Transcription
There are three things happening in the economy right now. And if you're an investor, you want to pay attention to these three things.
Number one, the United States government is spending $7 billion a day that it doesn't have, which is why we have over $39 trillion of national debt, which is now starting to become a problem.
Number two, the United States dollar has been the world's reserve currency since 1944. But year after year, the global share of countries holding United States dollars has been falling because central banks around the world want to hold less dollars and they want more gold or other currencies.
And then there's number three, China. China's economy is growing faster than the United States economy, and people are concerned about what it would mean if the Chinese economy is bigger and more powerful than the United States.
And the reason why you want to pay attention to this is because most investors are still investing their money based off of how our economy was 10 years ago instead of what our economy is going to look like 10 years from now. And as an investor, you want to invest your money where the economy is moving, not where it was. And the reason why you want to pay attention to this is because all of these changes create opportunity. And most people are still using their money the way that they did in our old economy, but our economy is changing. And in this video, I'm going to break down what's happening and how we can create opportunity. So, make sure you stick with me until the end of this video because we're going to break it all down.
And because of all the changes happening in our economy with Trump's economic changes, with artificial intelligence and geopolitical events, I'm hosting a live free and virtual investor workshop right around the corner on June 16th at 12:00 p.m. Eastern time, noon, where I'm going to be going over how these changes can create some of the best investment opportunities. I'll be going over my firm's research as to how this can create opportunities for you. It's free. It's live, but you do have to register because our software has a limited number of people that can actually join me live. And every time I've done this in the past, we've hit capacity. So, if you have not registered yet for June 16th at 12:00 p.m. Eastern time, noon, I have the link for you to register down in the description below. And when you sign up, you're also going to get added to Market Briefs, which is my newsletter for investors, completely free. and when you actually show up live on June 16th. You're also going to get a free digital copy of our company's new book, How Money Changed Forever. So, I'll see you on June 16th.
So, here's what I'm going to do. I'm going to talk about what you need to understand with China. I'm going to talk about what you need to understand about the dollar changing. I'm going to talk about what you need to understand about a national debt. And then I'm going to talk about how all this can create opportunity for you. So, let's break this down.
Every country's economy is measured through a number called GDP. GDP is just a number that takes a look at all spending that happens in an economy. And right now, the United States economy is about 31.8 trillion large, while the Chinese economy is approximately 20.8 trillion large. Now, you might look at that and say, "Wow, the United States economy is 50% larger than China's. Why are people concerned about the Chinese economy?" It's because you have to take a look at two things. The first is the growth rate of the economies. The United States economy is growing by around [clears throat] 2.1% a year while the Chinese economy is growing by around 4.6% a year. So now if you do the math, some economists are saying that the Chinese economy is going to be ahead of the United States economy by 2035. Others are saying it's going to happen in the mid 2030s. So now when you run the math, banks on Wall Street believe that China's economy is going to be bigger than the United States economy by the mid 2030s. But that's just the first part.
The second part is something that most people don't understand. The second part that you want to pay attention to is the purchasing power parity. The idea being that China is purposely working to devalue their currency to make their economy look not as big as it actually is. Because if you take a look at how much this $20.8 trillion buys you in China compared to what the $31.8 trillion buys you in the United States. Now, the picture looks very different because this money doesn't go as far as this money does in China. Think of it this way. You have $100,000 in the United States and you need to buy a house. How big of a house can you buy? The answer is it depends. Because if you go to San Francisco or you go to Manhattan, you might be able to buy a shack if you're lucky. But if you take that same $100,000 to Iowa, well, now you might be able to get a three-bedroom, two bath house with a garage and a basement. And so that $100,000 is different depending on what it can buy you depending on where you are. And so now [snorts] when you take a look at that, it's called the PPP, purchasing power parity in China versus the United States, because China is purposely working to devalue their currency to make it cheaper and easier for people outside of China to buy stuff from the United States. What that means now is that this buys you a lot more stuff in China than this buys you in the United States. And when you adjust for that, well, now the Chinese economy looks a lot larger than what it did here. For us here in the United States, the purchasing power parity doesn't make any difference because we're talking about how does a dollar actually translate to buying stuff in the United States. So, it's the same $31.8 trillion. But if we take a look at now how much this $20.8 trillion actually buys you in China, it actually buys you about $35 trillion worth of stuff according to the IMF. Which means if we take a look at the Chinese economy by translating this GDP number to what it can actually buy you in United States dollars in the United States, well now it looks like the Chinese economy is actually bigger than the United States. This is the second reason why people are concerned about the Chinese economy, which is artificially trying to make it look smaller when in reality they're doing that to get people to continue buying stuff from China. So the Chinese economy nominally is smaller than the United States, but it's growing faster than the United States economy. And this is why banks and Wall Street believe that the Chinese economy is going to surpass the United States economy in 2030s. And then number two is if we take a look at the purchasing power parity, you can actually get more stuff in China with this $20.8 trillion than you can in the United States with this $31.8 trillion.
