What does the fool mean by "Fathers that wear rags, do make their children blind, etc."?
Fathers that wear rags
Do make their children blind;
But fathers that bear bags
Shall see their children kind.
The fool means that fathers who are penniless will be totally ignored and neglected by their children. Their children will be "blind" to them. But fathers who have bags (of money) will get a lot of attention from their children because the offspring will want some of that money while their fathers are alive and all of it when their fathers die.
The fool is saying what happens to be the truth in most cases. The fool has probably been abused for most of his life, before being adopted by the King, and has seen the worst side of human nature. He never seems surprised by any new example of human greed, selfishness or cruelty; whereas Lear, who has always been flattered and fawned upon, is appalled by what he is learning about people now that he is dependent on the kindness of others.
The poor man is hated even by his own neighbor, but the rich has many friends. --Proverbs 14:20