The Fate of the US Dollar | Top of Mind Series
In this Invest Like a Billionaire podcast episode, co‑hosts Ben and Bob Fraser address the recurring investor anxiety that the U.S. dollar will lose its status as the world’s reserve currency, especially in light of recent talk of a BRICS‑led alternative currency. They begin by noting that concerns about de‑dollarization have surfaced repeatedly over the past four decades, most recently via a Business Insider article citing former White House adviser Joseph Sullivan. The hosts walk through hard data: about 58% of global central‑bank reserves are held in dollars, the euro is the second‑largest at roughly 20%, and BRICS currencies together account for only about 3% of reserves and 18% of total foreign‑exchange trade. They explain why creating a new BRICS currency would be a massive, unlikely undertaking—requiring a brand‑new central bank, unified monetary policy, payment‑system plumbing, and the surrender of capital controls—while highlighting the lack of political and economic cohesion among BRICS members, especially the divergent interests of China versus the other members. Bob contrasts this with the Euro’s two‑decade‑long integration process, noting that the Euro’s success depended on geographic proximity, shared regulatory frameworks, and the willingness of member states to abandon their own currencies—conditions the BRICS lack. The discussion then shifts to the structural foundations of the dollar’s dominance: the United States’ massive economy, the world’s most liquid and deep financial markets, the global rule of law protecting private property, and the unparalleled U.S. military that secures global trade routes. By contrast, they outline China’s demographic decline (projected 50% population loss over 75 years), authoritarian governance, and tight capital controls, arguing these factors undermine any ambition to make the yuan the world’s primary reserve asset. The hosts further examine the U.S. debt narrative. They trace the growth of deficits from the post‑2008 crisis through COVID‑19 stimulus, noting that while the debt‑to‑GDP ratio is above 100%, the U.S. has historically managed similar levels (e.g., post‑World‑War‑II). Citing the book This Time Is Different by Reinhart and Rogoff, they argue that moderate inflation has historically been the mechanism that erodes real debt burdens, not default. They illustrate how inflation transfers wealth from savers to borrowers and can halve debt in a decade at 8% inflation. They also discuss the Federal Reserve’s balance‑sheet expansion during crises and why, despite fears, the dollar has remained stable. Bob runs a thought experiment: even if the dollar were to lose half its value, U.S. exports would become cheaper, manufacturing costs would fall, and the economy could experience a boom—underscoring the dollar’s resilience. The episode concludes with a clear investment takeaway: don’t bet against America. The hosts cite Warren Buffett’s advice, emphasizing that the United States cannot “go bankrupt” because it issues its own currency (seigniorage), and that while fiscal discipline is wise, the systemic strengths of the dollar and the U.S. economy make a near‑term collapse unlikely. Overall, the episode blends data‑driven analysis, historical comparison, and macro‑economic reasoning to argue that de‑dollarization is more hype than reality, and that the dollar will likely remain the world’s premier reserve currency for decades.
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Hello, future billionaires, and welcome back to another episode of the Invest Like a Billionaire podcast. I'm your co-host Ben Fraser, joined by fellow co-host Bob Fraser. And today we're going to do a top of mind episode on the fate of the US dollar. So periodically we will kind of come on here and share our thoughts. These top of mind episodes are kind of the hot topics. You know, what are investors talking about? What are the headlines saying? And we like to dive deeper on this podcast, as you know, than just the headlines. And there's been a lot of fear. We've actually been getting texts and emails from investors worried about the US dollar losing its status as a reserve currency and the whole BRICS kind of arrangement coming out. So we actually just did this presentation— by we, I mean Bob Fraser Fraser Fraser Fraser— for our shareholder event just last week. We have an annual shareholder event for investors with Aspen Funds. And, uh, just took a little time to run through this. So we thought we'd share this information with all of our listeners here, um, to just help you understand what's going on and the reality of, uh, these concerns and should we even be concerned and, uh, what's going on here. This is the Invest Like a Billionaire podcast where we uncover the alternative investments and strategies that billionaires use to grow wealth. The tools and tactics you'll learn from this podcast will make you a better investor and help you build legacy wealth. Join us as we dive into the world of alternative investments, uncover strategies of the ultra-wealthy, discuss economics, and interview successful investors.