Now, the reason why this matters is because our economic policy in the United States and investment opportunities in the United States change because our government is working to protect the United States against China, which means money is moving based off of our worries about China. I'll show you what I mean.
Economic change. Number one, the United States has put big tariffs on China to change global trade, not just as a way to bring manufacturing back into the United States, but also to move business out of China and hurt the Chinese economy. Number two, the United States invaded Venezuela. Now, there's a lot of reasons why, but don't forget that Venezuela was also a major seller of oil to China. And so now, as the United States has invaded and took over Venezuela, Venezuela is no longer selling oil to China. It's selling that oil to the United States. Number three, the United States invaded Iran. You know who else was a major seller of oil to China at a big discount? Iran. And now the United States has invaded Iran to make it difficult or impossible for Iran to sell that oil to China. And that makes it more difficult for China to keep getting that cheap oil to keep producing products for cheap. Number four, advanced artificial intelligence needs smart semiconductors. The United States produces some very good semiconductors. And now the United States has blocked China's access to getting those semiconductors to prevent China to be able to compete against the United States economically by using those same semiconductors. So the United States is fighting China not with the military but economically with all these changes. And China is responding also economically by trying to hurt the United States dollar because China has been working to dump the United States dollar and treasuries one as a way to hurt the United States dollar. They've been working to push this de-dollarization movement as a way to get away from the United States dollar and weaken the United States dollar. They've been working to strengthen their currency but buying up more gold and we're working to build up something called the BRICS alliance which is a group of countries that are working to build trade to be able to compete against the United States dollar.
This brings me to number two. What are the risks of what's going on with the United States dollar right now? The United States dollar is facing a real challenge for the first time in approximately 80 years. Because in 1944, that was when the United States dollar became the world's reserve currency. It wasn't always the world's reserve currency. Before the United States dollar, it was the great British pound. Now, being the world's reserve currency gives the United States, the United States dollar a lot of power because number one, it means that countries around the world are saving their wealth in the United States dollar. And number two, it means that countries around the world are transacting and doing business in the United States dollar. When countries are buying oil, they're doing it in the dollar. When countries are doing other trade around the world with countries that are not the United States, they do it with the United States dollar. That means more people are using the dollar, there's more demand for the dollar, the value of the dollar goes up. The reason why that matters is because when you enter a time where the government is spending a lot of money that it doesn't have, meaning borrowing a lot of money, that currency can lose value. But if countries around the world are forced to use it, that value stays high. I'll talk more about that in number three.
But at the same time, we're starting to see this thing called de-dollarization, which is countries around the world starting to move away from the United States dollar. We've already talked about how China has been taking steps to move away from the United States dollar, but they're not the only one. Central banks from around the world have been working to acquire more gold to strengthen their currencies relative to the United States dollar. That BRICS alliance that I was telling you before, Brazil, Russia, India, China, and South Africa that was created as a group of five countries to rival the United States has now expanded from five countries up to 20 countries. And for the first time in many decades, we're starting to see certain countries like Saudi Arabia sell oil not in the United States dollar, but in the Chinese yuan.
Now, to be clear, the risk here is not the United States dollar collapsing tomorrow. That's not what we're talking about. We're talking about the United States's ability to keep printing money at the rate that we have done in the past because right now the United States government is borrowing about $2 trillion a year. That means it's spending trillions of dollars every year that it doesn't have. And the only way that it can continue doing that is if people continue to trust and have faith in the United States dollar. And if that trust starts to go down, we might not be able to continue spending money in the coming years the way that we have done in the past. And if that happens, that can have an impact on the economy because our economy runs on spending. And the largest spender in our economy is not mere you. It's not Nvidia or Tesla or Amazon. It is the United States government. Because the government is spending trillions of dollars first that come from taxes and then from money that is borrowed or printed and this money gets injected into our economy. So if the government has to slow down spending because of concerns about the dollar that has a direct impact on our economy.
