How the Rich get Richer

So, we've all heard the saying: the rich get richer. Looking at the data, it's easy to see why. The top 1% of U.S. wealth has increased its net worth by 650 percent since 1989, while the bottom 50% only saw its wealth grow a measly 170 percent. The middle class has also shrunk more than 15% since the 1980s and is expected to drop another several percent over the next decade.

So, it's really no surprise that wealth inequality has been a very popular topic of discussion during one of the longest-running bull markets in history. There's absolutely no shortage of articles discussing the disappearance of the middle class, shrinking incomes, excess consumer spending, oh, and also record CEO payouts, and continually increasing income within the top 1%, who now control nearly 40% of America's wealth.

I'm sure, while hearing data like this, it might sound disappointing or frustrating, and I’m sure a lot of people just blame this on the system. But there is a solution to this if you understand exactly how it works. And that solution is smashing the like button if you haven't done that already for the YouTube algorithm. Just kidding! But seriously, though, hit the like button.

For real though, here's the thing. Instead of hearing this information and then complaining about it and doing absolutely nothing about it, let's instead discuss exactly why this is happening and how you can use this information instead to make a profit. Because here's the thing: rich people are using their money differently than everybody else. If you understand how they're using their money, you can go and replicate these strategies to have a very similar result.

Now, in terms of making money, let's first start here, because this is going to make sense very shortly, and that would be the Federal Reserve. This is pretty much just like the central bank of the United States, and their job is to control the quantity of money flowing into the economy. If they go and print too much money, our dollar decreases in value, and things cost more money to buy because of inflation.

But on the other hand, if they print too little, this means that interest rates tend to cost a little bit more, and people don't spend as much. Because of that, the economy doesn't grow as quickly. So really, the Federal Reserve has the responsibility of monitoring these actions and doing what's best in the long-term interest of our country and our dollar.

Now, by the way, this leads me to an article by CNBC, in which hedge fund manager Stanley Druckenmiller had a few choice words to say about this. He said that the Fed was robbing from the poor to pay the rich. I have to say, I somewhat agree with him a little bit and would say he's right depending on the context.

Now, like I said, the Federal Reserve largely controls the supply of money flowing into the economy. One of the ways that they do this is by setting the interest rate that you will ultimately pay on your money. For instance, as we entered into the Great Recession and prices began to plummet for just about everything, the Federal Reserve lowered interest rates as a way to stimulate the economy and bring back money into different assets that have dropped in price.

Now, this just basically meant that money became cheaper to borrow, and because of that, it encourages people to go out and spend. When people spend more money, it helps lift the prices of everything else in the economy. But here's the thing, though. While low interest rates should theoretically benefit everybody, they tend to help the people the most who already have the assets and disposable income to begin with.

Here's how that works: like I said, low interest rates can help stimulate the economy, but it's usually done at the expense of devaluing wages and also raising the cost of living. Now, this isn't always a bad thing, but what often ends up happening is that the first people to go and borrow money and benefit from it are creditworthy borrowers who have money and assets to begin with.

These types of borrowers are considered safer; they have collateral, and because of that, banks are less likely to worry about them defaulting on their loan. So it's often from this perspective that rich people get the first shot at getting access to cheap money when prices are maybe falling down.

I also have to say, from my own experience, banks love lending you money when they see that you don't need it. It's pretty much like the more money you have, the more money banks are willing to lend you. This is just how it works, and so really from that is where the rich people getting richer begins.

Wealthy people are often the first ones to borrow money and pre-inflated prices. As they go and borrow cheap money and begin investing with cheap money, they slowly begin to drive the prices up. Then, by the time everyone else begins investing, prices have already gone up, leaving them with less profit than the early investors able to make. Hence the rich just getting richer.

So, from this, I really believe that it's not so much an income gap that's contributing to the inequality of wealth, so much as instead an investment gap. As the Fed continues to lower interest rates, the ones who could actually use it are really the ones who already have investments that rise in price or the ones who have great credit to take advantage of the market.

For example, if you own real estate and we see inflation, then for the most part, that's good news as an investor because real estate prices generally go up with inflation. If you borrow money at a cheap interest rate to go and buy real estate, then that is good too because now that's going to cost you a lot less, which means more money back in your pocket.

On the other hand, if you have no investments and you're living paycheck to paycheck, then inflation just means that the cost of everything else goes up while the value of your wages ends up going down. Investors also have the willingness to take more risk with their money for potentially higher returns because they don't really care about short-term market fluctuations and can afford to take a short-term loss if that's what's needed to end up making more money in the long term.

So yes, from this perspective, the rich get richer, and this policy benefits the people the most who are out there investing their money. So anyway, with all of that jargon out of the way, here's what this means for you and how you can use this information to profit.

