How the us is helping china take over the world. I’M gon na explain this to you in three simple, fast steps, step number one: let’s go over: where are the trillions of dollars going in order for china to take over the world? It requires a lot of money and they’re getting the money from the united states. Let me explain: it all starts with the trade deficit. Most of you know how this works. Let’S go over it quickly as a review. The united states has a lot of consumption, but we don’t produce much. So we have this. Walmart walmart gets all of their goods from factories in china, we’ll call it factory xyz to pay for all these stuff. That goes to the walmart targets and home depots dollars. Green pieces of paper electronically go to china. China accumulates all of these dollars. They have a trade surplus with the united states. Usually they take those dollars and send them right back to your drunk insolvent uncle sam, that spends them into the economy and your drunk insolvent uncle sam. The government, in other words, gives them treasuries that they put onto their balance sheet, so they swap those dollars. They’Re accumulating for treasuries, but they’re not doing it any more. So it takes us right back to the question: where are the trillions of dollars? China is accumulating actually going for answers. Let’S go right to the internet. This map shows us exactly what they’re doing with the majority of the dollars they’re getting from the united states, the belt and road initiative. This is china’s huge infrastructure project that will connect the majority of this part of the world, which is china, europe, india, the middle east and africa. It’S a project that’s set to be completed in the year 2047 and it’s going to cost between four and eight trillion dollars again most of those dollars they’re getting from the united states. So we consume china, produces they take the dollars from us and then they invest them into the belt and road initiative, this huge infrastructure project and who is right at the economic center, of course china, and when i say this is a huge infrastructure project. I am not exaggerating we’re talking about six proposed economic corridors which are highways freeway system, railways connecting not only people but probably more importantly, goods. Also, we’ve got railway connections that already exist. We see some that are planned or under construction, and this is all through china. Russia and africa, the majority of the world’s population lives in this area, but it’s also energy gas pipelines, oil pipelines and probably most importantly, sea ports, where china has a huge presence all up and down the coast of africa, egypt, europe, india, myanmar, we’ve heard jim rogers Talk about that all the time down to indonesia, singapore, if you guys have been watching my videos, you know this is going to be a huge. Most likely is going to be a huge financial hub in the future, maybe the financial hub of the world. It goes back up vietnam and then china. I want to point out another interesting city, that’s part of the belt road initiative, vladivostok, and, if you remember my interview with jim rogers, my favorite investor of all time, his two favorite cities, where he was most bullish in the entire world, were number one median columbia And i didn’t pay him to say that and number two was vladivostok right here in russia. He’S wildly bullish on the future of this city, because it is the port, the main gateway to all the goods and products going to the west from china and russia. But the main takeaway is through our trade deficit consumption and china’s production. We are paying for this entire infrastructure project that very well could put china in the position of being the number one superpower in the world. So i know a lot of you right now are probably shocked by this information. So let me go ahead and back it up with the data. We have two charts. The first one is. The trade deficit with china specifically starts in 2004. Goes all the way to 2018
On the left, it goes from 50 billion dollars up to 350 billion dollars in 2004. It was under 100 billion dollars that it goes up. It comes down slightly in the gfc, but since then has gone straight up to where in 2018 it was 323 billion dollars. So what i want to point out with this chart is the number of dollars that are going to china from the united states has been increasing significantly since 2004. Now, let’s look at this second chart, which shows us how many treasuries china actually owns starts in 2013. Goes to 2019 on the left. We go from 1 trillion up to 1.4 trillion dollars in 2013. At the start, it was still going up, meaning the amount of treasuries china owns was increasing, but right around the middle of 2013. It started to go down dramatically and wow. In 2016, it fell off, a cliff, went all the way down to a trillion dollars, and i know a trillion dollars still sounds like a lot, but when you look at it in terms of a percentage, the amount of treasuries china owned in 2017 was 30 percent. Less than they owned just four years prior, that’s a big big deal later on in the year. It does go back up, but notice the trend line is still down and we get to 2019, where we have another very steep decline that takes us down to a level similar to where we were in 2017.
