I have been engaged in international trade and foreign exchange trading for 30 years and have been thinking about the technical obstacles of economic globalization at the international settlement level. The Balance of Payments rules that the trade surplus countries end up with debts of trade deficit countries, and under the multilateral free trade system, the international settlement has become extremely complicated.
The Balance of Payments Principle determines that if the left side of the equation is deficit, the right side of the equation will be external debt. If the left side of the equation is surplus, the right of the equation will be international financial claims. Deficit countries usually fail to settle the debt owed to surplus countries. Regardless of whether the US dollar is an international settlement currency or Renminbi is not a free flowing currency, the Balance of Payments always applies. International trade is settled twice, first between traders, then the currency conversion between countries. Even if the United States trade in dollar, its external debt is still a foreign debt, and the US Dollar, while enjoying the status of an international settlement currency, cannot escape the rule of Balance of Payments. That’s why Buffett said: With long-term persistent trade deficit, the United States will eventually become a colony of the creditors!
This is a problem Western economics has not solved in 300 years. Three years ago, I finally came upon a solution entirely from the technical perspective. Gaming with real data of 2017, it worked. Addressing the dollar dilemma, I hope my work will lead to the establishment of a new world trade currency system step by step.
(1) The Dollar Dilemma
Assessing whether the US-led globalization and the dollar system they designed is good or bad for the US, we need to start from the “Balance of Payments” (see Annex 1: U.S. Balance of Payments)
From 1960, the United States has built a cumulative trade and service deficit of US $ 11.5 trillion, with a net international investment income of US $ 3.27 trillion, and personal remittance + government international expenditure of US $ 2.37 trillion. This means, in the past 59 years, the cumulative global profit return of American companies minus the return of profit to foreign investors, has resulted in a total net profit of 3.27 trillion US dollars. This income minus the personal remittance + government’s overseas expenditure of 2.37 trillion US dollars amounted to non-trade net income of 900 billion US dollars. This 900 billion income is not even close to trade off the 11.5 trillion trade deficit. Therefore, the entire nation’s running depends on increasing foreign debt. The cumulative increase in external debt is $ 11 trillion over the past 59 years! The public generally believes that although the United States has deficit in trade, American companies have made a fortune in globalization. This statement has no fact support at all.
The fact is the US-run international monetary system, centered on the US dollar, is maintained by the United States’ increasing foreign debt. As of September 2019, the global foreign exchange reserves were US $ 11 trillion, and the US net foreign debt was also US $ 11 trillion. From a global perspective, the global foreign exchange reserves have filled the black hole of US debt.
Why is this obvious problem not ringing global alarm? Because mainstream economists believe this is the basis of the Triffin Paradox.
(2) TheTriffin Paradox
Mr. Triffin argues that external debt is a necessary condition for the dollar to become a reserve currency. Money flows freely around the world, and savings of trade surplus countries naturally go to trade deficit countries, because if surplus countries’ financial institutions don’t convert traders’ gained dollars to local currency, these traders will not be able to continue reproduction. Therefore, trade surplus countries become trade deficit countries’ creditors, while the latter accumulates foreign debt. Mr. Triffin argues that if reserve currency countries need to absorb global savings, it’s only natural that trade deficit countries’ currencies should become global reserve currencies because only these countries need to borrow debt. As a result, trade surplus countries such as China and Japan naturally cannot become reserve currency states. This is the so called the Triffin Paradox. Call it a paradox because everyone knows that logic doesn’t work. The international trade settlement is the core of international financial stability, and this settlement is based on a paradox! This cannot go on. Supported by this paradox, the US foreign debt has put US economy in great danger.
The public is not alarmed because people believe the US government could print money to pay off their foreign debt.
(3) The US. Cannot Print Money to Pay Off Its Foreign Debt
Can the U.S. really evade paying debts? Let’s take a look at how deep the liquidity of global financial system is.
