Transcription
Okay? So, today I want to talk about something that sounds crazy. It sounds like a conspiracy theory. Trump, it sounds like something you would read on the internet at 2:00 in the morning and then laugh about and go to sleep. But, I want you to stay with me because by the end of this, you will not be laughing. You will be sitting there thinking, "Oh my god, this is actually happening right now."
And the move I am talking about, it is not a military attack. It is not a nuclear bomb. It is not a war. It's something much more quiet, much more subtle, and honestly, much more terrifying.
>> [snorts] >>
Okay, so let me ask you a question first. What holds the West together? Think about this. What is the glue that holds America, Europe, the entire Western world together? Is it democracy? Is it freedom? Is it NATO? Is it the military? What is it? Think about this carefully. And the answer, okay, the answer is going to surprise you. The answer is the dollar. Okay? The US dollar. That is the one thing, the single thing that holds the entire Western world together. And and today, I want to show you how that one thing, the dollar, can be destroyed. And if the dollar is destroyed, the West collapses. Not slowly, not gradually, overnight. Okay, does that make sense? So, let us begin.
Now, first, I want to give you some history cuz without history, you cannot understand the present. Okay, so let us go back to 1944. World War II is almost over. America and Europe, they know they are going to win. Germany is finished. Japan is almost finished. And so, the leaders of 44 countries, they all sit together in a small town in New Hampshire called Bretton Woods. Okay? And they ask themselves this question. After the war, how do we organize the global economy? How do we make sure that countries can trade with each other, that businesses can grow, that we never have another Great Depression. Okay? Because the Great Depression, that is what led to Hitler. That is what led to World War II. So, they are terrified of another Great Depression. And so, they make a deal. And the deal is very simple. Every currency in the world will be tied to the dollar, and the dollar will be tied to gold. Okay? So, 1 oz of gold equals $35. That is fixed. That is the agreement. Does that make sense?
So, the whole world is now running on the dollar. America is the banker of the world. And why did everyone agree to this? Because in 1944, America had 70% of all the gold in the world. Okay, 70%. America had it all. They had the factories. They had the military. They had everything. So, everyone said, "Okay, fine. We trust America. We will use your dollar." And this is what we call the Bretton Woods system. This is the foundation of Western power.
But, now here is where it gets interesting. In 1971, okay, Richard Nixon, the American president, he does something shocking. He goes on television and he tells the world that America is no longer going to convert dollars into gold. Okay? He just cancels the agreement. He just says, "Sorry, we are not doing this anymore." And the world is shocked. Every economist, every banker, every world leader is shocked because now what is the dollar backed by? Nothing. The dollar is not backed by nothing. It is what we call a fiat currency. Fiat means by decree, by law, we say this paper is worth something. We say so. Trust us. Okay?
And so, here is the question that every serious economist asked in 1971. If the dollar is not backed by gold, why would the whole world continue to use the dollar? This is a great question, right? And the answer is very dark. The answer is very dark. The answer is oil. Okay, so here is what happened. Nixon, he makes a secret deal with Saudi Arabia. And the deal is this. America will protect the Saudi royal family. America will sell weapons to Saudi Arabia. America will guarantee the security of Saudi Arabia. And in return, Saudi Arabia agrees to only sell oil in US dollars. Only. No other currency. You want Saudi oil? You need dollars. Okay? And then, America pressures the rest of OPEC, the rest of the oil-producing countries to do the same thing. And they all agree. And this is what we call the petrodollar system. Okay? The petrodollar, petro means oil. So, now the dollar is backed by oil. Not gold, oil. And this is genius. Okay? This is actually genius because what does every country in the world need? Every factory, every car, every airplane, every ship. What do they all need? Oil. Right? So, if you need oil and oil only costs dollars, then every country in the world must hold dollars. Every country must buy dollars. Every country is now dependent on the dollar. America has basically made itself the most important country in the world not through military force, but through financial engineering. Okay, does that make sense?
