The United States' most powerful weapon is the US dollar, but now, it is in danger.
Countries around the world are ditching the dollar.
The US dollar has been the currency that the world uses to trade for over 75 years, but
today, China's Yuan has replaced the dollar as the most traded currency in Russia.
China and Brazil have signed a deal to trade in Chinese Yuan.
Argentina and Brazil are planning to create a common currency to get rid of the dollar.
Russia is moving away from the dollar and replacing it with other currencies.
The UAE and India are discussing trading with Indian Rupees instead of the dollar.
Even Saudi Arabia is considering accepting Yuan instead of dollars for Chinese oil sales.
Oil has always been sold in US dollars, and it is one of the reasons that made the US
dollar the global currency reserve.
70% of all US dollars are outside the United States.
If the world stops using the dollar as the global currency reserve, then all of these
dollars will come back to the United States, creating massive inflation, the likes of which
we have never seen in the entire history of the country.
The economy will crumble, and the stock market will fall to pieces.
This is the worst thing that could possibly happen to the United States.
To understand what is really happening, we need to go back to 1913.Britain was the most
powerful country in the world.
It controlled half of the world, had the most capable Navy, and the strongest economy.
So, everyone trusted the British pound.
However, smaller countries such as Sweden or Italy did not trust each other's currencies
since they could print as much as they wanted.
That's why they used the British pound, the currency that they could both trust.
It was the currency of the largest and the most powerful empire.
The British Pound accounted for 60 percent of all global currency reserves.
But Germany did not like that, so it started World War I to put an end to British hegemony.
However, the plan backfired, and Germany lost the war.
The war devastated the British economy, and the country was already too big to manage
but It did not break the British economy.
So, Germany gave it another shot and started World War II.
Britain was on the verge of bankruptcy, and the only way it could have won the war was
by seeking help from the United States.
The US agreed to help the UK only if it gave independence to all of its colonies.
So, when the Allies won the war, most of Britain was destroyed, and it lost its colonies that
made Britain rich in the first place.
The entire Europe was demolished, the Soviet Union barely fed its people, and China was
fighting a civil war.
However, the United States was not touched since it was too far to attack.
Thus, the United States emerged as the most powerful country in the world, with the largest
economy and 70% of the world's gold reserves.
That's when people began ditching the British pound because and began using the US dollar
as a reserve currency.
So, to rebuild international trade after such a devastating war, the US pegged the dollar
to gold at $35 an ounce, and the rest of the currencies were pegged to the dollar.
Let's say France wants to trade with Spain; they don't trust each other's currencies,
but now they can use the dollar because they can turn around to the United States and change
those dollars to gold.
Everyone was happy, countries began trading with each other.
The US went as far as convincing major oil exporters such as Saudi Arabia to sell oil
only in US dollars in exchange for the United States protection and weapons.
Oil was the engine that drove the global economy and the only way to buy oil was by buying
US dollars.
The petrodollar dominated the world, which made the dollar the undisputed global reserve
currency.
But then the dollar almost collapsed.
The United States printed so much money that it didn't have enough gold to convert all
of these dollars to gold.
That's why it decided that the US would no longer exchange dollars for gold.
But why did the world still keep using the dollar?
Why didn't they begin using gold?
Why didn't they ditch their paper dollars?
Unlike other countries, the United States could now print as many dollars as it wanted.
It printed trillions of dollars to finance the most powerful military in history, to
start wars across the globe to project power, to lend to other countries, and to make them
financially dependent on the United States.
The dollar became the center and the foundation upon which the global economy was based, so
anyone who didn't follow Uncle Sam's orders could be cut off from the global economy.
Oil-rich countries only sold their oil in US dollars because the dollar was the only
currency they could use to buy everything else from the rest of the world.
The golden age of the United States had just started.
It wasn't gold that made the dollar so popular; it was the United States economy and military.
The US economy accounted for almost 40% of global GDP, making it the wealthiest country
on the planet.
Anyone who wanted to trade with the United States had to buy US dollars.
The US began producing computers, sophisticated weapons, cars, and planes, and the only way
to buy these products from US companies was by having US dollars.
Especially Europe, which had just gotten out of the war, borrowed billions of dollars from
the United States to rebuild its infrastructure, such as roads, schools, and bridges.
The only way it could pay back the US was by having dollars.
This gave the United States enormous power.
Other countries could not print money as they pleased because that would cause hyperinflation,
but US dollars was kept in central banks across the globe as a currency reserve.
32:40 This meant the United States could just print
money and pay for whatever it needed.
If China sold something to the United States, the United States did not have to give something
back in return to China.
31:10 It could just print money and exchange the goods for US dollars because the Chinese
government knew it could use these dollars to buy oil from the Middle East, technology
from Europe, or weapons from Russia.
And most importantly, the US could kick anyone out of the global economy if they did not
follow US rules.
It isolated North Korea since it stood with the Soviet Union, sanctioned Iran when it
decided to build nuclear weapons, squeezed the Iraqi economy when it violated US rules,
destroyed the Venezuelan economy when it built close ties to Russia.
