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Explainer: The US Dollar will be replaced by this currency & Impact on India - YouTube
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in 1760 uk or great britain became the
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first country in the world to adopt
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industrial revolution at scale as a
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result it witnessed a lot of economic
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progress in fact it also did a lot of
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loot mar all across the world including
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in india and became filthy rich but have
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you ever paused and thought about the
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fact that why do we consider the us
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dollar as the apex currency or the
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reserve currency in the world right now
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and not the british pound in fact the
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british pound over the last 40 years has
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fallen quite aggressively if you take a
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look at this chart you will quickly see
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that back in 1971 you could buy
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approximately 2.5 us dollar with one
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british pound and right now you can buy
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only 1.5 us dollar with one british
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pound so what has been the reason for
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this fall and why am i telling you this
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story in 2022 the reason is fairly
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simple that something similar is
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happening to us dollar right now a lot
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of political commentators and
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macroeconomists are saying that us
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dollar is going to get replaced by
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chinese currency which is remnant
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and china is going to take the control
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of the world's economic engine so is
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that really going to happen we are going
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to discuss three critical points in this
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video one what led to the rise of u.s
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dollar in the world number two is
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chinese currency going to overtake the
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u.s currency now third and most
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importantly what will be india's role
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and the impact on your portfolio in fact
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can you use this situation to make more
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money in the market so we are going to
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have this detailed analysis and
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discussion i had to study a lot to
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prepare for this video it is going to be
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a complex macroeconomics video but a
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very very important video so please make
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notes and also press the like button it
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will help these type of videos reach out
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to more people so let us first and
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foremost understand what led to the rise
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of the us dollar in the world because if
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we can understand that framework we can
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apply it to the current situation in
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2022 and do a thorough analysis if
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chinese remnant is going to replace the
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us dollar as the apex currency while
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there are many factors that led to the
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growth of the u.s economy there are
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three critical factors so let me try to
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demonstrate this in an anecdotal format
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so before 1850 there were a lot of
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internal conflicts in the u.s and there
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was lot of internal unrest as a result
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what happened in the us was that it was
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not a very powerful economy there were
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other countries for example uk was there
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several other european nations were
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there that were much more powerful than
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the us but within the period 1850 and
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1950 something dramatically changed in
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the us and that part can be triggered
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from a word called as innovation so we
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all understand that u.s is a very
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innovative economy and there are four
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bearers of this innovation for example
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there was a person called as vanderbilt
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under his name there is a university
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that exists and he developed railroad
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systems in the us there was another
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person called as rockefeller and under
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his name you can find a lot of charity
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institutions foundations even now and he
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was the oil baron and oil mogul so he
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consolidated the oil market in the u.s
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similarly you would have heard of henry
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ford who developed the assembly line
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model and he started manufacturing a lot
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of cars at scale so he led to
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industrialization but if you aggregate
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all these three people and i'm
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discounting a lot of other architects of
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the us economy but if you just consider
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these three people they had aggregation
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of oil they had aggregation of assembly
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line and they had aggregation of
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transportation so they could transport a
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lot of material in bulk due to railways
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this hundred year period and a series of
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innovations took us from literally a
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no-name economy to one of the most
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prominent economies by 1950. this was
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not the only standalone factor that was
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there the second biggest factor that
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contributed to the rise of the us
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especially the u.s dollar was the 1914
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world war one in 1914 all the major
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economies be it european economies it
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russians they all jumped into world war
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one in fact uk which was one of the most
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prominent economies in 1914 it was one
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of the earliest nations to jump into
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world war one and when did world war one
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end it ended towards the start of 1919
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and uk or great britain jumped into the
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war in 1914 and war is very very costly
