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Jan. 22, 2018 - Freedomain Radio - Stefan Molyneux
31:08
3969 The Inevitable Collapse of the U.S. Dollar. Prepare Yourself.
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So let's take a quick tour.
This is really, really important stuff, and I'll try and keep it as engaging and entertaining as possible.
Let's take a quick tour through the history of the US dollar.
Wake up! Wake up!
Trust me. It really is.
It's gripping stuff. So let's do a brief history and say what the hell is going on, because things are really coming to a tipping point, a flashpoint at the moment.
So, a currency, you know, used to be gold and silver.
It was constantly diluted.
They would mix all kinds of garbage and Kardashian residue into ancient Roman coins and so on to the point where they were like 90-95% trash and garbage.
And they used to be...
Gold. Gold is great for currency.
It's divisible and it's fairly portable.
It's fairly concentrated. And it's hard to produce.
People get mad at the electricity needed to produce bitcoins.
Like gold just flies up out of the ground and floats around us like butterflies.
But... There used to be, of course, how did fiat currency, paper currency come in?
Well, people didn't want to carry their gold because it might get stolen, but it was heavy.
And so they just got paper notes that represented gold in banks.
So rather than, say, take $100 of gold from one place to another, you'd just get a note that says from one bank to another.
It could be the same bank, could be a different bank, which says it's worth $100 worth of gold.
You can go cash it in at any time.
And so originally, fiat currency, paper currency, was only supposed to be a representative of gold.
And it's sort of like The box versus the iPad, right?
So if someone gives you a present, you open it and it's a brand new iPad.
Pro, pen, whatever, right?
And you rip it open and it's empty.
And people say to you, well, I gave you an iPad.
You say, no, you just gave me the box.
You gave me the representation, the transport mechanism of the iPad, not the iPad itself.
And fiat currency was originally, of course, a transport mechanism for gold.
It was not supposed to be currency itself anymore than the iPad box is supposed to be that which allows you to waste your life paying Candy Crush.
The first U.S. dollar, what we would call the U.S. dollar now, came about in 1914.
So this is around the time the creation of the Federal Reserve Bank.
And I've got conversations with G. Edward Griffin and others about this, which you can look up on the channel.
But basically, the Federal Reserve Bank gives a monopoly of the government and a quasi-private institution to create currency.
So, it took fewer than 60 years for the US dollar to become what's called the world's reserve currency, which is basically it's the currency that people trade in as best they can.
It's the intermediary currency.
So Federal Reserve Bank, Federal Reserve Act of 1913, created that.
And right around that time, the U.S. economy had just passed the British economy as the largest economy in the world.
But as far as being the center of world commerce go, Britain was still...
The way to go. And world commerce was transacted.
People bought and sold stuff in British pounds.
British pounds, of course, was tied to gold.
And pound sterling, I think, has been about the longest-running currency in the world, 400 years or so.
And it has lost, I think, like 97% of its value, just as the U.S. dollar since 1913.
About 100 years has lost 98%.
So back in the day, like the civilized modern economies, they had a gold standard for their currency.
And so what that meant was you could take your, more or less, it depends on various locales, but you could take your British pound and you could take it into a bank and you could redeem it for gold.
And that limits the amount of money that can be printed.
Now, what destroyed the gold standard, well, there was two major blows.
The first, of course, was U.S. dollar appears in 1914 and World War I breaks out in 1914.
And so this turned out to be like ferociously expensive.
One of the great problems in history is just a lack of knowledge.
It's a lack of knowledge. People don't understand race and IQ differences, which is causing people to make disastrous decisions regarding demography, immigration.
People didn't understand just how much wealth and technological prowess had been accumulated over the past hundred years since the founding of the Industrial Revolution.
And so... They just got dug in.
You know, this war that everyone thought was going to be over by Christmas 1914 dragged on for four plus years.
And that was a complete disaster.
So to pay for their military expenses, the countries involved in the First World War just abandoned the gold standard and just print, print, print, print money.
And this means that the currencies become worth a lot less over time.
And then, I've mentioned this before, but it bears repeating, the Americans entered the First World War like they did in the Second World War quite a while after the fighting had actually started.
And in 1917, they entered on the side of the Allies, of course.
Which, you know, everybody was fighting to exhaustion, and everybody would have just gone back home, basically, without the massive one-sided imposition of the Treaty of Versailles that occurred after the First World War.
