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0:00 Ray Deio just sent a powerful message. United States is on the brink of an economic disaster. If the United States will not bring down the deficit to 3% of the GDP, then the crisis that is waiting for all of us is much worse than you expect. At first, I thought that it is just going to be another recession. But after analyzing what he said, it seems like it is much worse than any of us expect. In fact, 90% of Americans will lose half of their wealth. So, let's first listen to what he said and then I will explain in details what exactly that means for you and the economy. I think that there's more than a 50% chance that in
0:46 three years, give or take a year or two, um that we will experience a trauma if we don't deal with this. Well, this is how the government of the US is spending its money. It's earning around $5 trillion, but it's spending $7 trillion, which means that there is a $2 trillion deficit. And that's about 6.5% of the entire GDP. This number must be brought down to 3% to make sure that this spending is sustainable. And there are three ways to do that. One is to cut spending by a trillion dollars. But if you look at the spending of the US government, you see that it's impossible to cut that kind of a spending. Now, first of all, there are debt obligations
1:32 of a trillion dollars. So, you can't actually cut this because you have you owe these people money. you borrowed money from these people and if you stop paying them then that means that you're defaulting on your loan. The second type of biggest spending that the government has is social security at $1.5 trillion. Now cutting this is impossible because politically it's a suicide. First of all, you need the vast majority of the Congress and that means both Republicans and the Democrats and 67 million of Americans depend on social security. And as the population of the US is aging, more people will depend on social security, which means that it's impossible to do anything like that. The same thing applies to Medicare. More and
2:17 more people aging, and by 2030, the number of people who will rely on Medicare are 75 million people. The only real cuts we can do is on defense. But even that is impossible. Now, United States is facing a lot of geopolitical tensions in Europe, China and Middle East. And if you cut spending on the defense, that means that the US is not ready to tackle all of these challenges. The second way to fix this problem is to raise revenue by a trillion dollars. But since the US government just passed the big beautiful bill which is going to make the tax Trump's tax cuts permanent and gets rid of a lot of taxes such as tax on tips, tax on overtime and a lot of other taxes, we know for a fact that the US is not going to raise taxes for
3:03 the next 3 to 5 years or you can do both of them. In theory, it's possible, but it's most likely not going to happen within the next 3 to 5 years and the crisis will happen within the next 3 to 5 years. So, the real question is that if we can actually take all of these measures, then what exactly is waiting for the United States? And this is what Ray Duo said. How are we going to solve this problem? We're going to we're going to do it the way that we always do it. And it's always done when countries essentially go broke. What they do is they uh through a combination of devaluing the currency um printing of money there's an imbalance the print money devalue the
3:48 currency and create an artificially low interest rate so that the person who's holding the bonds is receiving an artificially low interest rate. That's the way Japan has done it with their local and and that's the way we will do it. Japan was one of the fastest economies of the 20th century and it grew so fast that it almost overtook the United States as the world's largest economy and it turned into such a bubble and then it burst and since then like any other government the government should intervene in the economy lower down interest rates lower taxes pump the economy with cheap money in order to stimulate growth and stimulate demand. When people have jobs, when they are making money, they start spending money and the economy slowly gets out of the
4:34 crisis. That's what the Japanese economy or that's what the Japanese government tried to do back in 1990s and early 2000s. But if you look at the Japanese GDP, you see that the Japanese GDP has been declining since 2010. And that's a very strange phenomenon because in 2012, the Japanese economy or the GDP was $6.2 2 trillion. Today it's $4.2 trillion. So that raises the question, what exactly has happened that the Japanese economy didn't simply stagnate and stayed where it was for the last 15 years, but rather the Japanese economy is actually going down. And what's interesting is that over the last 15 years, prices has risen
5:20 dramatically, which means that the average Japanese got so poorer that most people cannot even comprehend that. Imagine if your income didn't grow for the last 15 years. Imagine how poor you would be today. But thankfully to a certain extent your income has risen. So why are Japanese people are not concerned about this? The answer is that if you look at the second graph, this is the Japanese GDP on yen and it has been growing dramatically from 57 trillion yen to 630 trillion yen. So if you look at the GDP of Japan and Japanese yen, it has been growing. On the other side, if you look at it from the outside perspective, it has been actually falling down. So the real question is
