The Next World Reserve Currency

So, there's a macro theory out there that we are moving from a globalized dollar-based world to a world where power is more evenly distributed. Now, in this transition, the role of the dollar is going to change. So, if you're wondering what's happening to the dollar right now, it looks like we are watching the breaking down of the current monetary order.

>> Let's step back from the sensational and and be clear about what I mean. the monetary order is breaking down. >> Okay, so what does that mean?

So [music] this right here is a gold certificate from the year 1928. That meant you could go to the bank, present the certificate and get some physical gold for it. Or you could go to the bank and present something like this, which is a silver certificate, which has this blue stamp on it, and get some silver.

That was the original job of the banks, to protect real money. None of these certificates say Federal Reserve note anywhere like our money does today. Now, this was an era in US history that was known as hard money.

But in 1971, when the country was on the verge of bankruptcy, the US [music] left the gold standard. So, the world entered into a new monetary order where the dollar became the center of everything without being backed by anything. And the world came to a new agreement.

We said, "Okay, all countries will now sell their stuff and their energy and dollars and then recycle those dollars back into US assets like Treasury bonds and the US stock market. " So, the stock market went up forever and Americans got to live beyond their means. That kept the demand for the dollar high and it allowed America to run trade deficits where we could borrow cheap money, we could offshore jobs, and we could consume more than we made.

But for that system to work, the dollar has to stay strong. And it stayed strong thanks to the military-industrial complex. And all of that is changing.

And what we saw at the most recent World Economic Forum was a conversation about how to divide that power. The rules-based order is fading. We believe that from the fracture, we can build something bigger, better, stronger, more just.

And what we're seeing now are new trade agreements and countries diversifying their reserves. So instead of holding dollars in the form of treasuries, they want more forms of hard money. That's why we're seeing assets like gold and silver repricing right now.

And there's a lot of volatility because no one knows where this is going to go. >> And this is that moment. This is that hinge point in history that we see every couple of generations.

Doesn't make it going to be easy. doesn't mean that every decision is obvious. >> Now, countries are not necessarily dumping the dollar overnight because that would negatively affect their own wallets.

But what they are doing is they are diversifying their reserves. Central banks are buying more gold instead of only holding US treasuries. And China has already built the payment system that does not rely on US banks.

At the same time, the United States has a huge debt problem and a shrinking industrial base, which means it can't keep running the old model forever, where it imports everything. It exports paper money while funding the forever war model around the world. And that change to the monetary order is maybe why we're seeing gold and silver explode and the dollar getting weaker.

So, in this video, I want to explain exactly what's happening with the dollar, why the plan might be to weaken it, and where we might go from here. Now, a portion of this video is sponsored by Weeble, but more about them later. So, with that said, let's get into it.

Hi, my name is Andre Jick. Hope you're doing well. Come for the finance and stay for the macro theory that we're moving from a globalized dollarbased system to a more regional multi-power system where lots of countries share power.

And in this transition, the dollar's role is going to change. And how that change looks like to us is currency weakness. And that shows up in everything that we're watching right now.

In the stock market, in commodities, in gold, silver, Bitcoin, everything is experiencing a huge amount of volatility because no one knows where this is going to go. Now, the question is, isn't this kind of bad for the US? And it's a question that was asked to Jerome Pal, the guy in charge of the Federal Reserve, and he gave one of the strangest answers.

>> We've seen quite big movements in the dollar over recent days. What do you think is driving the US currency lower? And have you been at all concerned just by the extent of the volatility we've seen this week?

Thank you. >> So, Claire, as you probably know, you know, we we don't comment on the dollar. really the administration, especially the Treasury Department, has the job of oversight over over the the currency and so and exchange rates and all that.

We don't comment on that. It's not our not our role. Uh so I have nothing for you.

>> Now, what's interesting about that answer is that every single dollar bill literally says Federal Reserve note at the top of it because everything the Fed does moves the dollar, right? One way or another. And the Fed's influence on the dollar is huge.

But the political consequences of admitting that would not be very good. Which is why recently President Trump threatened Jerome Powell with criminal charges. >> The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public rather than following the preferences of the president.

And the president's preference is to lower the interest rates, which he knows Jerome Powell doesn't want to do. So his plan B is to potentially weaken the dollar, which is also why when he was asked about the weakening dollar in an interview, here's what he said. >> The current value of the dollar, do you think it's declined too much?

