Transcription
The US Iran war is essential to save the US economy. And this might sound very controversial, but I was trying to understand what is the true reason that the United States out of nowhere suddenly decided to launch this war against Iran. And after digging into the numbers, it seems like this is probably the only way to save the US economy from the national debt that is exponentially rising.
Now, this sounds like an exaggeration and it might not make sense at first glance. And in this video, it might seem like I will be trying to justify the war, but I want to make a disclaimer that I am not trying to justify a war. I am not trying to say that this war is necessary. All I'm trying to tell you is to explain how this war could potentially save the US national debt. So, let's get politics out of the way and focus on economics and the numbers.
The biggest threat to the national security of the United States is the national debt that is rising faster than ever. Even if you check the war out, the debt to GDP ratio by 2030 would have hit about 150% or by 2031. And that is disastrous because the interest payments would exponentially rise to about 1.5 or $1.7 trillion. And that means that a big chunk of the US budget will be allocated just to make the interest payments to avoid bankruptcy.
Now with this war, the debt to GDP ratio if this war turns into another forever war is going to grow to 150% much sooner than most people expect. And that is during the Trump's presidency. So that is probably 2027 or 2028. And interest payments are already going to exceed $2 trillion within Trump's presidency.
Now, by looking at these numbers, it might seem like it doesn't actually make sense. Not starting a war and delaying this war or entirely preventing it would have been far better for the US national debt because the US national debt is now rising much faster with this war than without the war. But unfortunately, that's not how the global economy works. And here is the plan to save the US debt by waging this war.
So, how do you actually solve a debt problem? Now the biggest problem is that if there is no demand for the US debt, yields will rise. If there is a strong demand for the US debt, yields are going to fall down. So the only way to fix it is by creating a huge demand for the US dollar and at the same time creating a situation or an environment where the US dollar does not have a competitor and that means that the world will have no other option but to continue buying US treasuries.
Now why would anybody buy US debt? Because the dollar is the global reserve currency. A lot of countries across the globe have to keep a lot of US dollars. But keeping dollars is not sustainable. It is not the most rational thing to do because there is consist of inflation. So everybody in the world one way or another invest that money. So most of that money is invested in the US treasuries because you can get at least some interest payments from the US treasuries. China for example that is trying to compete with the United States for the status of the global reserve currency holds hundreds of billions of dollars of US treasuries. Why? Because they need a lot of dollars and you can't simply just hold dollars. You will keep holding US treasuries.
This war is going to lead to high oil prices. Now at first glance it seems like a catastrophe for the US economy because lower oil prices would benefit the US economy much more than high oil prices. But there's something that is called petro dollar. The Gulf countries are right now which are at war with Iran directly because these countries host a lot of US military bases. So they're getting hit by Iran because of this war. They've signed an agreement with the United States that they will be only selling their oil with US dollars. That means that now suddenly the entire world since 1970s has been buying oil with US dollars.
Now, if you need US dollars to buy oil, that means that you have to store a lot of US dollars because you're consistently buying oil to run your economy. Now, remember I told you you can't just be holding US dollars because there is inflation and it's losing money. So, you are buying consistently US debt. So, the demand, the petro dollar was one of the major reasons why so many countries are buying US debt. When oil prices are $60 per barrel, that means that the world is buying $2.3 trillion worth of dollars to buy oil. That is a lot of demand. That is a lot of demand from across the globe for the US treasuries. Now oil prices have risen to $120. That means that now the world would buy a lot more US dollars. Now the world would buy $4.6 6 trillion dollar worth of US debts because they need to do that otherwise their economies are not going to function.
So at first it might seem like high oil prices is really bad for the US economy. But if you actually zoom out and think about it, high oil prices are going to massively increase the demand for the US debt, which means that the yields on the US treasuries could go down, which means that the debt is going to become much more sustainable.
The next question is who exactly is buying oil from Middle East? That is China, Japan and mainly Asian countries. The European Union also buys a lot but European countries are the closest allies of the United States and they're not going to sell US treasuries no matter what happens. This is going to be like the worst case scenario. But China has no other option but to continue buying US debt. And the Chinese economy is the world's second largest economy after the United States. Now they have a lot of power and a lot of money to buy a lot of US treasuries. Now they are forced to buy US dollars which means that they are forced to buy US treasuries because they need to buy all of that oil from Middle East.
Now another important thing to pay attention to here is that Middle East was planning to sell their oil in Chinese yuan. So before this war started over the last couple of years, Middle Eastern countries started testing and experimenting that what if we instead of selling oil in US dollars, we will be selling oil in the Chinese one. That is a huge national security danger to the United States because if petro dollar is going to be over suddenly the demand for the national debt is going to be over and that could potentially crush the entire US economy. But now because there is an entire war in the entire Middle East and the only hope that these Middle Eastern countries right now which is Saudi Arabia, Qatar, Bahrain, UAE, they are under the protection of the United States. So now they have no other option but to abandon all of these dreams and plans of selling their oil in Chinese. Are you going to sell it in US dollars? Because you have you need protection. You are under war. You are under missiles. So if you don't listen to Uncle Sam that is going to tell you that you have no other option but to do it in US dollars, you're going to do that because this is a war and during a war, nobody's going to take such a huge risk by diverting out of the United States.
