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00:00Something strange is happening to the U.S. dollar.
00:02President Donald Trump's policies are having a major impact on the American currency.
00:07It's already dropped 10% this year, the biggest fall since 1973.
00:12At first, this just looked like a natural consequence of the, shall we say,
00:16unpredictable things Trump has done over the past six months.
00:19But as time's gone on, it's starting to look less like an accident
00:23and more like a deliberate part of a bigger plan.
00:25For decades, the dollar has stood as a symbol of trade, capitalism and American dominance.
00:31But not everybody sees that as a good thing.
00:34While it secured the position at the center of the global order,
00:37it could quietly be undermining their economy in ways nobody's ever really noticed.
00:42Of course, intentionally trying to bring down the dollar would be an insanely risky strategy.
00:47One wrong step could likely trigger a financial crisis,
00:50not only threatening the U.S. economy, but the entire global order.
00:53But despite this, it looks like exactly what the Trump team is trying to do,
00:58setting the stage for one of the biggest economic gambles in history.
01:02The only question now is whether the plans might actually work,
01:05or if they are set to disastrously backfire.
01:08It's hard to understate how important the dollar has become.
01:12If you're American, nearly every aspect of your life,
01:14from the price of groceries to the interest rate on your mortgage,
01:17is somehow affected by the currency.
01:19That's mostly thanks to the fact that the dollar is by far the most dominant asset in the world.
01:24Today, more than half of international trade invoices are priced in it,
01:28and around 90% of foreign exchange transactions involve the dollar in some way.
01:32While it's easy to assume the U.S. has always been the dominant force across the world,
01:36that's not really true.
01:38At least, not in the way we think of it today.
01:40The dollar's current power is the result of decades of careful policy,
01:44the exact same system that Trump's team now seems so determined to challenge.
01:48After the collapse of the Soviet Union,
01:50the U.S. was focused on securing its spot as the most powerful country on Earth.
01:54But on the other side of the Pacific,
01:56things were changing faster than anyone could have imagined.
01:59Countries like South Korea, Singapore, and China were growing at lightning speed.
02:04Cities that barely existed a decade earlier
02:06were now packed with skyscrapers, cranes, and glowing skylines.
02:10As these economies took off,
02:12millions of people suddenly had far more money to spend than ever before.
02:15A lot of it went toward the usual things.
02:18New tech, nicer cars, bigger homes.
02:20But the speed of that growth meant a lot more cash ended up getting saved.
02:24The problem was,
02:25these countries didn't yet have deep or reliable ways to invest that money at home.
02:29There weren't many stable banks,
02:30and stock markets were still small.
02:32And local companies weren't big enough to soak up all that capital.
02:35So instead of keeping their money sitting idle,
02:38investors started looking abroad,
02:39mainly to the United States.
02:41Over the course of a decade,
02:42hundreds of billions in Asian savings were poured into the country.
02:46This created something of a golden age for the American economy.
02:49In just a decade,
02:51the stock market more than quadrupled in value.
02:53Companies like Amazon, Google, and Apple
02:55were all born out of this era of wild speculation and easy money.
02:59But under the surface,
03:01it also had a more subtle,
03:02potentially even more significant effect.
03:04It sent the value of the dollar soaring.
03:07In just a decade,
03:08the currency climbed by nearly 50%,
03:10one of the biggest increases seen in history.
03:13Of course,
03:14at the time,
03:15most people thought this was great news.
03:16And to be fair,
03:17there was good reason to believe it would be.
03:19When the value of the dollar rises,
03:21while other currencies stay the same,
03:23each dollar can be exchanged for more foreign money,
03:26which means imported goods suddenly become cheaper.
03:29Before long,
03:30American homes were overflowing with foreign goods,
03:32Japanese electronics,
03:34Korean appliances,
03:35and Chinese toys.
03:36For consumers,
03:38this was great news.
03:39After all,
03:39they were effectively richer
03:40without having to actually do anything.