The United States has $39 trillion external debt, $28 trillion total external assets, meaning $11 trillion deficit in International Investment Position. (See Annex 2: Table of U.S. International Investment Positions)The Eurozone has total assets of EUR 28 trillion and total liabilities of EUR 28 trillion. (See Annex 3: Eurozone International Investment Position Table). The combined gross national income of these two economies is only $32 trillion. If there is any sign that US would default its debt, more than $70 trillion financial assets under the control of Wall Street in Europe and the US would be exposed to risk. The foreseeable scenario could be that the dollar’s selling pressure surging like a flood, tumbling the global financial system instantly. Comparing to the impact of dollar debt default on the global financial system, the collapse of Lehman would be less than nothing! The dollar debt default would be catastrophic while all the major European and American banks going bankrupt. So, it’s easy to say that the US can evade paying debts, while in practice, it’s not an option.
Another entrenched view of the public is that if the US cannot evade paying debts, it can start the money printing machine!
Although the US. owes US dollar debt, creditors still have to sell dollars if the Fed starts the money-printing machine to pay off its debt. For example, the Fed prints money to pay off its debt to China, the Fed buys US dollar debt, and China sells US. debt which is reflected in foreign exchange trading. China sells US $1 trillion to buy the equivalent of other currencies. The question is, China sells dollars, who is going to buy them? If the Fed buys dollars, what currency does the Fed sell? America’s foreign exchange reserves is almost zero, so the Fed can’t sell a non-dollar currency it doesn’t have, right? The Balance of Payments Rules!.It’s that simple!
The Fed doesn’t have any foreign exchange reserves, and when other countries sell dollars, the Fed simply can’t intervene in the foreign exchange market. Without intervention in the currency market, no dollar buyer can be found. That’s why I always say that the dollar has no self protection back up plan. The dollar stability depends entirely on international creditors’ confidence in dollar. When the market confidence vanishes, nobody can save dollar except for its creditors. The US Dollar is America’s strongest suit and its Achilles’ Heel.
Advantage: Because theUS dollar is the international settlement currency, American companies borrow in US. dollars, and run import and export without the risk of exchange rate fluctuation. Without exchange rate fluctuation risk, enterprises in the global competition has a profit margin of about 10%. A competitive edge of 10% profit is decisive. Therefore, American companies are more profitable and more competitive than those of Europe, Japan and China. The US dollar being an international settlement currency is indispensable. Weakness The US is a long-term deficit country with a total external debt of $39 trillion, of which $22 trillion is financed in bonds, funds and stock markets. Under normal market circumstances, America’s financial market liquidity is fine. However,once a unilateral market is in place, all the market liquidity will be gone over night. The collapse of Lehman in 2008 was a perfect example showing how vulnerable the market liquidity can be. When the dollar crisis comes, nothing can save the market. So the premise of dollar working effectively is that it always has enough liquidity, and this conclusion is based on the assumption that the dollar will not have a unilateral market. When the one-sided market comes, the dollar doesn’t have any self protection mechanism. America’s $11 trillion net foreign debt is the biggest threat to its national economic security.
(4)Why Does the Floating Exchange Rate System Inevitably Fail?
The current US Dollar system and the Triffin Paradox theory is based on the floating exchange rate system, and the past 60 years have proven that this system does not work.
First, it usually takes a country 5-10 years to establish an industrial chain, while the operating cycle of the floating exchange rate is getting shorter and more unpredictable. The floating exchange rate is losing the regulative power to balance trade. Moreover, the competitiveness of import and export is composed of many factors, and trade rebalance cannot be achieved by relying soly on exchange rate changes.
For example, to assess whether the RMB is overvalued or undervalued, if you look at property price, the Chinese Yuan is overvalued; if you look at the wages of ordinary workers and prices of basic necessities, the RMB has a big room for appreciation. Moreover, a country’s welfare system is also a key factor affecting its international competitiveness. For example, an average American earns an annual income of $40,000, but his living quality is no better than an Italian or a Spanish earning $20,000. This is because Americans bear higher costs of education, health care, and urban management. America’s living cost is the highest in the world. These factors all have an impact on a country’s international competitiveness.
