Speaker 1: I'm shocked that no mainstream media are currently covering this
Speaker 1: because what I'm breaking down is massive news. Saudi Arabia
Speaker 1: has ditched the US dollar. On Sunday, the ninth of June,
Speaker 1: Prince Muhammad Ben Salmon NBS he refused to renew the
Speaker 1: fifty year Petro dollar agreement between the US and Saudi Arabia. Now,
Speaker 1: real quick for those of you that maybe you know,
Speaker 1: scratching your heads trying to figure out what that means. Basically,
Speaker 1: the US dollar was backed by gold until nineteen seventy
Speaker 1: one when Richard Nixon removed it from the gold standards,
Speaker 1: and then the dollar was sort of like in freefall.
Speaker 1: And then in nineteen seventy four, a couple years later,
Speaker 1: when the US made a deal with Saudi Arabia creating
Speaker 1: what was known as the Petro dollar. Now, the United
Speaker 1: States basically agreed to sell Saudi Arabia cheap military equipment
Speaker 1: and weapons, think you know, protection in exchange for Saudi
Speaker 1: agreed to keep the oil trade domnominated in dollars, meaning
Speaker 1: any country that wanted oil from Saudi Arabia had to
Speaker 1: invest in dollars. Then, as a result of that agreement,
Speaker 1: percent of all global oil trade happened in dollars, and
Speaker 1: that basically cemented the US dollar as the world's reserve currency,
Speaker 1: which the dollar's been since the end of World War
Speaker 1: Two with the Brettonwoods Agreement signed in nineteen forty four.
Speaker 1: But now Saudi Arabia just officially walked away from that agreement.
Speaker 1: So the ripple effects for the US dollar are going
Speaker 1: to be massive, which is why in this video I
Speaker 1: want to go over what exactly is going on, why
Speaker 1: are the Saudis walking away from this deal now, and
Speaker 1: more importantly, where are they going? And then of course
Speaker 1: how is this going to affect our future and the
Speaker 1: potential consequences of it all. So let's get into it now.
Speaker 1: If you're new here, my name is Mark Moss, and
Speaker 1: I talk about a range of topics covering investing, macroeconomics, business, finance, bitcoin,
Speaker 1: and more. But it's crucial that you stick around to
Speaker 1: the end of this video to understand everything we're about
Speaker 1: to break down because these ripple effects could affect you
Speaker 1: no matter where you are in the world. Okay, so first,
Speaker 1: what just happened and what's going on? Well, the decision
Speaker 1: of Saudi Arabia just made not to extend. The petro
Speaker 1: dollar agreement allows them to now sell oil and other
Speaker 1: goods in multiple currencies, including the Chinese R and B, Euro,
Speaker 1: Yen yu want, and even even Bitcoin if they want,
Speaker 1: which it sort of sounds like they may want to do.
Speaker 1: We'll come back to that. But there's basically more choice
Speaker 1: for Saudi, which is of course great news for them.
Speaker 1: But the issue is the problem for the US, and
Speaker 1: that is that the petro dollar agreement that's been going
Speaker 1: on for now decades has kept the dollar in the
Speaker 1: dominant position, and without it, we, speaking of those of
Speaker 1: US that use the dollar system, lose a great amount
Speaker 1: of global power. This agreement acts as a safety valve
Speaker 1: for our economy because it allowed US to release pressure
Speaker 1: by exporting dollars to other countries, because after an oil trade,
Speaker 1: one party is sitting on too many dollars surplus dollars,
Speaker 1: and then those dollars are then reinvested back into the
Speaker 1: US dollar system, usually into US treasuries or equities, or
Speaker 1: or even sometimes local infrastructure. When the excess dollars are reinvested,
Speaker 1: it's called petro dollar recycling, and petro dollar recycling is
Speaker 1: the primary way the US is able to export its inflation. Now,
Speaker 1: petro dollar recycling allows the government to print money and
Speaker 1: keep those dollars outside the US money supply. However, the
Speaker 1: resulting inflation, we feel, although very high, it actually only
Speaker 1: represents about four percent of the monetary expansion because those
Speaker 1: dollars have been exported to the other countries. Meaning again,
Speaker 1: like I said, we've exported the inflation. But if those
Speaker 1: dollars come back, we could experience massive, even potentially triple
Speaker 1: digit inflation in the US. Okay, So now that we
Speaker 1: understand that deal, then the question is why why are
Speaker 1: the Saudies ending the deal now? And then what's this
Speaker 1: new system? Well, from the outside, it looks like they're
Speaker 1: simply stepping away from the agreement to be able to
Speaker 1: trade any currency. They want more options, more choices. If
Speaker 1: you have a store, why not accept more currencies I suppose, which,
Speaker 1: you know, like I said, as a country, seems pretty reasonable. However,
Speaker 1: in reality, there's a few things going on. The First
Speaker 1: one is it turns out that, like in a partnership,
Speaker 1: they're supposed to work two ways, meaning you know, both
Speaker 1: partners should be respectful of each other. But when President
Speaker 1: Biden came in, he basically came into office with threats
Speaker 1: and even name calling, which of course is you know,
Speaker 1: not a good way to start a partnership or a relationship.