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So, Bob, take it away.
Yeah, well, and there's a lot of alarm about the US dollar, as you pointed out. I mean, we get continually kind of bombarded with questions from our listeners. And, you know, fair enough, let's answer the questions. But this is just the latest iteration of the same question that's been— I've, I've seen, you know, maybe 4 or 5 times in the last 20 years since, since the '80s, really, really 40 years. And, and the latest one is the BRICS countries. What about if they basically de-dollarize and now the dollar disappears in value? And, you know, I first want to say, well, if you believe your dollars are about to become valueless, please feel free to send them. And You know, and that's tongue in cheek. But the point is they have a lot of value. And let's not forget that. But this was a— there was another iteration. This was the, the SDR, this, the, the, the IMF depository receipts that they were going to create and China was going to create a new currency there. That was 2015. There's always a new— the dollar is about to die. Well, here's, here's the latest iteration. And this is from, I believe this is Business Insider. It says de-dollarization could become a reality as the BRICS alternative to the dollar dollar could enjoy high prospects for success, a former White House advisor said. Joseph Sullivan, I know, who served as the staff economist for the White House Council of Economic Advisers during the Trump administration, wrote in Foreign Policy that a currency issued by Brazil, Russia, India, China, and South Africa, BRICS, would pose a unique threat to the dollar's dominance. There it is. But he goes on to say Sullivan also noted that would not spell the end of the dollar's reign. Oh, okay. Which still accounts for 84.3% of cross-border transactions, but possibly contribute to a multipolar regime in which several currencies are, are dominant, are dominant, I guess. In fact, some of the dollar's decline in dollar— decline in dollar strength could be a good thing, he writes. At the moment, the greenback's high price costs the US jobs and lowers exports. So So the headline is certainly a lot more alarming than the details when you actually read what he's actually saying. But let's, let's look at what Joseph is talking about, what the, what the concern is. So just a few charts as background, central bank reserves. And so if you're listening on this, you can pull up the YouTube later or look in the show notes and see the PowerPoint we're using. But central bank reserves are— so the central banks are the, The banks that manage the currencies of the various nations, and they may maintain reserves in other currencies in order to trade with those currencies and maintain exchange rates and be able to supply liquidity to commerce and other things. So right now, central bank reserves are 58% held in the US dollar.
Mm-hmm.
So it's— and the number 2 currency is the euro. BRICS, BRICS currencies are reserve only 3% of global central bank reserves are BRICS. So very low global trade today. China dominates global trade. BRICS all in all though are only 18%, all, all, all cumulative foreign currency trade. It's the largest, most liquid market in the world. If literally $7.5 trillion are traded every single day in foreign exchange. So that means the currencies are changed, right? 87% of which is traded in the US dollar. So 87%, the US dollar is just by far the most dominant currency, 33% in the euro. So you can see, so, so the dollar is very, very dominant. This, this chart is actually from the Federal Reserve and it shows an index of currency use as a combination of current currency reserve trade and foreign exchange. You can see over time The dollar's dominance has dropped from, let's say, you know, 72% ish around there to 60 whatever percent, 65%, 65% ish somewhere around there over the last 20 years. And the euro is kind of, you know, taking some dominance. The euro kind of came onto the scene about 20 years ago, roughly. And you see the other currencies are kind of hanging out there, the Chinese currencies. Ticking up a tiny bit, but really it's the dollar is certainly predominant. The euro is a, is a solid number 2 and really nothing else is really, really even rates. Here's, here's what I think why a BRICS currency is unlikely. I want to first just hit, hit that. I think it's actually not going to happen and you've got to realize. So what they're