Transcription
China, Russland, and the BRICS states as a bloc have been attacking the dollar for some time and want to turn away from it. But what if I tell you that Donald Trump and his team are countering this and creating a new possibility that will massively strengthen the dollar, even cleverly structured? What it's about and all the details will follow now.
Hello, dear Hell Investors, it's great to have you back with us for a new video. And as you can see, after a good 5 weeks, I'm finally back in Frankfurt. My long journey, the eternal journey as I called it, is over. I'm honestly quite happy to be back here now and of course, I'm making another video for you. I came up with the idea for this video in London, or rather, the idea came to me there because I had read a few articles beforehand and then had an interesting conversation with a business partner.
If you've been following my channel for a while, you may have noticed that quite a bit is going on regarding the de-dollarization by China, Russia, other countries, or associations like the BRICS states. Let's do a quick run-through of all the things that have been initiated against the US dollar lately. And before I go into that with you and forget, all those who leave a subscription and press the bell will be informed next Wednesday about the SPD's latest plans. There were many letters this week. I didn't want to make the video yet, however, regarding the SPD's demands on the CDU, CSU, and of course, Friedrich Merz. The negotiations are still ongoing. It's Friday morning when I'm recording this video for you. The party leaders want to negotiate in Berlin, so let's see what comes out of it. But no matter where you invest—whether in real estate, in a savings account, stocks, or elsewhere—everyone is affected. The SPD, I would almost say, is currently completely off the rails, and what will ultimately be distilled from this, what demands the SPD, as a smaller partner of the CDU/CSU, can impose, I will discuss that on Wednesday. Let's see what's coming our way. Therefore, leave a subscription, and now let's get into our quick run-through from the insert.
Financial Times: China's holdings of US Treasuries fall to lowest level since 2009. This means that the Chinese, those who have been involved for a longer time, have been massively investing in American government bonds, are getting out. They were once among the top creditors, but are selling more and more of these government bonds because they want to become more independent from the US dollar and because they are of course also massively investing the money they receive from the sale of these government bonds into gold again. We've also covered this in various videos. However, the fact that the Chinese are currently withdrawing from American government bonds is shown in this insert. It's from the US Department of the Treasury and shows that in 2012 and 2014, billions of dollars in Chinese money were invested in the USA in bonds of Amer—of the USA. Meanwhile, we're down to under 800 billion dollars. You don't have to be a great chart technician to see a very clear downward trend here. So, the Chinese are massively getting out of American government bonds and thus also out of the dollar. This is something that has been going on for some time and wasn't such a big topic in the past, as I will show you in a moment. But of course, it's not only China; Russia is also getting out. Other states are at least diversifying, and associations such as the BRICS states are also doing so. Another insert shows you an article from nest.com. At the beginning of the year, the question was asked: How would a new BRICS currency affect the US dollar? I won't go into detail; we've already discussed this in various videos. There are tendencies that the BRICS states want to introduce their own currency. However, the big question, and also my skepticism, is who will be in charge? Will China be in charge? I think the Chinese see themselves absolutely in a leading role. Will India agree? Will other countries agree? It was also discussed that the BRICS states could issue a kind of gold-backed currency. Again, the question arises who will take the lead, how much gold do the individual countries have? You can interpret a lot into this. Something is definitely going on, but there are scenarios that are significantly more likely than others. That the BRICS states will agree in the foreseeable future that they will, for example, choose China as the leading power, that it will then also take care of the currency, and that the others will take a backseat—I see that as less likely at the moment. But the fact alone that China is getting out of American government bonds, that many other countries are getting out, that independence is being discussed, that own trading areas are being created, that an attempt is being made to at least consider a common currency—all this shows that there are doubts about the US dollar and that one naturally does not want to submit to the leadership of the USA, especially to the sanctions associated with the US dollar if you misuse the dollar, so to speak.
What was really exciting in recent years was that, in my opinion, the USA did not resist this creeping de-dollarization at all. This graphic also shows this impressively. It shows the share of different currencies in the reserves of central banks. On the left, the temporal representation begins. The US dollar was at around 66% in the reserves of central banks. Currently, we are at 58%, a reduction of 8 percentage points in the last 10 years. You see the euro below; it stagnates. It has always been relatively constant at 20%, which is also an aha effect because the dollar is becoming less dominant, decreasing, but no one is really shifting into the euro, but into other currencies. Below, you see different color representations. We've already discussed this in more detail in earlier videos. The British pound is included, the Swiss franc is included, and the Chinese yuan is also included. However, they are all still running under Fan Liefen. One must say that the dollar still has dominance, but here, too, one can clearly see this downward trend, that the dollar is decreasing in the currency reserves of central banks, and that the gold share—those who know from the second to last video—is massively increasing among central banks. This is also an aspect. Interestingly, and this has always baffled me, is why nothing has been done by the US government, announced, or at least verbally undertaken, that the dollar is slowly falling behind. I don't want to hold a requiem for the dollar here; it's much too early, and that would actually be completely—that would be completely unserious and unfair to say the dollar is at the end. But one can see a creeping de-dollarization, and this is of course also eroding the power base of the USA, also the borrowing possibilities. If I am the world's leading currency, then everyone must have my currency and also like to buy my debts. This was also an important foundation for the USA being able to borrow so massively in recent years because the whole world needed dollars. If this system dissolves, slowly dissolves, then this is a big problem for the future. This mechanism is definitely understood in the US administration and US leadership, but nothing has been done about it. They watched under Obama, they watched under Trump 1, they watched under both.