>> No, I think it's great. I mean, the value of the dollar, look at the business we're doing. No, dollar's dollar's doing great.

>> So, let me explain what a weaker dollar means. And whether it's good or bad depends on which version of America we're rooting for because there's really two different US economies. The first is the America that we've lived in for the last 40 years.

We can call it the financialized America. Right? This is the one that's built on a strong dollar, cheap imports, rising asset prices, and expanding debt.

Because a strong dollar leads to cheap imports, which leads to higher spending power, which leads to more borrowing, which gives us bigger and bigger financial markets, right? It's ultimately more debt. That's the world we live in right now.

In this system, America's main export, aka the thing it makes the most of, are dollars, treasury bonds, financial assets. A strong dollar made America feel richer because everything overseas was cheaper for us to buy. And this was by design because that system incentivized US corporations to make the input costs, aka the labor, as cheap as possible.

through things like NAFTA, the North American Free Trade Agreement, it made it easier to offshore jobs because using American labor is expensive. So companies were like, "Okay, well, let's avoid using American labor if possible and let's instead borrow as much money as cheaply as possible and then use that money to pump up our stock values. " That model worked really well, but it only works as long as the rest of the world keeps buying US debt forever, which are the US treasuries.

[music] That's the America that benefits most from a stronger dollar. Well, then there's the other side of America, the productive America. This is the version that actually builds things, produces energy, runs the factories, right?

Makes the stuff the world needs. But there's a trade-off. If the US wants to get back to that America to rebuild its industry, it doesn't benefit much from a stronger dollar.

Why? Again, a strong dollar makes your labor more expensive, which means less incentive for companies to build in the US. So the same dollar strength that made consumers feel rich relative to the rest of the world is also what hollowed out American industry.

So from that perspective, the US might want a weaker dollar because it lowers the real burden of debt over time, right? It makes making stuff at home more competitive with the rest of the world. It pushes money or capital toward real output and real assets instead of just more financial speculation which more so benefits industries like the banking industry because the banks profit more from high interest rates, dollar dominance and global lending.

So the two are kind of in conflict quite literally because the president is suing JP Morgan for debanking his family. But I'm not going to speculate on that. So a weaker dollar is both good and bad.

It's good because if you want to win as a country, that's how you play the game long-term, right? You build real things. That's what China did.

But a weaker dollar can be bad because the transition is painful and it can last decades because Americans got used to the benefits of the old system and it takes a long time to fix the economy. There's a lot of unknowns which ultimately leads to volatility in all the markets. Now, before we continue, markets are always trying to price in what happens to the world in the future.

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I'm compensated by Weeble Financial LLC for this promotion, but check out the link in the description down below. And now, let's get back to it. Okay, so now that you hopefully understand why a weaker dollar could be good or bad, depending on how you look at it, here's how you can actually see this monetary order breaking down in real life.

Let me show you something that's going to blow your mind. Because everything we measure is always in dollars. But if the thing that's losing value is the dollar, then what happens to our time?

And this is where this monetary order starts to break. Let me show you what happens when we measure time in dollars. Because in the late 1960s, for example, the federal minimum wage was $1.

40 an hour. So a 40-hour work week made about $56. Now, at the gold price of that time, around $35 per ounce, that one week of work bought roughly 1.

6 ounces of gold. Today, the federal minimum wage is obviously higher. It's $7.

25 per hour. So, a full week of work makes about $290. Obviously, a lot more than 56.

But at today's gold price of, let's assume $4,000 per ounce, just to be conservative, means that you'd need to work 22 weeks full-time just to buy that same 1. 6 ounces that used to buy it in just one week time. Right?

That's because we're measuring the value of time in weaker and weaker dollars. That's what most people do and that's why they can never get ahead. Okay then.

So the next question is why was the ruler the dollar allowed to be shrunk in the first place? Cuz that seems unfair. And it was allowed to do that because that is the monetary experiment we are living through right now.

That is Keynesian style economics. That's how a debt-based monetary system that's built on credit works. An easy way to understand it is like this.

If I lent you this $10 bill, let's say this $10 was all the money in the world, just this $10 for example, but then I charged you a small 1% interest for borrowing it. The question is, where will you get the money to pay me the interest from? If this is all the money in existence, where do you get the interest?

you couldn't pay me back. There's no more base money. So, you have to expand it, right?