But because America came in, the Allies kept the war going and ended up beating Germany so decisively that they got to impose the incredibly destructive...
Conditions of the Versailles Treaty, which was one of the things that fueled the rise of Hitler and the Second World War as well.
Also, of course, Germany helped trigger the revolution in Russia by arming and funding Lenin through Finland into Russia to take Russia out of the war.
So as Germany came, it didn't have to fight a two-front war and so on.
So it's just one of these I mean, it's a butterfly effect.
You do not know what happens when you unleash massive amounts of war energies in the world.
And in this case, it ended up creating a Soviet dictatorship that helped to spread communism across a third of the world, lasted for 70 years and killed well north of 100 million people.
Good job fighting for freedom, and of course, set the stage for the Second World War, which killed off most of the K-selected men in the West, leaving us with the current soy boy generations.
So, I mean, testosterone has been declining for the past couple of generations pretty catastrophically, and testosterone is one of these things, you need a wall, well, you can need a wall based on testosterone.
So, what happened was...
The United States sold a lot of weapons to the Allies, and it took its payment in gold.
And so by the end of the war, the United States was in possession of almost all of the world's gold.
Because they weren't taking payment in paper currency, they wanted gold.
And what that meant was that the gold standard, you couldn't get back to it.
Because once you've paid for all of your weaponry in gold, you can't go back to the gold standard because you have no gold, right?
So you understand how this works.
So they knew this was a big problem.
Once you get paper currency alone, you get massive currency instabilities, and you also get the rise of socialism, because once you can print money, you can pretend to offer your voters something for free, which means fiscal restraint, reality, property rights, and so on go out the window, and people just end up with this orgy of consumption that has been going on in the West, certainly since the warfare welfare state was generated under LBJ in America in the 60s.
So, to try and deal with this problem, because they knew they were going to win the war by 1944, they also knew they had no gold left.
So what happened was, there were 44 allied countries.
Boy, it's quite the world war, eh?
They met in New Hampshire at a place called Bretton Woods, and they tried to come up with a way to handle exchanges between different currencies that wouldn't shaft any particular country or group of countries.
And so they said, well, it used to be a gold standard, but the First World War and the Second World War have destroyed gold as a reserve currency possibility for most of the world because it all ended up in America as a result of arms sales.
And so we can't put our currencies back onto gold.
So what are we going to do? Well, what we're going to do is we're going to link the value of our currency to the U.S. dollar, which itself is backed by gold.
And so they couldn't do it directly.
So they couldn't have a gold standard themselves, but they could have a kind of proxy, a gold standard, one cousin removed, so to speak, which was to link their currencies to the value of the U.S. dollar, which itself was backed by a massive amount of gold.
This is called the Bretton Woods Agreement.
And they said, okay, the central banks were going to create and maintain fixed exchange rates between the U.S. dollar and whatever local currency is in play.
So, this of course is price fixing, this is central planning, this is socializing, and it's created a huge amount of the messes that the West has experienced since.
You can't really have modern cancerous feminism if you don't have the capacity to pretend stuff can be created out of thin air.
I mean, it doesn't really work.
So, they said, okay, well, we're going to Fix our exchange rates for the franc, the pound, or whatever, to the US dollar.
Now, in return, in return for that, because that's going to make the US dollar even more valuable, in return for that, if we have US dollars, which we're going to end up with, you have to, America, give us gold on demand.
You understand, right? So they're willing to make the U.S. the gold standard, so to speak, the reserve currency of the world.
But the European, the 44 countries, the 43, I guess, they said, but once we have U.S. dollars, we want gold if we want to turn them in.
And that was, of course, supposed, was designed.
To prevent the US from overprinting.
Because once you've tied your money to the US dollar, if the US starts monetary easing, if it starts overprinting like it did in the 1920s, led to the massive stock market boom and a 13-year depression that triggered and marched the West to the Second World War, the most destructive war in the history of mankind.
So, there was some control over situations where their currency values go too low or too high relative to the dollar, because they can buy and sell their currency, they can regulate their money supply, they can, of course, trade in their U.S. currency for gold.
So this Bretton Woods Agreement, again, big socialized thing, nothing to do with the free market, it's communism for currency, which is why communism is spreading so much, or socialism is spreading so much.
Once you end up with communism or central government control of currency, there's no such thing as the free market anymore.
There's just vestigial remnants of it.
So as a result of this Bretton Woods Agreement, the U.S. dollar, aha, da-da-da-da, becomes the world's reserve currency.