Speaker 1: When President Biden was on the campaign trail back in
Speaker 1: twenty nineteen, he vowed to make Saudi Arabia quote the
Speaker 1: pariah that they are, and even Biden initially shunned the
Speaker 1: Crown Prince, agreeing to speak only to his alien father,
Speaker 1: King Solomon. Then he went on to rescind Trump's terror
Speaker 1: designation for the Huthies despite the group having attacked Saudi
Speaker 1: oil infrastructure, and of course now we've seen what the
Speaker 1: Hoothies have done to the oil industry overall. Then even worse,
Speaker 1: Biden attempted to revive the nuclear deal with Iran, which
Speaker 1: is Saudi Arabia's bitter enemy. On October eleventh, twenty twenty two,
Speaker 1: President Biden gave an interview with Jake Tapper on CNN
Speaker 1: basically talking about you know, the sanctions Russian President Vladimir
Speaker 1: Putin China, Saudi Arabia and so forth, the midterms, all that,
Speaker 1: and in the interview, Biden threatened Saudi Arabia publicly with consequences. Well,
Speaker 1: let's just listen to it. They're going to have to.
Speaker 1: There's going to be some consequences for what they've done
Speaker 1: with Russia. What kind of consequences, Menenda says, suspend all
Speaker 1: arm sales? Is that something you'd consider. I'm not going
Speaker 1: to get into what i'd consider and what I'm have
Speaker 1: in mind, but there will be consequences, okay. So besides that,
Speaker 1: it's also a result of Saudi Arabia's commitment to the
Speaker 1: Bricks Alliance. The Bricks I've talked about them a lot, Brazil, Russia, India, China,
Speaker 1: South Africa, and of course more nations now. But China
Speaker 1: and Russia have been reducing their reliance on the dollar,
Speaker 1: or what we call de dollarizing, for over a decade now,
Speaker 1: and of course Russia has been now completely kicked out
Speaker 1: of the entire global financial system. So how could all
Speaker 1: three of these powerful nations continue to trade. Well, they'd
Speaker 1: have to use another currency, one that's outside the dollar.
Speaker 1: So China and Saudi Arabia have been engaging in trade
Speaker 1: using the Chinese yuan, especially for trades involving oil and gas.
Speaker 1: Nigel Green, the CEO of one of the world's largest
Speaker 1: independent financial advisory and asset management companies said quote. One
Speaker 1: of the most significant but underreported outcomes of April's three
Speaker 1: day summer between Russia's Vladimir Putin and China's Xijingping was
Speaker 1: that Putin said, Russia is now in favor of using
Speaker 1: the Chinese yuan for oil settlements end quote. Ever since
Speaker 1: Western sanctions were put on Russia for its invasion of
Speaker 1: Ukraine early last year, Russia's increasingly depended on China to
Speaker 1: buy the oil other countries won't touch. This move away
Speaker 1: from the petro dollars suggests that the world's second largest
Speaker 1: economy and the world's largest energy exporter are actively intending
Speaker 1: to reduce dominance of the US dollar as the bedrock
Speaker 1: of the international financial system. Now, if we look at
Speaker 1: the data, as you can see from the graft that
Speaker 1: I have on the screen, in the first two months
Speaker 1: of twenty twenty three alone, China's imports of Russian goods
Speaker 1: surpassed their total purchases for all of twenty twenty two,
Speaker 1: with a staggering nine point three billion flowing in February
Speaker 1: even saw a record high of over two million barrels
Speaker 1: of Russian crude oil being imported by China. Now. This
Speaker 1: surge suggests that Yuan is gaining traction as a major currency,
Speaker 1: and this points towards a larger shift in global power dynamics,
Speaker 1: potentially giving China more influence in shaping economic policies that
Speaker 1: impact everyone. In Russia, they've also been buying up tons
Speaker 1: of gold since the sanctions were imposed on them by
Speaker 1: the Western States the NATO Alliance. In twenty twenty three,
Speaker 1: Russia announced that it's Boyon holdings jumped by approximately one
Speaker 1: million ounces over the past twelve months. The bank reported
Speaker 1: having nearly seventy five million ounces at the end of
Speaker 1: February twenty twenty three, up from about seventy four million
Speaker 1: a year early. Now, while the US dollar remains the
Speaker 1: current king of preserve currencies, its rain isn't guaranteed. It's
Speaker 1: not absolute, at least not as it once was. Over
Speaker 1: the past two decades, the dollars share in global central
Speaker 1: bank holdings has shrunk from a dominant seventy two percent
Speaker 1: in two thousand and one to just under sixty percent
Speaker 1: in twenty twenty three. Meanwhile, Duan has been steadily climbing.
