WEBVTT - Saudi Arabia Just DITCHED The US Dollar

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<v Speaker 1>I'm shocked that no mainstream media are currently covering this

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<v Speaker 1>because what I'm breaking down is massive news. Saudi Arabia

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<v Speaker 1>has ditched the US dollar. On Sunday, the ninth of June,

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<v Speaker 1>Prince Muhammad Ben Salmon NBS he refused to renew the

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<v Speaker 1>fifty year Petro dollar agreement between the US and Saudi Arabia. Now,

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<v Speaker 1>real quick for those of you that maybe you know,

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<v Speaker 1>scratching your heads trying to figure out what that means. Basically,

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<v Speaker 1>the US dollar was backed by gold until nineteen seventy

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<v Speaker 1>one when Richard Nixon removed it from the gold standards,

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<v Speaker 1>and then the dollar was sort of like in freefall.

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<v Speaker 1>And then in nineteen seventy four, a couple years later,

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<v Speaker 1>when the US made a deal with Saudi Arabia creating

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<v Speaker 1>what was known as the Petro dollar. Now, the United

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<v Speaker 1>States basically agreed to sell Saudi Arabia cheap military equipment

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<v Speaker 1>and weapons, think you know, protection in exchange for Saudi

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<v Speaker 1>agreed to keep the oil trade domnominated in dollars, meaning

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<v Speaker 1>any country that wanted oil from Saudi Arabia had to

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<v Speaker 1>invest in dollars. Then, as a result of that agreement,

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<v Speaker 1>percent of all global oil trade happened in dollars, and

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<v Speaker 1>that basically cemented the US dollar as the world's reserve currency,

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<v Speaker 1>which the dollar's been since the end of World War

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<v Speaker 1>Two with the Brettonwoods Agreement signed in nineteen forty four.

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<v Speaker 1>But now Saudi Arabia just officially walked away from that agreement.

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<v Speaker 1>So the ripple effects for the US dollar are going

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<v Speaker 1>to be massive, which is why in this video I

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<v Speaker 1>want to go over what exactly is going on, why

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<v Speaker 1>are the Saudis walking away from this deal now, and

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<v Speaker 1>more importantly, where are they going? And then of course

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<v Speaker 1>how is this going to affect our future and the

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<v Speaker 1>potential consequences of it all. So let's get into it now.

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<v Speaker 1>If you're new here, my name is Mark Moss, and

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<v Speaker 1>I talk about a range of topics covering investing, macroeconomics, business, finance, bitcoin,

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<v Speaker 1>and more. But it's crucial that you stick around to

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<v Speaker 1>the end of this video to understand everything we're about

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<v Speaker 1>to break down because these ripple effects could affect you

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<v Speaker 1>no matter where you are in the world. Okay, so first,

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<v Speaker 1>what just happened and what's going on? Well, the decision

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<v Speaker 1>of Saudi Arabia just made not to extend. The petro

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<v Speaker 1>dollar agreement allows them to now sell oil and other

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<v Speaker 1>goods in multiple currencies, including the Chinese R and B, Euro,

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<v Speaker 1>Yen yu want, and even even Bitcoin if they want,

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<v Speaker 1>which it sort of sounds like they may want to do.

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<v Speaker 1>We'll come back to that. But there's basically more choice

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<v Speaker 1>for Saudi, which is of course great news for them.

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<v Speaker 1>But the issue is the problem for the US, and

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<v Speaker 1>that is that the petro dollar agreement that's been going

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<v Speaker 1>on for now decades has kept the dollar in the

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<v Speaker 1>dominant position, and without it, we, speaking of those of

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<v Speaker 1>US that use the dollar system, lose a great amount

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<v Speaker 1>of global power. This agreement acts as a safety valve

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<v Speaker 1>for our economy because it allowed US to release pressure

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<v Speaker 1>by exporting dollars to other countries, because after an oil trade,

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<v Speaker 1>one party is sitting on too many dollars surplus dollars,

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<v Speaker 1>and then those dollars are then reinvested back into the

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<v Speaker 1>US dollar system, usually into US treasuries or equities, or

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<v Speaker 1>or even sometimes local infrastructure. When the excess dollars are reinvested,

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<v Speaker 1>it's called petro dollar recycling, and petro dollar recycling is

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<v Speaker 1>the primary way the US is able to export its inflation. Now,