So the main takeaway from these two charts is the amount of dollars going to china is increasing dramatically and the amount of treasuries they’re holding. In other words, the amount of dollars that are coming back to the united states is decreasing significantly, and the balance of the amount of dollars that are coming into china and they’re actually holding is going straight into the belt and road initiative. The infrastructure project that could allow them over time to take over the world another thing i’d like to point out that’s extremely important, is china’s official timeline for the belt and road initiative. 2012 was the buildup 2013. They announced the project that they’re moving forward. 2014 preparation. 15 visions, action 2016, the operation, 2017 cooperation 2018. They enlarged the scope of the overall project, but let’s pay very close attention to the year. They made the announcement 2013
But what were they doing with their treasuries? The very same year, china became a net seller when you sell treasuries. What do you get in return? You get dollars that you can take and invest on the biggest infrastructure project the world has ever seen that will make you potentially the number one superpower in the world step: number two: the global reserve currency network and i’m using the term network for a very specific Reason in step number one: we went over the belt and road initiative largest infrastructure project in history and china is right in the middle. They are the economic hub of the entire project. It includes 68 countries, 65 of the world’s population and as of 2017 40 of global gdp. Of course, i believe that this number will be increasing dramatically over the decades to come, but let’s go back to the petro dollar and euro dollar system or network, as i’m calling it today, it started off in bretton woods 1944 when the dollar was pegged to gold And all the other currencies around the world, or most of them were pegged to the dollar. This was the system, so the united states had to run significant trade deficits to get the dollars outside of the domestic economy that the world needed to function and these smaller markets needed to grow their gdp at a hundred percent of its maximum capacity. But there wasn’t enough dollars getting outside of the united states, so the international commercial banking system started to create dollar denominated loans. They started to increase the money, supply or increase the dollar supply. According to how much demand there was for productive loans from corporations that wanted to expand their business, increased the amount of goods and services they produce, but they needed dollars to do so. This is when we got the euro dollar system and in the 1970s we took it a step further as far as increasing the power of the dollar network by doing a deal with saudi arabia, where they were going to price all of their oil in dollars. So you had two things going on the oil that was in saudi arabia, going out to all these other countries was priced in dollars, therefore, creating demand for dollars, while at the same time, the global economy was functioning on dollars through the euro dollar system. So business around the world is being done in dollars. Therefore, loans are being created in dollars and oil is being sold in dollars. This creates an incredibly powerful monetary network. It’S like the monetary version of facebook. So now we know how the system was created and how the system works, but the next question becomes: can there be another system or network created that could potentially compete with this one? In other words, is this system facebook, or is it myspace to think through that question? Let’S go right back to the map of the belt and road initiative we looked at before so you’ve got that network system. I drew up on the whiteboard in your mind, but, let’s think about it in terms of a different part of the world where, instead of the united states being the hub. Now china is the center of economic activity where you have goods going out on railway and economic corridors, and then, let’s remember the reason the dollar has. Such a powerful network effect in part is because there’s so much demand for dollars. If there wasn’t economic activity being done that required dollars, there wouldn’t be any demand partially. That goes back to fiat currency, just being a thought abstraction. I don’t want to go too far down that rabbit hole, but the bottom line is the more economic activity you have denominated in x, xyz currency and the more people as a percentage. You have using the currency, the greater the network effect and the greater the probability that it takes over the entire globe as the world reserve currency. So, let’s think about this, we could be looking at an economic area that, in the future, is running on the digital yuan, china’s central bank, digital currency, so china is interacting with india. India is interacting with iran with egypt. Egypt is interacting with spain and italy, and then china is interacting with russia who’s going back and forth with iran with turkey. India remember this is 65 of the entire world’s population 68 countries and let’s go back to our example of the euro dollar system. One of the things that made it strong over time is all of these smaller countries that were growing in gdp needed dollars. Therefore, their banking system created dollar denominated loans, and then they would transact with one another using dollars. Therefore, the network grows and becomes more and more powerful, but, let’s think about the countries. China is including in this infrastructure project that in the future could transition over into using the digital yuan. Countries like india, iran, turkey, russia and, most importantly, i would argue – probably malaysia. Singapore, indonesia and this whole area surrounding myanmar and eastern southern asia. So as these developing economies grow, their corporations are going to need capital. The banks are going to have to provide loans for them, but i use the word. Banks – plural. Is it going to be the commercial banking system, or is it going to be one bank? The pboc people’s bank of china see the euro dollar system was set up originally because the bretton woods system of the dollar being the global currency was very inefficient because of triffin’s dilemma. The united states needed to run these big trade deficits and, if it didn’t, the world would be short of dollars. So the euro dollar system sprung up as a result of the inefficiencies. But if you had just one bank, the central bank, providing all these