And it sits on top of and is backed up by the world's largest gold reserves.
So because the other currencies couldn't get gold, they accumulated U.S. dollars.
And that was kind of like a gold currency.
So it was the only gold-backed currency.
Now, they needed some place to put their U.S. dollar, so they began buying U.S. Treasury securities, because that was considered to be a safe store of money, because the U.S. dollar could be converted to gold.
So, this is a massive subsidy, right?
The demand for Treasury securities.
And this was combined with the warfare.
There used to be this thing, guns or butter, right?
Like, you can have a war, or you can have consumer goods.
You can't have both. But in the 1960s, you get the Vietnam War and these massive welfare state, great society, domestic programs that the U.S. decided to flood the market with paper money.
And so what happened was people had all of this money in U.S. dollars, all of this U.S. denominated values like treasuries, and the U.S. started printing money like crazy.
And so what happened was if your money is going down in value, the first thing you want to do is to start to trade in your U.S. dollars for gold because the U.S. is just printing money like crazy to pay for the Vietnam War, to pay for these great society welfare state programs, to pay for the incipient destruction of the black community, the family as a whole, I mean, to fund massive expansions in higher education because, you know, hey, communists need jobs too.
So as the US in the 1960s begins printing money like crazy to pay for all of this free stuff that people want, free death, and women get to marry the state rather than a good husband, which reduces the demand for good husbands, and well, we know how all that goes.
So the countries say, okay, the US is printing money like crazy, so we're going to convert our dollar reserves into gold.
We're going to go and hand in our dollars and say, no, no, no, no, we want gold, because you guys are printing way too much money.
So what happened? Well, So many people were lining up in America.
So many international governments and other people were lining up saying, no, no, no, we want gold.
Now you guys are printing money like crazy.
So then Nixon destroyed the link between the dollar and gold.
And this leads to all of this floating exchange rate stuff that is around today.
But... There was nobody who could return to the gold standard.
And there are some stories that there's really not much gold even left in the U.S. Fed.
But it was kind of the U.S. dollar was already established as world's reserved currency.
Because the U.S. had such a big and powerful economy and U.S. financial markets were very powerful and dominant.
And so And there's like no, there's no backup.
There was no, I mean, there wasn't enough gold around to start a new currency and people who tried to start a new currency, like Hussein, like the guy in Libya, Gaddafi and so on, well, they didn't do very well because the US dollar retains its value.
Only because it doesn't have a limited currency to compare itself to, like a currency based on gold or oil or some basket of commodities and so on.
So it's sort of like if you're free-falling with some other guy who jumped out of a plane, if you just look at the other guy, it just looks kind of windy.
You don't really look like you're falling, but relative to the ground, you're falling.
And listen, by the way, this reserve currency thing, this is not mankind's first run at this particular currency.
I mean, there was Portuguese, Spain, Britain for a while.
I mean, reserve currencies, you can go back through history.
They come, they last 60 years, 70 years, and then they collapse and so on.
Because being the reserve currency is a massive subsidy for your government, which allows it to grow, which destroys the value of the currency.
So, I've made this case before, that it's not so much that Bitcoin is becoming more valuable, it certainly is.
It's just that Bitcoin is a way of measuring how valuable fiat currency is, and that's why it looks like it's making so much money.
Well, it is, right? So people were stuck with the U.S. dollar, despite the fact that the U.S. government has this massive deficit spending, foreign debt in the trillions of dollars, massive endless printing of U.S. dollars, you know, close to $200 trillion of unfunded liabilities and so on.
And so people think, and they've got to stay in dollars, U.S. Treasury securities are still considered a pretty safe store of money because people believe that the U.S. is, or at least they did believe that the U.S. was going to be able to pay off its debts.
And so the dollar, the US dollar, is still more or less about the most redeemable currency for facilitating world commerce.
Now, why does this matter? Well, so the US dollar holds value in more countries than any other world currency.
About two-thirds of the world's official foreign exchange holdings is the US dollar.
And this allows the US to run these big trade deficits.
Because they can buy a massive amount of goods.
Because what do they do?
They just hand out these paper IOUs instead of actual dollars, right?
Treasury notes and others, right?
And so the U.S. consumer loves to buy, loves to spend.
And so other countries are like, well, that's okay.
That's okay.
We'll live with it. We'll live with it.
Now, the U.S. loves, of course, the U.S. government loves being the dollar, loves holding the world's dollar reserve currency, right?
