Reaction & Commentary
Cutting off ties with the United States and this not surprisingly is the first to go so today let’s discuss exactly what’s happening why this is happening what this realistically means for all of you watching and whether or not this is a topic to be concerned about because I
Have to say this is something to be taken extremely seriously after all the billionaire Ray dalio is previously described the impending downfall of every major economy as we know it how these Cycles typically happen on a regular basis and how we could best prepare for what’s to come based off
Predictable events that happen about once every 100 years although before we start I have to warn you that the like button is also in danger of not being smashed for the YouTube algorithm so if you wouldn’t mind hitting the like button or subscribing it does help out
Tremendously so thank you guys so much and now with that said let’s begin alright so as a quick 60 second recap to bring you up to speed about what’s going on as of now and for the last 80 years the US dollar has been the most powerful
Currency in the world because it’s known as what’s called a reserve currency this refers to a currency that’s accepted throughout the entire world and since 1945 the US dollar has taken that place because of its safety resiliency and stability like when the system was first
Adopted it was used as a way to keep the price of Investments exchange rates and commodities like golden oil stable knowing that no matter which currency you held its value was pegged to that of the US dollar see when you have dozens of countries all trading goods and
Services with each other it helps to have one universal currency accepted around the world with a predictable value to conduct those transactions in otherwise you run the risk of getting paid in a currency that might be difficult to exchange or maybe its value is Fallen by the time you’re able to
Convert it back to your native currency so think of this kind of like a global transfer of value through the US dollar that everyone has agreed to be safe of course the United States benefits from this as well because more countries use the US dollar more countries hold on to
Those dollars and as a result we have greater buying power but the US dollar is apparently at risk of losing that Reserve currency status and to understand why look no further than Ray dalio’s changing World Order see as he explains throughout history there’s a constantly changing World Order between
The leading economy and the rising economy and over time one will fail to make way for something new for example prior to 1945 the reserve currency was held by the British pound which lasted for 105 years following the French Revolution followed by the Netherlands followed by Spain and Portugal and
Venetian Gold and so on with the understanding that Reserve currencies have never lasted forever and about every hundred years they change in a transition that lasts between 10 and 20 years so what causes this you might ask well Ray dalio points out that this could be summarized into three
Categories the rise the top and the decline during the rise after every new Reserve currency there’s a period of peace certain Prosperity is People BET and borrow on that system continuing this is typically marked with strong education critical thinking character building and work ethic that allows for Innovation new technologies and other
Resources for a continual rise in productivity however in order to finance that continual rise in productivity there has to be a system in place for borrowing and allowing people from around the world to convert their currency into Investments that share in the success of making that happen in
Fact Ray dalio points out that all the successful Reserve currencies followed the exact same path leading to of course the top at the peak the general consensus is that will people earn more their time becomes more valuable relative to other countries who would be willing to do the same work for Less on
Top of that other countries have the ability to take the blueprints of the latest Innovation and then copy that for a fraction of the cost reducing the leading Powers competitiveness The Tipping Point though comes when people lose faith in the reserve currency they refuse to buy it and would rather sell
Than reinvest the profits leading to of course the decline Ray dalio explains that during an economic downturn if the country cannot sustain its own debts it has to choose between defaulting and printing more money and they’re always going to choose printing more money that devalues the currency it raises
Inflation and since the 1990s the central bank has already stepped in three times to finance and Industry collapse once in the.com bubble once during the mortgage crisis and again during the covet shutdown historically it’s said that when a government is trouble funding itself during bad economic conditions or Rising inflation
The rich move their assets to places Investments and currencies that they feel safest in and giving way for other nations to eventually take the spot as the reserve currency surprisingly he explains that these events have repeated themselves consistently since the Roman Empire and even though no two changes
Have been the exact same there is a similar blueprint that we could look at today to determine what might happen in the future now in this case the value of our dollar is indeed weakening see the dollar isn’t just valued at a dollar even though technically a dollar is
