Currency debasement: why every reserve currency loses value

0:00If you have a stock portfolio, a 401k, or really anything denominated in US dollars, what I'm about to show you has cost people everything repeatedly throughout history, and it's happening again. The Roman Empire, 260 AD, the currency died. The British Empire's currency died in the 1940s. The German Weimar Republic's currency died in 1923. The Soviet Union's currency died in 1991. Different cultures, different centuries, different reasons, but the same ending.

0:35And right now, for the first time in history, the US government is paying more to service its debt than it spends on the entire military. Just let that sink in. And by the end of this video, that's my goal, is you'll understand exactly why currencies fail, how often it's happened, and most importantly, the framework I use to position my portfolio so that whether I'm right or wrong about the timing, I come out okay. This isn't doom and gloom. This is pattern recognition. I'm going to show you a pattern that's repeated for 2,000 years, and I explain how I'm positioning my own money because of it.

1:10So let's start with Rome. Why? Because it is the perfect case study. In 64 AD, Emperor Nero, that lunatic, had a problem. He just had a massive fire destroy most of Rome. Some people rumour that he started it and he had very expensive wars to fund. And like every politician since, he really enjoyed spending money that he didn't have.

1:39Right now, Nero couldn't exactly fire up a printing press, but he could do the next best thing. He could debase the currency, the Roman silver coin. They had this coin and there was a picture of a chap that's meant to be Nero. And this silver coin was meant to be, guess what, silver. Almost pure silver. It was about 95% silver. Maybe they had to put some other things into it to make it easier or something, I don't know.

2:06So what did Nero do? He said 95%, let's bring it to 90%. No one's going to notice. And guess what? His successors were inspired by this lunatic. And by the time you move forward a little bit, about 200 years later, let's call it 260 AD, the silver in the coin was no longer 90%. No, they'd lowered it and lowered it and lowered it and lowered it and lowered it and it was then 5%. Some of the old coins we're digging out still have 2% silver. It was basically a copper coin with a very thin silver wash sprayed on top.

2:47And what happened? Hyperinflation, loss of trust, economic collapse. Soldiers demanded payment in goods instead of coins because the coins were worthless. Guess what? The empire fractured. Now, if you asked any of these emperors around that Roman times what's the value of the silver coin we have, the denarius, they would have said to you it's worth exactly the same. This silver coin is a silver coin. It's worth what it's always been worth. Sound a little familiar.

3:18So the official story is everybody is fine, right? Your money is just as good as it always has. But the reality is your money buys less. But let's go back to the US and the dollar because that's where most of us put most of our money. Have you noticed prices are rising faster than your paycheck? Your parents bought a house for what now seems like pocket change. Your savings account earns 4% if you're lucky, but real prices seem to be climbing at 7, 8, or 10% a year. And things are starting to feel expensive.

3:52But no one's calling the crisis. The Fed calls it transitory inflation, trending towards our 2% target, which basically means we're printing money, you're getting poorer, but please don't panic because we have a plan. Well, sort of. Maybe we'll be data dependent.

4:10So things look stable on the surface, right? You got good GDP numbers, job reports are okay, but something feels off. And that disconnect you're feeling, it's not irrational, it is historically consistent. My name is Felix Prehn. I'm an ex-investment banker. That's Winston back there who does all the hard work and research here. And we're also the founder of the GOAT Academy where my retired Wall Street mentors, the guys I look up to, guys who actually build institutional trading desks, they teach regular investors like you and me.

4:45The strategies are usually reserved for the hedge funds, the family offices. And for the last 6 years, we've taught over 20,000 students. I'm also the co-founder of trademission.io, where we keep up to date with what's actually going on in the world. And my mission is very simple. I want to give regular investors access to the knowledge and the tools that Wall Street keeps, well, locked behind closed doors because the wealthy are not worried about what I'm about to tell you. They already know. They're already positioned. The question is, are you?

5:15Everybody says, "Oh, every currency dies." Let's be specific about what we mean by that because most people hear that and then imagine the Mad Max scenario where dollar bills are literally worthless and we're all bartering with canned goods and bones. That's not usually how it actually works. Currencies don't disappear. They degrade slowly, quietly over years or even decades. You still get paid. You still go to work. You still buy groceries. The money still works, but there's a catch. It buys less.