Speaker 1: Since twenty sixteen, its share has more than doubled, reaching
Speaker 1: roughly two point eight percent of global reserves by September
Speaker 1: of twenty twenty two. Now I get it. Those numbers
Speaker 1: are small. It's a small number compared to a big number,
Speaker 1: but it's not about the absolute number. Obviously that's important,
Speaker 1: but we also have to consider the rate of change
Speaker 1: and the direction. Right we're trying to see where we're going,
Speaker 1: not where we're at, and it's pretty clear what's happening.
Speaker 1: So then the question is, so what what does this
Speaker 1: matter to me? And why should I even care? Well,
Speaker 1: as we've already discussed less countries, recycling trade surpluses into
Speaker 1: US treasuries makes them by less treasuries, and we can
Speaker 1: see how this has been happening over the last ten years.
Speaker 1: Central banks around the world have become net sellers of
Speaker 1: US treasuries and net buyers of gold. At this point today,
Speaker 1: there's no good reserve currency status. It's not like the
Speaker 1: other nations are going to start parking their money in
Speaker 1: Russian or Chinese bonds. But going back to gold is
Speaker 1: working well for them, and you can see the price
Speaker 1: of gold is moving in accordance of that. And if
Speaker 1: the FED is forced to buy more of their own treasuries.
Speaker 1: That means more money printing. More money printing means more inflation,
Speaker 1: and it also means less global influence for the US
Speaker 1: when it comes to trade and political issues. Now does
Speaker 1: this mean it's game over for the US dollars global status?
Speaker 1: Well not entirely. The US could raise the Fed Fund
Speaker 1: rate right, and by doing that they could attract more capital.
Speaker 1: The problem is it also makes it way more expensive
Speaker 1: for the US government to borrow money, and as we've
Speaker 1: seen in the interest payments on the US debt, which
Speaker 1: have now exceeded a trillion dollar even exceeded the amount
Speaker 1: that the US spends on its military. That's a problem,
Speaker 1: and that's only a problem for the government, but it's
Speaker 1: also extremely hard on the economy. Homeowners are struggling to
Speaker 1: buy homes, Businesses struggle to finance new projects, finance inventory,
Speaker 1: Consumers struggle to keep up with living expenses. Now, the
Speaker 1: other thing the US could do, or really I guess
Speaker 1: could have done, or maybe should have done, is to
Speaker 1: be less demanding, less demeaning, right less coercive. It turns out,
Speaker 1: when you see the global superpower like Russia's assets and
Speaker 1: then you threaten nations like Saudi that quote, there will
Speaker 1: be consequences. Those other nations don't really like that, and
Speaker 1: then they start to maneuver to protect themselves from that.
Speaker 1: So while the US could try to go back on that,
Speaker 1: you know, that hard line rhetoric, it's one of those
Speaker 1: things that you can't really take back. Okay, So that's
Speaker 1: the what and the why and even what comes next.
Speaker 1: But what do you and I do about this? Well,
Speaker 1: first off, I'm not saying, let me be clear here,
Speaker 1: I'm not saying the US dollars demise and the end
Speaker 1: is imminent. I'm not saying it's coming anytime soon. As
Speaker 1: we've already discussed, the dominance is falling, and I think
Speaker 1: it continues to fall, but the dollar doesn't just disappear,
Speaker 1: at least at least not for decades, in my opinion.