Because it increases demand for American financial assets, and in particular, government financial assets.
But even in stocks and bonds, right?
The dollar reserve currency drives up demand for stocks and bonds, and it lowers interest rates.
And so this allows for this inflation of household wealth.
It lowers the cost of borrowing money because of low interest rates.
And the U.S. government gets an interest-free loan because there are hundreds of millions of dollars held offshore.
So printing a $100 bill costs almost nothing to the U.S. government, but People outside the U.S., they've got to provide more than $100 worth of resources in order to get the $100 bill, and that's profit, wealth, and all this kind of stuff.
I mean, so it's good for the government, and it's good for, in the short run, consumers and those who hold stocks and bonds and treasury notes and all that kind of stuff.
And there are, of course, lower import prices, but...
This is really, really important for what's going on in America at the moment.
It makes U.S. manufacturing far less competitive relative to other countries because the dollar is overvalued.
And that means that U.S. exports are more expensive, but the imports are cheaper.
So it promotes trade deficits and promotes...
The end of manufacturing. It promotes de-industrialization, which is why you have these terrible rust belts of people strung out on drugs with no future.
So, it's a mess.
Now, why are we talking about this?
Because things...
It's hard to say whether things are changing.
There are a lot of people who are very unhappy about this situation around the world and desperately want to change it.
So, people...
A lot of people don't like this stuff.
So China, for instance, is really trying to get off the US dollar.
I mean, I hate to say Orientals are good at math, but they can figure out.
Which you don't need to be a weatherman to know that it's raining, as the saying goes, right?
So, China is experimenting with this one and gold-settled oil futures, right?
So it's trying to tie a currency to something tangible, oil, gold, or whatever.
And they have been trying to figure out a bilateral agreement with Iran for wans and rials.
But the World Bank's former chief economist is desperate to replace the U.S. dollar with some global super currency, sort of similar to the euro.
Say, oh, it's going to create more stable global financial systems.
So he said, the dominance of the greenback is the root cause of global financial and economic woes.
And there is, of course, he says, the solution to this is to replace the national currency with a global currency, because another layer of bureaucracy is going to solve everything.
That's me, not him.
So Beijing wants to deal with this.
So China is going to soon launch...
A crude oil futures contract priced in yuan.
And so if people want to start investing in oil, they can do it in yuan rather than in the US dollar.
Tehran and Beijing, so Iran and China, are trying to find ways to bypass the need to use the US dollar as a settlement currency in trade.
And this is according to a report by Iranian Economic Daily Financial Tribune.
Trying to find a way to bypass and get off the U.S. dollar.
Well, there was a meeting between leading Chinese government political advisors and Iranian central bank officials in Tehran.
And the quote is...
This is the central bank of Iran's governor.
And... Tehran, Iran, the central bank, they've wanted to eliminate the dollar for its trade for quite a while.
And they're trying to sign these currency swap agreements with countries that they think will benefit from that.
So, people are aware that the US empire is heavily undermined.
And some people who believe that the U.S. empire, not just its Physical empire, it's sort of half imperialism with like 700-plus military bases around the world, but even its economic empire.
They say, look, the debts are way too big, the economy is too weak, and the number of people dependent on the tax dollar, like close to half of American households are heavily reliant on the state, on the government for their income, there's just no way.
The birth rates are too low.
I mean, what did they take in America this year, I think?
1.8 million immigrants.
A combination of legal and illegal.
I mean, Canada's 300,000 a year.
Utterly unsustainable. And so people say, okay, well...
And what type of immigrants?
Well, they tend to be, you know, third world and so on from IQ-limited countries and so on.
There's no way. See, in China and in Japan and so on, they talk about race and IQ all the time.
This is an open topic.
It's well-discussed. It's well-understood.
So they make their decisions...
Accordingly, but the suppression of this information in the West is leading to truly civilization-threatening decisions.
So they want to get off the U.S. dollar.
And what that means is, as the empire begins to collapse, as the capacity, I mean, the destruction of U.S. wealth represented by the unjust and utterly immoral wars in Iraq and Afghanistan, along with the destabilizations that have occurred in Syria and Libya and other places, it's horrendous.
But what happens is, if they bypass the U.S. dollar, Then they're actually reducing America's capacity to spend on its military.
And that's very important.
This is why when things end, they tend to end.
It's like the old saying, like the rich guy, somebody said to the rich guy who declared bankruptcy, how did you go broke?
