what’s up guys it’s Graham here so it’sofficial China and Brazil have juststruck a dealto ditch the US dollarwhoopsokay before everyone freaks out don’tworry it’s a fake build for dramaticeffect but the point Still Remains theworld’s second largest economy is slowlycutting off ties with the United Statesand this not surprisingly is the firstto go so today let’s discuss exactlywhat’s happening why this is happeningwhat this realistically means for all ofyou watching and whether or not this isa topic to be concerned about because Ihave to say this is something to betaken extremely seriously after all thebillionaire Ray dalio is previouslydescribed the impending downfall ofevery major economy as we know it howthese Cycles typically happen on aregular basis and how we could bestprepare for what’s to come based offpredictable events that happen aboutonce every 100 years.
although, before westart I have to warn you that the likebutton is also in danger of not beingsmashed for the YouTube algorithm so ifyou wouldn’t mind hitting the likebutton or subscribing it does help outtremendously so thank you guys so muchand now with that said let’s beginalright so as a quick 60 second recap tobring you up to speed about what’s goingon as of now and for the last 80 yearsthe US dollar has been the most powerfulcurrency in the world because it’s knownas what’s called a reserve currency thisrefers to a currency that’s acceptedthroughout the entire world and since1945 the US dollar has taken that placebecause of its safety resiliency andstability like when the system was firstadopted it was used as a way to keep theprice of Investments exchange rates andcommodities like golden oil stableknowing that no matter which currencyyou held its value was pegged to that ofthe US dollar see when you have dozensof countries all trading goods andservices with each others.
it helps to have one universal currency acceptedaround the world with a predictablevalue to conduct those transactions otherwise you run the risk of gettingpaid in a currency that might bedifficult to exchange or maybe its valueis Fallen by the time you’re able toconvert it back to your native currencyso think of this kind of like a globaltransfer of value through the US dollarthat everyone has agreed to be safe ofcourse the United States benefits fromthis as well because more countries usethe US dollar more countries hold on tothose dollars and as a result we havegreater buying power but the US dollaris apparently at risk of losing thatReserve currency status and tounderstand why look no further than Raydalio’s changing World Order see as heexplains throughout history there’s aconstantly changing World Order betweenthe leading economy and the risingeconomy and over time one will fail tomake way for something new for exampleprior to 1945 the reserve currency washeld by the British pound which lastedfor 105 years following the FrenchRevolution followed by the Netherlandsfollowed by Spain and Portugal andVenetian Gold and so on with theunderstanding that Reserve currencieshave never lasted forever and aboutevery hundred years they change in atransition that lasts between 10 and 20years.
So what causes this you might askwell Ray dalio points out that thiscould be summarized into threecategories the rise the top and thedecline during the rise after every newReserve currency there’s a period ofpeace certain Prosperity is People BETand borrow on that system continuingthis is typically marked with strongeducation critical thinking characterbuilding and work ethic that allows forInnovation new technologies and otherresources for a continual rise inproductivity however in order to financethat continual rise in productivitythere has to be a system in place forborrowing and allowing people fromaround the world to convert theircurrency into Investments that share inthe success of making that happen infact Ray dalio points out that all thesuccessful Reserve currencies followedthe exact same path leading to of coursethe top at the peak the generalconsensus is that will people earn moretheir time becomes more valuablerelative to other countries who would bewilling to do the same work for Less ontop of that other countries have theability to take the blueprints of thelatest Innovation and then copy that fora fraction of the cost reducing theleading Powers competitiveness.
The Tipping Point though comes when people lose faith in the reserve currency theyrefuse to buy it and would rather sell than reinvest the profits leading to ofcourse the decline Ray dalio explainsthat during an economic downturn if thecountry cannot sustain its own debts ithas 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 inhere 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 bioeconomic 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 reexplains that these events have repeated themselves consistently since the Roman Empire and even though no two changeshave been the exact same there is similar blueprint that we could look attoday to determine what might happen inthe future now in this case the value ofour dollar is indeed weakening see thedollar isn’t just valued at a dollareven though technically a dollar isalways equal to a dollar really thoughit’s tracked against three differentmetrics the first is the exchange rateto other currencies the second is thedemand for 10-year treasury notes andthe third is what’s known as foreigncurrency reserves which is a reallyfancy way of saying how many US dollarsare held by other countries.