Now the last thing that I want to say about this to help hammer this point home is that global reserves of United States dollars back in the year 2000 was about 71% which essentially means that 71% of the world's wealth was saved in the United States dollar. Fast forward to the year 2025 and that number has fallen down to around 58.5%. So you can start to see this idea of countries slowly starting to move away from the United States dollar. And as a currency that's not backed by physical gold or any precious metal is backed by people's trust and faith in the dollar. That's not [snorts] a good sign when it comes to value and trust in the United States dollar.
This phrase return number three concerns about the national debt and this concept called the debt death spiral. >> We just talk about a debt uh death spiral and a debt death spiral is that part of the cycle when you when the uh debtor needs to borrow money in order to pay debt service and it accelerates and then everybody sees that they don't want to hold the debt. >> Here's a very rough depiction of how the government's finances work. The United States government lives right here and they have one source of revenue that is tax dollars from taxpayers. And this year the government is going to collect something like $5 trillion in taxes. And then the government is going to go out and spend money. They spend money on things like social security and Medicare and the military. But they also spend money on interest payments on all of the debt that we have. Now, you'd think that the government would run a balanced budget that if we're going to collect $5 trillion, we should only spend $4 trillion. But that's not what happens. We also don't spend all the money that we get. We're not living paycheck to paycheck. So, we're not collecting $5 trillion and spending $5 trillion. We are spending more than we are generating from taxes. So, the government collects this money, then they're going to go out and spend this money. And this year, we're going to spend something like $2 trillion more than what we collected. meaning we're going to spend a total of about $7 trillion. Well, the $2 trillion has to come from somewhere and that is now borrowed money. This is debt. Now, some of that money has to be printed with the help of the Federal Reserve Bank. But this year, we're going to collect about $2 trillion.
Now, the reason why this matters is because over here now on the debt side, we have now racked up over $39 trillion worth of national debt. Meaning if you take up all this debt that we borrow year after year after year, right now we owe about $39 trillion in total of debt. Which [snorts] means the fastest growing expense for our government is not the health care for our senior citizens. It is not the military although we are spending a lot more money on our military. It is interest payments on our debt because number one, the amount of debt that we have is going up. But number two, the interest rate on this debt is also higher today than where it was back during the pandemic era. Which means more and more of your tax dollars are being used not to fund your retirement, not to fund your health care, not to fund your military, not to fund your infrastructure, but to pay back this debt.
Well, here's why it's starting to become a problem. Because we keep spending more and more of this money. And the question is, how long is it until the United States has to borrow money to pay back this debt? Because today, the government is spending 20 cents of every dollar that you pay in taxes just on interest payments. That's not including health care. That's not including your social security, your retirement. We're talking just your interest payments. Could there be a time where the government now says, "Okay, we cannot continue funding our operations unless we borrow money to pay back your debt." It's almost like using your Visa to pay off your Mastercard. That is what's called the debt death spiral. And that's the concern that many economists like Ray Dalia have been warning about that if we continue spending money that we don't have, we're not collecting enough tax dollars. Well, that's going to pose a problem for the government. And if that happens, that's going to make the United States have a much tougher time continue borrowing that money. And if we cannot borrow that money because countries and investors are saying, "We don't want to lend our money to a country that doesn't have the ability to pay it back. They have to go into debt to pay that money back." That is a more risky investment. That could change our economy as a whole because now bond rates would go through the roof, which means mortgage rates would go higher, car loan rates would go higher. it would hurt the stock market and that has a direct impact on many different parts of the economy and your job and your paycheck. So this national debt concern is really a concern about the health of the economy as a whole because this could trigger pain in the economy.
Now couple that with other things that are happening in the economy like high oil prices which is making the inflation problem worse which also hurts the value of the United States dollar. At the same time we're also seeing concerns about artificial intelligence hurting jobs. All of these things impact the economy which create pain but it can also create opportunity. And that's the thing that I want you to think about is understand that these three things are happening at the same time. It doesn't mean that the economy is going to fall off a cliff tomorrow. But these three things are happening. And as an investor or as a financially savvy person, you want to understand that these three things are happening and understand well what does this mean? And this is where we can just take a look at history because our economy has been evolving decade after decade after decade and we start to see some patterns.