5:55Since 1913, which is the year the Fed was created by the banks, let's leave it at that, the dollar, the US dollar, has lost how much value? What do you think? Put a comment down below in the chat. 1, 2, 3. It has lost 96% of its purchasing power, which is a really fancy economist word for value. 96%. Not a conspiracy theory. That is the Bureau of Labor Statistics data. The government's own data. You can go look it up yourself. What cost your grandparents $1 now costs you $30.

6:43That's not normal inflation. That is currency degradation. You're not that special. This isn't unique. This isn't new. It certainly isn't unprecedented because while everybody throws that around in mainstream media, if they ever get to this topic, this pattern has played out again over and over and over. The people living through it thought their currency was different, their government was smarter, the situation was special. It never was. There's a really good rule one of my mentors taught me. They said when people say this time is different, tell them it's not.

7:18Talk to our friends in Great Britain, which is now just Britain. And they have a currency that used to look like this. It is the pound sterling. It was the currency of currencies. It was a currency that was insanely valuable. When Brits went abroad, they thought they were visiting third world countries. Everything was cheap. Now talk to Brits now because what's happened in the UK is that the pound has lost an incredible amount of value compared to other currencies. It doesn't give you entry into everywhere for very little anymore.

7:54What's happened is that salaries are basically flat for 20 years. Now I used to live in the UK. I got a first job as a lawyer and I got paid, first paycheck was £28,000 a year. Seemed like a lot of money back then. It wasn't, but right now if you start off as a lawyer, you get paid almost exactly the same thing 20 years later. Living costs have exploded and gone up dramatically. What it means is that the value of the pound's gone down, but also the value of salaries has gone down.

8:28And then on top of that, most Brits put their money into the UK stock market, which is something called the FTSE, which has also massively underperformed the US markets. Had a little bit of a boom because there's a war going on in Europe and wars are very profitable, but other than that, it's been a bit of a freaking disaster. So they've seen their pensions which are tied to their stock market go up 2% a year. Go to the US for the same time period and they would have gone up about 13% a year and that makes a huge freaking difference if you do that for 10 years, right? One is dirt poor mouse and the other is the loud brash American friend.

9:13This did not happen suddenly. This kicked off really in the 1940s when, I was going to say, the US decided that Britain's empire was over, which is pretty much I think the true story, but the empire crumbled. So it wasn't a sudden apocalypse. It was a slow erosion. Most people don't notice it. Most people still don't notice it. Talk to the average Brits. I'm sure there'll be a few outraged chaps in the comments down below.

9:38I'm German. The Weimar Republic. That one's quite famous, right? Workers were paid twice a day because money lost value so fast. People used wheelbarrows of cash to buy bread. The currency was replaced at a rate of 1 trillion old marks to 1 new mark. The other way around, you get the idea.

10:02Talk to our Russian friends. Are we still allowed to have Russian friends? The ruble collapsed in 1991 because Yeltsin's vodka bill made the country bankrupt. That's the unofficial story. But basically the ruble collapsed pretty much overnight and lifetime savings became worthless. So people who worked their entire lives found the retirement accounts, well, it wouldn't buy a loaf of bread, the entire thing.

10:31So, different reasons, different technologies, different political systems, different centuries, but the pattern's the same. Government takes control of money. Government spends more than it collects to be popular and possibly fill coffers of people they're friends with, and then government prints money. Why do they print money? To cover the gap. So the currency loses value. And people who saw it coming, they held real assets. They survive. People who didn't, well, they didn't.

10:57So why does this keep happening? Why hasn't any government in history been able to resist this temptation? Because the incentives are all wrong. Think about it. Think of it from a politician's

11:07Perspective, right? So you are a politician. You have two options. You can be responsible, right? So what do you do? Well, you cut spending, you increase taxes, and you lose the election, right? Your opponent who promises everything, well, they win.

11:29Your second option is what? You just fund everything. Free stuff for everybody, and checks and bailout money and dividends and just hand the money out, and the consequences are going to be down the road. So by the time the bill comes due, you're either retired or you're dead, but you were popular. Do you choose popular or do you choose unemployed? Those are the two options politicians have.