Second, how major economies deal with the flaw of the floating exchange rate puts us in a global perspective.
Western economists believe that trade imbalance can be regulated by exchange rate fluctuation, so their balance of payment equation is:
Current account balance = Financial account balance
In practice, Asian trade surplus countries such as China and Japan adopted countermeasures to maintain domestic reproduction by establishing the foreign exchange reserves, while Germany integrated the Eurozone at all costs. The goal was to help the currency market achieve equilibrium of currency transactions. Therefore, the Balance of Payments equation evolved to:
The foreign exchange reserves has helped trade surplus countries to balance the foreign exchange transactions and to stabilize reproduction. In the mean time, it has ruined the adjusting function of the floating exchange rate.
The United States often labels trade surplus countries as exchange rate manipulators, while in fact, it’s a complete pseudo proposition. The $11 trillion global foreign exchange reserves is indeed the result of government intervention. Without government intervention in the foreign exchange market, there will be no foreign exchange reserves at all. The global foreign exchange reserves is $11 trillion, America’s net foreign debt is $1.1 trillion, this shows that the US. economy relies on global foreign exchange reserves to move on. Without global foreign exchange reserves, the dollar may have collapsed long ago. Global foreign exchange reserves plays a vital role in dollar stability. So we must crack the Triffin Paradox when we design the new international settlement currency system.
(5)Triffin Paradox Can Only Be Solved with Offshore Currencies Operating Independently
The current international monetary system is still a variant of barter trade. Whether in Europe and the United States, which pursue market-determined exchange rates, or in China and Japan, which intervene in foreign exchange markets, or at WTO established for the multilateral free trade system, so far, economists around the world have not resolved the settlement problem arised from trade imbalance. Trade surplus countries cannot achieve actual settlement with trade deficit countries. In practice, trade balance is rare and trade imbalance is common. Under the multilateral trade system, this problem becomes more complicated.
The dollar’s external debt problem is not only US economy’s biggest threat, but also the biggest danger to global financial stability. The economic globalization has been undergoing for 300 years, and gold, silver or today’s dollar settlement currency all failed to solve the settlement problem resulted from trade imbalance. Looking back at the major financial crises, the reasons behind were always related to trade imbalance. The economic motive of the British and other Western powers launching the Opium War against the Qing Dynasty was also the British trade deficit with the Qing Dynasty. Deficit countries’ gold and silver went to surplus countries, which led to the depletion of gold and silver in deficit countries.
In 1971, the dollar got rid of the shackles of gold, but it’s still under the rule of Balance of Payments. The United States has accumulated as much foreign debt as trade deficit. The new monetary system of international trade must tackle this 300 year problem. My plan is: onshore and offshore currencies should run completely independent of each other. The international settlement and reserve currency should not participate in the circulation of domestic currency. Only in this way, can we avoid the dollar dilemma, thus cracking the Triffin Paradox.
(6) The New International Reserve Currency System
To solve the dollar problem, the international reserve currency must be independent from any sovereign state currency, and the global foreign exchange reserves must endorse the global clearing currency. At present, 60% of the global foreign exchange reserves comes from Asia, of which 34% from the Greater China economic circle, and 17% comes from raw material suppliers, 8.3% comes from oil suppliers. A careful analysis of these trade surpluses shows that 85% of the export demand for foreign exchange reserves comes from China (see Annex 4: Global Foreign Exchange Reserve Distribution).
From 2000 to 2018 , China accumulated a trade deficit of US$8 trillion with raw material countries and producers of high-tech products ( see Annex 5: China’s import and export trade ) , which means that countries with trade surpluse with China earned foreign exchange from China and deposited it mainly in US dollars. China’s foreign exchange reserves also come from trade surplus with the United States. In one word, the bulk of foreign exchange reserves outside China and Japan is contributed by China’s purchasing power. Therefore, the so-called petrol dollar is no longer true. Countries with foreign exchange reserves together should work out a plan for the new global trade settlement and reserve currency.
