Transcription
You must not let your fiscal deficits and your dollar come to grief. If it comes to grief in the short term and there's a run on the dollar for whatever reason because your deficits are too big and the world... the financial community and the bankers and all the hedge funds and everybody come to a conclusion that you're not going to tackle these deficits and they begin to move their assets out. That's real trouble. And there is a risk of that perception today. Absolutely.
In 2013, Lee Kuan Yew issued his final warning about America's fiscal trajectory that few took seriously, stating, "Spending is going in the wrong direction, Social Security and Medicare costs will become unbearable within 30 years. If nothing is done to reform the current regime, if American leaders choose to sit on their hands indefinitely, confidence in the US dollar will eventually collapse."
But just 13 years later, Lee's prophecy is coming true. US national debt continues to reach record highs, recently hitting a staggering $38.5 trillion. Additionally, the US dollar's share of global reserves has plunged from 72% in the early 2000s to just under 57% today, with central banks scrambling for gold at rates not seen since the 1960s, signaling a fundamental loss of confidence in the US.
And as the dollar's foundation cracks, nations are quickly building a future where Washington is no longer the middleman. Last week, India, a nation notoriously allergic to free trade, shattered a 20-year stalemate to sign a historic pact with the EU. In the digital space, a coalition of central banks, including China and Saudi Arabia, have developed Mbridge, a blockchain-based platform designed to bypass the dollar entirely. And even Singapore is quietly insulating itself, locking in massive trade deals with South America. Regions Lee once considered too distant to prioritize.
But perhaps most tellingly, even America's closest partners are beginning to distance themselves. We are in the midst of a rupture. Great powers have begun using economic integration as weapons, tariffs as leverage, financial infrastructure as coercion, supply chains as vulnerabilities to be exploited. Now, Canada was amongst the first to hear the wakeup call leading us to fundamentally shift our strategic posture. Canadians know that our old comfortable assumptions that our geography and alliance memberships automatically conferred prosperity and security. That assumption is no longer valid.
This is the story of how Lee Kuan Yew foresaw the dollar's decline and the erosion of American power decades in the making. But you cannot build up enormous deficits that allows all the and do nothing about it. And people say, "Oh, well, this is hopeless." Yeah. There's always a Treasury. They can or there's always a Federal Reserve that will make more money. Yeah. No, they just print more money. They will print more money. Exactly. There's the difference. So deficits, the looming deficit of the United States is what worries you the most because it will strike at the heart of the US global leadership. Absolutely. Absolutely.
To understand why Lee never fully trusted any fiat currency, we need to go back to where it all began. In 1942, when Singapore fell to Japanese forces, the occupiers immediately issue their own currency known as banana money. But to fund the war, they made the fatal mistake every struggling empire makes. They printed and printed and printed. The result, textbook hyperinflation. A bag of rice that cost $5 in the morning could cost $50 by evening. This wasn't just economic theory. This was real time monetary collapse affecting everyone's daily survival.
A young Lee watching this unfold in real time learns the most important economic lesson of his life. Fiat currency is only as good as the institution backing it. And when that institution is reckless, paper money becomes exactly what it is, worthless paper. Decades later, Lee documented his experience with hyperinflation with haunting clarity, stating, "I knew that the moment I had cash, the important thing was to change it into something of more permanent value or it would melt away in my hands." In this mad urge to convert banana notes into assets, I bought myself a full-size billiard table, had it restored and revarnished. The next most desirable asset was jewellery.
Lee watched fortunes evaporate overnight. He watched people who trusted paper money lose everything. He watched those who converted to real assets survive. He noted that gold was particularly valuable, even more so than property, as you could easily transport it during times of crisis, stating, "One ounce of gold, regardless of hyperinflation, you could feed a family for a month, as well as buy medicine and other essentials." Over the millennia, historical experience of devastation and famine caused by drought, floods, wars, and other calamities had taught the Chinese people the value of gold. Indestructible, immutable, and fungeable.
Fast forward to today, and the world's central banks are proving Lee right. For the first time in three decades, central banks hold more gold than US debt, signaling the collapse in trust in paper money. The financial principles Lee forged under the Japanese occupation has never been more relevant. In fact, the Singapore dollar is a testament to Lee's approach to economic management, having consistently appreciated against the US dollar since the 1970s, a rare achievement matched only by the Swiss Franc.
But when Lee was building Singapore, he recognized troubling parallels in America to the monetary mismanagement he had witnessed decades earlier. The mechanism was different. The timeline was longer, but the underlying mathematics were concerning. You and I talked about America's deficit and debt problems and its seeming political dysfunction to do anything about it. I still am. I still am worried. The leaders think they can tweak the problem without paying. And they're afraid to tell the people, "Look, we got to do this. We got to make these cuts and over the period of x number of years 5 6 7 our deficits will go that's the only way otherwise it keeps on growing and your interest rates burden will grow with it."