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<v Speaker 1>petro dollar recycling allows the government to print money and

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<v Speaker 1>keep those dollars outside the US money supply. However, the

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<v Speaker 1>resulting inflation, we feel, although very high, it actually only

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<v Speaker 1>represents about four percent of the monetary expansion because those

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<v Speaker 1>dollars have been exported to the other countries. Meaning again,

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<v Speaker 1>like I said, we've exported the inflation. But if those

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<v Speaker 1>dollars come back, we could experience massive, even potentially triple

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<v Speaker 1>digit inflation in the US. Okay, So now that we

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<v Speaker 1>understand that deal, then the question is why why are

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<v Speaker 1>the Saudies ending the deal now? And then what's this

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<v Speaker 1>new system? Well, from the outside, it looks like they're

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<v Speaker 1>simply stepping away from the agreement to be able to

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<v Speaker 1>trade any currency. They want more options, more choices. If

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<v Speaker 1>you have a store, why not accept more currencies I suppose, which,

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<v Speaker 1>you know, like I said, as a country, seems pretty reasonable. However,

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<v Speaker 1>in reality, there's a few things going on. The First

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<v Speaker 1>one is it turns out that, like in a partnership,

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<v Speaker 1>they're supposed to work two ways, meaning you know, both

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<v Speaker 1>partners should be respectful of each other. But when President

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<v Speaker 1>Biden came in, he basically came into office with threats

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<v Speaker 1>and even name calling, which of course is you know,

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<v Speaker 1>not a good way to start a partnership or a relationship.

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<v Speaker 1>When President Biden was on the campaign trail back in

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<v Speaker 1>twenty nineteen, he vowed to make Saudi Arabia quote the

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<v Speaker 1>pariah that they are, and even Biden initially shunned the

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<v Speaker 1>Crown Prince, agreeing to speak only to his alien father,

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<v Speaker 1>King Solomon. Then he went on to rescind Trump's terror

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<v Speaker 1>designation for the Huthies despite the group having attacked Saudi

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<v Speaker 1>oil infrastructure, and of course now we've seen what the

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<v Speaker 1>Hoothies have done to the oil industry overall. Then even worse,

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<v Speaker 1>Biden attempted to revive the nuclear deal with Iran, which

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<v Speaker 1>is Saudi Arabia's bitter enemy. On October eleventh, twenty twenty two,

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<v Speaker 1>President Biden gave an interview with Jake Tapper on CNN

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<v Speaker 1>basically talking about you know, the sanctions Russian President Vladimir

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<v Speaker 1>Putin China, Saudi Arabia and so forth, the midterms, all that,

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<v Speaker 1>and in the interview, Biden threatened Saudi Arabia publicly with consequences. Well,

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<v Speaker 1>let's just listen to it. They're going to have to.

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<v Speaker 1>There's going to be some consequences for what they've done

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<v Speaker 1>with Russia. What kind of consequences, Menenda says, suspend all

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<v Speaker 1>arm sales? Is that something you'd consider. I'm not going

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<v Speaker 1>to get into what i'd consider and what I'm have

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<v Speaker 1>in mind, but there will be consequences, okay. So besides that,

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<v Speaker 1>it's also a result of Saudi Arabia's commitment to the

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<v Speaker 1>Bricks Alliance. The Bricks I've talked about them a lot, Brazil, Russia, India, China,

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<v Speaker 1>South Africa, and of course more nations now. But China

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<v Speaker 1>and Russia have been reducing their reliance on the dollar,

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<v Speaker 1>or what we call de dollarizing, for over a decade now,

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<v Speaker 1>and of course Russia has been now completely kicked out

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<v Speaker 1>of the entire global financial system. So how could all

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<v Speaker 1>three of these powerful nations continue to trade. Well, they'd

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<v Speaker 1>have to use another currency, one that's outside the dollar.

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<v Speaker 1>So China and Saudi Arabia have been engaging in trade

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<v Speaker 1>using the Chinese yuan, especially for trades involving oil and gas.