03:42But this did come with a major drawback.
03:45While it might have been great
03:46for the people buying the products,
03:47it was crippling for the old school American businesses.
03:50Because the dollar was so expensive,
03:52it became really expensive
03:53for America to sell their products to other countries.
03:56Even for people in America,
03:58it made a lot more sense to buy cheaper imported goods,
04:01rather than the pricier ones made at home.
04:03At the same time,
04:04cheaper labor markets were quickly opening up overseas.
04:07Places like China,
04:08Vietnam,
04:09and Mexico
04:10offered wages
04:10that were often less than a tenth
04:12of what American workers earned.
04:13In some cases,
04:15just a few dollars a day.
04:16This combination made it basically impossible
04:18for American firms to compete.
04:20So across the country,
04:21businesses,
04:22particularly in the manufacturing sector,
04:24began to quietly shut down.
04:25Within a decade,
04:26the US lost roughly 3 million manufacturing jobs,
04:29and industrial employment
04:30as a share of their total workforce
04:32fell to its lowest level on record.
04:34But despite the struggling industries,
04:36all the foreign money pouring into the country
04:38kept the stock market booming.
04:40Of course,
04:41industries like finance and tech
04:42thrived under a strong dollar.
04:44So on the surface,
04:45Americans were richer than ever.
04:47Average incomes actually went up
04:48by nearly 40% in this time period.
04:51But the thing was,
04:52an enormous section of the country
04:53was basically left behind.
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06:07Now, let's get back to the video.
06:09Nearly half of this income growth
06:11went to the top 1%,
06:12while the bottom half
06:13saw their share of national income
06:15fall from around 20%
06:17to just under 13%.
06:19States that had once relied
06:20on manufacturing jobs.
06:21Places like Michigan,
06:23Ohio, and Pennsylvania
06:24were hollowed out.
06:25But this went almost entirely unnoticed
06:27while the economy boomed.
06:29That is, until 2016,
06:31the year Trump got elected.
06:33If you've been following politics
06:34closely enough,
06:35you might have noticed
06:36something about those states.
06:37They're all hardline Trump supporters.
06:39And there's a good reason for that.
06:41In both 2016 and 2024,
06:43he ran on a clear promise.
06:45On every front,
06:47in every way,
06:48on every policy,
06:50we are guided by the same economic goal
06:53to keep jobs in America.
06:55His idea was really to try
06:57and roll back decades of globalization,
06:59breaking away from
07:00the interconnected world economy
07:02and replacing it with a network
07:03of regional trading blocs.
07:05To be fair,
07:06that's exactly what he tried in 2016,
07:08when his administration slapped
07:1025% tariffs on imported steel.
07:12The problem was,
07:13they didn't really work.
07:14Estimates suggest that the trade war
07:16cost the U.S.
07:17around 170,000 manufacturing jobs.
07:20And at the same time,
07:21U.S. companies paid an estimated
07:23$46 billion in additional import costs.
07:26Not exactly a roaring success.
07:29Now, there's a lot of debate
07:30over why that happened.
07:31The majority of economists
07:32simply thought that the tariffs backfired,
07:34raising costs for American producers
07:36without ever making domestic manufacturing
07:38more competitive.
07:40But it was around that time
07:41that somebody named Scott Bessett
07:42came up with a controversial explanation
07:44that quickly gained traction
07:45in Trump's inner circle.
07:47His theory was actually pretty simple.
07:49When tariffs were first announced,
07:51global investors expected them
07:53to hurt the economies of countries
07:54that sold goods to the U.S.
07:56That uncertainty attracted a ton of foreign money
07:59into American assets.
08:00After all,
08:01at the time,
08:01it was still considered
08:02by far the safest place
08:04to store money in the world.
08:05After the tariffs were first announced,
08:07foreign investment into the U.S.
08:09gradually increased
08:10by nearly $200 billion.
08:12Of course,
08:12by itself,
08:13that's not necessarily a bad thing.