talking about is actually creating a brand new currency, right? So it's like the Europeans did with the euro. They actually create a brand new currency. Okay, well, that is a massive undertaking, massive undertaking. So they would have to make a new currency. And it's one thing to do, you can't just make a currency, you have to make it valuable. You have to create, you have to back it, you have to create financial plumbing, you have to create bonds in this, you know, create a place to put the money, a place to central trade, trade the money. Yeah. You, yeah, you would need to, you need to establish a central bank that would require a brand new central bank that doesn't exist today to be built. And they would have to agree who's gonna man that central bank, who's gonna govern that central bank, what the exchange rates are amongst the constituent currencies. And here's a biggie, you know, so if you look at the BRICS countries, China is pretty much all of BRICS. I mean, the other countries really don't rate much. You know, China's the number 2 world economy. And, you know, and the other countries really don't count. And here's the thing is China's interests are not aligned with the other BRICS countries, right? You know, the president, they've, they've had it. They've had a goal to basically the stated goal is, is to make the Chinese yuan a dominant international currency. Well, you can't have both a BRICS currency and a Chinese currency. So they're really not aligned. And I don't— I think the, the only thing these countries, the BRICS countries have in common really is, you know, is let's say, you know, more despotic regimes and, and, and a hatred of the US dollar and hatred of US hegemony, you know, is really— and that's not a unifying force, right? Right. The fact that you hate something is not— does not unify you. So it would require a whole new central bank, new currency systems, payment systems, swaps and hedging systems. I mean, this whole financial plumbing that is incredibly complex and incredibly, you know, just a ton of work and would take a very long time to do. It also require the BRICS countries to agree on exchange rates and convertibility to their own currencies and a system to continually rebalance and require the BRICS countries to give up capital controls. So right now the Chinese yuan, like everything in the country, is tightly controlled. You cannot trade Chinese yuan inside and outside the country. They use capital controls to try and control the currency and maintain its value. And, you know, unlike the dollar, which is freely traded wherever, however, whenever people want, you can do whatever you want with the dollar that you can't with the Chinese currency. So they're going to have to stop that. And that's part of their— the way they control their country. And so, again, I just— I just don't think it's very likely. You know, I just want to make a quick comparison to the euro. So the euro, took nearly 2 decades to implement, 2 decades. And they set up a brand new central bank. They staffed it with some very, very smart people. They, they built the whole financial plumbing system. They made a transition plan and they all abandoned their own currencies. So the Deutsche mark doesn't exist. The French franc doesn't exist anymore. They were rolled into and now those countries use the euro. So they, they had, they, they, they decommissioned their own central banks, each individual country, and decommissioned their own currencies. Made an exchange system into the euro, you know, and today the euro accounts for 20% of global reserves, you know, and you saw how much trade. So, so, you know, but it took a long, long, long time and a massive amount of effort.
I'm not an expert in the euro or the history of the euro, but it appears to me that just the political alignment, even the geographical alignment of the countries that use the euro and the trade alliances seem a lot different than the proposal between the BRICS countries, right? It just, it feels very different.
Oh, why? The European countries have a lot in common.
Yeah.
With each other. Right. And there's a lot that's not in common. There's a lot of differences between Greece and Italy.
Sure.
And Sweden and, and, and Denmark, you know, but they are, they share borders, they share ideologies to a large degree. I mean, the cultures are somewhat different, languages are somewhat different, but there is a lot of commonalities. They are Europe.
Right.