So, now let me explain why this is so powerful. Okay, let us do a thought experiment. Okay, imagine you are a small country. Let us say you are Brazil. Okay? You are Brazil and you want to buy oil from Saudi Arabia. What do you do? Uh First, you need dollars. So, you sell your soybeans or your iron ore or whatever you produce, and you exchange it for dollars. Okay? Then, you use those dollars to buy oil. Simple, right? But, here's the thing. Where do those dollars go? They go to Saudi Arabia. And what does Saudi Arabia do with those dollars? They put them in American banks. They buy American government bonds. They invest in American companies. So, the dollars go out, they come back. They go out, they come back. Okay? America is like a giant vacuum cleaner, constantly sucking in money from every corner of the world. And this is why America can spend more than it earns. This is why America has a debt of $34 trillion and nobody panics because the whole world is holding dollars. The whole world needs dollars. So, America can just print more dollars and the world absorbs it. The world has no choice. Okay? Does this make sense? This is extraordinary. This is the most extraordinary financial system in the history of the world. And now you understand why the West is so powerful, right? It is not just the military. It is not just democracy. It is this dollar system because whoever controls the dollar controls the world. Whoever controls the world's reserve currency controls global trade, controls global finance, controls the global economy. And America has had this power since 1944, for 80 years. 80 years of financial dominance. Okay?
But now, okay, now we come to the scary part. Now we come to the one move that could collapse all of this. And this move, it is already happening. It is happening right now as we speak. And the country making this move is China. Okay, but not just China, Russia, Saudi Arabia, Iran, Brazil, India, South Africa. These countries together, they are making one quiet, coordinated move. And that move is called dedollarization. Okay? Dedollarization. Say it with me. Dedollarization. This means these countries are slowly, carefully, deliberately trying to stop using the dollar for international trade. They are trying to build a parallel financial system that does not need the dollar. Okay? And if they succeed, okay, if they actually pull this off, the consequences for the West are catastrophic. I am not exaggerating. I am going to show you exactly why.
Now, let me first tell you what BRICS is because this is very important. BRICS stands for Brazil, Russia, India, China, South Africa. Okay? These are five countries that came together and said, "You know what? The current financial system is unfair. It is designed by the West for the West. The dollar system benefits America. We are tired of this. We want a new system. Okay?" And so, in 2009, these five countries started meeting together, started talking together, started coordinating together. And in the beginning, the West laughed. Okay? The West said, "Oh, these countries are so different. Brazil and Russia have nothing in common. India and China fight each other on the border. This group will never work. This is just politics. This is just talk. Okay?" But, something happened that the West did not expect. Something that changed everything. And that thing was Russia's invasion of Ukraine in 2022.
Now, wait. Wait. Let me explain. Okay? When Russia invaded Ukraine, America and Europe, they responded with sanctions. The most severe financial sanctions in history. Okay? They froze $300 billion of Russian money that was sitting in Western banks. $300 billion gone, frozen overnight. They kicked Russia out of SWIFT. SWIFT is the global messaging system that banks used to send money to each other. If you are kicked out of SWIFT, you basically cannot do international banking. It is like being kicked off the internet. Okay? And the West thought this would destroy Russia immediately. They thought Russia's economy would collapse in weeks. That is what they predicted. Okay? But, here is what happened instead. Russia did not collapse. Russia survived. Russia adapted. And every country in the world, every country that is not Western, watched this and thought to themselves, "Oh my god. If America can do this to Russia, they can do this to us. If we keep our money in American banks, if we use the dollar for trade, if we depend on SWIFT, then we are vulnerable. America can destroy our economy overnight if they disagree with our politics." Does that make sense? This was a turning point. This was the moment when dedollarization went from being a theory, an academic discussion, to being an urgent, practical priority for dozens of countries. Okay?
So, after 2022, okay, BRICS starts to grow very fast. Very fast. In 2023, BRICS S invites six new countries to join. Saudi Arabia, UAE, Iran, Egypt, Ethiopia, Argentina. Okay? Saudi Arabia, this is huge. Okay? This is enormous because remember the petrodollar deal, the deal Nixon made with Saudi Arabia in the 1970s? If Saudi Arabia joins BRICS, if Saudi Arabia starts selling oil in currencies other than the dollar, that deal is over. The petrodollar is finished. Okay? And in 2023, Saudi Arabia started having conversations with China about selling oil in Chinese yuan. Okay? They had the conversations. It is documented. It is in the news. This is not a conspiracy theory. Saudi Arabia and China talking about yuan-denominated oil trade. This is the one move. This is the move that could collapse the West overnight. Because if oil stops being priced in dollars, the entire reason for the rest of the world to hold dollars disappears. Think about this. If you can buy oil with yuan or or rupees or rubles, why do you need dollars? You do not need dollars anymore. And if nobody needs dollars, then America loses its most powerful tool. It's ability to just print money and have the world absorb it. It's ability to run massive deficits without consequences. It's ability to sanction and punish any country it disagrees with. All of that power evaporates. Okay? Does that make sense?