08:15But the thing is,
08:16with more money flowing into the country,
08:18the value of the dollar
08:19ended up getting pushed even higher.
08:21And with a more expensive dollar,
08:23it became even harder
08:24for American companies
08:25to sell their products abroad.
08:27In an ironic twist,
08:28the tariffs that were supposed
08:29to reduce American reliance
08:31on foreign imports
08:32did the exact opposite.
08:33All of that meant
08:34that while tariffs
08:35might help Trump win an election,
08:36the only thing
08:37that could actually bring back
08:38American manufacturing
08:39was devaluing the dollar itself.
08:41That's at least
08:42according to Scott Besson,
08:44who would later become
08:45Trump's Secretary of the Treasury.
08:46The trouble is,
08:47devaluing the dollar
08:48isn't really an easy thing to do.
08:50The currency has built up
08:52a reputation over decades,
08:53to the point where
08:54even during the financial crisis
08:56caused by America,
08:57global investors still rushed
08:59to the dollar
08:59to protect their money.
09:00In the past,
09:01if a country wanted
09:02to devalue its currency,
09:04it could use tools
09:04like capital controls.
09:05That is,
09:06placing hard limits
09:07on the amounts of the currency
09:09that foreigners could buy.
09:10But since the 1990s,
09:12those kind of interventions
09:13have been made practically illegal
09:14under most modern trade agreements.
09:16On the surface,
09:17this makes intentionally
09:18devaluing the dollar
09:19seem like an impossible task.
09:21And for most presidents,
09:23it probably would have been.
09:24But if we know one thing
09:25about Trump,
09:25it's that he's not exactly afraid
09:27of causing a bit of chaos.
09:29If the US government
09:30were to engage
09:30in massive deficit spending,
09:32trade wars,
09:33and open political pressure
09:34on the Federal Reserve,
09:36they might just be able
09:37to destroy their own status
09:38as the reserve currency
09:39of the world.
09:40By doing this,
09:41there would be
09:41a mass capital exodus
09:43from the country,
09:44with investors looking
09:45to buy stability
09:46in other assets,
09:47like the euro,
09:48the yuan,
09:48or even gold.
09:49As crazy as that sounds,
09:51the Trump team
09:51appears to be totally on board.
09:53In the weeks
09:54following the election,
09:55reports emerged
09:56that his inner circle
09:57were discussing
09:57a Mar-a-Lago accord,
09:59a blueprint for exactly
10:00how they would go
10:01about weakening the dollar.
10:02And over the past year,
10:03almost everything
10:04his administration has done
10:06seems to be pushing
10:07in that exact direction.
10:08During his now infamous
10:09Liberation Day press conference,
10:11Trump unveiled
10:12a sweeping package
10:13of tariffs.
10:14China,
10:15Germany,
10:15even tiny countries
10:16like Cambodia
10:17weren't safe,
10:18being hit with rates
10:19as high as 49%.
10:21Almost instantly,
10:22the markets
10:23went into freefall.
10:24The Dow fell nearly 8%
10:25in a single day,
10:27Treasury yield spiked,
10:28and the dollar briefly
10:29hit its lowest level
10:30in years
10:31as investors scrambled
10:32to figure out
10:32exactly what was happening.
10:34But then,
10:35a few weeks later,
10:36something strange happened.
10:37Trump quietly reversed
10:38most of these tariffs,
10:40walking back
10:40almost everything
10:41that had been announced.
10:42By the time
10:43the dust had settled,
10:44the actual tariff rates
10:45were only about half
10:46of what had originally
10:47been projected.
10:48On one hand,
10:49that seems like
10:49the logical thing to do,
10:51given how badly wrong
10:52it seemed like
10:52the policies went,
10:53which could well be
10:54what happened.
10:55But at the same time,
10:56if his goal was
10:57to deliberately shake
10:58investor confidence,
10:59like the Mar-a-Lago
11:00Accord suggests,
11:01then it worked perfectly.
