https://youtubetranscript.com/?v=eiPbGRJ6i5Y
First of all, maybe you could walk everybody through why the government is the biggest debtor. Because people aren’t really clear, even for example, about the difference between the deficit and the debt. And they don’t know what the debt means to them in real terms, because it’s always expressed in these huge numbers, like 132 trillion. It’s like no one knows what that means. But they could figure that out if they knew how much of that debt they were responsible for, or their families were responsible for. Yeah, so you’ve got two things. First of all, why is the government the big debtor? Well, you’ve got the national debt, which is the accumulation of every year’s budget deficit. And then you’ve got the annual budget deficit, which adds to the total debt. But when I’m talking about creditors versus debtors, nations can either be a creditor nation or a debtor nation. A creditor nation is a nation in which the world owes it money, more money than it owes the world. A debtor nation owes the world more than it’s owed. So prior to the US going off the gold standard in 1971, and in fact, all the way up to probably the early 1980s, the United States was the world’s biggest creditor nation. We generated tremendous amounts of wealth under a freer economy than the one we have today, and one that was governed by the disciplines of a gold standard. So we became the world’s wealthiest creditor nation. Today, after 50 years of fiat money, America is not only the world’s biggest debtor nation, America owes more money than all the other debtor nations of the world combined. That’s how much our financial position has eroded. Now, when the dollar became the reserve currency, it became the reserve currency because of America’s financial and industrial might. We were the world’s biggest creditor nation. We also had huge trade surpluses. Now we have massive trade deficits, I mean, over a trillion dollars a year. But when the dollar became the reserve currency, we made everything. All the consumer electronics that are now made in Japan or Korea or China, all that stuff was made in America. I mean, if you wanted anything, we made it in this country, in America. And so since everybody wanted American products, everybody needed American dollars to buy them. And the American dollar was as good as gold, because if you had dollars, you had gold. If you had $35, you could get an ounce of gold from the government, it was convertible. And so under those conditions, the US dollar became the reserve currency. But today, the dollar would never be the reserve currency today if it wasn’t already there, right? Nobody would pick the dollar given our financial position, our trade imbalances, but it’s been the reserve currency because for the tradition of the fact that it’s been. But in order for the world to maintain this status, it’s very expensive for the world. It’s a huge benefit for America. I said we have a trillion dollar a year trade deficit. That means the world has to supply America with a million dollars worth of merchandise for which it doesn’t get paid, right? It doesn’t get products. Most countries in order to export, I mean, in order to import, have to export. You have to export something in order to pay for your imports. Well, we don’t have to export anything. We just print money and export that. Well, that costs nothing. But the rest of the world has to produce real stuff and use resources, land, labor, and capital to produce products. So Americans get to live beyond their means because of the dollar status, but the rest of the world collectively lives beneath its means. And of course, it’s not consistent because some countries have to live even further below their means, depending on how big a trade surplus they have with the United States. That’s how much they’re subsidizing the US economy. So a lot of the emerging markets bear an even bigger burden of preserving the dollar status. And so I think the world is starting to move away from the dollar, not only because of the economic cost of maintaining it, but now we have raised the political risks. If you look at what the Biden administration did with Russia, the unprecedented sanctions on Russia, this has really highlighted the tremendous risk that every sovereign nation assumes by being beholden to the dollar because it puts tremendous power in the hands of the United States. It’s like putting a noose around your neck and then throwing it over a tree to America who’s holding the other end, and you’re hoping that they don’t pull. I mean, nobody wants to really be in that position, especially if you’re a country like China, where we’ve kind of made China our enemy. But in reality, China provides America with the largest annual subsidy. Their biggest trade deficit is with China, so they supply us with more merchandise than anybody else, and they’re our largest creditor. Now, some people say it’s Japan, but no, it’s actually China because you have to take Hong Kong because Hong Kong is part of China. So if you take all the treasuries that Hong Kong owns and the treasuries that China owns, that’s more than Japan. So they’re our biggest banker. They supply us with credit. They supply us with merchandise. That’s all going to end. China is going to wean itself of that. Okay, so let’s go after that. So you said, and let me see if I got the reasons right. You said, well, the American dollar could stand as the fundamental currency because it had come off the gold standard but had still benefited from that. It was extraordinarily productive. It ran huge trade surpluses. So it was a dynamic, expanding, rich country with a very stable currency. So it could run on that for a long time. And you said, however, now, if people looked at the American economic situation, the American dollar, without that historical context, there’s no way the US dollar would be the reserve currency. But then we’re back to the dirty shirt and hamper problem. And I know the Russians and the Chinese and the Brazilians, et cetera, are wrestling with that. They’re trying to move people away to some degree from the dollar as a reserve currency. But like nobody in their right mind is gonna trust the Chinese currency. So where do people go if it’s not the American dollar that’s gonna be the standard for all the reasons you laid out? Well, the Euro doesn’t look better, really. And certainly you have to be insane to use Chinese currency, I think. See, that is the false choice that everybody thinks we have to make. One of the reasons that people are so arrogant, particularly in America, that the dollar status is not in jeopardy. And so that we can keep on running these huge deficits. We can keep on creating inflation. And the world’s got no choice, right? But to stick with the dollar because are they gonna go to the Euro? Are they gonna go to the yen? The pound, I mean, the renminbi. I agree, all of those currencies also have problems. And so do you really wanna switch from one flawed fiat currency to another, even if those other fiat currencies may be less flawed than the dollar, right? Do you really wanna make that shift? I don’t think that that’s what’s going to happen. What everybody is missing is that there is an alternative to the dollar that doesn’t involve another fiat currency. And that’s gold. That is real money. Everybody forgets that for thousands of years, gold was money. It was money because it worked. Now, over the course of time, we had paper currencies that would rise and fall. I mean, hundreds of years ago, they were paper currencies that are now worthless and you don’t even know their names. They come and go, but gold has stayed.