If the United States will successfully change a regime in Iran, so I'm not going to I'm not sure what's going to happen with Iran. I'm just saying that if the United States will achieve its objective by turning Iran into a pro- US country, that means that Iran will join the Middle Eastern countries in a coalition to sell their oil in US dollars. And that means that China will have no other option from now onwards but buy the massive chunk of its energy with US dollars. That means that China will be spending hundreds of billions of dollars annually buying US treasuries and maintaining US debt. Not because China wants to do that, but rather China will have no other option because it needs all of that energy to continue boosting its economy and growing its economy.
But here's another interesting fact with the Iran war that delivers Trump's objective. So Trump basically campaigned that he wants to bring manufacturing back to the United States. He literally criticized all of these companies that they offshore manufacturing to China, to India, to Vietnam. And now the moment he became the president, the first thing he did is that he raised the tariffs on China at at some point tariffs were 180%. Now, the objective was that I'm going to make it so expensive for you to bring that thing to the United States that you will not find it economically and financially viable to manufacture it in China. And it's going to be a lot cheaper for you to manufacture it in the United States. So, Apple, if you want to manufacture your iPhones, for God's sake, do it in China. But you're going to come here and you pay such huge tariffs. So it was a reason to push these companies to manufacture things in the United States. But he failed because the Supreme Court has decided that these tariffs are unconstitutional and now we won't have these tariffs at all. So Iran war could actually be a perfect opportunity to push these companies to do that.
How? First of all, we are going to have high energy cost and that means that now manufacturing in China is going to be a lot more expensive. You could do that when oil prices were low. But now when oil prices will rise to above $100, $120, maybe within a couple of months they could rise to $150. Now manufacturing in China is no longer going to be as cheap as it was in the past. Well, the United States is the largest producer of oil. So, if you just take the cost of energy, manufacturing in the United States will no longer seem insanely expensive compared to China. Secondly, the cost of insurance. When there is a war in the Middle East and all these ships have to pass through China and Middle East, the cost of shipping is going to exponentially rise because it is happening outside the United States in that part of the world. So if you want to reduce your cost and reduce your risk, maybe it's a lot cheaper to just do all of that in the United States instead of handling this globalization.
Now manufacturing globally will simply just become much more expensive. So, US companies might think, we don't want to take all these risks for years to come. So, it's going to be a lot more financially reasonable to do that in the United States. Even foreign companies could bring manufacturing to the United States when they're selling in the United States. So, if you're a Chinese company and you're selling something or building something in China and selling it in the United States, just come to the United States because of all of this chaos that is happening in that part of the world. It might simply be for you financially better to do it in the US. The same thing would apply to all other companies. So the longer this war is going to last, the longer this war is going to continue, the more likely companies will bring manufacturing to the United States, which was literally the main promise that Donald Trump has made during his campaign.
Now, I'm not trying to justify him. I'm not trying to defend him. I'm not trying to kind of take a political stand. All I'm trying to do here is that what are the consequences or the financial consequences of these actions?
Another most important thing that he might be trying to do and this is probably the most dangerous act is that he wants to lock in the world in US dollars and then devalue the currency. So now this war is going to force these Middle Eastern countries not to move away from the dollar because they're under the attack of Iran which means that now they're forced to stay in with the US dollar. That forces China to buy a lot more energy by using dollars. So they're also locked in. And the same thing would happen all across the globe because that is the dominance the United States have now that everybody's locked in and they have no other alternative besides the US dollar.
The US dollar or the US government at this moment can use this opportunity and massively devalue the dollar. Now, this sounds so theoretically impossible because this is only possible in theory. I mean, who would do that in practice? But if you kind of just go back historically to the United States, the United States has already successfully done this multiple times. And the best example is FDR. So FDR when he was the president during the great depression he has faced a very serious problem. The United States is already in a depression for almost 5 years and he has to get out of the economy out of that depression. The main problem was that the stock market turned into such a huge bubble that it when it crashed it took down with it the rest of the economy. So the only way to get out of this debt or get the country out of this debt is was to massively devalue the dollar. So at that time the dollar was pecked to gold and a single ounce of gold used to worth about $20.67. So FDR becomes the president and he passes a law that says that it is illegal for anybody in America to own gold and you got to sell your gold to the government of the United States. So throughout the entire year, every American that has gold goes to the US government and sells it for $20.67 because if our dollars will be packed to gold anyways, what is the point of carrying this gold and that is basically how we trust the US government. Literally the next year FDR comes out and says that now the pri the new price of gold is $35 an ounce. So instantly overnight the dollar loses 40% of its value. The strategy was simple. Lock in first everybody because you have got everybody's gold at the hand of the government and then suddenly devalue it.
