Transcription
If you have a smart president, you will never lose the standard. If you have a stupid president like the last one, you would lose the standard. And if we lost the world standard dollar, that would be like losing a war, a major world war. We would not be the same country any longer.
Well, folks, if the United States losing the dollar standard is like losing a war, then buckle up because the dollar is having its worst year since 1973 and something unprecedented is happening with US treasuries. Take a look at this graph and focus on the pink line showcasing how China is dumping US treasuries at great speed. China has now sold off more than $300 billion worth of treasury bonds over the past 5 years. Something we've never seen a major trading partner do on this scale and with such clear strategic intent. As the world watches the dollar's dominance continue to erode, this article from the Guardian says it best. Trust in the US is eroding. The question isn't if the dollar will lose supremacy, it's when.
Now, at the heart of the dollarization movement is BRICS, the economic bloc of Brazil, Russia, India, China, and South Africa, who are now joined by partner countries to make an economic alliance that surpasses the G7 in population and GDP growth. In fact, emerging Asia accounts for 60% of economic growth in the future with founding BRICS members China and India driving more than half of that growth along with Indonesia, Thailand, and Vietnam, all of whom are partner members of the BRICS organization. It's very clear that the future of our world is coming from countries aligned with BRICS, not the declining G7.
But here is where things get very interesting. No matter how much Trump threatens BRICS, one thing is clear. The world no longer fears the US government. Trump tried to intimidate China and India, proudly boasting that he would impose 100% tariffs against them if they continue to purchase Russian oil. The results? India and China both rebuked Trump's threats and will continue buying cheap Russian oil as leaders will not allow American policy to shape its choices on vital energy supplies. Trump claimed with a smart president, the US would never lose the dollar as the world's reserve currency. But in a twist of irony, it's Trump himself who's accelerating de-dollarization, undermining the very power and prestige he says he wants to protect.
But what makes this even more puzzling is that the weakening of the US dollar isn't entirely accidental. In fact, it appears to be part of a deliberate strategy by the White House. A weaker dollar can make American exports more competitive, supporting Trump's goal of reviving US manufacturing. But as with many of his administration's policies, the approach is riddled with contradictions. Trump has no coherent long-term strategy, and no clear trade framework. Supporting American industry through currency devaluation requires stable and consistent trade. But Trump's erratic tariff threats have frozen global trade, alienated allies, and sent a clear message to the world: The United States is no longer a stable or reliable economic partner. In effect, the administration is making a high-stakes gamble, one that's almost certain to backfire and accelerate the shift towards a de-dollarized world. And that's exactly what we're breaking down in today's video. Stay tuned because this massive gamble puts not just the US economy at risk, but the entire world financial system. Let's jump into it.
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But now let's get back to the story of the US dollar and why for many years the US government enjoyed the exorbitant privilege of the dollar. Because the dollar is the world's reserve currency, countries around the globe are often forced to trade in dollars even when their transactions don't involve the United States directly. For example, if a German company is doing business with a Chinese manufacturer, that trade would still typically be settled in US dollars, regardless of whether an American firm is involved. This global need for dollars creates a constant and immense demand, which continuously props up the dollar's value. And that's why the US can get away with things that would wreck most other economies, like running a massive budget deficit and having a national debt surpassing a staggering $37 trillion without sparking a full-blown currency crisis. Since everyone needs dollars to trade, the US can push its inflation onto the rest of the world. At the same time, global wealth flows into US assets like the stock market, making the dollar even stronger. The dominance of the dollar allows the US to live well beyond its means. It's a privilege that no other country on Earth possesses and one that it frequently abuses.
But this system that has lasted since the end of World War II is collapsing, and it's collapsing fast. Trump is gambling with this very system by deliberately pursuing a policy of dollar devaluation. Despite his public speeches emphasizing the importance of maintaining dollar dominance, his administration is actively moving forward with a strategy aimed at weakening the dollar in an attempt to make American manufacturing more competitive. A devalued dollar makes US-made goods cheaper for foreign buyers, boosting exports and helping domestic manufacturers grow. At the same time, it makes imported goods more expensive for American consumers, reducing the competitiveness of foreign products and giving US producers an advantage in their own market.
Now, the US can achieve this kind of devaluation through methods like lowering interest rates, printing money, running large deficits, or signaling support for a weaker dollar. All of which reduce demand for the currency. This policy direction has been crafted by Secretary of Commerce Howard Lutnik and Secretary of the Treasury Scotty Basent. Trump approved these moves because they've been sold to him by his cabinet as a win for American manufacturing, something he's publicly passionate about. But at the same time, Trump also clings to the idea of a strong dollar because he loves the prestige and power that comes with the US currency being supreme. This is why he constantly boasts about protecting the dollar's dominance even as his administration enacts policies that directly undermine it. This disconnect between what the president says and what his administration actually does is a defining feature of his leadership, and it raises a legitimate question: Does Donald Trump even fully grasp what these policies mean or what their long-term consequences will be?
Quite simply, Donald Trump wants to have his cake and eat it too. He wants to boost American manufacturing while also keeping a strong dollar. But the most disastrous part of it all is that both of these goals require a coordinated set of second-order policy decisions to succeed, neither of which he is pursuing. Simply devaluing the dollar alone is not enough to bring back American manufacturing. It is just one policy that must be implemented alongside a range of other supportive measures.
