what's up guys it's Graham here so throughout the last week there's been a new topic gaining a lot of attention with over two and a half million views over these last few days and it has to do with the video posted by Ray dalio titled principles for dealing with the changing world order this is a 43 minute presentation about the impending downfall of every major economy as we know it how these evolving Cycles typically happen on a regular basis why the times ahead would be radically different from those that we've experienced in our lifetimes and how we could best prepare for what's to come based on predictable events that have happened in the past so let's talk about what this is what this means for you and my own thoughts about the changing world order coming from the CEO of the world's largest hedge fund with over 45 years of investing experience right after of course you change that like button order by giving it a gentle tap for the YouTube algorithm and subscribing if you haven't done that already I'll also link to Ray Dalia's full video down below in the description for anyone who wants to watch that as well and now with that said let's begin so first we gotta talk about what the changing World Order even is because despite what some people might assume it has nothing to do with the great reset the Russia crane Invasion or even an event that's happened in most of our lifetimes but instead a repeating cycle of rise and declines since the beginning of time that all starts with this no it's not Benjamin Franklin it's the US dollar see Ray dalio explains the throne history there's a constantly revolving changing World Order between what he calls the leading economy and the rising economy both fighting for the economic superpower of being what's known as The Reserve currency this refers to a currency that's commonly accepted around the world and since 1945 the United States has been the reserve currency with the dollar when the system was first adopted it was used as a way to keep the price of Investments Commodities like oil and gas and exchange rates stable knowing that no matter which currency you had and held its value is always pegged to that of the US dollar however as Ray dalio points out Reserve currencies like this don't last forever and a change occurs in what he calls the big cycle this starts with the New World Order which lasts occurred in 1945 when the United States became the reserve currency after World War II prior to then that title 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 not lasted forever and about every hundred years they changed giving way to a new world order with the transition that lasts anywhere from 10 to 20 years so what causes this she might ask well Ray dalio points out that this could be summarized into three segments the rise the top and the decline during the rise after every new Reserve currency there's a period of peace and prosperity as 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 new innovation new technologies and other resources for a continual rise in productivity however in order to finance that continued push in productivity there must be a system in place for borrowing and allowing people from around the world to convert their currencies into Investments to share in the success of making that happen in fact Ray dalio points out that all of the most powerful Reserve currencies followed the exact same path leading to the top at the peak the growing consensus is that will people earn more the more expensive their time becomes relative to other countries who are willing to do the same work for Less on top of that other countries have the ability to take the blueprints from the latest Innovation and then replicate the same thing for Less reducing the leading Powers competitiveness at the same time as people become richer they tend to work less their values change over generations and as a result they continue to borrow even more without contributing to the same Innovation leading to a growing divide between the rich and the poor over a sustained period of time now even though excess spending and borrowing is great in the short term long term he explains that it weakens the economy because at some point it becomes unprofitable to sustain and the country grows deeper into debt potentially than borrowing money from poorer countries who are able to save more The Tipping Point though comes when people lose faith in the reserve currency refused to lend more money and would rather sell than reinvest the profits leading to the decline Ray dalio explains that during a downturn if a country can't sustain its own debts it needs to choose between defaulting or 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 U. S had three occurrences for the central bank had to step in to finance and Industry collapse from the. com Bubble mortgage crisis and coveted shutdown historically it said that when a government has difficulty funding itself during bad economic conditions and Rising internal conflict the rich moved their assets to places Investments and currencies they feel the safest in reducing tax revenue Innovation and productivity and giving way for other nations to eventually become the new Reserve currency and the New World Order surprisingly he explains that these events have repeated themselves since the beginning of the Roman Empire and even though no two changes have been the exact same they do contain a very similar blueprint that we could look at today to determine what might have happen in the future for example France held the reserve currency from 1720 to 1815.
this occurred when France conquered the Netherlands and then issued their own dominant currency however over time they began to run at a deficit where they spent a lot more money than they made that led to a lowering of interest rates and then eventually reissuing even more currency when it came back to the treasury instead of destroying it even though it was initially a boom to their economy over time it devalued their currency and within just two years their notes held only 82 percent of their original value from there within 10 years after declining economic conditions the world had lost faith in France's Reserve currency and then moved on to the British pound which held Reserve status from 1815 to 1920. during the time that France was economically declining Britain was quickly becoming one of the largest economies in the world London was the center of international trade and as a result their currency was already being used around the world on top of that even though the pound was directly redeemable for gold they also allowed the opportunity to directly invest into London and earn an interest rate effectively making it a safe stable store of wealth although after World War One the UK went through a time of economic depression slowing growth and deflation eventually leading them to abandoning the gold standard and the eventual U. S Reserve currency that we have today from 1944 until who knows when see prior to then the U.
S grew to the point of becoming the world's largest economy by 1920 during a time where other countries were abandoning the gold standard to pay for World War One by the time World War II came around the U. S was in a position to supply weapons and goods that were later repaid back with gold giving them The Leverage to officially become the reserve currency is laid out in the Bretton Woods agreement in 1944. however the U.
S decided to sever its ties with the gold standard during the Vietnam war leading to a surplus of spending borrowing and money printing that we see today and worrying people that maybe we could see a changing World Order like Ray dalio suggests objectively speaking I have to say Ray dalio is a point when you look at this from his perspective he explains that there is a measurable output for each country as a reserve and in this case there are eight factors to consider education technology competitiveness output World Trade military strength financial center and the strength of the currency when it comes to this he alludes to the concern that the United States has begun to decline from their peaks since the 1950s and now is beginning to look less appealing as China's economy begins to grow in its place this was even seen back in 2020 when China and Russia created a Financial Alliance to reduce their dependency on the US dollar with China for instance as you could see since 2015 the number of settlements to the US dollar has been on a consistent decline possibly as a result of increased tariffs on Chinese Goods on top of that the U. S has seen a slight decline in its Reserve currency status over the last 10 years and the billionaire Jeffrey gunlock said that at the same time estimates for when China's economy will be the largest keep getting pulled forward noting some Economist projections show China's economy will surpass the U. S by 2028.
now when a Charles Schwab analyst looked at this even further They concluded that still the US dollar is used in 40 percent of global trades and almost 80 percent of all cross-border transactions overall if there is going to be a new Reserve currency there has to be something better to take its place of which there aren't many viable options even now the US dollar is held roughly the same value since 1987 and even throughout International turmoil it's continued to rise against other currencies as investors dive into Safe Haven Assets Now when the big picture so far the decline that we've seen is still relatively small compared to the volume of transactions taking place in USD however not everybody agrees and even though it seems like being the reserve currency is the most sought after title while the US is at risk it might not be on the surface being a reserve currency means that the US could borrow from foreign Nations driving down interest rates and fueling more spending but as a result it's thought that our own products and services would be more expensive because the dollar is worth more will become in effect less competitive and as a result unemployment will go up in 2016 the Federal Reserve chair Ben Bernanke said the name declining share of a growing global economy and the rise of the euro in Yen means Nations other than the us could also borrow at low rates but the rising wealth of other nations doesn't spell Doom for the U. S it doesn't mean the U. S is getting poorer just that other nations are getting richer that was followed up by the Council of Foreign Relations who wrote that absent to catastrophic U.