I name the new international settlement and reserve currency the Global Yuan, independent of any sovereign state currency. Founding states of the Global Yuan can join the new Global Yuan Central Bank with their foreign exchange reserves. Their respective investment will decide their voting power and equity interests. The Global Yuan is not any country’s domestic clearing currency. This can technically solve the problem that surplus countries cannot manage international reserve currencies. SDRs cannot be implemented because SDRs have nothing to do with global trade. The new international settlement currency can only take root when it serves world trade. The SDRs system must be reformed to attract countries with foreign exchange reserves to be share holders in the new central bank, so that the new currency could serve world trade.
In short, the Global Yuan will replace the US dollar to function as the international trade settlement currency and international credit, and the Global Yuan will become a pool of global foreign exchange reserves. The Global Yuan is endorsed by participating states’ foreign exchange reserves. It does not have the right to print money. It is like any commercial bank to make ends meet when it comes to international credit business. The Global Yuan Central Bank can use credit leverage to support economic growth and promote trade rebalance. This will fundamentally solve the settlement problem caused by trade imbalance, while boosting global economic growth.
The Global Yuan will put an end to the 300 year international settlement problem originated from economic globalization. With the new currency system for international trade, the global foreign exchange reserves will benefit the people of the world, and in the mean time, bring long-term stable return to participating countries and investors.
（7）With Global Foreign Fxchange Reserves Reaching Ceiling, the US Trade Deficit Keeps Growing , A Red Light for Dollar Indeed！
Financial capital inflows into the dollar are unstable sources of funding and the rising foreign exchange reserves is the cornerstone of dollar stability. The U.S. net foreign debt accounted for 19% of global foreign exchange reserves in 2007, and today it’s 93%. (see Annex 6: Global Foreign Exchange Reserves vs. Net Foreign Debt of the United States).
Data shows that since 2007, the continued growth of global foreign exchange reserves has been the umbilical cord for US dollar. Now, the global foreign exchange reserves has reached ceiling, but the US foreign debt is still growing. (see Annex 7: U.S. debt vs global foreign exchange reserves) The Dollar can no longer rely on global foreign exchange reserves to maintain its stability. The US. dollar is about to face the risk of a broken capital supply chain! The world has to be prepared for the coming up dollar crisis.
Annex 1
Annex 2
Annex 3
Annex 4
Annex 5
Annex 6
Annex 7
CV of the Author
Born in June 1959 in Tianjin China, Margaret Ma volunteered to be a peasant in Inner Mongolia in1976. During her stay in the rural area, She read “On Capital” by Karl Marx. In 1977, she passed the national college entrance exam and studied in Inner Mongolia Food Institute, accounting major.
From 1980 to 1987, she worked in an agency under Tianjin Municipal Planning Committee, in charge of large state enterprises’ foreign exchange loans conversion to RMB through trade. In 1993, she quitted the job and began to do import and export of bulk commodities. In 2000, she immigrated to Australia and became an independent investor.
Persistent reflection on futures helped Margaret develop a keen insight in the basics of exchange rate fluctuation. Margaret is now studing Balance of Payments in hopes of providing technical support for the new world trade settlement currency system.
Today I will talk about why the relationship between a trade surplus country and a deficit country is a zero-sum game. The trade surplus is positive, the trade deficit is negative, the surplus and the deficit add up to zero. The surplus of the trade surplus country would turn into indebtedness owed by the trade deficit countries. Deficit countries manifest it as external debt. This zero-sum relationship has become a bit complicated under the economic globalization of the multilateral trading system, but the truth can still be glimpsed. For example, from 2000 to 2018, the United States had a cumulative current account deficit of $ 10 trillion, and the United States’ net external debt was also $ 10 trillion. Similarly, from 2000 to 2018, China’s cumulative current account surplus was US $ 3.3 trillion, and China’s foreign exchange reserves were US $ 3.1 trillion. So, the question arises: The deficit countries could borrow infinitely without limit. Regardless of whether the debtor countries can afford to repay their debts, how does the surplus countries continue to operate? This is very important. This is the key to cracking the Triffin paradox. Below I continue to use stories to explain how the zero-sum game is operated between countries.