There's not a lot of commonalities between, you know, South Africa or Saudi Arabia and China. Okay. There's just not. And, and, you know, so I mean, I think everybody just, they just don't like necessarily being, being under US hegemony where the US is kind of dictating policies and these kind of things. And, but again, that's, that's, you know, that's not gonna drive enough, enough effort or it's not gonna drive enough demand to go create a whole currency. So, We'll see. I just want to look at the US versus the BRICS countries and a BRICS kind of economy. And I'll compare it to China. The US is the world's largest economy. It's backed by the world's strongest military. Well, why does that matter? Well, the military is what secures trade routes. And, you know, if you look in history, the history since 1945, global trade has been policed by the world's largest military, the United States. So the And this is really historically an anomaly, really. You know, 100 years ago, there was no such thing as free trade across the globe. Right. I mean, and the nearest thing to it was the British who had the largest navy, and they policed part— partly the oceans and maintained free trade routes. But, but, you know, the whole age of piracy and all that, the golden age of Blackbeard and all that, that was— that was real where trade couldn't exist. Well, it's all— global trade is maintained by the US military. Right. And the US military is the only military that actually has a capability of projecting power in any significant way, meaning we can go park a Navy and an Air Force pretty much in front of anywhere and control that part of the world. No other nation has that capability. And what it means is it means there's, you know, we can enforce global trade. US also has rule of law. I mean, You know, I know being an American, you know, it can feel like it's pretty darn chaotic and there's not a lot of— not a lot of respect for law or a lot of, a lot of, you know, political unity or all those things. But the truth is our laws protect private property and they protect the, you know, debt and mortgages and hedges and all these different financial plumbing things. And it's very well understood, well documented, and it's very deep with very— with law that actually works. And compared to, for example, let's take China. Let's say, you know, who knows what, right? They're changing the rules and they'll simply— they could simply nationalize your business or change something that puts you completely out of business. And we're, you know, we've seen that. We've seen them do this. The US has the world's deepest and most liquid financial markets. China, China, which is, you know, the largest component of a potential BRICS currency, is a nation in decline. As I've pointed out in my, in my Megatrends, um, and this is shocking to some people, and if this is news to you, please look into this because this is a fact that China is about to lose 70, about half of its population in the next 75 years. So the population of China will drop by half. Well, that means its GDP drops by half unless they double their productivity per person, and that's unlikely. And two-thirds of its workforce, they're a nation in decline, and And if you— this is all from the UN population database and forecasts that I'm pulling my data from.
Right.
And if you look at it, if you look at the— there's a confidence factor with their projections, right? How, how sure are we? It's 100% sure. China is one of the most clear nations at all because we can see how many young women they have, where the women are the ones that have the babies and young women. We see what their birth rates are and they're simply not hardly any young women in the country. And through forced abortion, through the one-child policy, through gender selection in that policy where they favored males, it's a nation that has seen its peak for sure. They're a police state. They have no free elections. There's no free press, freedom of religion or speech. Would you want to go park all your money, you know, over there if you were a multimillionaire and start your sole business over there? You mean you'd know you're at risk, right?
Right.