By understanding how the system works, you can use it to your advantage. Even though you might not have a multi-million dollar a year income or be able to go and buy private Gulfstream jets or have hedge-fund-level signing bonuses and stuff like this, it doesn't mean you can't still play the game and use this to your advantage.

So with that said, here is exactly how you're able to do that. The first thing that you need to do is realize that your credit score is everything. In school, you take exams and you get a grade. In life, you manage your finances and you get a credit score.

Your credit score pretty much just tells a bank how likely you are to default on the loan that they give you. The higher the credit score you have, the more likely a bank is to give you money. The more likely a bank is to loan you money, the lower the interest rate you will pay, which means more profits back in your pocket.

If you're not already working right now to improve your credit score, this is something you got to do. You've got to do this. You’ve got to get a credit card; you got to pay it off every single month in full. You have to constantly be working to improve your credit each and every month so that way you could take advantage of the low interest rates that the bank is going to be giving you.

If you're confused at all about how to go about doing this, I have nearly a 20-minute video that details exactly how you can improve your credit score: exactly what you need to do, exactly step by step, everything. So if you're interested in taking a look at that, the link to that video is down below in the description. You can't miss it.

So anyway, go and do that. I promise you, if anything from this video, if you just do that, just do that, it is going to make you so much money, and it's so easy to do, and it's totally free! I love free! This is not going to cost you — just go and watch that video and start doing this immediately.

The second thing that you absolutely need to do is save your money. Saving money is almost like fueling up your car. You can have the fastest Ferrari in the world, but if there's no gas in it, you're not going anywhere. Saving money is the exact same way.

It makes no difference how much money you make if you cannot save a significant portion of that and use that toward investing in big opportunities. Even when the stock market plummets in price and everyone is panicking, you're going to have the gas to pour in that Ferrari to go faster than anyone else. That's the equivalent of saving.

Now, I'm not trying to advocate timing the market or anything like that because none of us know exactly when the market is going to drop and for how much, and for how long. But I am saying that saving and having the ability to save money will be a huge determining factor in whether or not you could use these strategies to actually benefit from and profit.

The third, with the ability to save money, comes with it the ability to now go and invest. If you're just sitting around all day letting your money pile up in a savings account without any intention of ever investing it, then low interest rates don't help you; they hurt you.

This just means a potentially lower payment in your savings account. It means your savings is slowly devalued over time, and it means you're also not putting your money to work for you. If there's anything that rich people are good at, it's investing their money. It's also investing your money at a time where most people either can't or won't.

It is so important that you prioritize investing and you make sound investment decisions for the long term without panic selling and without just thinking of the short term, but instead thinking of the long term.

This brings me now to number four: the biggest mistake that anyone can make when they invest is panic selling, not thinking long-term, and just getting emotional about their decision and selling as soon as something goes down. If there's anything that the rich really know well, it's buying investments with the intention of having a very long-term outlook.

If prices go and drop 20%, it's not a time to panic; instead, it's a time to double down and buy even more because now, it's just like buying the same thing except at a 20% discount. Remember, you're investing money that you save that you do not need in the short term.

It does not matter if prices fluctuate in the short term. All you care about is what it's going to be twenty to forty years from now, and anything else in between. If it goes down, it just means it's now cheaper to buy back in. Also, by holding long-term, it means you're less likely to sell at a time when maybe it's probably not a good time to sell.

Many studies have shown that time in the market, not timing the market, is the best strategy for the majority of investors out there. So yes, to answer the title of this video: the rich definitely have an easier time getting richer. But really, once you begin leveraging your money to do all of the heavy lifting for you, a recession and cheap interest rates really just turn it into a Black Friday sale of just about any investment out there.

By improving your credit, cutting back on expenses, saving money, and investing as much as you can long-term, you're going to set yourself up to be in a very good position later in life. Now, I'm not saying that that means you're going to be driving your Lamborghini Aventador Roadster to your Gulfstream 550 jet a few years from now. But that does mean that all of these are very sound long-term investing strategies that will apply to pretty much anyone watching.

From all of this, you're going to be able to take advantage of some of the opportunities that the rich people can take advantage of just by understanding the system, how this works, and using this to your advantage. Also, by smashing that like button already if you haven't done that for the YouTube algorithm.

So with that said, you guys, thank you so much for watching! I really appreciate it! If you made it to the very end and haven't already subscribed, make sure to subscribe and also hit that notification bell so YouTube notifies you anytime I post a video, which is three times a week: Monday, Wednesday, Friday at 3:30 p.m. Pacific Standard Time.

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So with that said, you guys, thank you again, and until next time!