The 7-Stage Cycle: How Every Reserve Currency Collapses (Dollar = Stage 5)

About this video

• Video Title: The 7-Stage Cycle: How Every Reserve Currency Collapses (Dollar = Stage 5)
• Channel: Economy Rewind
• Speakers: Not specified in the transcript.
• Duration: 27:55

Overview

This video explains a historical pattern of seven stages that every global reserve currency has followed, leading to its eventual collapse. It argues that the US dollar, which became the reserve currency in 1944, is currently in stage five of this cycle and is exhibiting the same characteristics that led to the downfall of previous reserve currencies like the Portuguese real, Dutch gilder, and British pound.

Key takeaways

• Historical Pattern: Every global reserve currency has followed a predictable seven-stage cycle of rise and fall, contrary to the belief that each instance is unique.
• Reserve Currency Status: Being a reserve currency grants "exorbitant privilege," allowing a nation to print money and export it, finance trade deficits, and borrow at lower interest rates, but this also sows the seeds of its own destruction.
• The Seven Stages:
  1. Military Dominance and Trade Route Control: Establishing power through military strength to control global trade pathways.
  2. Massive Trade Surplus: Accumulating global wealth through advantageous exchange, leading to a net inflow of capital.
  3. Reserve Currency Status Formalized: Official adoption of the currency as the global standard, marking the peak of its power.
  4. Deficit Spending and Living Beyond Means: The reserve currency nation begins importing more than exporting, consuming wealth rather than producing it.
  5. Currency Debasement and Money Printing: As deficits become unsustainable, the government resorts to printing money, leading to inflation and loss of purchasing power.
  6. Loss of Confidence and Search for Alternatives: The world begins to distrust the currency and seek alternatives, shifting reserves elsewhere.
  7. Replacement and Collapse: A new currency emerges and is adopted by the market, leading to the collapse and irrelevance of the old reserve currency.
• US Dollar's Position: The US dollar, having achieved reserve status in 1944, is currently in stage five and showing signs of entering stage six, mirroring the decline of previous reserve currencies.
• Global Implications: Unlike previous regional collapses, the dollar's global integration means its decline will have far more widespread and chaotic consequences.
• Personal Finance Advice: Holding dollars is presented as a risk; diversification into real assets like real estate, commodities, and productive businesses is recommended to preserve value across currencies.