Always equal to a dollar really though it’s tracked against three different metrics the first is the exchange rate to other currencies the second is the demand for 10-year treasury notes and the third is what’s known as foreign currency reserves which is a really fancy way of saying how many US dollars
Are held by other countries now when it comes to the exchange rate to other currencies it is true that the value of the US dollar has been gradually weakening since 2020. however the US dollar is more recently higher than it’s been throughout the last 20 years
Despite the recent drop second as far as the demand for tenure treasury notes goes this is essentially just a 10-year loan to the government and for people who want a safe place to store their money they’ll essentially buy these and then get a guaranteed return on their
Capital in terms of our own currency though the value of the US dollar has been actually going up alongside with interest rates meaning to higher the rates go the more demand there is to buy those higher yielding bonds which is good for the US dollar and third in
Terms of foreign currency reserves this is where things get slightly less optimistic because as you can see the US dollar has been steadily declining as other currencies are beginning to take its place and as CNBC reports were now at the lowest level that we’ve seen in
25 years this of course brings us to what’s happening right now on March 29th it was announced that China and Brazil struck a deal to trade in their own currencies ditching the US dollar as an intermediary this would essentially enable them to trade directly with each other without having to buy US dollars
In the process and they currently transact around 150 billion dollars every single year that’s no longer going through the U.S now keep in mind that this is not the first time that something like this has happened China’s been slowly shifting away from the US dollars since 2010 Russia and India both
Ditched the US dollar a year ago and Saudi Arabia recently said that it was open to the idea of trading the Chinese Yuan not to mention China Russia Brazil India and South Africa have already joined forces to transact in their own Reserve currency that’s separate from our dollars referred to as bricks so
This isn’t exactly something that came out of nowhere but it could have a significant effect in fact as great Capital points out on Twitter China’s trading volume skyrocketed upon the Russia Ukraine war with sanctions allowing them to gain an even stronger foothold on international trade but is this actually something to worry about
And could the U.S be heading towards a time where it’s no longer the reserve currency well as of now even though the future of the US dollar looks uncertain there’s currently nothing close to being able to take its place now of course it’s certainly not the most confidence
Inspiring to hear that China’s economy is supposed to outpace the US by 2030 or that brics economies are some of the fastest growing nations in the world but the US dollar still makes up the vast majority of global transactions and its dominance is not going anywhere anytime
Soon frankly a lot would need to happen first if there were to be a new Reserve currency and notwithstanding a massive Black Swan event that undermines the United States role in worldwide trade it might not happen or it might not be able to take place in a way that we could
Reasonably predict of course this doesn’t mean that there’s not any concern turn it all with even Elon Musk tweeting that this is a serious issue U.S policy has been too heavy-handed making countries want to ditch the dollar combined with excess government spending which forces other countries to absorb a significant part of our
Inflation with that it’s no wonder why Barons recently reported that the U.S stimulus following the financial crisis started a currency War cheapening the Greenback to boost America’s economy because there is the very real danger that other countries will want to compete even Saudi Arabia entered a new trade agreement and ultimately that’s
Going to put a lot more pressure on the United States but at the end of the day the reality is the US dollar is being traded less there is more competition between countries and that’s not going away anytime soon however I personally believe that the US dollar as a reserve
Currency is not going anywhere it’s still the number one spot by far and most of the headlines that you see simply want clicks I think to spend your time worrying about this is going to be incredibly unproductive especially when there are way more imminent topics that
Should be discussed a lot more like in regards to raise using the debt ceiling which is likely going to take a significant toll on the markets if both sides can’t come to an agreement that’s why I tend to believe that it’s always a good idea to understand what’s going on
And why this is happening but instead Focus your time on what you can control like whether or not you’re Diversified whether or not you save enough money whether or not you have a consistent income and whether or not you invest on a regular basis that’s why I think
Focusing on those will make you so much more money than thinking about the possibility that maybe one day the US is not going to be the world’s Reserve currency at some point possibly In Our Lifetime plus by focusing on what you can control you’re going to be in a much
Better position to subscribe if you haven’t done that already because why not I hope you enjoy the video and if you subscribe that does help out tremendously so with that said you guys thank you so much for watching as always feel free to add me on Instagram and
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