Now, let me explain what happens to America if the dollar loses its reserve currency status. Okay? Let me be very concrete. Right now, America imports about $3 trillion worth of goods every year. Okay? Clothes, electronics, cars, food, everything. And America pays for all of this with dollars that it prints. Okay? But if the world no longer wants dollars, if the world starts sending dollars back to America saying, "We do not need these anymore." then suddenly America has too many dollars and not enough goods. And what happens when you have too much money chasing too few goods? Inflation. Massive massive inflation. Okay? We are not talking about the 8% inflation you saw in 2022. We are talking about inflation like Venezuela, like Zimbabwe, like Weimar Germany in the 1920s where people were taking wheelbarrows of cash to buy a loaf of bread. Okay? That is what happens when a reserve currency collapses. And this is not just an economic problem. This is a political problem. This is a social problem. Because when people cannot afford bread, when inflation is destroying their savings, when unemployment is exploding, what do people do? They get angry. They revolt. They elect radical politicians. They do extreme things. And you know what happened the last time a major Western country had this kind of economic collapse? 1930s Germany. Okay? I am not saying America becomes Nazi Germany. I am saying economic collapse leads to political chaos. And political chaos in the most powerful country in the world is dangerous for everyone. Okay? Does that make sense?
Now, I know what some of you are thinking. You are thinking, "Okay, Professor, this sounds scary, but China is also not a perfect country. China has its own problems. The yuan is not a global currency. India and China do not even trust each other. How can BRICS actually replace the dollar system?" This is a fair question. This is a very fair question. Okay? And honestly, right now in 2024, the dollar is still dominant. Okay? I want to be honest with you. About 58% of global foreign exchange reserves are still in dollars. International trade, most of it is still denominated in dollars. So, the dollar has not collapsed yet. But here is the thing. Here is the key thing. You do not need to replace the dollar completely to destroy American power. Okay? You just need to reduce dollar dependency enough that America can no longer use the dollar as a weapon. You just need enough countries to trade in local currencies that sanctions lose their teeth. You just need Saudi Arabia and a few other oil producers to accept non-dollar payments often enough that the petrodollar system cracks. Okay? You do not need 100% de-dollarization. Even 30%, even 40% de-dollarization would be enough to fundamentally shift the global balance of power. And that 30% or 40%, we are already moving towards it right now, today.
And now, let me tell you something that very few people talk about. Okay? There is a new technology that is making de-dollarization much faster and much more dangerous for the West. And that technology is blockchain. Okay? Specifically, central bank digital currencies, CBDCs. Okay? China already has a digital yuan. They call it the e-CNY. And they have been testing it for years. And the brilliant thing about the digital yuan is this. If two countries want to trade each other using digital yuan, they do not need SWIFT. Okay? They do not need American banks. They do not need any Western financial infrastructure at all. The transaction happens directly peer-to-peer on the blockchain. America cannot see it. America cannot block it. America cannot sanction it. Okay? So, imagine this. China and Saudi Arabia trading oil. Saudi Arabia accepts digital yuan. The transaction happens on the blockchain bypassing SWIFT completely. America cannot do anything about it. America cannot freeze the money. America cannot punish either country. The sanction weapon is useless. Okay? Does that make sense? This is why this technology is so important. This is why America is so nervous about the digital yuan. Because it does not just create a new currency. It creates a new financial plumbing system that is completely invisible and unreachable to American power.
And now, let me show you some real numbers because I do not want you to think I I am just making this up. Okay? In 2015, Chinese yuan was used in about 2% of global trade. Okay? By 2023, that number had risen to about 7%. Okay, 2% to 7% in 8 years. Now, that sounds small, right? But think about the trend. Think about the direction. And here is the more important number. In 2010, the dollar was used in about 85% of global foreign exchange transactions. By 2022, that number had fallen to about 88% according to some measures. But according to other measures of actual trade settlement, the dollar's share had fallen significantly. Okay? Russia now does more than 80% of its trade in non-dollar currencies. China and Russia do most of their bilateral trade in yuan and rubles. India and Russia made a deal to trade oil in rupees. Saudi Arabia sold oil to China in yuan for the first time in decades. These are not small things. These are structural shifts. These are tectonic movements in the global financial system. And they are all pointing in the same direction. Away from the dollar. Okay?