now when itcomes to the exchange rate to othercurrencies it is true that the value ofthe US dollar has been graduallyweakening since 2020. however the USdollar is more recently higher than it’sbeen throughout the last 20 yearsdespite the recent drop second as far asthe demand for tenure treasury notesgoes this is essentially just a 10-yearloan to the government and for peoplewho want a safe place to store theirmoney they’ll essentially buy these andthen get a guaranteed return on theircapital in terms of our own currencythough the value of the US dollar hasbeen actually going up alongside withinterest rates meaning to higher therates go the more demand there is to buythose higher yielding bonds which isgood for the US dollar and third interms of foreign currency reserves thisis where things get slightly lessoptimistic because as you can see the USdollar has been steadily declining asother currencies are beginning to takeits place and as CNBC reports were nowat the lowest level that we’ve seen in25 years this of course brings us towhat’s happening right now on March 29thit was announced that China and Brazilstruck a deal to trade in their owncurrencies ditching the US dollar as anintermediary this would essentiallyenable them to trade directly with eachother without having to buy US dollarsin the process and they currentlytransact around 150 billion dollarsevery single year that’s no longer goingthrough the U.S now keep in mind thatthis is not the first time thatsomething like this has happened China’sbeen slowly shifting away from the USdollars since 2010 Russia and India bothditched 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 frondeur dollars referred to as bricks sothis isn’t exactly something that cameout of nowhere but it could have significant effect in fact as greatCapital points out on Twitter China’strading volume skyrocketed upon theRussia Ukraine war with sanctionsallowing them to gain an even stronger foothold on international trade but isthis actually something to worry aboutand could the U.S be heading towards atime where it’s no longer the reservecurrency well as of now even though thefuture of the US dollar looks uncertain there’s currently nothing close to beingable to take its place now of courseit’s certainly not the most confidence inspiring to hear that China’s economyis supposed to outpace the US by 2030 orthat brics economies are some of thefastest growing nations in the world butthe US dollar still makes up the vastmajority of global transactions and itsdominance is not going anywhere anytimesoon frankly a lot would need to happenfirst if there were to be a new Reservecurrency and notwithstanding a massiveBlack Swan event that undermines theUnited States role in worldwide trade itmight not happen or it might not be ableto take place in a way that we couldreasonably predict of course thisdoesn’t mean that there’s not anyconcern turn it all with even Elon Musktweeting that this is a serious issueU.S policy has been too heavy-handedmaking countries want to ditch thedollar combined with excess governmentspending which forces other countries toabsorb a significant part of ourinflation with that it’s no wonder whyBarons recently reported that the U.Sstimulus following the financial crisisstarted a currency War cheapening theGreenback to boost America’s economybecause there is the very real dangerthat other countries will want tocompete even Saudi Arabia entered a newtrade agreement and ultimately that’sgoing to put a lot more pressure on theUnited States but at the end of the daythe reality is the US dollar is beingtraded less there is more competitionbetween countries and that’s not goingaway anytime soon.
however I personallybelieve that the US dollar as a reservecurrency is not going anywhere it’sstill the number one spot by far andmost of the headlines that you seesimply want clicks I think to spend yourtime worrying about this is going to beincredibly unproductive especially whenthere are way more imminent topics thatshould be discussed a lot more like inregards to raise using the debt ceilingwhich is likely going to take asignificant toll on the markets if bothsides can’t come to an agreement that’swhy I tend to believe that it’s always agood idea to understand what’s going onand why this is happening but insteadFocus your time on what you can controllike whether or not you’re Diversifiedwhether or not you save enough moneywhether or not you have a consistentincome and whether or not you invest ona regular basis that’s why I thinkfocusing on those will make you so muchmore money than thinking about thepossibility that maybe one day the US isnot going to be the world’s Reservecurrency at some point possibly In OurLifetime plus by focusing on what youcan control you’re going to be in a muchbetter position to subscribe if youhaven’t done that already because whynot I hope you enjoy the video and ifyou subscribe that does help outtremendously so with that said you guysthank you so much for watching as alwaysfeel free to add me on Instagram anddon’t forget you can get that free stockwith your sponsor public.com Down Belowin the description when the code gramwhen you make a deposit enjoy thank youso much and until next time.