, and shoes as assets, just as I can list my cars. You
and I know that a used shirt has very little value, and a used car has
considerably less value than a new car.
3. Net worth going up is often caused by the dollar going down. Some

of the appreciated value of a house is due to the decline in value of
the dollar. In other words, the house is not going up in value. It just
takes more dollars to buy the same house because the government and
central banks keep injecting more funny money into the system to

keep the economy afloat, and to keep the feel-good illusion of
prosperity alive.

A Politician’s Greatest Fear

The reason I used the words “feel-good illusion of prosperity” is because

the greatest fear of politicians and bureaucrats is people feeling bad.
Throughout history kings, queens, and rulers have been overthrown and
even executed when the people feel bad. You may recall the French people
chopped off the head of their queen, Marie Antoinette, and the Russian

people executed the last czar, his wife, and his kids.
The old capitalism was based upon tough economic fundamentals. This
new capitalism is based upon feel-good economics. As long as a person’s
net worth is going up, the illusion of prosperity, based upon debt, not

production, continues. Who needs freedom when you’ve got things? As
long as the world economy allows the U.S. government and the U.S.
consumer to borrow and spend, the fairy-tale global economy will continue.