Let's take a look at China to understand how this actually works. China is by far the world's largest industrial powerhouse. By 2030, China's share of global manufacturing is projected to reach 45%, while the US share is expected to fall to just 11%. China's success is the result of decades of strategic investment by its government into crucial industrial foundations. This includes major investments in education to equip the population with the skills necessary to build and operate modern industries. At the same time, China has poured resources into infrastructure, constructing state-of-the-art ports, roads, telecommunication networks, and transportation systems. But perhaps most critically, China has made massive investments in energy capacity, which has expanded exponentially through a diverse mix of sources, including the largest rollout of renewable energy in the world. Meanwhile, US energy production has remained largely stagnant since 2005. After all this, China has also consistently devalued its currency, making its imports that much more competitive, something the US is now trying to copy.
But the ironic thing here is that Trump believes he can skip over all the crucial steps required to build a competitive manufacturing economy and go straight to devaluing the currency. But while he's focused on weakening the dollar, the foundational elements of a strong industrial base in the US are crumbling. Infrastructure is deteriorating, education levels are at historic lows, and energy production has remained stagnant for years. Because these critical inputs are missing, there are no real incentives for manufacturers to bring their production back to the United States. So, while Trump is devaluing the currency in hopes of making American goods more competitive, there are no domestic goods or factories to compete with Chinese products in the first place. Quite frankly, they simply don't exist in America. America's industrial capacity was hollowed out many decades ago, and no amount of wishful thinking or currency manipulation will change that reality.
And this leads us to yet another fundamental contradiction in the president's agenda. Trump says he wants to bring back US manufacturing, a goal that would take massive government investment. But at the same time, he's calling for spending cuts, smaller government, and lower taxes. In other words, he wants to build without paying the bill. These policies are inherently incompatible. You can't rebuild an industrial economy by starving it of the public investment it needs to function.
So all of this leads to the worst possible scenario for the United States. By devaluing the dollar in isolation, the US literally gets the worst of both worlds. A devalued dollar undermines the dollar's privilege while doing nothing to help US manufacturing. Americans will be paying more for foreign products while there are no domestic alternatives on the shelves to replace them. These are just some of the reasons why devaluing the dollar simply won't work for the United States.
But that is only the tip of the iceberg. Trump's erratic policies aren't just ineffective. They carry much broader implications for the US-led global economy. By creating an increasingly unpredictable trade environment, Trump is chipping away at one of the United States' greatest economic advantages: its reputation as the safest and most stable destination for foreign investment. That reputation rests on the dollar's status as the world's reserve currency, which for decades has given investors confidence that their money is secure in US markets. But that confidence is unraveling. Through constant attacks on the Federal Reserve, chaotic tariff wars, ballooning national debt, and a pattern of flip-flopping policies, Trump has undermined the very predictability that once made the dollar and the United States so appealing.
And we're now witnessing these consequences in real time. Something rare is happening on Wall Street. Stocks, bonds, and the dollar are falling at the same time. Normally, when stocks fall, investors flee to bonds or the dollar as safe havens. But when all three are dropping together, it signals a crisis of confidence in the entire US economic system. It means investors no longer see any corner of the American market as a reliable place to park their money.
Now the world is looking elsewhere. International markets are outperforming US stocks by a wide margin. In fact, the Hang Seng index from Hong Kong is the best performing stock market to date. And check out this report from Bank of America, which states fund managers had preferred US stocks over international stocks for most of the past two decades. But that's changed this year. The latest survey out in mid-June showed a startling statistic: Only 23% now preferred US stocks. This divergence tells a clear story. Capital is starting to flow away from the United States. Pension funds, endowments, and institutional investors are increasingly looking to foreign markets, not just for growth, but for stability.
There's no question that a broader trend of moving away from the dollar is underway, and Trump's chaotic policies have become a major accelerant. And it's not just other advanced economies shifting investments towards markets in places like Hong Kong and Europe. Central banks around the world are also making massive gold purchases, pushing the metal past the euro to become the second largest global reserve asset. Since the start of 2024, the price of gold has surged nearly 62%. Countries are scrambling for an alternative path with BRICS now expanded to 20 member states representing half of the world's population and accounting for 40% of the global economy, including the crucial additions of Vietnam and Indonesia. Meanwhile, there's been a sharp rise in countries trading directly in their own currencies. Most recently, the central banks of Egypt and China agreed to move away from the SWIFT system in favor of local currency trade and the use of China's cross-border interbank payment system, CIPS. All of these developments are rapidly chipping away at the dollar's dominance, much faster than anyone expected.
What we're witnessing isn't just a policy misstep. It's a turning point. The dollar's central role in the global economy has always been as much about trust as it is about economics: trust in US institutions, trust in long-term stability, trust in competent leadership. But that trust is now eroding at a pace that no one anticipated. Driven not by external enemies, but by internal confusion, contradiction, and short-term thinking. The dollar has long acted as the spine of the global financial system. But a spine can only bend so far before it breaks. If the current trajectory continues, we may not just see the end of dollar dominance. We may be living through the end of the American economic order as we've known it. And what comes next won't be shaped in Washington, but in the capitals of a new multipolar world that's already preparing for life after the US dollar.
Everyone, I hope you enjoyed today's deep dive into the US dollar. And I want to thank our video sponsor, Nomad Capitalist, for their continued support. If you enjoy geopolitics and want to prepare yourself for a better future, please visit nomadcapitalist.com and learn more about their incredible service and also their annual event in Kuala Lumpur. I appreciate you all for your continued support and look forward to seeing you all in our next video.