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<v Speaker 1>Nigel Green, the CEO of one of the world's largest

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<v Speaker 1>independent financial advisory and asset management companies said quote. One

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<v Speaker 1>of the most significant but underreported outcomes of April's three

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<v Speaker 1>day summer between Russia's Vladimir Putin and China's Xijingping was

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<v Speaker 1>that Putin said, Russia is now in favor of using

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<v Speaker 1>the Chinese yuan for oil settlements end quote. Ever since

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<v Speaker 1>Western sanctions were put on Russia for its invasion of

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<v Speaker 1>Ukraine early last year, Russia's increasingly depended on China to

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<v Speaker 1>buy the oil other countries won't touch. This move away

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<v Speaker 1>from the petro dollars suggests that the world's second largest

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<v Speaker 1>economy and the world's largest energy exporter are actively intending

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<v Speaker 1>to reduce dominance of the US dollar as the bedrock

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<v Speaker 1>of the international financial system. Now, if we look at

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<v Speaker 1>the data, as you can see from the graft that

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<v Speaker 1>I have on the screen, in the first two months

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<v Speaker 1>of twenty twenty three alone, China's imports of Russian goods

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<v Speaker 1>surpassed their total purchases for all of twenty twenty two,

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<v Speaker 1>with a staggering nine point three billion flowing in February

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<v Speaker 1>even saw a record high of over two million barrels

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<v Speaker 1>of Russian crude oil being imported by China. Now. This

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<v Speaker 1>surge suggests that Yuan is gaining traction as a major currency,

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<v Speaker 1>and this points towards a larger shift in global power dynamics,

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<v Speaker 1>potentially giving China more influence in shaping economic policies that

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<v Speaker 1>impact everyone. In Russia, they've also been buying up tons

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<v Speaker 1>of gold since the sanctions were imposed on them by

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<v Speaker 1>the Western States the NATO Alliance. In twenty twenty three,

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<v Speaker 1>Russia announced that it's Boyon holdings jumped by approximately one

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<v Speaker 1>million ounces over the past twelve months. The bank reported

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<v Speaker 1>having nearly seventy five million ounces at the end of

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<v Speaker 1>February twenty twenty three, up from about seventy four million

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<v Speaker 1>a year early. Now, while the US dollar remains the

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<v Speaker 1>current king of preserve currencies, its rain isn't guaranteed. It's

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<v Speaker 1>not absolute, at least not as it once was. Over

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<v Speaker 1>the past two decades, the dollars share in global central

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<v Speaker 1>bank holdings has shrunk from a dominant seventy two percent

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<v Speaker 1>in two thousand and one to just under sixty percent

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<v Speaker 1>in twenty twenty three. Meanwhile, Duan has been steadily climbing.

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<v Speaker 1>Since twenty sixteen, its share has more than doubled, reaching

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<v Speaker 1>roughly two point eight percent of global reserves by September

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<v Speaker 1>of twenty twenty two. Now I get it. Those numbers

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<v Speaker 1>are small. It's a small number compared to a big number,

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<v Speaker 1>but it's not about the absolute number. Obviously that's important,

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<v Speaker 1>but we also have to consider the rate of change

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<v Speaker 1>and the direction. Right we're trying to see where we're going,

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<v Speaker 1>not where we're at, and it's pretty clear what's happening.

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<v Speaker 1>So then the question is, so what what does this

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<v Speaker 1>matter to me? And why should I even care? Well,

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<v Speaker 1>as we've already discussed less countries, recycling trade surpluses into

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<v Speaker 1>US treasuries makes them by less treasuries, and we can

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<v Speaker 1>see how this has been happening over the last ten years.

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<v Speaker 1>Central banks around the world have become net sellers of

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<v Speaker 1>US treasuries and net buyers of gold. At this point today,

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<v Speaker 1>there's no good reserve currency status. It's not like the

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<v Speaker 1>other nations are going to start parking their money in

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<v Speaker 1>Russian or Chinese bonds. But going back to gold is

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<v Speaker 1>working well for them, and you can see the price

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<v Speaker 1>of gold is moving in accordance of that. And if

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<v Speaker 1>the FED is forced to buy more of their own treasuries.

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<v Speaker 1>That means more money printing. More money printing means more inflation,

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<v Speaker 1>and it also means less global influence for the US

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<v Speaker 1>when it comes to trade and political issues. Now does

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<v Speaker 1>this mean it's game over for the US dollars global status?

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<v Speaker 1>Well not entirely. The US could raise the Fed Fund

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<v Speaker 1>rate right, and by doing that they could attract more capital.