So Trump most likely will attempt to do the exact same thing. And that was not done once. It was done multiple times through different strategies. So back in 1930s and 40s the United States had a huge debt problem especially during World War II. That was for the first time that the debt to GDP ratio has crossed 100% and that was the national threat to the United States. Now we are facing a very similar problem. In fact, the debt to GDP ratio today is 125%. Which is way worse than it was back during World War II. So how did FDR solve that problem? He forced the Federal Reserve to lower down interest rates while inflation was high. So the US government goes into a war during World War II and wars always create massive inflation because you're continuously spending money. The government borrowing money and spending money, borrowing money and spending money. That increases massively the supply of money which creates a lot of inflation. But FDR literally destroyed the independence of the Federal Reserve. Now we are criticizing Trump for trying to force Federal Reserve to lower down interest rates. But that already happened in the past. FDR literally forced the government or the Federal Reserve to keep interest rates at 3%. That if anybody is going to sell their US treasuries, the Federal Reserve will buy their US treasuries to keep the interest rates and the yields on the US government at.3%. Even though that inflation was really high, when inflation is much higher than the real returns, that means that the dollar is massively losing its value, which means that all of that debt that was borrowed previously loses a lot of its value, which make it a lot easier to pay off.
So essentially, FDR turned the US economy into a war economy because it was massively producing and was creating massive inflation. Donald Trump is probably trying to do the exact same thing. if you draw the parallel between Donald Trump and FDR. Now, I'm not comparing FDR to Donald Trump. I'm just saying that it seems like he's using the exact same playbook.
So, the US government is facing the exact same problem right now. And the moment Donald Trump became the president, he was trying to keep and force interest rates to go down. So remember, he spent the entire last year calling the chairman of the Fed with different names and tweeting all the time that he must lower down interest rates. He accused the chairman of the Fed of corruption. He literally did everything possible. And he once told the reporters that I called him with every name possible and he still refuses to lower down interest rate. Now the term of J. Poll is about to be over probably in a month or so and he will be replaced with somebody that possibly going to be a much more loyal to Donald Trump and he gave multiple interviews that he might be against quantitative easing but he is not mind lowering down interest rates now I don't know if that person is going to be a yesmen to Donald Trump but the fact that he has criticized so much J Paul and now he is replacing him with someone else something is telling telling me that he's kind of confident that he will be lowering down interest rates just like just like he wants. And that means that if this war is going to be turned into a prolonged war, it is going to create a lot of inflation because the government will be forced to borrow a lot of money to continue this war. And if he's going to force the new chairman of the Fed who is going to keep interest rates very low, then inflation will be much higher than the interest rates. And if this war for example continues for three four years then in the next 3 four years the dollar will be so much devalued that paying off the debt is going to be a lot easier just like it was during 1940s with FDR.
And the reason that this is important is that this also might be that the devaluation of the dollar will make it a lot cheaper to manufacture in the United States and that might force and make it easier for companies to bring manufacturing back to the United States. And another very interesting parl that I saw is that this was the reason that allowed FDR to become the president for the third time because he was actually the only person that could force the Federal Reserve to keep interest rates so low and the United States government was fighting a major war in the world which was World War II. the Congress or the American people literally gave him the chance to become the president for the third time, which was literally historical in the history of the United States. And the fact that Donald Trump has hinted multiple times that he want to be a president for the third time. This might be actually his opportunity to literally replay the exact same playbook that FDR has played back in the days that he might be the only person that could force the Federal Reserve to keep interest rates so low until this war with Iran is over. And over the next three, four years, the US government is basically going to erode most of its value of the debt.
And here's the question, why wouldn't the rest of the world just move away from the dollar when that is going to happen? And that's because we have already discussed that before you do something like that, you have to lock in everybody in the dollar. You have to create a situation in the world that nobody will have a chance to get out of it. You will be forced. The Middle East is forced. China is forced, Japan is forced, South Korea is forced, European Union is forced, everybody is simply forced to continue using the dollar so the US government can successfully do the massive devaluation.
Now, I don't know for a fact if this is going to happen, but based on everything that has been happening lately, it seems like they're basically trying to play the exact same playbook that they have already once played on the American people. What it will do to you is that it will massively devalue the dollar which will bring down your wages which will destroy your savings and will just make life a lot more expensive. The way you protect yourself is you understand how the financial markets works. You understand which are the assets that you should be buying to protect yourself in such a crisis. And remember every single such crisis is always a massive transfer of wealth from one group of people to another. So, we are going to see trillions of dollars moving from one group of people into another. So, if you want a step-by-step strategy on how you can massively profit and be on the winning side and literally benefit from that massive transfer of wealth from trillions of dollars, then check out the investing academy. The link is going to be in the description of this.