That's endemic socialism and corruption, tightly controlled capital markets. That's a liquid with no rule of law. So, you know, if you cross the government, you're thrown in jail. I mean, they don't have free elections. They don't have free press. They don't have— they don't have, you know, private property rights like we have. So it's simply not a place you would ever want to park money or, or, or trust to manage money. Right? Right. So the dollar is, is, you know, is extraordinary. And in history, I mean, the only, the only thing that comes close, I guess, in modern history would be the, the, the pound sterling, which dominated for a couple hundred years. You know, when, when the, As they said, the sun never set on the British Empire, right? 'Cause it was global and they were truly all over. So dollars can be used to pay for imports in nearly any country. Dollars are held as foreign currency reserves. The dollar's considered stable and safe from long-term fluctuations and devaluations. It's also versatile because dollar reserves can be used for any purpose. And the foreign currency reserves of all 5 BRIC nations are actually in the US dollar, right? Almost entirely. Dollars can be converted to other, other currencies. Dollars can invest in US assets such as Treasury bonds, which are the gold standard of global investment because they're considered risk-free. So when you're, when you're trading a lot of money, you have $1 billion you have to park overnight or for 7 days, what are you going to buy? Well, you want to buy US bonds because you just get— they're so liquid. You can buy 7— you can buy $1 billion worth of those things in a day. And you can sell them the next day and you're not going to lose any money. Right. And you know, nothing's going to happen to it. Right. It's a, it's a good, it's a good asset. Dollars can service debt, you know, in any country. In fact, most, most foreign governments' debt is issued in U.S. dollars. So again, all that, it's just the dollar is just by far the most, the most prolific and best currency in the world. You know, here's another point I want to make, too, is the currencies must be desirable by all parties. So, so I just want to put a scenario out there as I was thinking about this. So let's say Saudi Arabia, who basically exports about $500 billion a year in oil, and let's say they say we are going to only accept a BRICS currency for our oil. So you have to, you have to— they're going to formulate this new currency and to buy our oil, you have to buy it in a BRICS. Well, okay, so then, well, first of all, it wouldn't affect the US, right? Because we don't import Saudi oil hardly at all, but Europe does. So Europe would then say, okay, we will buy, we will take our euros and we will convert it into BRICS. Well then Saudi Arabia gets a bunch of BRICS and what are BRICS good for? Well, you can dissolve it into its 5 constituent currencies of rubles and Chinese yuan. So what are they gonna do with rubles? What are the Saudis gonna do? What are the Saudis gonna do with Chinese yuan? They don't want anything from over there. You know, they want to build buildings, they wanna build dams. Well, that's gonna be euro, that's gonna be primarily Europeans are gonna do that. They're gonna want euros. They're gonna have to switch it all back to euros. They don't want the stuff that these countries have, which is pretty much raw materials. And you know, how can they spend it? And then, okay, so then they got all these BRICS. Well, then they're gonna have to store it someplace. So they gotta have billions of dollars worth of temporary money storage. What are they gonna store it in? Chinese government bonds. I just don't think anyone has any confidence in that, right? The number one place to store money is US government bonds because they're very, very safe. And here's a chart. You can see this is since the 1970s. I mean, this is 55 years of the US dollar. And you can see in spite of all the, you know, the kind of, I guess, fear. The dollar just, you know, motions along, you know, and it's not that volatile. It does go, you know, it has its ups and downs, but it's certainly not crashed. And even when the euro came, you know, everybody could have said, oh, that was, you know, that's gonna destroy the dollar. Well, it didn't. You know, so yeah, you can see the euro coming in there. So dollar's been very, very stable. So the bottom line, and I have actually said this for well over a decade, that the US will be the world's strongest currency for at least the next several decades. Well, I'm extending that out. It's still going to be the strongest world's currency for the next several decades. There's nothing comparing. There's nothing, no comparison. The euro is the closest. And, you know, it's a decent currency, but it has, it has a lot more problems than the dollar does. Right. And certainly every other currency has more problems. And the bottom line is those propagating dollar fear are selling their protection packages.
Yep.
Right. And so just take that with a grain of salt. Right, right. And they're wanting you to do that. The final thing I want to— I want to say just about the dollar here is let's say the dollar did crash by half. Let's say, you know, you woke up and the dollar was crushed by half. So that means You know, you could exchange it for half as many euros and, you know, oil would be priced in double because we're importing it. All imports would go up and up by, by half. But on the other hand, our exports would drop by half in value. So that means you could buy an iPhone for half the price if you're overseas. It means you could buy a Miami beachfront condo for half the price it was yesterday. You could buy 2 Boeing airplanes for the price of 1 Airbus. You know, guess what would happen to Boeing airplanes? Yeah, they'd be, you know, crazy. US exports would explode as we became the cheapest oil producer by far than anyone else. US manufacturing costs would drop by half, making the US twice as attractive as a manufacturing destination. The stock market would skyrocket in anticipation of explosive earnings. So you gotta realize the dollar is backed by a massive economy with incredible places to invest. This is the best country in the world to invest in. Yeah. The best stock markets, the best, the best companies, the best real estate, best, you know, and all that stuff would be on sale to a foreigner by half.