Let me break this down again. This is exactly what I'm going to be talking about on my workshop on June 16th. I'll be laying out all of our firms research as to where the investment opportunities are moving. If you haven't signed up for that workshop, I have that link for you down in the description. But what we talked about so far is that we're seeing three major changes happening in our economy. Number one is the shift with China because the Chinese economy is growing faster than the United States economy. And nominally, it's not bigger than the United States economy, but if you start to take a look at what those dollars can actually buy you in China, well, now things start to look a little bit different. And the concern is if the Chinese economy continues to grow faster and overtakes the United States economy, what would that mean? And those are the things you want to start thinking about because a lot of people are now predicting that's going to happen in the next decade.
Then we take a look at what's going on with the dollar and de-dollarization. As countries around the world, not just China, but multiple countries around the world are starting to separate themselves from the United States dollar. We're seeing the dollar being a lower share of global reserve currencies around the world because people are saving their wealth less in the United States dollar. And the reason why that matters is because the dollar is not backed by gold. It's just backed by trust and faith and value and promise. Well, if people are using less of the United States dollar, that brings lower value to the United States dollar.
And then we have the concerns about our national debt and our economy because we know that right now the fastest growing expense in our economy is not our military, is not healthcare, is not retirement. It is interest payments on the national debt. And if we hit a point where now the government has to borrow money to pay back this interest, people are going to have a harder time continuing to lend money to the United States dollar. That would create a shakeup in the bond market. That would create a shakeup in our economy. That would create a shakeup in the job market and paychecks. That's why you want to pay attention to that. Couple that with all the changes that are happening in the economy, which include AI taking jobs now, which include higher oil prices and its impact on oil. All of these three things now are happening at the same time. And this is where now let's take a look at history to see how money has changed because this can help give you an idea of what this means.
Because what happens is a lot of people hear this and then they panic and they freak out. They say, "Oh my god, we've never seen anything like this before." And the reality is that's not true. We've seen a lot of changes in our economy decade after decade after decade. And the idea is there are similar patterns. And so let's just start by taking a look at what this means from a general perspective. That way you can start to understand now how things have changed in our economy in the past. Because while history doesn't exactly repeat itself, it does rhyme.
So let's break this down by taking a look at our economy and numbers over the last 50 years. The median income in America in 1975 is about $11,800. Fast forward to 2025, the median income jumped up to around $80,000, which means the median income in America grew by about 6.8 times. Not bad. But let's compare that to the prices of things that most people need. The median home in America went from around $38,100 to about $417,000, which is a growth of around 11 times. Buying a new car went from around $5,000 up to about $50,000, which is a growth of about 10 times. Going to a public university was about $540 for one year in 1975. Fast forward to 2025, it is about $12,000. That's a growth of about 22x. And then let's take a look at the cost of health insurance for a family of four. Back in the year 1975, it cost you around 550 bucks. Fast forward to 2025, and that same family of four would spend around $24,000 over a year for health insurance, which is a growth of around 44x, which means, hey, your income grew by 6.8 times. Sounds pretty good. But when you compare it to the price of houses now 11 times more, cars 10 times more, college 22 times more. health insurance 44 times more. You can start to see how the growth of people's incomes over the last 50 years hasn't kept up with the prices of things.
But let's compare now incomes, the prices of things with the prices of assets. If you put your money into the least aggressive investment, which would be United States Treasuries, meaning just lending your money to the United States government, this is considered a risk-free investment. So, we're not talking about taking high risk here. $10,000 invested in 1975 would have grown to about $80,000 with all the interest in 2025 which is a growth of about 8x which is beating incomes even though it's a considered a risk-free investment but it's not keeping up with the price growth of a lot of other things that you need. This is the risk-reward difference of a low-risk investment like bonds. The risk is very low but so are the returns. Although it is still better than income growth over the last 50 years.
If you bought $10,000 worth of gold in 1975, it would have grown in value to about $200,000 by 2025, which is a growth of about 20 times. Now we're talking. Now you're starting to see some real growth in the value of your assets. But now, if you took that $10,000 and you invested it into real estate, not as a home to live in, but as a rental property where you're also generating rental income, well, now the numbers really start to look different because now you're talking about assets that are working to produce value because the gold isn't producing value. was just sitting there looking back at you. This real estate is working to produce value. And I get it. What house can you buy for $10,000? That's not what I'm talking about. I'm talking about if you had invested $10,000 into real estate and you also factor in the rents. Well, now the $10,000 would have grown to somewhere between $800,000 to a million depending on how aggressive the real estate was and what types of returns you were getting on the rent. But if we just look at some average returns, your money would have grown to somewhere between $800,000 to a million, which is a growth of somewhere between 80 to 100x.