11:55Problems are once you start with the popular thing and just handing out money you don't have, and the US government has $38, $39 trillion in debt, to service that debt, just to pay the interest, not to pay it down, the government spends way well over $1 trillion, which is more than they spend on the entire military in the same period. And so how do they pay it? This is the insane part. New freshly minted debt pays the interest on the debt, which means the interest creates more debt and the debt creates more interest.

12:28So what's the only politically acceptable way out of this little circle? Well, you can't default because that will just end the party. You can't raise taxes enough, the numbers are too big. You can't cut spending enough, no politician survives. By the way, somebody wrote in my comments the other day, "Oh no no, you could just tax all the billionaires at 100% of income. You would collect $15 trillion now and then another $20 trillion over the next 10 years."

12:54That chap was an economist. He says the problem is once you raise taxes above a certain point, the billionaires leave. They take their money and their companies with them. And it might seem incredibly fair that they have billions and you don't, but that's the reality, right? Look at the UK. They raise taxes. What happened? They're collecting less money. Why? Because all the billionaires move to Monaco or Dubai or Italy or Portugal or somewhere where there's lower tax, right? So it's not really a viable option. And if you tax the masses, more people, well, everyone can hate the billionaires, not that many of them, but you start taxing everybody, well, you get voted out of office.

13:34And if you want to move beyond the headlines into actually understanding how Wall Street positions themselves, whether the market goes up or down or around and around she goes, I've actually recorded a mini video for you. It's only 17 minutes long where I break down that whole system. You can watch that little mini master class on how to buy more and sell more like the Wall Street guys at phoenix./getfree. There's a link in the description. You can check that out at the end of this video or right now if you wish.

14:00The printing press is a beautiful thing. You print money. What happens when you print money? You have more dollars. Therefore, the dollar is worth less. Debt is also held in dollars. So your money is worth less. So your debt is worth less. Not a very obvious concept, but that's what happens.

14:23If you are an American and you hold some cash or you have a salary that pays in cash, which most of you do, guess what? You're paying for the printing, but it's quiet. It's silent. There is no tax bill. It just happens. It's a slow and steady erosion of everything that you've saved.

14:43And I'm sure there are some objections. Let me know if you're one of those who say, "But Felix, America is different. We have the world reserve currency. We have the biggest military. We have the biggest economy. We have all the technological advancements and innovation and the smartest people and more golden retrievers than any other country, that kind of thing." And that might all well be true.

15:04But I'd ask you, was Rome not the most powerful empire of its age? Was Britain, formerly Great Britain, now just Britain, not the greatest empire of its age, right? They ruled a 5th of the world. They had the world's reserve currency before the United States. So having the world's reserve currency does not prevent currency degradation. It delays it, buys you time, but it doesn't buy permanence.

15:32The average lifespan of a reserve currency is 94 years based on historic data. The US dollar has held reserve status for now how many years? Anybody? 100 plus. That doesn't mean it collapses tomorrow. But it does mean we are in uncharted territory. We're past the average expiration date. It's like that yoghurt you're looking at going, "It's a week past its expiration date, but I still really want this chocolate yoghurt."

16:02To understand why we are here, we need to understand what the central banks are doing because they are not acting like everybody is fine, right? Most people, if I tell people this, like, "Are you not worried about the loss of the reserve currency status and inflation?" they just look at me and they go, "Lunatic," right?

16:19But central banks, they bought 863 tons of gold last year. That is the 3rd year in a row of buying over 800 tons of gold. They got the Poles, the Kazaks, the Brazilians, the Turks, the Chinese, they're all accumulating gold at the fastest pace in 50 years. Why? Because they've read my script. No, they understand what's happening here. They are diversifying out of the dollar. They're preparing for a world where the dollar is no longer the sole king.

16:59Why do I care about that? Because the central bankers are the same lunatics that print the money, right? And they're hedging their bets with gold, not their own currency or any other financial instrument denominated in their currency.

17:15Where are we with this reset? What are the signals? What should you watch out for? You might want to write this down. What are the signs that we're further along in the cycle than people might realise? Well, the signs are already here. You just have to actually know where to look. Let me give you a couple. Write these down.