Now, let me ask you a deeper question. Why is this happening now? Why not 20 years ago? Why not 10 years ago? Why now? And the answer is very interesting. The answer is that America made a mistake, a very big mistake. Okay? America used the dollar too aggressively as a weapon. Okay? For many years, America used sanctions against countries like Iran, Cuba, Venezuela, North Korea. Small countries, weak countries. Countries that the rest of the world did not care much about and the rest of the world looked away. They said, "Okay, those countries did something bad, so America is punishing them. Whatever. We are are fine. We use the dollar. We are safe." Okay? But then in 2022, America used this weapon against Russia. Russia is the largest country in the world by area. Russia is a nuclear power. Russia is a member of the G20. Russia has the world's largest natural resources. And America froze their money and kicked them out of SWIFT. And the rest of the world, the global South, they saw this and they thought, "Oh. Oh, this weapon can be used against anyone. There are no rules. There is no international court that America has to answer to." America can just decide, "We do not like your politics." and boom, your economy is destroyed. >> [snorts] >> Okay? And this realization, this fear, this is what has turbocharged de-dollarization. America's greatest weapon, the dollar, became so scary that it pushed the whole world to find an alternative. America's strength became its weakness. Okay? Does that make sense? This is a very important point. When you use power too aggressively, you generate resistance. You generate coalitions against you. This happened to every great empire in history. The British Empire, the Roman Empire. When you overreach, you create your own opposition. And America overreached in 2022.
Now, okay, let us think about this from China's perspective for a moment. Okay? Because I want you to understand China's strategy here. China is not stupid. Okay? China is very patient, very strategic, very long-term in its thinking. China does not want a sudden dramatic collapse of the dollar. Okay? Why not? Because China holds about a trillion dollars of American government bonds. Okay? If the dollar collapses overnight, those bonds become worthless. China loses a trillion dollars. So, China does not want an overnight collapse. What China wants is a very slow, very gradual, very controlled transfer of power. Okay? China wants to slowly build up the yuan as an alternative. Slowly build relationships with oil-producing countries. Slowly develop the digital yuan as an alternative to SWIFT. And over 10, 20, 30 years, gradually shift the center of gravity from Washington to Beijing. Okay? This is the Chinese strategy. Patient, methodical, long-term. And honestly, it is working. Okay? It is working. And the West is not responding effectively because the West is trapped in short-term thinking. Politicians in America and Europe, they think about the next election, the next four years. China thinks about the next 40 years. Does that make sense? This is a fundamental difference in how these two civilizations operate.
Now, okay, let me also be fair to the West. Let me give the other side of the argument. Okay? The dollar has survived many challenges before. In the 1970s, people said the dollar is finished. It survived. In the 1980s, people said Japan is going to replace America. Japan did not replace America. In the 1990s, the euro was created and people said the euro will challenge the dollar. The euro did not replace the dollar, okay? So, there is a pattern here. Every generation thinks the dollar is about to collapse and every generation is wrong. Okay? And why is the dollar so resilient? Because the alternatives are not ready. Okay? The yuan is not freely convertible. You cannot just go and exchange yuan for any other currency at any time. China controls capital flows. China controls its currency and nobody trusts a currency that is controlled by a government that can manipulate it at any time. India's rupee is too weak. Europe's euro, Europe is divided and has its own internal problems. There is no obvious replacement for the dollar. And this is what the optimist about America say. Yes, the dollar is challenged. Yes, de-dollarization is happening, but the dollar will remain dominant because there is no alternative. Okay? This is a fair argument. I want to be honest with you.
But, here is my response to that argument, okay? And this is the most important point in this entire lecture, so I want you to pay close attention. The question is not whether there is a single currency that can replace the dollar. The question is whether the world can build a system where no single currency dominates, okay? Think about this. Think about this carefully. The goal of BRICS, the goal of China, the goal of the global south is not to make the yuan the new dollar. Okay? That would just be replacing one master with another master. The goal is to create a multipolar financial world. A world where there are many currencies used for trade. Where different regions use different currencies. Where there is no single country with the power to sanction everyone else. Where America cannot use the dollar as a weapon. Okay? And you do not need a perfect replacement for the dollar to achieve that goal. You just need enough fragmentation, enough diversification. You just need the dollar share of global trade to fall enough that America's financial weapon loses its power and that that is already happening. Okay? That is the trajectory we are on. Does that make sense?