loans, you wouldn’t have the bottlenecks that were created by bretton woods that the euro dollar system had to compensate for. Therefore, these countries that are more developing the ones i just mentioned would be able to grow a lot faster, the faster they grow, the more they’re using digital yuan to transact the more powerful the network is and the greater the probability it competes with the dollar step. Number three: now, let’s take a glimpse into the future, to determine if china does in fact have a chance to take over the world. What we know so far is they’re building out the center of the largest infrastructure project in the history of the world. It includes 68 countries, 65 of the world’s total population, which currently represents 40 percent of global gdp. Most likely this number is going to go much much higher in the decades to come. China has also already rolled out its central bank, digital currency, the digital yuan, and this is at the center of their belt and road initiative project, the more goods and services that are traded within that region, the more economic activity that’s done in digital yuan, the stronger Their network becomes and this network could grow so significantly in size that it might dethrone the dollar for the world reserve currency network and remember this is all being funded by the united states and our trade deficits. That’S where china is getting the dollars they need to fund these projects. So it’s vitally important. We get our heads around what is happening with the trade deficit today. What it did in the past, therefore, connecting the dots to determine what it may look like in the future to do this, let’s go to a recent podcast episode from my good buddy peter schiff that walks us through the trade deficit in 2008, the gfc and what The trade deficit numbers are today. This is the unified deficit uh, which includes our deficit in goods and the surplus that we have that offsets that in services we already got recently the goods deficit otherwise, or what used to be known as the merchandise trade deficit? And that’s at an all-time record high, our merchandise trade deficits have never been higher than they are right now. Well, the total trade deficit, which was supposed to come out at 66.8 billion, came out at 68.1 billion. So that’s a big jump above what was estimated and a big jump from the prior month, which was 63.1 billion, but it’s still not a record high. The largest unified trade deficit that we ever had. That record was still set in the first half of 2008
Right before the financial crisis and everything came falling apart, that massive deficit was a byproduct of that bubble of the imbalances of the housing bubble that allowed americans to live beyond our means by borrowing money extracting equity from their homes and then using it to buy all Sorts of stuff that was imported, that was part of the manifestation of that bubble, and that was an unsustainable imbalance that blew up well. The bubble that we are experiencing today dwarfs anything that we experienced back then, and so i’m sure that the trade deficits that this bubble is going to produce are going to eclipse that record. We’Ve already set new all-time records for goods within another month or two. I think we’re going to take out that record from 08 and in fact, we’re going to shatter it and we’re going to keep making new records until ultimately, the dollar completely implodes, and we don’t just have a financial crisis but something far worse, a u.s dollar crisis. So here is a chart of the united states, trade deficit starts in 2000 or a little earlier goes all the way through 2020
On the left, we go from a negative 80 billion all the way up to zero during the late 1990s. Our trade deficit wasn’t that bad almost at zero, but then it really goes down gets worse to the point where peter was talking about in 2008, where it was at an all-time high, because we were producing very little but consuming a lot. It goes right up with the recession. The gfc comes down again. Kind of levels out goes up a little bit, maybe because of the trade tariffs with china, but when the cerveza sickness hit, the trade deficit gets worse and worse and worse to a point where it is today, almost as bad as it was at its worst point. In 2008, although the trade deficit is just as bad and most likely getting worse, i think it’s happening as a result of much different dynamics in the market check this out back in 2008, our consumption was high production low because we were using our homes as an Atm machine to buy more and more goods that were being imported during the gfc, the production domestically united states pretty much stayed the same, but our consumption really went down. That’S why, during this recession, the trade deficit got less extreme, but in 2020 the consumption has stayed pretty much the same. Although we’ve been in a much much bigger recession, i would argue a great depression if it wasn’t for the fed and the government coming in and printing more money. So the consumption has stayed relatively the same because of all the stemies and the stimulus checks for those of you who haven’t watched my more recent videos. But what has happened to the amount of production domestically because of the cerveza sickness, the lockdowns, and we’re literally paying people to stay at home and not go to work? Therefore, our domestic economy is producing less and less and less if we’re producing less but we’re consuming. The same amount that means that we have to import more goods from china. If we import more goods from china, we export them or export to them more of our dollars. If we put all the pieces of the puzzle together, it becomes crystal clear that in the future, china will have even more dollars than they had in the past to execute on their plan for the one belt, one road initiative and the closer the largest infrastructure project. In the history of the world comes to completion, the more economic activity will be happening between those 68 countries, which means more demand for the digital yuan network, potentially dethroning, the united states greatest asset, the dollar being the world reserve currency. If china is at the center of the global economy, and if they have the world reserve currency network by default, they will be the number one superpower in the world for more content that will help you build wealth and thrive in a world of out of control. Central banks and big governments check out this playlist right here and i will see you on the next video
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