6:06 that which of these charts are actually correct? Did the average Japanese became richer over time or it became poorer? That is the real question. Because when people in Japan look at their GDP and it's growing every single year, yes, maybe it's not growing as fast as the US economy or some of the other economies out there, but overall it's growing. To understand what's happening over here, we have to take a look at this graph. Remember I told you that when the Japanese economy got into a crisis, the government got in and it started lowering interest rates and borrow money to pump the economy to get out of the crisis. And that's when you look at the debt to GDP ratio of Japan since 1990s has been growing dramatically which is absolutely normal. But at certain point
6:52 if you look at this by 2010 the debt to GDP ratio has reached almost 200%. And that is unsustainable because the country is about to go bankrupt. There was so much debt on one side that the Japanese economy couldn't actually make the interest payments on those debts. But what is fascinating about this graph is that something happens in 2010 and 2012 that the debt to GDP ratio stops growing. It's simply flat after that. It doesn't grow at all. And if you think about it, it doesn't make sense because the more your debt grows and it accumulates more interest, logically that debt should grow much bigger. So for example, the US economy or the US debt right now is $37 trillion and every
7:39 single day it is growing much faster than it has ever been growing because there is an interest on it. And 5% interest on $37 trillion is much more than 5% interest on $10 trillion when the debt was $10 trillion back in 2010 or 2008. So what exactly has happened that the Japanese debt stopped growing after that? In 2010 when Japan couldn't pay off its debt, Japan realized that they have to do something about it and they lowered down interest rates. Now that raises a very interesting question. How would you possibly lower down interest rates when you have so much debt? Who is going to buy your debts when you have such a low interest rates? In fact, if you look at the Japanese interest rates, they were literally 0%
8:26 and at certain times they were even below the interest rates. How are you going to refinance your debt? Because when your debt is expiring and now you have to refinance it, which means that you have to create new debt and sell it to new investors. And when you have so much debt and you lower down interest rates to 0%, investors are not going to buy your debt, which means that you cannot refinance your debt, which means that you're going to default on your debt, which means that you are going to go bankrupt. That's basically why lowering down interest rates when you have so much debt is going to push away investors and you won't be able to survive. But somehow Japan succeeded at that. So the real question is that who exactly started buying Japanese bonds when the Japanese interest rates were
9:11 0%. To answer that question, you have to take a look at the balance sheet of the Bank of Japan. Now the Bank of Japan is the same as the Federal Reserve in the United States or the Bank of England uh in the UK. It manages the local currency. And if you look at this graph, you see something very very strange that around 2010 something fundamentally happens. In 2010, the Bank of Japan held around 10% of all the government bonds of Japan. And then suddenly something happens and the holdings of government bonds by the Bank of Japan dramatically rises after that. And by 2025, the Bank of Japan holds 50% of all the government bonds. So basically what happened is
9:56 that when the government of Japan could not pay off its debts, it lowered down artificially interest rates to 0%. Investors did not want to buy the Japanese government bonds because they're not making any kind of return. And the Bank of Japan started buying all of the government bonds that are being issued by the government of Japan. But where does the Bank of Japan takes the money from? There is no other place but to print money because the Bank of Japan is the only entity that is allowed to print the Japanese yen. And that's why the supply of money dramatically increased. So the government of Japan could refinance all of its debt almost at 0% interest rate because the Bank of Japan artificially lowered down interest
10:43 rates and purchased all of the Japan's government government bonds. Now the real question is that how about the other half? Because if 50% is being owned by the bank of Japan who purchased the other 50%. See according to Japanese law if you're a pension fund then by law you are required to purchase and invest the money of the pension fund in the Japanese government bonds. So the pension funds in Japan were forced to buy all of these government bonds even though that they make no return or whatsoever. Because if you're a sane investor, if you have made money, you want your money to work for you and you want your money to be invested in the right assets. You want to be making some kind of a return. So not single sane investor invested in the Japanese