And he said, very slowly and then very quickly.
And China and Russia and Iran...
Are trying to find ways to unite Eurasia and bypass the US financial machines.
And if you look at sort of the big enemies, so to speak, of America at the moment, we got China, we got Russia, and we've got Iran.
Well, they are focusing on getting off the US dollar.
So, you know, please don't Listen to the media about this stuff.
Hey, don't even listen to me.
Go do your own research and so on.
But this is very, very important.
Do not mess with US dollar hegemony because they get just a little testy around all of that.
So if, through bypassing the dollar, you are eliminating the magic money printing capacity of the Federal Reserve and the American economy, well, it means that U.S. military power, imperialistic goals and so on are diminished as well.
And the U.S. military is partly used to protect and impose the use of U.S. dollars.
This is a huge shift in the global order and it is right on time for the decline of, historically, as has been seen in the West, any kind of reserve currency.
And a lot of these reserve currencies lasted that long back in the day when there was gold as the basis for the currency, but it doesn't tend to last, and it certainly hasn't been the case for the last 50 or so years in, well, 45 or so years in the West.
So, all of this is very important stuff to understand, and I'm not saying that you can do a huge amount about it, but I think it is important to understand.
You can talk to people about all of this stuff because at the root of a lot of the tragedies that we are facing is, of course, the cause of it is the greed for the unearned, but the supply of it is money printing, is just the creation of money.
I mean, imagine if you could type whatever you wanted into your own bank account, what would happen to your sense of restraint or reality or objectivity or anything like that.
And so when You end up with this promise of free stuff to the population.
I can imagine that looking at the electorate these days in the West is like being a mama bird with an imaginary worm, and you've got these big, wide, squawking, yellow-red beaks of infancy, of people just wanting more and more free stuff.
And when people become economically dependent on reality...
Then they view reality as a predator.
They view reality as something that is going to undermine and destroy their very existence.
We have unfortunately had enough time in the West now, many generations, three generations, or maybe even more, depending on how you count it.
But generally, I would say two to three generations in the West of people who've become now dependent upon and biologically adapted to The welfare state and to the military industrial complex.
The reason I talk about the welfare state a little bit more than the military industrial complex is not because I don't care.
It's just that the people in the military industrial complex are going to have much more of a capacity to realign themselves.
They tend to have some market skills, some decent education, some job experience and so on.
So if they have to transition to the private sector, to the free market, they're going to have less of a challenge transitioning.
If you have, you know, three generations of fatherless welfare Holmes, you have the development of what is called the employment-resistant personality, you know, very aggressive, no impulse control, no capacity for gratification.
These have biological elements.
They've been bred into the population in certain sections of Western society, and that transition is going to be enormously painful.
Frankly, violent. I don't imagine there's going to be a lot of riots and neighborhood burnings if the military-industrial complex contracts significantly.
We saw that happen before in the supposed peace dividend from the end of the Russian Empire.
When you have people who have adapted to the welfare state and the welfare state begins to diminish.
I mean, everybody knows the welfare state is a disaster, but no politician wants to diminish it substantially for fear of riots and violence and then the associated coercive nature of the state being revealed in the bad PR. Of, you know, racially charged incidents and controls.
So, when you have people who have biologically and culturally adapted to state money, to free money, quote, free money coming from the state.
Then they view the free market as a gene-ending, a life-threatening situation, which is why they fight so strongly and so viciously against the free market.
It's why you get these leftist extremist groups who are willing to use violence, because we all want to survive biologically.
It's a Darwinian situation.
We all want to survive. We all want to flourish.
And if people have adapted to free money, free stuff, state power, well, they will defend that state power in the same way that you will defend your last livestock at the beginning of a long winter.
It's what you need to survive. That's your perception.
And in many ways, that may in fact be a reality.
For people, it's hard to tell.
I mean, I'm very optimistic about people's capacity to adapt, but this is an unprecedented situation that we've got ourselves into in the West with this steady drip-trip of free stuff and imagined wealth being spread out to buy votes and seal people off from the basic reality of being biological organisms that need to produce in order to consume.
So it is important to know about this stuff.
It will be, I believe, a very destabilizing event for America, should countries find ways to bypass the US dollar as a reserve currency.
But it will be the end of the socialization of money, which could open the gateway to the increased privatization.
And therefore freedom of life itself.
Thank you so much for listening and for watching.
Wish you a very happy new year. And let me tell you this.
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