Speaker 1: You have to understand history, right, So the US dollar
Speaker 1: took over the global status from the pound sterling about
Speaker 1: one hundred years ago, and yet the pound it's still
Speaker 1: the third largest currency today and the UK doesn't even
Speaker 1: really like produce an export anything. So US has a
Speaker 1: long way to go. And I think this is a process.
Speaker 1: It's not like an event that's going to happen it's
Speaker 1: a process, and I think this goes out more of
Speaker 1: like with a whimper and not a bang. That means
Speaker 1: that we continue to just sort of head in the
Speaker 1: direction that we're going into, which is, you know, the
Speaker 1: same direction, more inflation, more money printing, but only at
Speaker 1: accelerating rate. This means more deficit spending, more money printing,
Speaker 1: more inflation. It also means less global cooperation, which means
Speaker 1: more trade proper problems, which means uh, more inflation, which
Speaker 1: is exactly why I've been an inflation bowl. I continue
Speaker 1: to remain an inflation bowl. I've been saying for a
Speaker 1: long time. I think this is still just getting started. Now.
Speaker 1: There's good news and there's bad news in this Now.
Speaker 1: If you work for hourly wages and you don't own
Speaker 1: any assets, it's going to be bad, right. You're going
Speaker 1: to continue to fall further and further behind, and your
Speaker 1: quality of life is going to continue to go down.
Speaker 1: And I know that's bad. But for those of us
Speaker 1: who do own assets and even long term debt like
Speaker 1: a home, we can expect inflation to continue to push
Speaker 1: those asset prices higher and higher, and inflation will continue
Speaker 1: to make our fixed rate debt cheaper and cheaper now
Speaker 1: for bitcoin. Of course, not all assets move at the
Speaker 1: same rate and speed. Now, we know that bitcoin has
Speaker 1: a nine percent sensitivity ratio to global liquidity, so as
Speaker 1: more money is printed, more debt is finance, more inflation,
Speaker 1: Bitcoin should continue to outperform the rest of the market.
Speaker 1: But interesting developments are that Saudi specific mentioned accepting bitcoin
Speaker 1: as payments for oil. Now, I don't expect them to
Speaker 1: do that today. Okay, so I already hear all the comments.
Speaker 1: I'm not expecting them to do that today. But again,
Speaker 1: it's the trend, it's the direction that we're going. We
Speaker 1: know that some of the oil producing nations in the
Speaker 1: region are already starting to mine bitcoin with their energy,
Speaker 1: and there are talks of Saudi Arabia joining into this.
Speaker 1: We also know that bitcoin is legal there, We know
Speaker 1: there's lots of bitcoin ATMs there. We know their Sovereign
Speaker 1: Wealth Fund, the Saudi Sovereign Wealth Fund, invests into bitcoin
Speaker 1: and crypto projects, so there's lots of interesting developments there.
Speaker 1: And remember, again, it's the direction we want to be
Speaker 1: focused on. And as we continue to see a decline
Speaker 1: in the global power of the US dollar, I think
Speaker 1: the trend will be that we continue to see a
Speaker 1: rise of foreign countries investing into bitcoin, sort of like
Speaker 1: what else Savador has done. Why Well, of course, instability
Speaker 1: of the dollars means people need somewhere else to park
Speaker 1: their money, something else to use as trade, something else
Speaker 1: they can trust. Now, I hope this is answered a
Speaker 1: lot of your questions. My honest opinion is again, this
Speaker 1: isn't emminent. I'm not saying warning, warning, warning, like I
Speaker 1: have to go do something right now, but rather it's
Speaker 1: the confirmation that we're on the same trend, which means
Speaker 1: for our future plans of wealth building we want to
Speaker 1: stay long. We also need to continue to watch for
Speaker 1: further developments and for more on the Bricks Alliance and
Speaker 1: the developments there their currency reserve status. You might want
Speaker 1: to go watch this video I did about that here now.
Speaker 1: As always, give me some thumbs up if you like
Speaker 1: the video. If you don't, you can give me some
Speaker 1: thumbs down. That's okay, but at least tell me why
Speaker 1: in the comments down below. And of course, while you're
Speaker 1: at it, don't forget to subscribe. And that's what I
Speaker 1: got to your success. I'm out