11:30 government bonds. Another example are banks in Japan. If you want to open a bank in Japan, then by law, you're required to have a certain percentage of your assets to be invested in the Japanese government bonds. So whether you like it or you don't like it, as long as you open a bank in Japan and you're one of the largest banks in Japan, then you must invest a certain amount of your money in the Japanese government bonds. And that's the next 40% that is being held by pension funds in Japan and Japanese banks. The last 10% is being held by investors who are doing business in Japan. Because if you want to do business in Japan, then you have to buy Japanese yen. And if you want to protect your Japanese yen against inflation, then you want to hedge them against inflation by buying
12:17 treasurables of the government of Japan. But not a single person in the world right now or the past 15 years has been buying the Japanese treasurables to invest in them. In fact, even if you look at the Japanese companies and the Japanese government, all of them are investing in the United States. Which is why the largest investor in the US debt is Japan because they're not making any kind of return by investing in the Japanese government bonds. So all of them are investing in the United States which is why Japan is the largest foreign investor in the United States. But if the Bank of Japan purchased all of these government bones by printing so much money, didn't that cause inflation in Japan? Well, if you look at the value
13:03 of the Japanese yen compared to the dollar since 2010, it has lost almost 50% of its value. So basically, the Japanese yen became half as valuable as it has been 15 years ago. Which means that the price of everything has doubled since then. So the price of iPhone has doubled, the price of cars have doubled, the price of everything has doubled. And that means that your your your money can now buy less things. Your income can buy less things. Your savings can buy less things. In other words, the average Japanese became 50% poorer. And that explains why the GDP of Japan over the last 15 years has been going down dramatically even though that the rest of the world has been growing since then
13:48 because the average Japanese actually became poorer since the government of Japan or the central bank of Japan started buying the Japanese government bonds by printing money and oversupplying the market with lots of Japanese bonds or the Japanese yans because not a single person who want to make any kind of return of his investments would buy treasurables of Japan. And according to Ray Deio, this is the path that the United States is about to take by devaluing the dollar. So let's take a look if it's actually possible. So the debt to GDP ratio is growing dramatically for the United States and it has been exponentially growing over the last 20 years. United States is not ready to take the harsh way which is either by cutting cost or
14:35 increasing taxes. At least it's not going to happen within the next three to five years which means that the debt to GDP ratio is going to continue rising and maybe in the next couple of years it might reach 135% or 150% and by then United States has to take the path of Japan. Currently interest rates are about 4.5% and this makes it attractive for investors to invest in the US debt because this is much higher than inflation. If we artificially lower down the interest rates to 0% then the government of the United States will be able to refinance its debt at a much lower interest rate. And if there won't be foreign investors or real investors or even US investors such as mutual funds, hedge funds, and people who have
15:23 money to invest in the treasur bills, then the United States Federal Reserve will have to intervene and purchase all of the government bonds of the United States and massively increase its balance sheet. Currently, the Federal Reserve holds 20% of the entire treasur bills of the United States. If it's going to go to 50% then maybe the dollar will be devalued by 50%. Which means that yes, you're still going to make the exact same amount of money. If you are making $100,000, you'll still have the same $100,000. If you have saved $200,000 in your bank account, it will still be $200,000. It will simply buy much less things than it can right now. And this is the path
16:09 that the United States is about to take according to Ray Deio. And based on everything that I see, I think he's right. And this is exactly what the United States is doing. The White House is trying to force the Fed to lower down interest rates when inflation is high. He's got a very easy job to do. You know what he has to do? Lower interest rates. And why do they want to do that? Is exactly to take the same path as Japan has taken. So if you are on a fixed income, if you have saved money, prepare yourself that your money is going to lose a lot of its value. Prepare yourself for the fact that your income will be able to buy less things. So for example, a car that cost $50,000 can easily go to 80, 90, or $100,000. Well,
16:56 your income isn't going to grow as much as that car, which means that you will simply be able to buy, you know, less expensive car. you will the cost of houses is going to increase and asset prices over time will adjust but your income isn't going to adjust which means that the only way or the only path to save yourself is to make sure that you're being invested in the right assets and if you want the best strategy to win out of this crisis first of all protect yourself and make sure that you profit out of it I have laid down a step-by-step strategy that you can find out using the link in the description of this video. Thanks for watching and I will see you in the next