You have to make more. Now, that's an oversimplification, but the idea is that the system that's built on credit, growth, and expansion are needed for stability. That is how for decades and decades, the US ran what was basically a consumer of last resort model.

Meaning the world made stuff, sold it to America, it earned dollars and recycled those dollars back into US assets. That kept the dollar strong, interest rates low, propped up by countries like Japan, which was the interest free lender. But that system depended on other countries wanting to hold unlimited dollar reserves.

Today, this is changing. Countries and central banks are diversifying. And now we can see that gold has actually overtaken treasuries in central bank foreign exchange reserves.

Think of foreign exchange reserves, by the way, as a bank's piggy bank, right? A reserve wallet where it keeps lots of different currencies. And this is exactly what Rayalio is describing in one of his latest interviews.

>> We're going to have a supply demand problem for debt at the same time as we have these other problems. >> Supply demand problem for debt. meaning we have a lot more supply of our debt and not enough demand around the world to buy it.

Instead, we could see that central banks have been buying gold pretty aggressively over the last few years. They're buying gold so that they could protect themselves against whatever system replaces this monetary experiment we're running. Now, in a more technical explanation, something called Basil 3 changed how banks value gold on their balance sheet as of last year.

And now gold is considered a higher quality reserve asset valued at the market price instead of a discounted price. Now that doesn't mean gold replaces treasuries in the global plumbing system, but it does make gold a lot more attractive as a neutral reserve outside the dollar system. And as a result of the debasement, again to us, to normal people, it looks like the price of assets goes up forever.

Right? That's the line in black. This is the MSCI index excluding the US and the same index including the US.

And it looks like the stock market goes up all around the world. But if you look at both of the indexes as measured in gold instead of dollars, which is shown by the blue line, you'll see that the market has actually lost value in comparison to gold since the year 2000. Again, this is slightly cherry-picking data, but one could argue the last 20 years is a good enough example to prove the point.

There's strong evidence of the fact that this has been accelerated by China and all the central banks buying tons of gold so they could build out this parallel system to the dollar instead of using only treasuries. What all of this means then is that the structural demand for dollars might not grow the way it did before. And that's exactly what we're seeing.

We're seeing the demand for dollars gradually going down. That's what Ray Dolly is describing. Dollars are debt in the form of treasuries.

And if the demand for them goes down, that means in the future we might see a lot more inflation. Peter Schiff is someone that believes that's exactly what's going to happen. >> But Peter, people's incomes are pretty solid.

We're starting to see some real gains in productivity. Call it the coldest. We're we're not we're not see we're not seeing that, Liz.

Unfortunately, uh the numbers are not accurate. Uh they're highly skewed. They're going to be revised and a lot of it is being influenced by inflation.

Uh you know, inflation is going to be much more uh pernicious uh over the next few years than it was uh when Biden was president. Unfortunately, that's what gold and silver are are telling you. They are a warning.

So now that we hopefully understand the dollar is getting weaker in relative terms and that this serves as a structural economic purpose to make the US more competitive but that it could also bring about inflation especially in the asset space. The next question is who benefits the most from this kind of a transition. So, let me sort of explain this through the lens of my last video using the four power players.

Starting with the financial industrial complex, aka transnational capital, money that transcends nations. Remember, this power comes from controlling the financial plumbing system. These are things like the debt markets, the stock markets, proxy votes, etc.

What they want control over is the flow of capital. They do this how? with the three asset managers we mentioned in the last video that together manage more than $30 trillion.

With that money, they use their clients votes as proxies to influence the direction of a company and who gets hired to run them. And then of course there's the banks which want >> ECBDC >> central bank digital currencies. They want to stay relevant in this transition.

Okay, but why would all these guys be fine with a weaker dollar? and they'd be fine because they don't measure their wealth in dollars. They measure it in ownership of real assets, real money, which might be things like stocks, real estate, infrastructure, energy, commodities, right?

And when a currency gets weaker, those kinds of assets tend to rise in what are called nominal prices. Who it hurts are the people that rely on their job for income and who it benefits are those with assets. Okay.

Second player are the sovereigns. aka the leaders of tier one nations and that would be the people with access to nuclear weapons. Now what they want is more control over their supply chains, their energy production and their people.