And now let me tell you the final piece of this puzzle, the piece that ties everything together. Okay? There is a concept in international relations called hegemonic stability theory, okay? Big words, simple idea. The idea is this, global order, global peace, global prosperity, it requires a single dominant power, a hegemon, a country that sets the rules, enforces the rules, provides security and maintains the global financial system. In the 19th and early 20th century, that country was Britain. After World War II, that country became America. And the American hegemony, the Pax Americana, it has given the world 80 years of relative peace among great powers, okay? No World War no nuclear war. Relative stability. And part of the reason for this stability is the dollar system. Because when countries are financially integrated, when they all depend on the same currency and the same financial system, they have a strong incentive not to go to war with each other. Going to war means being kicked out of the financial system. Going to war means economic suicide, okay? So, the dollar system is also a peace system. Okay? And this is why the collapse of the dollar system is so dangerous. Because if you remove the financial glue that holds the world together, if you fragment the global financial system into competing blocks, then you also remove one of the main reasons countries do not go to war with each other. Okay? A fragmented financial world is a more dangerous world. A multipolar financial world is a more unstable world. Not because multipolarity is bad in theory. In theory, multipolarity, many powers balancing each other, that sounds fair, that sounds just. But, in practice, historically, multipolar worlds have been more conflict-prone than unipolar worlds. The 19th century was multipolar. It ended in World War I. The interwar period was multipolar. It ended in World War okay? Does that make sense? So, de-dollarization is not just an economic story. It is a story about the future of global peace and security. Okay?
So, now I want to bring this all the way back to you. Because I do not want you to think this is just about big countries and big banks and things that have nothing to do with your life, okay? Let me ask you this. If the dollar collapses, okay, if America loses its reserve currency status, what happens to you personally? What happens to people in Pakistan, in China, in India, in Brazil, in Nigeria? Okay? Think about this. Right now, every country in the world holds dollars in their central bank reserves, okay? Pakistan holds dollars. Your government holds dollars. And why do they hold dollars? Because when Pakistan needs to buy oil, it needs dollars. When Pakistan needs to import medicine, it needs dollars. When Pakistan needs to buy any major commodity on the global market, it needs dollars. And to get dollars, Pakistan has to earn dollars by exporting goods. And this creates enormous pressure on developing countries. Okay? You have to manage your exchange rate. You have to worry about dollar shortages. You have to sometimes go to the IMF and beg for dollar loans with painful conditions attached. Okay? This is the pain of living in a dollar-dominated world when you are not America, okay? So, in theory, a world where the dollar is less dominant, where trade can happen in local currencies, that could actually be good for developing countries. That could reduce the financial pressure on countries like Pakistan, like Nigeria, like Brazil, okay? But, here is the problem. Here is the painful irony. The transition from a dollar world to a multipolar world, that transition is going to be incredibly painful. Okay? That transition is going to involve financial volatility, currency crisis, trade disruptions, possibly even military conflicts. And who gets hurt most in times of financial volatility? Not America, not China, the small countries, the developing countries, the countries with weak currencies and fragile economies, okay? So, the countries that theoretically benefit most from de-dollarization are also the countries that will suffer most during the transition. This is a terrible irony. Does that make sense? Okay?
So, let me give you my final analysis, my final thought, okay? The one move that could collapse the west overnight, it is real. The de-dollarization movement is real. The BRICS expansion is real. The digital yuan is real. Saudi Arabia's conversations about yuan-denominated oil are real. These are not conspiracy theories. These are documented, verifiable, real-world developments, okay? But, will this happen overnight? Probably not. Okay? The dollar system is deeply embedded in global finance. It has enormous inertia. It will not disappear in a week or a month or even a year. But, over a decade, over two decades, the trajectory is clear. The dollar's dominance is declining. American financial power is declining. And the world is becoming more multipolar and more fragmented. And the consequences of this, as I have shown you today, are enormous. For global peace. For global stability. For your personal economic security. Okay?
Now, here is the question that I want to leave you with. Okay? And I want you to think about this question seriously. Not as a political question. Not as a question of who you are cheering for. But, as a deep philosophical, civilizational question, okay? The question is this. We have lived for 80 years under the American order, under Pax Americana, under the dollar system. And yes, the system is unfair. Yes, it benefits America disproportionately. Yes, it gives America too much power. But, this system has also, for all its flaws, maintained a certain stability. A certain order, okay? And now we are moving towards something new, something multipolar, something more fragmented. And nobody knows if that new world will be more just or more chaotic, more fair or more dangerous. Okay? And I think this is the fundamental question of our time. Not who wins between America and China. Not whether the dollar survives or collapses. But, what kind of world order comes next and whether human beings are wise enough to build a new order that is both more just and more stable than the old one. Okay? Because history suggests that the transition between world orders is the most dangerous moment of all. And we are living through that transition right now. Today, as we speak, okay? Does that make sense? Thank you.