Right.
You know, while it would quickly, money would flood in. And so, so the dollar, the dollar is simply not, you know, don't, don't, don't buy the fear. Right.
Yeah. I, I think that's exactly it is it's generally fear-based and whoever's propagating the dollar's about to crash, it's, generally a headline, and there's usually an angle behind, you know, the motivation to say that, right? And it's a recurring, you know, theme that is all— there's always the demise of the dollar for some reason or other. And this happens to be the latest in, you know, the ongoing commentary on it. But I do think, I mean, this is pretty compelling because a currency doesn't live in a vacuum. It's backed by this economy that is, very, very strong, largest in the world. And it's not going anywhere.
If you want to buy an iPhone, you're going to need a dollar to do it. Yeah. If you want to buy a Boeing, you're going to need a dollar to do it.
Yeah.
You know, so it's— we got a massive economy that is extremely vibrant and innovative, you know, so some best, best companies in the world are headquartered here.
So, yeah, you know, what do you think are kind of the primary reasons that they're exploring this? Right. I mean, to your point earlier, it doesn't seem like the reality of this actually happening, where they're formalizing a brand new currency, creating a new, you know, central bank, and, you know, the— all the financial plumbing required to do that, you know, it's probably not going to happen. So what's really the motivation behind these countries doing it? Seems more like political posturing, right, to kind of try to get, you know, things in their favor from—
it's— or it's Putin, who is pretty peeved. Yeah, he's under sanctions and he's trying to— he doesn't like having dollar hegemony where we can dictate what happens, what he can and can't do. He wants to be out from under that. Well, let's, let's, you know, establish our own currency. And then that kind of resonates with the Chinese because they want— they hate the dollar. They want that. They think the Chinese should be the greatest country in the world with the economy. And they're, they're trying hard to make their, their, their currency better. And they want more esteem and recognition globally. So they, they want their currency. So they're kind of, they're kind of saying, yeah, us too. But it's not. It's really, you know, it's Brazil and, you know, other countries where the same thing. It's just, it's just, it's just they don't like US hegemony where we're dictating what happens in the fight to their— they want, they want to be free of the shackles of the US dollar. But, you know, you know, you know, let's, let's hit another question too. So one of our, one of our writers wrote in, says, what about the US debt? Yeah, right. Yeah. And so there's this idea that, that, you know, our deficit spending— so there's, you know, two components of debt, right? One is deficit spending, where we spend a lot more money as the US than we take in in taxes. Yeah. And then that accumulates by— as we issue bonds, you know, we borrow money and we issue bonds in order to fund that deficit. So, so it accumulates over time and that it has been on fire. I mean, both the deficits have been you know, have been extreme and—
Fire in a negative way where we're taking a lot more.
Extreme and negative, and the debt has been compounding rapidly, you know, and you've got, you know, Obama, you know, he started at the end of the Bush era with the great financial crisis, you know, stimulus, and then Obama took it on steroids. I mean, we've had very, you know, a lot of spend and, you know, tax and spend or just spend. And don't tax kind of leadership in place. And so, you know, the deficit spending is through Obama era, went through, went through the roof. Meanwhile, Trump didn't scale it back. And then you look at interest rates are going up now. So the cost of that debt and then, and then the stimulus with the COVID was incredible. You know what they did. And yeah, meanwhile, so the government just continues to expand and expand and expand and then yeah, so now the concern is Well, how does this end, right? How does that end? And yeah, interest rates are now going up. Well, that means the US is paying a large portion of its tax or its interest bill.
Yeah, keeps going up.