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so uk lost a large chunk of their
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economy just fighting the war on the
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flip side u.s was one of the last
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prominent economic nations to jump into
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world war one they jumped into world war
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one somewhere in 1917 and they only had
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to fight for one one and a half years so
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this world war one scenario crushed
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literally all the economies in the world
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including the us but u.s economy got
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crushed less compared to some of the
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other prominent nations and as a result
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in relative terms it became a very big
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economy now third and finally once the
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world war one got over in 1919 there
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were miscellaneous factors at play us
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already had a very big economy that was
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shaping up in relative terms it had
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already gained a lot of ground and there
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were miscellaneous factors at play for
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example if you look at the migration
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data you can categorically see from this
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chart that u.s migration has always been
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very high it is a country that has been
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built on immigrants a lot of indians go
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there become ceos of top tech companies
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this is not a recent phenomena in fact
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any type of business that has been
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kick-started in the u.s and it has grown
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in scale you will always find immigrants
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building those businesses in fact if i
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recall the statistic correctly the
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average income of an american is roughly
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55 57 000 us dollars but an immigrants
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especially an indian immigrants average
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income in the u.s is more than hundred
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thousand us dollars correct me if i'm
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wrong by commenting in the comment box
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i'm just quoting this from memory so the
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point is that u.s as a nation has been
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built on the back of immigrants and this
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migration even till today is helping the
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us economy massively and on top of this
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that u.s became the cradle of innovation
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and capitalism that it fostered
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capitalism a lot of other countries in
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the world they did not adopt capitalism
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to the extent the u.s did and as a
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result what happened it gave us the
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ability to pivot for example if you
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consider henry ford assembly line model
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in early 1900s it pivoted and by the end
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of 1900s the tech industry took over why
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the tech industry originate in the us to
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begin with because there was wealth of
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capital that was already available and
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because of this fostering of capitalism
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this pivoting became easy so as a result
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the u.s economy kept going up up and up
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in real terms so this story beautifully
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played out up until the 2008 crisis when
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the u.s debt giving model was working
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wonderfully well and the u.s economy was
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getting richer by the day but anything
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that goes up including the u.s economy
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needs to come down at some stage and now
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the pundits or the economists are
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claiming that you know what with the
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rise of china with the internal
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conflicts that are picking up in the u.s
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with the excess money printing that the
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feds are undertaking they just turn on
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money printer for fun so they keep on
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pushing more and more and more money so
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all these series of different negative
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things is putting the us down and 2020
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has acted as a catalyst very similar to
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the way the 1914 world war one acted as
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a catalyst where this change of power is
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going to take place between the u.s and
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china so you can clearly see from this
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graph that the percentage share of china
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in the world trade has been going up and
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for the u.s it has been coming down over
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the years so this brings us to the
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second question of the video that is
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china going to take over the us if yes
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why it will take over second is when it
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will take over okay so let us try to do
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a very quick analysis i can create a
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separate video on this topic altogether
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let me know in the comment box if you
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would want me to do that but here is the
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quick story so i'll make you see three
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graphics and then i will do a quick
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commentary on it so the first graphic we
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already covered that the share of china
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in the world trade is going up and for
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the u.s it has been coming down so this
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is graph number one second key thing if
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you analyze the manufacturing prowess so
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the word of the day today is prowess let
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me know what does that mean so the
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manufacturing prowess of china is again
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picking up and for the us it is going
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down so this is the second key graph and
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third and final graphic is very very
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worrying this difference shows the
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amount of debt that the us owes to china
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now all these three graphs inter relate
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and i will explain you the macro
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economics behind it so here is the quick
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macroeconomic story behind these three
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graphs and there are three critical