And a slightly weaker currency helps rebalance trade in their favor because it makes domestic production, aka the stuff a country makes at home cheaper to make and therefore more competitive when they sell it overseas. So, while a strong dollar benefits consumers when we go to buy stuff overseas, a weaker currency can benefit nations trying to rebuild their industries and it reduces their dependency on the old model where they have to run deficits to fuel their growth. So, a sovereign power like the United States could benefit from the weaker dollar.

I know how insanely complicated this might sound, but I hope all of this makes a little bit of sense. Now, I should also mention there's a slightly deeper layer to all of this, and I don't like talking about it because it walks the fine line of conspiracy, but it's the layer that is the competition with China for as much control, especially over society as possible. Right?

That's the China model. This is where the third power player comes in. That's the tech industrial complex.

As the old monetary order becomes less dominant, whoever controls the new systems of technology gets more influence, it gets more powerful. Now, in my last video, I saw a comment that someone asked that I think ties into this, which is, "How do mass deportations benefit the financial industrial complex? " It's a really great question.

So, I'll be very careful how I answer it, but I hope you can read between the lines. You see, throughout history, a lot of economic transitional periods coincided with new systems that are sold to us as protection, digital identity tools, financial tracking systems, and more centralized infrastructure. That's because uncertainty in markets, uncertainty in society increases the demand and the need for systems to control this unrest.

So, let me just say this a little bit easier. When things get crazy around the world, technology is sold as the thing that will make us safer. Technology then becomes the solution that is offered to people during times of instability.

And these technologies can change the architecture of society for better or sometimes for worse. This is where digital IDs, social credit scores, car switches, all that stuff comes in. Now the fourth player in all of this is the military-industrial complex and that's just the layer that enforces all these changes often times through instability using for example religion as a precursor right as a justifier when there's such a big change in power and we don't really know the outcome of this nations tend to do what they invest more in their defense in their energy sectors strategic leverage aka consolidating their regional proxies aka the land and resource grabs.

So that is the four major power players and how they benefit. Okay. So then the question is what does all this mean for the average person?

The honest answer is I don't know because I haven't lived a thousand lifetimes. But the way I see it is there seems to be a fork in the road. One path is the inflation path and the other is deflation.

Now, on path number one, inflation, that could be triggered by maybe the new Fed chair, Kevin Worsh, who's expected to lower rates, but maybe he doesn't because he's been hawkish in the past. That means volatility in the short term. Now, if rates do go down and it does become easier for people to borrow money, then it becomes easier for the country to roll the debt over.

And if the world slowly wants less and less treasuries and maybe more gold like what we're seeing, that also means maybe more dollars stay inside the country. That means deficits might grow and maybe the currency weakens. And in that world, asset prices can still go up.

Stocks, real estate, commodities, right? They can still go to the moon partially because that measuring stick we talked about, it's the dollar, right? It's shrinking thanks to inflation.

So your portfolio goes up, but maybe your purchasing power doesn't go up at the same rate. So life still gets more expensive for those without assets. Now the other path may be less optimistic.

If investors around the world look at the US and they're like, "Oh man, I don't have confidence in the US anymore. " If capital leaves and if interest rates go to maybe fight inflation of some sort, then asset prices could also fall. That's much more painful of an outcome in the short term.

I don't think it's the most likely outcome necessarily, but I think it's still a risk. So either way this plays out, whether it's inflation or deflation or some other option that we're not considering, I think this transition still favors people who own assets more than people who rely on incomes. That's the K-shaped world that we've been living in.

And I think that divide will continue to grow. Now, maybe technology and AI eventually creates a world that Elon talks about where robots do everything for us and it's utopia and everything's great. Maybe we get a productivity boom that offsets all of it.

But even if we get there someday, the point between now and that perfect future might be painful for the people who are not prepared for the time that it takes to get us there. I still believe in the theory that what we're seeing is all political theater anyway. the big things have already been pre-negotiated and what we're watching is just the show.

So, enjoy the show cuz some of it is kind of funny if you're paying attention to it. I'd love to hear your thoughts. If you want to see how I'm personally investing, I'll leave a link down below.

At some point, I'll make a video explaining it. But in the meantime, I hope you have a wonderful rest of your day. Smash the like button, subscribe if you haven't already.

I'd love to see you back here next week. I'll see you soon. Bye-bye.