And then if we take a look at the broadest measure of the stock market, the S&P 500, which is a group of the 500 largest companies in the stock market, well, over the last 50 years, we have seen big recessions. We saw the 2020 pandemic. We saw the 2008 crash. We saw the 2000.com bubble bursting. We saw recessions in the 1970s. I mean we saw a lot of things happen. We saw inflation crises. We saw oil crises. So the decades between 1975 to 2025 were very volatile. A lot of ups and downs. But despite the recessions, despite the multiple market crashes, what we saw is that if you invested $10,000 in 1975 into the S&P 500, and you just held on and you reinvested those dividends over the multiple crashes, over the multiple ups and downs, by the year 2025, now your money would have grown to about $1.4 million and so many again that you reinvested the dividends which is a growth of about 140x which means if you just rely on your salary you saw growth in your income but that growth in income did not keep up with the price growth of your home your car your college or your health insurance. If instead you put your money into the lowest risk investment, which would be something like a treasury bond, [snorts] well, now your money would have grown faster than your income, but really not that fast to keep up with the price growth of a lot of assets. If you put your money into just gold, well, yeah, gold has some really good periods, especially when people are concerned about inflation, when they're concerned about recessions, but it wasn't producing value the way the other assets did, and it did beat multiple price growth of things like your home and your car. but it still didn't keep up with college and health insurance.
Now, if we take a look at real estate as an investment where not only are you seeing the price growth of a house, but you're also now getting rental income. That's the purpose of your investment. Well, now the numbers look very different than here because now your money grew by 80 to 100x as opposed to just 11x because now you're buying it with the purpose of making money instead of just living in the house. You're not just thinking about appreciation. You're also looking at rental income. Well, now your money grew by 80 to 100x, which now you can start to see the value investing your money. And then if you put your money into the stock market, well, these five decades were great for the stock market overall. There were some bad decades. There were some horrible years. There were some really bad recessions. There were some really bad market crashes. But despite all that, if you just held on and he held on for a long time and he just reinvested the dividends, well, now you had that 140x growth.
So what does this mean? What this means is that the people who become wealthy are not the people that just rely on their incomes. It is the people that invest their money but not just try to trade. They're investing their money for the long run in good assets. There are periods where gold booms. But if we take a look at the long run, what we see is that gold does not outperform other assets like real estate and stocks. Now, does that mean that well, every year gold is going to underperform stocks and real estate? No. There's going to be periods when gold way outperforms the stock market like we've been seeing happen. But over the long run, remember, we're talking about decades. Now, what we've seen is that real estate and stocks, especially when you reinvest your profits, really start to build wealth. So when you have concerns, the person that becomes wealthy is the long-term investor, assuming you're a long-term investor, the two key words. Because if you're just relying on your income, you're going to become poorer. Unfortunately, that's the way that economic system works. But if you are an investor who wants to own assets for the long term, well, that's where the opportunity is.
Now, if you want to get even more niche, this is where active investing comes into play where instead of just putting your money into the S&P 500, now [snorts] you're going to find opportunities because now you can capitalize in those huge growth periods of gold. You're going to capitalize on huge growth periods in the stock market. You're going to capitalize in huge growth periods in the real estate market. That is what active investing is all about. And that is where even bigger opportunity is. It's because now you are investing your time into understanding, well, this is a period where gold might boom. This is a period where energy stocks might boom. This is a period where tech stocks might boom. This is a period with real estate stocks or real estate itself might boom. If you're willing to invest in that, well, now you can get even better returns, but it comes with more risk and you have to understand what type of investor that you are.
Again, this is what I'm going to be going over on June 16th. I'm going to be going over how you can find those opportunities today in today's economy because they are shifting. Again, if you haven't registered for it yet, I have that link for you down in the description. But that's what you want to understand. Instead of panic and freaking out about this, understand that all of this creates opportunity. How do we know? We can just take a look at history. The 1970s had an inflation crisis. The 1970s had an oil crisis. The 1970s had a high interest rate crash that brought down the economy, that brought down the stock market. We saw multiple oil crisis after that. We saw them happen again in the '90s. We saw the.com bubble bursting. We saw the 2008 great financial crisis. We saw the pandemic despite all that. Take a look at how assets have done for the long term. People will panic. We will see downturns. We will see recessions again. But the people that win are the people that can cut out the motions and find the opportunity for the long run.
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President Trump is now unleashing the biggest AI push the world has ever seen. >> America is the country that started the AI race. And as president of the United States, I'm here today to declare that America is going to win it. In plain English, that means hundreds of billions of your tax dollars are