Say if the Chinese family has four sons, each of them living independently, dad would preside over a fair competition between the brothers, and dad would have the right to print money. Initially, trade was between the four brothers. The eldest son sells bread to the second son. The eldest son’s income is the second son’s spending. The second son must sell the equivalent worth of products in order to have money to buy the eldest son’s products. Among brothers, one party’s income is the other’s expenditure, the four brothers exchange with each other, living a self-sufficient life, this model is the so-called domestic demand economy. Therefore, when any economist advocates a domestic demand-based economy, I will chuckle as people could not be rich without foreign wealth, and so is the country. The Chinese people must not rely solely on domestic demand in order to lead the world’s richest life. The domestic demand-based economy is like the four brothers’ economy. To become rich, we must embrace globalization. That is why President Xi put forward a great vision of a community of shared future for mankind.
Well, let’s get back to the story. Dad wishes the family to get richer and accumulate more savings. He encourages the four brothers to work harder and sell the surplus output to other families. As a result, the four brothers increased working hours, increased output, and sold the surplus products to the American family.
In the course of the transactions, the Chinese family sold 50,000 yuan of goods to the American family, but only 20,000 yuan of the goods sold to the Chinese family in return. Americans has no equivalent income, therefore unable to repay the remaining 30,000 yuan to the Chinese family. So, the brothers go to their father claiming that they could not do the business anymore. “We sold to The American 50,000 yuan of goods with the cost amounted to 40,000 yuan. American owe us 30,000, how do we pay for the wages and raw materials?”
Dad thought about it for a while. He figured out he could print money to the four brothers and let the Americans owed him money. So, dad bought the debt of 30,000 yuan, which became the foreign exchange reserve. In this way, old dad kept on buying the American debt notes. As he printed money to buy the debt notes is virtually without cost, he earned interest instead. Therefore, no hurry to urge the American to repay the debts. Not only did the Chinese family do this, but the Japanese and The Europeans sold their goods in the same way to the American family as well. They also do not bother to force the American to repay their debts. Just like this, the Americans ended up with more and more debts.
By 2018, the American family’s external debt had reached 50% of its total annual income. Among them, most money owed to the Chinese Family. At this time, the father of the Chinese family felt that something was wrong, sooner of later those debt notes would go bad. But the Americans owes too much debt, and the Chinese worry that selling them could lead to a collapse of the U.S. currency. So, they began to discuss with other families how to sell the US debt without causing the US dollar to collapse. . ….
The above story is the clearing problem of our current trading system. The global foreign exchange reserves are $1.1 trillion, and the net foreign debt of the United States is $10 trillion. It proves that the global trade imbalance is essentially coming from the long-term deficit of the United States. The United States has taken advantage of its dollar reserve status to absorb global savings. The savings of the world’s people have filled the US consumer debt. Consumer debt itself does not create value. US debt is more worrying. New debt is used to pay off old debt, and total debt continues to increase at a rate of 500 billion US dollars each year, the dollar has become a Ponzi scheme. With such a simple and clear truth, what do economists say? They say, “You are layman, this is the famous “Triffin Paradox”! Because the United States is a trade deficit country and the US dollar is willing to assume liabilities to foreign countries, can the US dollar be called a global reserve currency? It is because China is Trade surplus country and foreign exchange reserve contributor, so the RMB can never become a global reserve currency! “
My God! Western economics is the most ridiculous knowledge I know. Why would countries be accumulating foreign exchange reserves for the American consumption??? At the core of the Triffin paradox, must the precursor conditions of an international reserve currency be a global debt king??? In the next talk, let me analyze the Triffin paradox. In the past, I have rolled out the simple facts about currency issues, now the exciting part is coming! Designing a new global currency system begins with cracking the Triffin paradox. Only by breaking Triffin’s paradox can the community of human destiny move on ahead.