Today US national debt continues to reach record highs hitting a staggering $38.5 trillion with interest payments alone costing more than the entire US military budget. You see, Lee understood that in a democracy, fiscal discipline is a political liability. When leaders have to compete for popularity, they lose the ability to say no. Slashing the trillions required from social security, health care, and defense would be political suicide. Instead, leaders choose the path of least resistance. They keep the system on life support by printing more money, triggering inflation that eats your future from the inside out. You believe that? And if we do not do something about it, we become a you become an indebted country. We already indebted country. Yeah. Become more indebted and eventually you have inflation. You are indebted in a different way from other countries. Other countries borrow US dollars or pounds or euro euros and they got a payback. You owe yourself US dollars. So you're under no pressure to pay back, but you're under pressure from such a huge amount of currency floating around that you get inflation.
But the story doesn't end there because the dollar is the world's reserve currency. America is also effectively exporting its inflation to everyone else, effectively forcing the rest of the world to pay for its $38 trillion debt. Nations are sick of holding a currency that loses value by design. To them, the dollar isn't a safe haven anymore. It's a leaking bucket.
But as they look for the exit, Lee predicted that the transition away from dollar dominance wouldn't be smooth. In his final published book, he wrote something chilling. "Any change in reserve currency will probably be marked by at least a brief period of confusion. Even if, and this is a big if, the question is settled amicably among the leaders of all the major economies."
Today, as Lee suspected, the transition is anything but amicable. For decades, the world mostly accepted American hegemony and the stability the dollar provided. But this all changed in 2022 when the US weaponized the global financial system. When the US froze $300 billion in Russian reserves, it signaled that the dollar was no longer a neutral utility, but a political tool. It shattered the illusion of a secure global system and turned what had been a slow crawl into a frantic global sprint for the exits.
Central banks around the world went on an unprecedented gold buying spree. In 2022 alone, they purchased over 1,000 tons, the highest annual total in 55 years. They bought another 1,037 tons in 2023. Today, they're accumulating gold at roughly 60 tons per month, more than triple the pre-2022 average.
Meanwhile, countries began restructuring trade relationships to bypass the dollar entirely. In 2014, over 90% of Russia and China's trade was settled in US dollars. But today, a staggering 99.1% of their trade is settled in their own currencies. Saudi Arabia, America's most reliable Middle East ally for half a century, recently started accepting Chinese yuan for oil sales, fracturing the petrodollar system that had anchored dollar dominance since the 1970s.
And new infrastructure has emerged. Project Mbridge, a collaboration between the central banks of China, Thailand, the UAE, and Saudi Arabia, hit full stride in late 2024. By early 2026, it has already processed over $55 billion in trade, allowing countries to settle payments in seconds without needing US dollars or banks as middlemen.
But while the dollar's dominance declines, many assume that the Chinese UN will simply replace it as the world's reserve currency. But Lee was famously skeptical of this narrative, at least in the short term. You see, China maintains significant capital controls over its currency. You cannot easily move large sums in and out of China without government approval. And this limitation is why it represents only 2.5% of global reserve holdings today.
So instead of China taking the throne, Lee predicted a multipolar currency system. As far back as 1999, he laid out the map. "Given the size of the Chinese economy, by 2050, the renminbi is likely to be a major international currency floating freely against the other three major currencies, the US dollar, the euro, and the yen. The world's trade and reserve holdings will be dominated by these four currencies."
And now, recent developments suggest this multipolar vision is materializing. In 2025, China settled nearly 40% of its $6.5 trillion in foreign trade using the yuan, a record number up from around 26% just 2 years earlier. And the ambition is only growing. President Xi Jinping recently renewed his call to build China as a financial powerhouse, specifically demanding a strong currency that can act as a global reserve.
So what of America's future? Despite his repeated warnings about fiscal decay, Lee never made the mistake of betting against America. He remained a pragmatic optimist, believing that the US, like so many times before, would find its way out of the storm, even regarding its staggering national debt. He wrote, "The problem is worrying, but I do not see it as intractable. Both sides know that the nation will be hobbled without a solution and may even go into decline at some point. Therefore, there will be a breakthrough."
Are you confident that the United States will do something about its deficit, which is at $1.3 trillion for the last? Well, if I'm not confident, and I have no hope of that, I wouldn't be here. As simple as that.
But while Lee believed in American resilience, the math has become merciless. With the national debt surging by over $8 billion every single day and the world building a future without the dollar, the question remains, is it too late?