17:33Signal number 1 is central banks, not ordinary banks. Central banks are changing their behaviour. We just talked about that, right? They're buying gold. They're doing it quietly. Back door stuff, right?

17:46Signal number 2, interest payments exceeding all the key items in the government budget. So exceeding the military budget in the US. That's a red flag, right? So it means that debt is starting to compound faster than the economy can actually handle. We crossed that threshold in 2024. As I'm recording this, we're 2 years into it.

18:09Signal number 3 that I look for is the economy. Watch how politicians and central bankers talk about the economy. Notice how many things require these strong GDP growth. It's mostly healthcare inflation, by the way, and government spending. Low unemployment, which doesn't count the people who stopped looking. Healthy consumers, well, they're paying their groceries with credit cards and buy now pay later, right? They're ordering their Uber Eats delivery with buy now pay later. And you look at those things and you think, well, those things are not healthy. They are things we should put in speech marks, right?

18:46And then the 4th thing, and maybe that's the best place to start. Look at what the wealthy individuals and institutions are actually doing or what they're saying. Follow the money. That's always my key mantra as an investor. What I learned from my mentors is follow the money. Everything else is just opinion and politics and noise.

19:05What do they own? What do the wealthy own? Well, they're putting it into things like real estate, right? Buying up all the farmland and all the burned down bits of California, right? They own businesses that have the ability to hike prices. They own commodities, gold, they own productive assets that go up with inflation.

19:31Now, before somebody throws in the comments, "But Warren Buffett has all his money in cash." No, he doesn't. He does it in bonds. He just calls it cash because they're cash equivalent, but they pay him an interest, an absurd amount of interest, which he obviously very well deserves for a life well spent.

19:50I want to talk for a minute about gold and silver because these always come up in conversations like this and I want to be clear. I'm not a gold bug. I'm not one of those guys who thinks we need to go back to the gold standard or that holding gold is some sort of ideology. But I'm a pattern guy. I'm a follow the money guy. And the follow the money path is pretty clear.

20:07Every time we trust in paper currencies and those trusts get eroded, every time governments push the printing press too hard, gold and silver re-enter the conversation, right? It's been the dead thing for boring people for decades because they have one unique property that paper does not have. There is, write this down, there is no counterparty risk.

20:36What the heck does that mean? When you hold dollars, cash, you're trusting the US government. The government is your counterparty. But when you're holding gold, you're trusting, well, physics. Gold is gold. It doesn't need anybody's promise to have value. Now, there is actually no inherent value in gold, which is of course true because it doesn't do anything. It doesn't produce anything. You have to put it in storage and pay insurance for it.

21:06But enough people in the world believe that it's got value, including central banks. And again, if you look at what central banks are doing, buying gold. The World Gold Council found that 95% of central banks expect global gold reserves to increase this year. Nearly half said they're planning to add to their own reserves. It's not conspiracy theory. They're the people who run the system. They're hedging.

21:31Silver are insurance, not speculation. I'm not trying to time the gold market. I'm not waiting for gold to moon. I hold some because history shows that in every currency crisis, the people who held real assets outside the system did better than those who did not. It's not ideology, it's not some gold push. I'm not sponsored, I get offered all the time. All these gold miners say, "Oh, you interview." I'm like, "No, why not? Because you want to pay me and I don't want your money."

21:56And maybe you're still thinking he's a bit of a lunatic. Dog's cute, but this guy's a bit mad, which is fair enough probably. But who loses in these situations? Problem with it is that it isn't obvious. It is quiet.

22:08If you're diligently saving your money in a saving account, you're losing purchasing power every single year. If you're earning 4 to 5% interest, real inflation, the stuff you actually buy, is often higher. You're falling behind. If you are a retiree and you got your fixed income portfolio, you're living on a pension or social security, your cheques might go up 3% a year, but if costs go up 6 or 8%, you're getting squeezed. Do that for 10 years, do the maths. Your standard of living drops a little bit. You don't really notice it at first, but after a while you do.