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points that you need to remember so
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first and foremost that as the share of
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china in the world trade goes up and as
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its manufacturing prowess increases it
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will be able to control more money in
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the world so that is fact number one now
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in the last decade or rather in the last
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three decades china's manufacturing
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power has been going up up and up so as
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a result china has been able to control
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a lot of debt from the us now if you
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require a very quick input as to how
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this dead game is played out let me
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quickly explain that also this is a
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highly complex macroeconomic viewpoint
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so please press the like button if you
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like the explanation so what happens is
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this that u.s and china trade with each
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other and trade with other countries and
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it what currency do they trade so they
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trade right now in us dollar mostly
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speaking why is that because us dollar
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is the primary or apex currency it finds
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more usage for example india might also
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want to use u.s dollar china might also
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want to use u.s dollar u.s itself would
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want to use us dollar so this entire us
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dollar that you see printed so let's say
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that there are ten thousand one dollar
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u.s note that is out there in the world
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so what does this indicate this
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indicates the amount of total debt on
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the us because every time the u.s
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government prints any amount of money
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that becomes a debt on them that simply
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means that the us government has taken a
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loan or an obligation for example if you
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zoom the note in india what does it say
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it says that i promise to pay the bearer
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the sum of 100 rupees so this is an
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obligation on the indian government
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similarly whenever the us government
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prints currency it becomes an obligation
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for them so right now if you check that
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how much debt the u.s has taken from
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china you will be surprised to learn
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that they have taken 1.06 trillion
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dollars of debt as of january 2022 you
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will say that okay how big is one
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trillion dollar is it large enough is it
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small enough okay so let us look at the
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external debt of different countries and
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here if you check the debt of india you
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will see that india's external debt is
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roughly 615 billion so india's total
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external debt is roughly 35 percent less
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than the debt that u.s has taken from
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china so that is how large that one
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trillion dollar debt is so now comes the
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natural question that will china kill
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the us because they are holding 1.01
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trillion dollars of debt
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of course it would want to kill the us
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the very next day they are not friends
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they are not hugging each other and we
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don't see joe biden or donald trump
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kissing xi jinping and all that stuff so
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that is not happening so what is exactly
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going on so here is a very quick
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simplified summary so number one if the
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chinese decide to flood the market with
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u.s dollar because they are holding a
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lot of us dollars so to say and they can
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decide to sell those us dollars whenever
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they feel like so it is like selling
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stocks so that will devalue the dollar
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at a very very brisk pace
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is that something that china would do
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the answer seems like no because if they
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crash the us dollar even their own trade
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will suffer it will crush their own
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economy also it is like pressing a
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self-destruct button yes fine you will
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kill the u.s economy but in that game
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plan even you yourself will get
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evaporated so what is it that china is
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likely to do
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so they will maybe wait and watch so
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what exactly will they wait and watch on
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okay so basically two things there are
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multiple other things i am simplifying
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this so please take it in that spirit so
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first and foremost the chinese
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government will not derail the us till
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the time and international collaboration
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systems
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are built up from their end so you might
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have seen that china is building a lot
[703]
of international partnerships why are
[704]
the belt and road initiative what are
[706]
they trying to do they are trying to put
[708]
their foothold across different parts of
[710]
the world they are building a railway
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line to europe they are building a lot
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of physical infrastructure in africa in
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sri lanka bunch of other asian countries
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they are also trying to capture taiwan
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what not what are they trying to do they
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are trying to do both hard and soft
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diplomacy art diplomacy means that go
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and literally acquire a country for
[726]
example they are planning to invade
[728]
taiwan soft diplomacy means that you
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know what give people debt for example
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the pakistan government had taken a lot
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of debt from china they went to china
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again to get their debt restructured and
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xi jinping said to imran khan that okay
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you know what time for you to dance no