It keeps going. So what happens to this? Does this mean the end of the dollar and the end of the US dollar, you know, confidence in the dollar and the dollar crashing? Well, you know, let me just say, let me give you a couple perspectives here. Yeah, well, first let's give an international perspective. The dollar's value is, is determined by its peers. So the value of a dollar is determined how it's, how it trades relative to a euro or a yen, right? Well, they're all doing the same thing, so they're all deficit spending as bad as we are. So it doesn't— if somebody decided to not deficit spend and decided to have a great currency, you would see it, you would see it go, you know, you would see it rise in value. The other thing is that so the US has had a debt-to-GDP ratio over 100% in the past. In fact, it had about 70 years ago, is almost as high as it was now. And, and, you know, extremely high debt. Well, and that was— and we recovered from it. Well, what happened? Yeah, that was 1945 and the war debts. Well, you know, it's, it's, it is, it is unfortunate that even without a war, we're going to be in this part of it, definitely managed to get ourselves in the same pickle. But how did the US get out of it? Well, here's what happened. And this was a, you know, there's a great book that I loved and, and it's by, by a couple of Harvard economists called This Time Is Different. It's by Carmen Reinhart or Kenneth, Ken Rogoff and Carmen Reinhart. And they, they studied 800 years of financial crisis. And, and I love that book, but they came up with another study. They, they showed basically how deficit spending had been handled throughout history. And in most cases, deficit, high deficit spending was not answered by defaults. We're not going to pay our debt back where a lot of, a lot of people today think that's what the answer is going to be. But the truth is, moderate levels of inflation are how it's been answered. Right. So if you, if you think about this, so if there's inflation, that means it takes more money to buy something tomorrow than it does today. But it means you, it takes less money in real terms to pay off a debt tomorrow than it does today. It's because debt is negative money. And so what happens is so, and I've said in the past, I said inflation is a massive transfer of wealth from savers to borrowers. Yep. So if you can, if you can, I mean, you know, I was in Zimbabwe in 2007 and when they have a currency crisis, and by the way, you know what, when their currency failed, the Zimbabwe dollar, you know what started happening, what they use for currency? The US dollar. That was the only, only thing started trading. But literally I was there when a guy would take a grocery sack full of money to fill a gas tank with a car. And a pastor there went to his congregation before all this happened, and a guy I knew, and said, guys, he saw what was happening. He said, guys, do whatever you can to borrow as much money as you possibly can and buy real estate.
Uh-huh.
And he bought a $300,000 Mediterranean mansion. Think of like a 6,000-foot, 600, sorry, 6,000-square-foot mansion, right?
Yeah.
Yeah. For $300,000. He literally paid it off with a grocery bag full of money a couple of years later. You think about that? Yeah. Well, what paid it off? Inflation did. Inflation did. So debt is, is, is diminished by inflation. So all it takes, it just is. So at 8% inflation, that debt drops by half in 10 years, right? At 6% inflation, it's a little bit longer. You know, I have the calculation somewhere, don't have it in front of me, but you get the idea. So a little bit of inflation actually solves it. And this is historically how high debt nations have solved their debt crisis by a little bit of inflation.
Yep.
Is it possible that we get, you know, so out of our, we start borrowing so much and the rates, the interest rates scope so high, we start, you know, having to print even more money and it gets us— gets into a spiral. Well, so here's what happened in the 2008 financial crisis, right? They basically printed $3.7 trillion worth of money and the Federal Reserve monetized it. They actually— so I believe before we actually get to a real crisis like that, the federal— they'll basically tap the Federal Reserve on the shoulder and say, hey, buy this debt. What that means is, so yeah, the government borrows the money. So you buy a bond, you go to your, your, your broker, you buy a bond, and that government, the money goes to the government. And then they say to the Federal Reserve, buy this from us. So the Federal Reserve prints money. Now they don't actually print money, but you get— yeah, I'm just making— I'm simplifying. And they buy those bonds. So now the Federal Reserve owns the debt of the US government and they can simply, you know, they bought $3.7 trillion. By the end of the Great Financial Crisis, by about mid-2010. Well, what if they said, "Ah, don't pay us back"? They could have. What would've happened? Nothing. Nothing would've happened. They just said, "Don't pay us back. Yeah, forgive it." And that was shocking to me 'cause I was at that time was a hard money economist. I was an Austrian economist. And you know, hard money economists and realize that one, you know, when they did that, I expected hyperinflation, but it didn't happen. And we actually had— we're struggling with deflation, right? So I believe the Federal Reserve could monetize and get us out of a lot of this. Now, what happens at some point, it is inflationary. It is inflationary. So if, if the government monetizes a lot of money, so let's say they the Federal Reserve monetized the entire US deficit, right? And they just monetize it. Well then I think confidence in the dollar would drop.