22:40And then there are people on the sideline, they say, "Oh, I'll invest when things calm down," or, "I'm waiting for a better entry point." Every month their wait is another month where their currency loses value. The cash is melting like an ice cube, right? This crisis does not hit all at once. There's no dramatic event, there are no headlines screaming currency failure. It happens so slowly and so quietly year after year that the people who lose most, they don't realise it's happening until they look back 10, 20 years later and wonder why they can't afford what their parents could.

23:14But there is good news. This is not doom and gloom, right? Every currency crisis throughout history, well, it made some people wealthier, some people came out ahead. So who are they and what do they do differently? There are people who own businesses that have pricing power.

23:29Say you are the only electricity company in your state. You're the only ones who make electricity. If you raised your prices, would people turn off the lights? No, they wouldn't. That would be a very simple example. There are other examples, right? Say you're Amazon and you have a cloud business right now. Say I run my entire business and hundreds of staff on Amazon's cloud business, lots of IT stuff up there. So if Amazon come out and go, look, your bill is going to go up by 10%, I'm going to go bastards and do nothing about it and pay it.

24:05Another example would be a petrol station. Say you have two petrol stations on different sides of the road. If one pulls their petrol up by 2 cents a litre, you're probably going to cross the road and go to the other guy. They have bugger all pricing power, right? So you want to own a piece of a business that can charge more when costs go up. That's how you're protected.

24:26That's item number 1. Item number 2, real estate. And it is called real because it is real. You can touch it, you can chew it, you can taste it, you can live in it. It's actually there, it exists in the physical world, and they tend to move up in value with inflation because your house doesn't care about monetary policy. It's still a house. Nobody built another million houses, right? There are about as many houses there now as there were a week ago.

24:53And then we have metals. You could just make this a broader category of commodities, but let's keep it simple to metals. We talked about gold and silver, the shiny things. We discussed these as insurance, not as the whole portfolio, but some allocation to assets outside of the money printing system.

25:12But the worst thing you can do is people get fearful when they hear about these things and what do they then do? They go into cash because somehow you think cash is the safest thing. Cash is a piece of paper. It's an IOU from someone who can hand out as many IOUs as he feels like.

25:32Imagine that. You're at school and a friend borrows $5 off you and gives you a $5 IOU. And then you see him do that every single day to every student. And after a day or two, you're starting to wonder, am I going to get my $5 back? Now, after a month, so 30 days in, and he's now issued thousands of these pieces of paper, you kind of get the idea that you're never going to see your money back, right? Because your IOU is now kind of worthless because there's so many of them. That's what paper money actually is.

26:07So what do you want to be? You want to be an owner. Real estate, metals, the good quality stocks. The savers, they get crushed. Owners get richer. It's not about being smart, it's about handling your emotions. Not about timing the market, it's not about calling when the crash or the reset happens. It's about simply understanding that in an inflationary world, stuff beats paper.

26:32So how do I actually apply all this? Too many people acting like they know exactly what's going to happen and when. I don't know that. Nobody knows that. Anybody who tells you they do, they are trying to sell you something, right? The gold bugs or one of those.

26:44So there are a couple of principles here that I want you to absorb. Ideally write them down because otherwise this is in one ear, out the other. Or maybe you're just sleeping through it like that guy. Winston, are you paying attention? Are you paying attention to principle number 1?

27:01The first principle is no single bets. Don't put everything in gold. Don't put everything in stocks. Don't put everything in real estate because you could be wrong. You could be wrong about the timing and even the outcome. So diversification is not about maximising returns, it's about surviving when you're wrong. And that's what these successful investors actually do.

27:22The second thing is you want to own assets and you do not want to own cash. Some emergency fund is obviously a reasonable thing to do, we don't need to get into that. Stocks with pricing power, some real estate, some gold and silver. I keep minimal cash, but then I have quite a lot of income stream so I can keep less cash. If you only have one income stream or no income stream, you're going to have to keep some cash to be able to pay for unexpected things.

27:47And then our third principle is some insurance. Gold and silver. Maybe you want to add Bitcoin to that list. That's really an esoterical question for you, whether you think that's going to take off. Typically when these things get hammered for 2 years like Bitcoin has, they typically tend to then recover, because everybody who hated it is now out of it and all the people who wanted to sell are gone and so on. That's the third part here. Basically gold and silver, which yes, I could see you might say, well, isn't that also an asset? Yes, of course it is, but it's a particularly inflation protected asset.