And now the new thing, and this is the interesting part, is that the Trump administration is now countering this creeping de-dollarization and has understood that this is becoming a bigger problem as US debt is growing, and as a constant inflow of US dollars is needed to continue financing the debt. And I find the developments of the last few weeks interesting, and that one really has to go through the world with open eyes, that one cannot say, okay, the dollar is depreciating, it's passé, that's it, but that one has to see what the other side is doing. And the other side, under Donald Trump, is currently initiating various measures. For one, Donald Trump has already threatened that if a BRICS currency were to emerge or states were to turn away from the dollar, there would be corresponding sanctions. He has expressed himself relatively vaguely in Trumpian fashion, but he has it on his radar, as his statements show. Then there is this interesting paper by Stephen Mnuchin, I think that's his name, if I remember correctly. In this paper, he said that if countries want access to our dollar from now on, which many need, then they must also participate in government bonds, for example, with perpetual government bonds that yield no interest. This also shows that if countries want access to the American economic area, they are trying to bind them through appropriate measures and at the same time solve the American debt problem.
Another point that comes into play, which has something to do with cryptocurrencies, has to do with so-called stablecoins. If you are not particularly involved in the crypto universe, there is Bitcoin, you've certainly heard of it, there is Ethereum and Ripple and what they're all called, and there are so-called stablecoins. One of the largest stablecoins is Tether, I'll show you an insert. This is from CoinMarketCap, the list of the top 3 largest cryptocurrencies. In first place is Bitcoin, on the far right, with a market capitalization, a total value of 1.7 trillion dollars; then Ethereum, 230 billion dollars, and in third place already Tether with 144 billion dollars. Tether and some others that come after that are so-called stablecoins. Stablecoins mean they are stable. If you trade cryptocurrencies, for example, you can go from Bitcoin to the euro or the dollar or another currency. But you can also go to the stablecoin. This stablecoin allows you to shift much faster from one cryptocurrency to another because you are not dependent on bank transfer times, on transfers, you are not dependent on various intermediaries, but you go from cryptos into the stablecoin and then back into another cryptocurrency, for example, or store the money in the stablecoin, depending on what you want. And one sees that many countries, especially people in unstable countries, sometimes also in poorer countries, are increasingly using these stablecoins to simply keep their money because stablecoins are pegged one-to-one to the currency in which they are backed. For example, Tether, in the form of US dollars, is as good as a US dollar. There are various other problems in the background, that this coupling could theoretically also dissolve. We had this 2 years ago with another stablecoin, but it was algorithmically backed. But it shows that this is a kind of fiat currency substitute in the crypto universe to simply accelerate payments and shifts. The Trump administration now wants to significantly deregulate these stablecoins and to create a regulatory basis in the USA. Interestingly, Donald Trump no longer wants the American central bank, the Fed, to pursue its own currency. This is the e-euro, the e-dollar, a topic of so-called central bank digital currencies, that central banks create their own currencies that then come into payment transactions. The ECB is also working on it; many different central banks are working on it. This was also a topic in the USA. Donald Trump now wants this project to be canceled. He wants to create sensible regulation instead, so that, from now on, if this law comes into force—it is still in the American legislative process—if these laws come into force, then only private companies will dedicate themselves to the stablecoin market, issue their own stablecoins based on the dollar. Among others, Bank of America has already said that if there is sensible regulation, then they will also be involved. Trump therefore wants private American companies to flood the world with stablecoins denominated in US dollars. These stablecoins will then spread worldwide. Some will be used in countries that are ARMS for storage, others in stable countries, others for payments, transactions. But you see where the wind is blowing. One wants to try to flood the world with American stablecoins because, and this is the interesting thing about this way of thinking, if the demand for these stablecoins massively explodes, and we see really good growth in it—Bloomberg had a few articles that it partly almost doubled, year on year, almost doubled the use and also the market capitalization doubled because more and more people are accepting these stablecoins—if there are now more stablecoins denominated in US dollars, these stablecoins must also store the US dollars they use as collateral for their stablecoin in the USA, i.e., in accounts or in American government bonds. Most of them go into short-term American government bonds. This is also a major business model of these providers. If you issue this stablecoin, for example, then at the short-term end, you earn 4-5% interest on short-term American government bonds and either don't pass this interest on at all or only partially. So you see, if you have 20, 30, 40 billion in such a stablecoin as an issuer and only pass on part of the interest and then, for example, have your own 1, 2, 3% interest on this capital that you retain, then this is already a guarantee for massive wealth. And that's exactly what Trump now wants with his government, with a regulation, a clever regulation—regulation doesn't always have to be wrong. He simply wants to create a legal environment that is safe, that these stablecoins are really backed by dollars, that these dollars are then at least in a savings account or in short-term government bonds, that security is guaranteed, and through this, the worldwide distribution should take place. And if the demand for these stablecoins rises, the demand for dollars also rises, and these dollars are in turn used to finance American debt. I must say this is a very, very clever idea that is currently happening, or rather, underway. This is of course also something where Donald Trump, in my opinion, is one of the first presidents of the USA to resist this creeping de-dollarization, and this is really of particular importance because, let's see which direction this goes, it is of importance for us investors, because you see, if the dollar strengthens, we notice that in the portfolio clearly whoever is invested in the USA has gains. If the dollar weakens, we of course also notice that relatively quickly with losses. So let's see in which direction this pendulum swings, but that the USA and Trump are now actively resisting this is a really important and decisive development that will of course also be further accompanied on this channel. Therefore, if you are interested, stay tuned on this big stage of currency shifts that we are currently experiencing, also the currency battles one could say that we are currently seeing. Those interested naturally leave a subscription. Now, I'm also curious about your comments on how you currently see the situation. And then I may say goodbye to you. I'm Sebastian Hell; see you in the next video, and until then.