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he did not literally say it but that is
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what he literally meant that he gave
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chinese really bad terms in terms of
[748]
debt restructuring so this is slightly
[750]
more softer diplomacy why are they doing
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it because you might have observed that
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post world war ii the international
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systems for example take a look at un wh
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world bank you name it imf who controls
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all these international agencies it is
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controlled by the u.s because if u.s as
[767]
a normal nation would go to a country
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like india and say that you know what i
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have come up with brilliant us dollars
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do you want it no one is going to use it
[775]
they are going to put soft diplomacy
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pressure on you for example if you watch
[779]
one of my earlier videos i spoke about
[781]
the fact how is india's forex reserve
[783]
made of it is made of sdr or special
[786]
drawing rights which are related to imf
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so please go and watch that video it
[789]
will give you more clarity but to cut
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the long story short these international
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systems need to be built first in order
[795]
for a country to exert its influence on
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other international parties second key
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point the alternate money system also
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needs to be built so after 1914 as i
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discussed on several of my previous
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videos that u.s aggressively promoted
[809]
the keynesian economics so they became
[811]
like a money printing agency so to say
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and that was the monetary system that
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they adopted and made the other parts of
[817]
the world also
[818]
so china also needs to come up with
[820]
their own system they are working on
[822]
their own digital yuan so let's see how
[824]
that currency plays out but to cut the
[826]
long story short that in the short term
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it doesn't seem like that china will
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derail the us intently unless they have
[833]
these two key pillars sorted out one is
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around international coordination that
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countries want to go with china for some
[838]
reason or china is able to exert enough
[841]
influence over them be it through hard
[843]
diplomacy or soft diplomacy and second
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is that it needs to create a new
[847]
monetary system which is not us dollar
[849]
driven so if both these things are
[851]
sorted out then yes that would be the
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time to transition from a u.s driven
[855]
economy to a chinese driven economy now
[858]
you would say that akshat you know what
[859]
this is like very depressing because
[860]
china you know they spread some virus
[863]
which i cannot name because otherwise
[865]
this video will get banned so they ate
[868]
some wild animal and spread that virus
[870]
and what not so
[871]
i don't want to go with china can india
[873]
stand up to china okay so let me show
[876]
you facts please don't stir up
[877]
nationalistic feeling here please look
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at data i'm just presenting data to you
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so let me present three facts here so
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fact number one is that chinese gdp is
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roughly 16.7 trillion dollars india's
[888]
nominal gdp is roughly three trillion
[890]
dollars so we are one-fifth the size of
[892]
china in terms of the mode now people
[895]
give really weird arguments here for
[897]
example we will say that you know what
[899]
compare the gdp in ppp terms okay what
[901]
are you going to do you are trying to
[902]
compete against china and the us so that
[904]
ppp comparison is not correct you have
[906]
to do an absolute comparison here so
[908]
this is fact number one fact number two
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lot of people say that you know what in
[912]
china there will be internal unrest that
[914]
will be caused because chinese
[916]
government really crushes people and
[918]
income inequality in china is very very
[920]
high again this number is not correct if
[922]
you compare the income inequality in
[924]
india it is 24 higher than in china
[927]
third key fact we say that okay the
[929]
consumer spending or india has a very
[931]
big consumer base so many people are
[933]
young they will buy a lot of stuff what
[935]
not
[935]
and chinese population is aging so they
[938]
will buy less but right now in consumer
[940]
spending chinese consumers spend roughly
[943]
15.7 trillion dollars indian consumers
[945]
spend roughly one and a half trillion
[947]
dollars so there is a huge difference in
[949]
terms of the income set which we are
[950]
comparing does this mean that we are
[952]
doomed the answer is no it does not mean
[954]
that you should shift your indian
[955]
portfolio to chinese portfolio you need
[958]
to listen to couple of more points one
[960]
is that our demographic dividend is high
[962]
and the hope is that going forward lot
[964]
more people will be placed they will be
[966]
given better jobs a large part of our
[968]
workforce will migrate from agriculture
[970]
driven economy to service or
[972]
manufacturing driven economy if that
[974]
happens that will improve our gdp per
[977]
capita from roughly 2 000 us dollars to
[979]
4 000 us dollars and at that stage india
[982]
becomes a high value market second key
[985]
point is that india is one of the best
[987]
in fact let me revise the statement that
[989]
india is probably the best emerging
[991]
economy out there and it will continue
[993]
to see a large influx of foreign
[996]
investors it is happening for a wide
[998]
variety of reasons one of the primary
[1000]
things being that we have an english
[1001]
educated workforce that can create
[1003]
services that can be exported out of
[1005]
india and the cost of production of
[1007]
those services in india will remain low
[1010]
so that is a winning mode for india if
[1012]
india can figure out a way to use its
[1015]
workforce productively and in high-end
[1017]
jobs india will become a massive economy
[1019]
in the next few decades so this brings
[1022]
me to the investment section of the
[1023]
video that what are some of the key
[1025]
things that you should be doing so i
[1026]
have two pieces of advice for you that
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number one if you are looking to invest
[1030]
in india from a long term perspective
[1032]
then you must take positions in
[1034]
industries that support capital
[1036]
formation for example banks because if
[1039]
indian economy has to grow banks have to
[1041]
grow if more capital is coming to india
[1044]
it will be deployed one way or the other
[1046]
by the banks they will be the one giving
[1048]
loans their loan books will become
[1050]
better and better and stronger and
[1051]
stronger as more customers avail credit
[1054]
so this entire flow of credit will be
[1056]
managed by banks and therefore i am
[1057]
super bullish about banks i have said it
[1059]
multiple times but this is one of the
[1061]
key insights that i can give you if you
[1063]
are trying to build a position for the
[1064]
next 10 15 20 years in india this is
[1067]
most likely going to happen second key
[1069]
thing you must diversify between u.s and
[1072]
china also so far we have been doing u.s
[1075]
oriented investing only i have already
[1077]
started to take position in chinese
[1079]
stocks have already spoken about it
[1080]
alibaba seems to be giving decent
[1082]
returns now so i'll make a separate
[1084]
video of investing in chinese economy in
[1086]
case some of you are interested and as a
[1088]
final section since this was a very
[1090]
complicated video let me summarize three
[1092]
key facts that i see playing out number
[1095]
one the u.s economy is going down and it
[1097]
will continue to go down almost everyone
[1100]
unanimously agrees on this part but this
[1103]
decline will take some time it's not as
[1105]
if that it will happen in the next five
[1106]
years or 10 years no one knows how long
[1108]
it will take but these type of changes
[1110]
take a lot of time second key thing that
[1113]
the chinese economy is going to rise we
[1115]
must as investors as international
[1117]
investors if we keep the nationalistic
[1119]
pride aside from an investment
[1121]
diversification viewpoint we must learn
[1123]
about the chinese economy also third and
[1126]
final point that indian market is huge
[1128]
it is one of the best emerging economies
[1130]
in the world it will continue to grow
[1132]
please be bullish about india india will
[1134]
become a great bridge and it will play a
[1136]
pivotal role in this transition from u.s
[1139]
to china if that ever happens so let me
[1141]
know what did you think about this video
[1143]
when do you think china is going to
[1144]
overtake the us will it ever overtake
[1146]
the us i will also post my answer in the
[1149]
pinned comment thank you so much and i
[1150]
will see you soon
[1168]
you
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