28:21And then number 4, humility. I don't pretend to know the time. I don't pretend to have all the answers. I just try to structure things so that across a wide range of outcomes, I'm okay. That's what I learned from my mentors. They were like, Felix, you haven't got a crystal ball, you're not a freaking genius. You just want to make sure that if you are wrong, you're still okay.

28:44So what do I do? Every Sunday I put money to work. And I've talked about this before. I don't try to time the entries perfectly. I don't wait for perfect. What I do is I look at the patterns, the repeatable, predictable patterns in the market, and I look for the ones that look the best. Not perfect, but the best. And then I put money into those. And then I make sure we have really, really tight risk management. Again, check out the mini masterclass at felixfriends.org/getfree, it'll walk you through that.

29:11But I understand that cash sitting in a bank account is guaranteed to make me poorer. So I keep moving the cash into assets that have historically preserved and grown wealth through these kind of periods.

29:22Clear, I'm not a financial adviser. I'm not registered as anything other than Winston's keeper. You might want to talk to a financial adviser or registered investment advisor and so on because I'm not one of those. I'm not predicting the dollar collapse tomorrow. I'm not saying sell everything and hide in a bunker. Most currency degradations take decades to play out. The base case is that the system persists and slowly erodes.

29:45I'm bullish on the stock market. Seriously, in an inflationary environment, stocks are one of the best places to be. Companies can raise prices, their profits go up, stock prices follow. There's more money around, therefore asset prices generally get inflated. The dollar will probably remain the world's reserve currency for years, maybe even decades. I'm not suggesting you dump all your dollars tomorrow.

30:07This isn't about fear. This is about structure. It's about understanding the environment you're investing in and then making smarter decisions on the back of that understanding. The Roman Empire didn't collapse overnight when they started playing with their silver coins. It took centuries. Life went on, people adapted. The British Empire didn't disappear when the pound lost reserve status. Britain is still there, just without the Great. Just a little different.

30:33So what I'm describing isn't apocalypse, it's gradual transition. And the people who understand that transition, who position for it, I think they'll do better. People who ignore it, I think they'll get slowly left behind. And I think we're already seeing that. I think we've seen that the last 20 years. I'm 45.

30:50Years old. I have seen it. I see it with a lot of people who work in the jobs that I used to work. I think they're getting left behind. If you think about currency resets and so on, you think the market's going to crash and the banks are going to close and all this stuff. That's almost never how it works.

31:05The damage is cumulative. It is a little erosion this year, a little more next year. It's compounding over decades. And that's probably the one thing you want to really get into is compounding. That's the one thing that motivates the heck out of me.

31:15But most of the time, nothing dramatic happens. No headlines, no crisis, just a slow and steady transfer of wealth from the people holding paper to the people holding stuff. And because nothing dramatic happens, people assume nothing is happening. So they keep waiting for the signal to act. But the signal is the pattern itself.

31:33The signal is that $38 trillion debt as I'm recording this, the interest payments, central banks buying gold. So if you want to wait for a bigger signal, it's a free world. But you might lose more than you think. So doing nothing is a decision.

31:52Every currency has a lifespan. It's not doom and gloom. It's just a historical fact. It was the Romans. It was the Brits, the Soviet ruble. Different centuries, different millennia, different systems, same ending.

32:02And people tend to notice the ending. They don't notice when it starts. And my hope is that you're now in a position to notice when it starts and therefore make smarter moves.

32:13If you want to take this to the next step and actually learn how we follow the money because the big money is following this pattern, I can tell you. Watch the free mini masterclass. It's only 17 minutes long, nowhere near as long as this video. You don't need to become a conspiracy theorist to see what's actually going on here.

32:32And I'm going to keep doing what I'm doing. My mentors are going to keep teaching thousands and thousands of people. And I'm going to keep learning. I'm going to keep getting smarter and I'm going to stay invested.

32:42So if you got some value out of this video, my only ask is that you share it with somebody else. You might get some value out of it, too. Maybe they tell you you're a lunatic, but maybe it'll just plant a seed in their mind where they'll be more open to this level of information so that when they see it next time, they might actually watch it. I wish you amazing success.