The derivative market today is worth over 600 trillion dollars (notional value). Stop and think about that. These derivatives are nothing but people betting on real economic value or production. It is more like a casino built on top of the real economy. To illustrate for clarity, there are more bets on gold on the various commodity exchanges than there is actual physical gold.

This means that if everyone who has a legitimate paper claim on physical gold tries to order it physically, there would be a severe shortage. Lots of people will get more paper. But the good news is that nobody wants physical gold, right?

House of Cards VS Real Economy

In an ideal setting when the central bank prints money, the money is supposed to go into the real economy to produce productivity growth. Or some version of productivity growth.

But what if the money just fueled the things that already existed. What if it just created more demand for products and services that already exist. And hence, driving up the price sharply.

There was no question about the printing of money from 2020. It was clear that no productivity growth would occur during that time. In fact, it would be a net productivity decline, even though there are all the ideas about pivoting that flooded the business space.

The only thing that was enabled was the house of cards. Not the real economy. People take more of their money to bet in the “institutionalized casinos”. And you should know that when people got to bet, the big winner is always going to be the house.

The super-rich in this case is the people that play “house” in this institutionalized casino. And they always win. The hardworking middle class that goes to try their luck at the casino always loses eventually, even if they win the first time. They have not learned the lesson that if you want to win in that kind of game, you have to be the house.

The derivatives market isn’t $600 trillion for fun. You can’t win the house. Middle-class people think they can win with hard work and passion. But the game has no emotions. The house always wins.

Dollar Dominance

Some experts are saying that the dollar is weakening (with respect to time) and will eventually meet its downfall. Some are assuming that a financial instrument like bitcoin will replace the dollar as the global reserve currency. But those people do not understand the dollar and why it has its position.

It is easy for Americans to clamor against inflation and everything happening with the national economy. But there is something much greater at stake. For you to project the future of the US dollar, you have to first understand its place in the world.

Whenever any two countries want to transact or do business, they use the dollar. For example, if Japan wants to buy stuff from Brazil, the transaction is settled in US dollars. This means that Japan needs to have dollars to buy anything from any country (not just the US).

Even payments made in bitcoin today are capitalized on the dollar. This means that when the transaction gets to the international clearing house, the transaction will be settled in dollar equivalents. This is the real power of the dollar.

Every country has to have the US dollar for international trade, otherwise, the country’s buying power is lost. Now, keep this in mind as we go on.

The Sri Lanka Case Study

I will try to stay away from the core details that can get me into unwanted debates. The purpose of this article is to enlighten you. You are expected to do your own research and not just believe blindly.

I will also try to avoid the obvious “poverty and control” agenda by some organizations that are neither elected nor accountable to anybody. So, they created this fear of certain (mostly imaginary) problems, so that they can push for certain goals. Of course, it all has fancy marketing and stuff.

The 3rd world countries that are struggling to impress the world swallowed the idea, hook, line, and sinker. One of them was Sri Lanka. In trying to look cute for “green goals”, they gave a decisive blow to a critical part of their productivity. And this was farming and agriculture.

With a few other complications, the country started losing all its edge of getting US dollars. Agriculture (exports) was down and tourism took a big hit from the events of 2020 (and other complications).

But the country depends heavily on imports. And now, there is no dollar to buy from other countries. With the decisive blow on farming, the reality of starvation started rising. And finally, a few days ago, the protest that resulted caused the president and prime minister to resign.

That was not the first country to feel the heat. And all countries do not respond the same way. My point is that maybe everyone is looking at this wrong. Maybe the target was never the downfall of the US dollar.

Experts Predict a Recession

Yes, we all know a recession is imminent. But to what end? First, you should understand why there is a fear of recession.

In 2020, the Federal Reserve printed money. They printed so much money to pretend there was no economic consequence for the lockdown policies. Now, when economic activities finally pick up, inflation came up.

Inflation is nothing more than the price of goods and services going up sharply. But the Fed has started taking money out of circulation (with quantitative tightening) too. So, the price of goods and services is going up and at the same time, the money supply is getting reduced. That is a recipe for poverty.

But they had already printed too much money already. So, they turn to increasing the interest rate. This means the cost of borrowing money just went higher. And as we all know, the world revolves around borrowed money.

Making it more difficult to get borrowed money, people have access to less money to buy stuff. And in the minds of the Fed, if people don’t have enough money to buy stuff, the price of stuff will eventually come down to what people can handle. Which is supposed to be true in a fair marketplace.

When the Fed prints money, eventually the bulk of it goes to the top 0.1% that are super rich and financially smart. When the tightening comes, the bottom 90% feels it.

If you want to know what is wrong with the world economy, ask yourself why there is a derivative market. What in the world is that supposed to even mean? But it’s too late now. We are already used to it.

The derivative market means that a $2 million loss or collapse in the real economy can lead to a $2 trillion deficit in the global financial structure. If something like that happens, who is at a loss? And who stands to gain something?

The reality is that the Fed can always print money to bail out the US government, as long as there is trust in the governance system. But every country that cannot print the US dollar and are heavily dependent on imports is in trouble. Who will bail them out?

Now, I don’t want to peddle any conspiracy theory. Do the math yourself

The Future of the US Dollar

There are two schools of thought. Some believe this whole situation was masterminded by a certain group. Others believe many of these things are coincidental and the foolish decisions just aggravate things further.

To anyone who lives outside of the US, do not trust your country’s financial system. Protect yourself financially in the way you can. There is only one global reserve currency and it is the US dollar. That will not change soon.

As long as the US stands, the dollar dominance will remain. Many Americans do know what is at stake when they trigger internal conflicts within the country. They think it is just about the USA. But there is something way larger at stake.

Bitcoin is a good hedge, but it is no more than that for now. Only a country with a strong governmental system and net import can make bitcoin a good reserve. And even if they do, they will have to solve the problem of international clearing without the influence of the dollar.

The era of free money has passed. Now we are in the era of trust. If you don’t own it, then you don’t have it.

If you are not certain of winning, it is not wise to fight the system. Just play on many legs. If you want to be stupid rich, get close to the money supply regulator and do your business from a position of advantage.

The experts are predicting a recession, but this is an economic tsunami on a scale that has never been witnessed. Play smart, don’t be the fool.

Don’t get it twisted, the future of the US dollar still looks as bright as the sun on a hot afternoon.

Conclusion

Most experts are wrong about the state of the world’s economy. There is no doubt about the recession now. But if you think that is the only thing happening, you need to think again.

This is an economic tsunami on a massive scale. Whether it is intentional or not, I don’t know. All I know is that the worst of it will not be experienced in the USA. The USA is just a necessary catalyst because of the position of the dollar in global finance.

The future of the US dollar is still bright. The average American just needs to really become very smart.