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<v Speaker 1>The problem is it also makes it way more expensive

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<v Speaker 1>for the US government to borrow money, and as we've

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<v Speaker 1>seen in the interest payments on the US debt, which

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<v Speaker 1>have now exceeded a trillion dollar even exceeded the amount

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<v Speaker 1>that the US spends on its military. That's a problem,

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<v Speaker 1>and that's only a problem for the government, but it's

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<v Speaker 1>also extremely hard on the economy. Homeowners are struggling to

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<v Speaker 1>buy homes, Businesses struggle to finance new projects, finance inventory,

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<v Speaker 1>Consumers struggle to keep up with living expenses. Now, the

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<v Speaker 1>other thing the US could do, or really I guess

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<v Speaker 1>could have done, or maybe should have done, is to

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<v Speaker 1>be less demanding, less demeaning, right less coercive. It turns out,

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<v Speaker 1>when you see the global superpower like Russia's assets and

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<v Speaker 1>then you threaten nations like Saudi that quote, there will

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<v Speaker 1>be consequences. Those other nations don't really like that, and

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<v Speaker 1>then they start to maneuver to protect themselves from that.

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<v Speaker 1>So while the US could try to go back on that,

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<v Speaker 1>you know, that hard line rhetoric, it's one of those

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<v Speaker 1>things that you can't really take back. Okay, So that's

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<v Speaker 1>the what and the why and even what comes next.

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<v Speaker 1>But what do you and I do about this? Well,

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<v Speaker 1>first off, I'm not saying, let me be clear here,

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<v Speaker 1>I'm not saying the US dollars demise and the end

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<v Speaker 1>is imminent. I'm not saying it's coming anytime soon. As

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<v Speaker 1>we've already discussed, the dominance is falling, and I think

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<v Speaker 1>it continues to fall, but the dollar doesn't just disappear,

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<v Speaker 1>at least at least not for decades, in my opinion.

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<v Speaker 1>You have to understand history, right, So the US dollar

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<v Speaker 1>took over the global status from the pound sterling about

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<v Speaker 1>one hundred years ago, and yet the pound it's still

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<v Speaker 1>the third largest currency today and the UK doesn't even

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<v Speaker 1>really like produce an export anything. So US has a

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<v Speaker 1>long way to go. And I think this is a process.

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<v Speaker 1>It's not like an event that's going to happen it's

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<v Speaker 1>a process, and I think this goes out more of

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<v Speaker 1>like with a whimper and not a bang. That means

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<v Speaker 1>that we continue to just sort of head in the

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<v Speaker 1>direction that we're going into, which is, you know, the

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<v Speaker 1>same direction, more inflation, more money printing, but only at

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<v Speaker 1>accelerating rate. This means more deficit spending, more money printing,

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<v Speaker 1>more inflation. It also means less global cooperation, which means

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<v Speaker 1>more trade proper problems, which means uh, more inflation, which

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<v Speaker 1>is exactly why I've been an inflation bowl. I continue

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<v Speaker 1>to remain an inflation bowl. I've been saying for a

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<v Speaker 1>long time. I think this is still just getting started. Now.

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<v Speaker 1>There's good news and there's bad news in this Now.

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<v Speaker 1>If you work for hourly wages and you don't own

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<v Speaker 1>any assets, it's going to be bad, right. You're going

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<v Speaker 1>to continue to fall further and further behind, and your

0:12:23.120 --> 0:12:25.120
<v Speaker 1>quality of life is going to continue to go down.

0:12:26.080 --> 0:12:28.480
<v Speaker 1>And I know that's bad. But for those of us

0:12:28.480 --> 0:12:31.320
<v Speaker 1>who do own assets and even long term debt like

0:12:31.360 --> 0:12:34.080
<v Speaker 1>a home, we can expect inflation to continue to push

0:12:34.120 --> 0:12:37.880
<v Speaker 1>those asset prices higher and higher, and inflation will continue

0:12:37.920 --> 0:12:41.600
<v Speaker 1>to make our fixed rate debt cheaper and cheaper now

0:12:41.640 --> 0:12:44.480
<v Speaker 1>for bitcoin. Of course, not all assets move at the

0:12:44.480 --> 0:12:46.679
<v Speaker 1>same rate and speed. Now, we know that bitcoin has

0:12:46.720 --> 0:12:50.439
<v Speaker 1>a nine percent sensitivity ratio to global liquidity, so as

0:12:50.520 --> 0:12:53.520
<v Speaker 1>more money is printed, more debt is finance, more inflation,

0:12:53.840 --> 0:12:56.760
<v Speaker 1>Bitcoin should continue to outperform the rest of the market.

