The REAL Reason Saudi Left The Dollar.

Saudi Arabia's Shift from the US Dollar: Understanding Project mBridge

Introduction to Saudi Arabia's Financial Transition

• The video discusses Saudi Arabia's departure from the US dollar and the Petro dollar agreement, introducing a new financial system involving Central Bank Digital Currencies (CBDCs).

• The focus is on Project mBridge by the Bank for International Settlements (BIS), highlighting recent advancements and implications of this shift.

Overview of Project mBridge

• By the end of the video, viewers will understand what Project mBridge entails and its potential impact on personal finance.

• Mark Moss, an experienced investor and financial educator, aims to provide insights into these developments.

Clarifying Misconceptions about the Petro Dollar Agreement

• There are conflicting narratives regarding Saudi Arabia’s relationship with the Petro dollar; some claim it has ended while others assert it continues.

• The original 1974 agreement between Saudi Arabia and the US was about mutual cooperation rather than solely pricing oil in dollars.

Historical Context of US-Saudi Relations

• The 1974 agreement allowed Saudi Arabia to reinvest oil revenue back into the US economy in exchange for military protection and technology.

• The non-renewal of this broader agreement does not equate to an immediate collapse of the dollar but indicates a continuing trend away from its dominance.

Trends in Global Currency Usage

• Current data shows a gradual decline in the percentage of global trade conducted in US dollars, dropping from nearly 80% in 2000 to below 60%.

• This trend suggests that while there isn't an immediate crisis for the dollar, a long-term decline is evident as other currencies like the Chinese Yuan gain traction.

Visualizing Currency Trends

• Charts illustrate that while there hasn't been a sudden drop-off for the dollar, its downward trajectory is clear over time.

• Comparisons with other currencies show that while some have remained stable or increased slightly, such as the Euro, others like China's Yuan are rising significantly.

Conclusion on Future Implications

• As technology evolves, shifts in currency usage may accelerate; understanding these trends is crucial for future financial planning.

• The discussion emphasizes that changes in international agreements can lead to significant shifts in economic power dynamics.

Saudi Arabia Joins the BIS and China's Digital Currency Project

Understanding the BIS

• The Bank for International Settlements (BIS) is a key financial institution that many people may not be familiar with, yet it plays a crucial role in global finance.

• Saudi Arabia has recently joined the BIS and is participating in a China-led Central Bank digital currency project, marking a significant shift in international monetary dynamics.

Implications of Joining the Digital Currency Project

• The US dollar has been dominant as both a currency and payment network globally; however, Saudi Arabia's participation indicates a potential shift towards alternative systems led by China.

• As of June 5th, Saudi Arabia's full participation in this project signifies its commitment to new financial technologies and frameworks.

Structure of Global Financial Governance

• The BIS operates at the top of an organizational hierarchy that includes central banks, policy makers, and various international organizations like the IMF and UN.

• This structure influences how policies are disseminated down to governments and ultimately affects public perception through media channels.

Participants in the Digital Currency Initiative

• The initiative includes not only countries but also major financial institutions such as Goldman Sachs and HSBC, indicating broad support from influential players in global finance.

• A diverse range of participants from various nations—including Indonesia, France, Israel, Italy—demonstrates widespread interest in this transformative project.

Historical Context and Future Outlook

• This development is likened to historical events such as the Bretton Woods Agreement of 1944; it suggests we are witnessing foundational changes in global economic structures.

• The concept of "leapfrogging" technology illustrates how emerging markets can adopt advanced systems without needing outdated infrastructure.

The Leapfrog Moment: Africa's Internet and the Future of Payment Systems

The Unique Path of Africa's Internet Development

• Africa did not develop a wired internet infrastructure like the United States; instead, it leapfrogged directly to wireless technology.

• Critics argue that no system can replace the US dollar network due to its established bond market, correspondent banking, and SWIFT system.

• The analogy is made that just as Africa didn't need wired telephones for internet access, the world may not need traditional payment systems to adopt new technologies.

Understanding Project mBridge and CBDCs

• Project mBridge aims to connect economies through Central Bank Digital Currencies (CBDCs), which are essentially digital forms of money.

• CBDCs represent programmable money, allowing authorities to impose restrictions on spending based on various criteria (e.g., carbon limits).

• Concerns are raised about potential Orwellian controls embedded in CBDC systems, such as restrictions on purchasing certain goods.

Challenges with Current Payment Systems

• The existing global payment systems have not kept pace with economic integration and globalization.

• Issues include high costs, slow transaction speeds, lack of transparency, and operational complexities that hinder international payments.

• Emerging markets often lack affordable access to the global financial system due to geopolitical decisions by dominant players like the US.

Potential Solutions Through Multi-CBDC Arrangements

• Multiple CBDC arrangements could enhance connectivity between jurisdictions and improve current financial systems significantly.

• Institutions like the Hong Kong Monetary Authority and Bank of Thailand are collaborating on developing a multi-CBDC platform known as mBridge.

How mBridge Works

• mBridge facilitates currency exchanges among different central banks (e.g., Hong Kong, China, Thailand), creating a hub for real-time transactions.

• This hub allows each participating country to use its own currency while simplifying cross-border transactions without messy exchanges.

• A visual representation shows how central banks interact with commercial banks through this new system for efficient currency exchange.

Understanding the Centralization of Banking

The Connection Between Private Sector Banks and Central Banks

• Discussion on how various financial instruments (cash, credit cards, bank accounts, electronic money) connect to central banks rather than commercial banks.

• Emphasis on the dangers of centralizing the banking system, which can lead to manipulation and potential risks.

Implications of Currency Use in Global Trade

• Clarification that Saudi Arabia has not completely abandoned the Petro dollar agreement; they will still use dollars alongside other currencies.

• Prediction that dollar dominance will gradually decline over time but not disappear suddenly; it’s a long-term process.

Inflation and Purchasing Power Dynamics

• Explanation of how U.S. dollar printing affects inflation globally; when dollars return to the U.S., inflation impacts domestic prices.

• Analysis of rising Consumer Price Index (CPI), indicating that increasing prices reflect weakening purchasing power rather than increased value.

Cost of Living and Economic Challenges

• Projection that living costs will rise faster than wages, leading to a decrease in quality of life for individuals globally.

• Introduction to "currency debasement" as a critical issue needing attention from individuals trying to maintain their wealth.

Market Trends and Wealth Preservation Strategies

• Presentation of S&P 500 performance relative to global liquidity; while stock values may appear high, they are merely keeping pace with currency debasement.

• Identification of a "hurdle rate" for wealth growth—individuals need at least 12% growth annually to stay ahead due to inflationary pressures.

Historical Context and Future Predictions

• Comparison between current monetary shifts and historical transitions like the shift from pound sterling dominance to the dollar about 100 years ago.

• Invitation for viewers interested in understanding broader international monetary systems and their future implications.