Time is up for this session. The dollar problem concerns all of us. Out of this centennial change, the most important one is the change of currency. Foreseeing correctly how this happen perhaps providing the biggest opportunity for wealth explosion in the next 20 years. This is my original aim for this series of lectures. Keep listening, and you will definitely gain something.
Today I’m going to continue with the history of the dollar. From the announcement of the dollar’s peg to gold in 1944 to the run on gold in 1971, the Bretton Woods system collapsed after only 27 years of survival, and the dollar, free dwindled by gold, was on the road to debt inflation. Today, I continue to use the story to illustrate what happened to the dollar after the decoupling from gold.
Let’s liken the main countries to families, namely, the American, the European, the Chinese, and the Japanese. Despite tearing up the promise linked to gold, the American’s economic strength is very strong together with alliance of European Union, other small ethnic groups have no ability to fight against them, and thus want to continue to do business with the Americans. The US dollar unpegged with gold continue to circulate and accumulate as savings among the various ethnic groups.
In the 80’s, the Japanese family began to grow. The products that Japanese sold to Americans greatly exceeded the products bought from Americans. Therefore, the Japanese family hoarded a large amount of US dollars. The Japanese used the money they earned to buy the houses and lands from the Americans. The self-esteem and vitality of the Americans were severely damaged. Eventually the Americans and Europeans jointly pushed for the appreciation of the Japanese currency. As a result, the appreciated Japanese currency reduced the competitiveness of Japanese goods. The single out Japanese could only endure the unfairness in order to survive. During this period, despite many trade disputes between the various ethnic groups, life for the Japanese was relatively peaceful.
In 2000, American’s big trouble came, and the Chinese family, which has always been hard-working, smart and not prone to troubles, accelerated to rise. The Chinese family not only worked hard, but also cooperated with the most advanced American bosses to set up factories. The Americans are good at scientific research and development. The Chinese people are pragmatic and hard working. The American bosses have mastered most of the initiative and gave the dirty work to the Chinese people. They still make most of the profit. Why not? The Americans control the design and consumer ends of the industrial chain, and the Chinese are responsible for production. This is what the Americans calls the smiling business rule.
However, after playing with the smiling business rule, it becomes the rule of crying. One after another, the American factories have moved to the territory of the foreigners, and even all the necessities of daily life must be purchased from other ethnic groups. In addition to the Chinese, other families are also willing to sell goods to the Americans’ chassis. As the Americans have high wages, and people are lazy, they have nothing to sell to other ethnic groups, so they continue to raise debts and owe more and more debts.
The above story illustrates the model of the international trading system. The current international trading system is actually still a variant of barter trade. When the international trade has reached the settlement level, the trade surplus country owns the debt of the trade deficit country, the surplus is positive, and the deficit is negative. Between 2000 and 2018, the U.S. accumulated a current account deficit of $10 trillion, and the U.S. net external debt was $10 trillion. Please pay attention to this critical phenomenon! The cumulative current account deficit of the United States is equal to its net external debt. Important words have to say three times: the cumulative current account deficit of the United States is equal to its net external debt; the cumulative current account deficit of the United States is equal to its net external debt. This is the principle of balance of payments. How much deficit a country has accumulated, it would accumulate an equivalent amount of foreign debt. While we are trying to understand the problem of the dollar and looking for a way out for the new monetary system, we must keep this principle of balance of payments in mind. With this in mind, all other problems could be solved. The United States has accumulated a long-term trade deficit, and its dollars naturally flow to the trade surplus countries, leading to the constant expansion of U.S. external debt. To put it bluntly, when international trade has reached the settlement level, it undoubtedly becomes a zero-sum game. Let me analyze why it is a zero-sum game in next talk.