0:12:57.000 --> 0:13:01.760
<v Speaker 1>But interesting developments are that Saudi specific mentioned accepting bitcoin

0:13:01.840 --> 0:13:05.120
<v Speaker 1>as payments for oil. Now, I don't expect them to

0:13:05.200 --> 0:13:07.880
<v Speaker 1>do that today. Okay, so I already hear all the comments.

0:13:07.920 --> 0:13:10.080
<v Speaker 1>I'm not expecting them to do that today. But again,

0:13:10.400 --> 0:13:13.680
<v Speaker 1>it's the trend, it's the direction that we're going. We

0:13:13.760 --> 0:13:16.080
<v Speaker 1>know that some of the oil producing nations in the

0:13:16.120 --> 0:13:19.040
<v Speaker 1>region are already starting to mine bitcoin with their energy,

0:13:19.240 --> 0:13:22.000
<v Speaker 1>and there are talks of Saudi Arabia joining into this.

0:13:22.400 --> 0:13:24.960
<v Speaker 1>We also know that bitcoin is legal there, We know

0:13:25.000 --> 0:13:28.720
<v Speaker 1>there's lots of bitcoin ATMs there. We know their Sovereign

0:13:28.720 --> 0:13:31.320
<v Speaker 1>Wealth Fund, the Saudi Sovereign Wealth Fund, invests into bitcoin

0:13:31.360 --> 0:13:34.560
<v Speaker 1>and crypto projects, so there's lots of interesting developments there.

0:13:34.760 --> 0:13:37.400
<v Speaker 1>And remember, again, it's the direction we want to be

0:13:37.400 --> 0:13:39.760
<v Speaker 1>focused on. And as we continue to see a decline

0:13:39.760 --> 0:13:42.000
<v Speaker 1>in the global power of the US dollar, I think

0:13:42.080 --> 0:13:43.920
<v Speaker 1>the trend will be that we continue to see a

0:13:44.000 --> 0:13:47.320
<v Speaker 1>rise of foreign countries investing into bitcoin, sort of like

0:13:47.360 --> 0:13:51.360
<v Speaker 1>what else Savador has done. Why Well, of course, instability

0:13:51.360 --> 0:13:54.640
<v Speaker 1>of the dollars means people need somewhere else to park

0:13:54.720 --> 0:13:57.840
<v Speaker 1>their money, something else to use as trade, something else

0:13:57.880 --> 0:14:00.360
<v Speaker 1>they can trust. Now, I hope this is answered a

0:14:00.400 --> 0:14:03.440
<v Speaker 1>lot of your questions. My honest opinion is again, this

0:14:03.559 --> 0:14:07.160
<v Speaker 1>isn't emminent. I'm not saying warning, warning, warning, like I

0:14:07.240 --> 0:14:10.480
<v Speaker 1>have to go do something right now, but rather it's

0:14:10.520 --> 0:14:13.400
<v Speaker 1>the confirmation that we're on the same trend, which means

0:14:13.520 --> 0:14:16.160
<v Speaker 1>for our future plans of wealth building we want to

0:14:16.200 --> 0:14:18.800
<v Speaker 1>stay long. We also need to continue to watch for

0:14:18.840 --> 0:14:22.320
<v Speaker 1>further developments and for more on the Bricks Alliance and

0:14:22.320 --> 0:14:25.360
<v Speaker 1>the developments there their currency reserve status. You might want

0:14:25.360 --> 0:14:27.880
<v Speaker 1>to go watch this video I did about that here now.

0:14:27.920 --> 0:14:29.680
<v Speaker 1>As always, give me some thumbs up if you like

0:14:29.720 --> 0:14:30.880
<v Speaker 1>the video. If you don't, you can give me some

0:14:30.920 --> 0:14:32.720
<v Speaker 1>thumbs down. That's okay, but at least tell me why

0:14:32.720 --> 0:14:34.800
<v Speaker 1>in the comments down below. And of course, while you're

0:14:34.800 --> 0:14:36.960
<v Speaker 1>at it, don't forget to subscribe. And that's what I

0:14:37.000 --> 0:14:38.880
<v Speaker 1>got to your success. I'm out