11:03Even though tariffs
11:04were rolled back,
11:05investors had no idea
11:06if or when
11:07they might make
11:07a reappearance.
11:08And as a result,
11:10they were a lot more
11:10careful about whether
11:11or not they should
11:12buy dollars.
11:13Over the next few weeks,
11:14the currency continued
11:15to tumble,
11:16losing nearly 12%
11:17of its value
11:18against a basket
11:19of major currencies.
11:20At the same time,
11:21demand for gold,
11:22the main alternative
11:23to the dollar,
11:24surged to its highest
11:25level in over a decade.
11:26Now,
11:27it would be easy
11:27to dismiss all of this
11:29as just another round
11:30of Trump being,
11:31well,
11:32Trump,
11:32throwing markets
11:33into chaos
11:34for the sake of a headline.
11:35At the same time,
11:36it all makes a bit
11:37too much sense
11:38to dismiss it
11:38as just that.
11:39Since the dollar fell,
11:41states like Michigan
11:41have seen auto exports
11:43climb nearly 12%.
11:44In Texas,
11:45energy shipments,
11:46oil,
11:47gas,
11:47and refined fuels
11:48rose close to 15%.
11:50Even states
11:51which had been dormant
11:52for decades,
11:53like Ohio
11:53and Pennsylvania
11:54saw steel
11:55and machinery exports
11:56tick up for the first time
11:58in over a decade.
11:59But while it might be
12:00working for now,
12:01that doesn't mean
12:01it's without its risks.
12:03When foreign investors
12:04start pulling money
12:04out of the US,
12:05that doesn't just weaken
12:06the dollar,
12:07it also means
12:08there is less money
12:09flowing around the system
12:10for businesses
12:11and the government
12:11to borrow.
12:12That inevitably
12:13dries up interest rates
12:14across the entire economy.
12:16And for a government
12:17which is sitting
12:17on over $36 trillion
12:19in debt,
12:20that's a massive issue.
12:21Every 1% rise
12:22in borrowing costs
12:23adds roughly
12:24$360 billion a year
12:26to interest payments,
12:28a cost which already
12:29makes up nearly 15%
12:30of the government's budget.
12:32And it's not just
12:33the government
12:33that's exposed.
12:34Private companies,
12:35especially in the tech sector,
12:37have built up
12:37record levels of leverage
12:39over the past few years,
12:40fueled by the easy money era
12:42that followed the pandemic.
12:43Much of that cash
12:44has gone into speculative bets
12:46on AI and automation,
12:47to the point where
12:48an estimated 92% of growth
12:50over the past year
12:51has come from
12:52AI-related investment.
12:53The problem is,
12:54those companies
12:55suddenly find themselves
12:56paying twice the interest
12:57on all that debt.
12:58A lot of them
12:58could end up going bust.
13:00And if that happens,
13:01it could quickly push
13:02the economy
13:02into a deep recession.
13:04For better or worse,
13:05the US economy
13:06has become deeply reliant
13:07on its role
13:07as the world's reserve currency,
13:09a position that has
13:10quietly fueled
13:11America's prosperity
13:12for decades.
13:13It's what allowed
13:13the country
13:14to run persistent deficits,
13:16borrow cheaply,
13:17and still remain
13:18the safest place
13:18on earth
13:19to park money.
13:20Devaluing the dollar
13:21might be necessary
13:22to change that dynamic,
13:23but it's also
13:24a massive gamble,
13:25one that risks
13:26not just the stability
13:27of the United States,
13:28but the entire global system
13:29that's been built
13:30around it
13:30for the past century.
13:32Whether this is part
13:32of a carefully calculated strategy
13:34or just an improvised
13:36political experiment,
13:37nobody can really say.
13:38But what's clear
13:39is that whatever the reason,
13:40this shift is set
13:41to reshape
13:41the global economy
13:42for decades to come.
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