Time is up for this session. The dollar problem concerns all of us. Out of this centennial change, the most important one is the change of currency. Foreseeing correctly how this happen perhaps providing the biggest opportunity for wealth explosion in the next 20 years. This is my original aim for this series of lectures. Keep listening, and you will definitely gain something.
Thank you host. Firstly, I want to introduce myself. I have directly and indirectly engaged in currency trading for nearly 30 years. I can say that most of my wealth accumulation is related to currency, During the last 30 years, I have been trying to understand the nature of currency trading every day. A few years ago, I finally found a code to understand the currency problem in the mess of seemingly simple mathematical principles and logical confusion in Western economics. I believe I find a way to crack the dollar trap for the Community of Destiny for Humanity. But so far, I have not seen this idea widely recognized by the public. Below, I’ll share my view on the dollar problem and my cracking plan with a series of lectures, and we’ll explore ways to get rid of the dollar trap for China and the rest of the world. This is a very grand subject. We will explore it in different pieces with a kind of magical skilled craftsmanship just like the cook Ding. Today, I’m going to take a look at what Warren Buffett said, starting with Buffett’s 2003 essay, ” America’s Growing Trade Deficit Is Selling the Nation Out from Under Us:”
Buffett put it this way:
Assuming that there are only two villages in the world, called the thrifty village and the waste village, the villagers each work eight hours a day to live a happy and self-sufficient life. Later, the residents of the thrifty village wanted to have more savings, working 16 hours a day and exporting another eight hours of labor to their neighbors the waste village. Waste village was very happy to take it. Now they do not have to work hard to get food and goods. However, there is no free lunch. Waste village never produce enough income to buy goods from thrifty village. Therefore, the village of thrifty demands the waste village to issue bonds in exchange for goods, and the waste village readily accepts it. The waste village gets what they want without working hard, but the bonds being issue is getting more and more. As time goes by, the thrifty village have accumulated substantial amount of waste village bonds. Some people in waste village finally realize that if the situation goes on, they would leave their children with huge amount of debt to repay in the future. Don’t we have to double our work while we must earn our living and repay the huge debts? Unfortunately, the waste village just ignore the fact. On the other hand, the thrifty village begin to worry about whether the neighboring villages could honor the bonds, so they change their tactics, selling most of the bonds back to the waste village for money and buying the waste village’s vast amounts of land, factories and buildings. Gradually, the village bought all the valuable assets of the waste village until they do not have any more assets to sell, so the whole village becoming the colony of thrifty village. This is Buffett’s true description of America’s current situation and future destiny. Buffett’s wake-up call was in 2003, and since then America’s external debt have been accelerated rapidly. The U.S. total foreign debt was $11 trillion and net debt of $2.3 trillion in 2003, and by 2018, the U.S. total debt amounted to $35 trillion, or 166 percent of its gross national income. Net external debt amounted to $10 trillion, equivalent to 50 per cent of gross national income. Net debt of $10 trillion corresponds to $11 trillion in global foreign exchange reserves, which means that the global foreign exchange savings have been consumed by the United States! The global reserve bank, run by the dollar, is essentially bankrupt!! That meant our 3 trillion-dollar foreign exchange reserves have been watered down! America’s external debt problem has reached the point where it cannot sustain! To be sure, sooner or later, China must replace US. The establishment of a new monetary system should not replicate the old way of the dollar pawn country. This is what I want to work with you to explore the issues, to find a solution to the problem …
Well, let’s start from here today. The dollar problem concerns all of us. I believe when the dollar collapses, the global financial system will collapse as well. The globalization that each of us tied to is a global chariot. It is important to have a correct understanding of the dollar, a clear understanding of how the great changes of the century would take place. Not only can we avoid suffering from loss of wealth caused by such collapse but also make good money out of this big move. That’s why I’m running this lecture series. Thank you for listening. Let’s see you again soon.
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