Sure.
And that means the dollar's value would drop. Would you wanna own that or a euro? Well, you'd wanna own a euro at that point. So the confidence would drop. And so the US currency would drop in value. It wouldn't drop precipitously, it would drop some, right? And the more severe, the more severe drop. But then that's its own fix. So what happens is when you see currencies drop, inflation begins to happen because imports cost more money. And then as soon as you have inflation, well, that wipes out— start wiping out the debt. You follow me? So, so it really is. It really is. You know, it really is. It's not as bad as people say. But we— that said, I am an economic conservative and we actually should be, you know, trying to balance our budget and we shouldn't be spending as much money and we You know, we have too much government and too much government spending and too much waste. And it, and it really should be, should be checked. And we need to, we need to check our politicians. But that said, it's not existential crisis. It's not an existential crisis. It is, it is weird. This, this US government is going to continue and going to, going to be very successful and our economy is going to continue to be very successful. Yeah.
I think you made the point, but so many people think of the US or the US dollar, the economy in a vacuum, right? There's a lot of problems in our economy. There's a lot of problems politically, et cetera.
Sure are.
But that's not, it's, it's all relative, right? It's that the way the US dollar is, you know, priced is relative to other economies and other currencies. And so there's, you have to look at the broader scope of, okay, the US dollar's not perfect. This economy's not perfect, but it's still the best option we have, you know?
And, right. And I'll make one more point here too. So the only time countries go back— so US cannot go bankrupt. And there's, there's a, there's, here's the reason. The only time countries go bankrupt is when you borrow money in a currency you cannot print.
Okay.
Which happens. Yeah. Okay. Happens in Brazil happens in Argentina. They borrow money in dollars. They can't print dollars, last I heard. Well, at some point they can't pay that back, right? And that's the problem. Well, it's also a problem in Europe because they can't print euros. The individual countries that are doing their debt, borrowing, spending, they can't print their currencies. And they— so if there's bankruptcy, it's going to happen. It's going to be in Europe and it's going to be in other places. In the United States, we can never go bankrupt because it's called the rights of seigniorage. Seigniorage is the right to make money. And as long as you can make money, you can really never go bankrupt. Now you can devalue that money.
Sure.
But again, as I pointed out, well, devaluing that money by printing too much solves the problem. It is self-correcting. Yeah.
So now that's very interesting. Thanks, Michael, for, for writing in the question and Definitely love the feedback on some of these topics as we talk about them.
And bottom line, guys, don't bet against America. I mean, the most successful investor of all time is Warren Buffett. He says, don't bet against America. Right. You know, and you bet against America, you're betting against me. You're betting against him. You're betting against the entrepreneur, the inventor. You know, we're innovating, we are creating, we're adapting, we're changing what we're doing. Collectively to create a vibrant economy. And it's not a thing, it's, it's human beings who are constantly innovating, changing, adapting. Go— don't bet against that. Don't ever bet against that. Yeah.
So awesome. Good stuff. Thank you so much for listening to the podcast. Hopefully you got a lot out of this episode, and feel free to share it and rate and review. We always appreciate that. Until next time.