If that did not work, the US could invade the country, like it did with Iraq or Afghanistan
PICTURES, and nobody could sanction the US because the global economy depends on the
US dollar.
However, China and Russia did not like that, so they decided to put an end to US global
dominance by ditching the US dollar.
China and Russia are bitter rivals, but as the saying goes, "the enemy of my enemy is
my friend."
So, the two countries decided to put their differences aside and work towards building
a new world order.
China’s GDP has grown from 360 billion dollars in 1990 to 18.3 trillion dollars in 2022,
and it now accounts for almost 19 percent of the global GDP, while the US accounts for
a little over 20 percent.
The gap between them has shrunk dramatically, and if we count GDP as purchasing power parity,
then China has already overtaken the United States as the largest economy.
Russia no longer sells its oil and gas in dollars but rather in rubles and yuans.
Russia and Iran are working together to launch a cryptocurrency backed by gold.
Russia is expanding its own version of the SWIFT system for global banking, and Indonesia
wants to ditch Visa and Mastercard after the US sanctioned Russia.
The president of france is saying that Europe should not just blindly follow the US against
China.
The US dollar used to account for 85 percent of all currency reserves, but today it accounts
for less than 60.
The trend is definitely downward.
Russia has convinced the world to move away from the US dollar as soon as possible.
Russia is not North Korea, Iran, or Afghanistan.
It is the second most powerful country and one of the largest economies in the world.
Thus, the Russian economy did not collapse.
Most of the world didn't follow the United States and kept trading with Russia.
India continues to buy Russian oil, while Saudi Arabia and the UAE didn't take sides
and carried on with business as usual.
Turkey built ever closer ties to Russia, and Southeast Asia, Africa, and Latin America
just ignored US sanctions.
In fact, they started realizing that they had to break away from US influence because
the US could crush their economies if they didn't follow US rules.
This is how the world economy used to look like in the 1960s.
The US was the major trading partner for most countries, followed by Great Britain and then
Germany.
In the next 30 years, the US dominance only grew, and the global economy was dominated
by the US and its allies.
However, this is how the global economy looks like today.
READ China is the largest trading partner for most
countries.
It isn't just producing low-quality goods but also manufactures high-tech products.
Chinese electric vehicle manufacturers are the largest in the world.
China supplies 70% of solar panels globally, and it has built the world's biggest 5G network.
More and more countries are looking to purchase Chinese technology, which led China to launch
the Belt and Road Initiative that will further integrate the global economy to China and
make the world dependent on China even more.
This dependence on China is pushing countries to use Yuan, take loans from Chinese banks,
and use China's payment system CIPS, China's alternative to SWIFT.
But most importantly, China is building a military that could stand up to the United
States.
Anyone who has ever challenged the authority of the US dollar found himself at the mercy
of the most powerful military in the world, but with the second-largest economy in the
world, China has the resources to match the United States.
China's military budget increased from less than 10 billion dollars to almost 300 billion
dollars by 2021.
China has built modern fighter jets, the largest navy with two aircraft carriers and five in
construction, and hypersonic missiles.
China's economy is projected to surpass the US economy in the next 10 years, and when
that happens, imposing sanctions on China will hurt the US more than it will hurt China,
and that's when the Chinese Yuan will replace the dollar as the global reserve currency.
However, not everything is sunshine and rainbows.
china’s economy is slowing down, its population is shrinking
China’s neighbors are building closer ties with the United States to confront China.
China is stuck in the middle-income trap.
China is experiencing a shortage of high-quality chips after the US started a trade war with
China.
On the other hand, Russia's economy is in serious decline after US sanctions.
So, will China's Yuan really replace the US dollar as the global reserve currency?
While China has made significant progress in the last 30 years, its GDP per capita is
still a little over $12k, which is almost 7 times less than an average American.
Boosting GDP by building infrastructure is easy, but moving from an industrial economy
to a high-tech service economy is the hardest part.
Many countries get stuck in this middle-income trap, which is why China's economy might not
surpass that of the United States in the next 30 or 40 years.
Secondly, selling oil in yuan won't matter because the United States is energy self-sufficient,
but most importantly, oil will matter less and less as the world moves towards clean
energy.
About 30 percent of the world's electricity comes from renewables already, and that number
will grow faster and faster.
Clean energy Thirdly, Russia's economy is a tiny fraction
compared to the United States.
With Russia no longer having access to the European market and technology, its exports
will shrink, and it will become more dependent on Chinese imports, which will lead the ruble
to lose more of its value and shrink the Russian economy further.
International trade is not based on moral principles and values.
People use the currency they can trust, whether they like that country or not.
China, which is trying to replace the US dollar, is the biggest holder of the dollar with over
$3 trillion in its reserves.
The United States has the best geography in the world, the most powerful military, and
despite being an advanced economy, it still grows at an average rate of 3 percent.
If China overcomes its problems and escapes the middle-income trap, it might be used as
one of the currency reserves, but it certainly won't replace the US dollar in the foreseeable
future.