Global debt explained: who lends when every country borrows

0:00If you're an investor or even just a saver, what I'm about to reveal could either protect your wealth or leave you devastated, because every single country on Earth is drowning in debt. $111 trillion and counting. Yet nobody can answer the simple question, who the hell is lending all this money? According to the latest OECD data, global public debt just hit $111 trillion. That is 95% of the entire world's output. The United States is $38 trillion of that. China $18 trillion. Japan almost $10 trillion. These are all trillions. Senior Biden moment here.

0:35So this is not a crisis that's coming. This is the crisis, and the answer to who's lending this will change how you invest forever. My name is Felix Prehn. I'm a former investment banker. That back there is Winston who does all the research around here, and we've been studying how Wall Street actually operates for many years. I'm also the founder of the Goat Academy where we've taught over 20,000 students and the co-founder of TradeVision.io where we provide news and data that's better than what retail investors get.

1:03So I'm dedicating my retirement to teach regular investors, which is what I used to be, how to protect their wealth from the schemes and the engineering out there in the financial world. So for this video I've spent the last 2 weeks analysing OECD reports, IMF data, Federal Reserve holdings, and literally thousands of pages of institutional research on who actually holds this $111 trillion worth of debt. And Winston helped a lot. He slept on some of the papers. And what I found will shock you. And more importantly, it'll show you exactly how to position your money before this whole system shows its cracks.

1:37So I'm going to break down 3 things here for you. First, the debt trap, who actually holds this money and why you're probably one of the lenders without even knowing it. And then second, the circular money machine, how governments, central banks, and your pension are all lending to each other in some crazy self-referential system. That's kind of brilliant and terrifying at the same time. And then third, your action plan. The 5 specific assets that I believe you need to own, the 3 you must definitely avoid, and most importantly, how to put this all together.

2:10So by the end you'll understand exactly how to position yourself to potentially profit while everybody else is going, "Wow, panic." So let me put this debt into perspective. $111 trillion in government debt. If you took that number and divided by every person on Earth, that's about $14,000. Might seem a little unfair to the Eskimos, but every baby and child, basically $14,000. It is not distributed evenly though.

2:37In America the national debt is $38 trillion and counting, which is more than $105,000. So you guys have done your bit. Per household, $266,000. Again, large numbers that seem almost just crazy, right? But think that through like a household. If you put $50k a year away into your investments, which is a lot, you did that for 5 years, even then you wouldn't have paid off your share, right? So that is what kind of makes this insane.

3:05And it is not actually the amount, it's the interest alone. The US pays $1 trillion in interest per year. It's going to rise to $1.9 trillion over this decade. That's $3 billion every day by the way, which is kind of an insane amount. What can you do with $3 billion every day? I mean just think that through, right? It's more than the military spend.

3:27Now this isn't the first time a major power like the US has faced this crisis. There's lots of historical examples that give us an exact road map of what actually happens. Let's start with the Romans. The Roman Empire literally for centuries had a stable silver coin. It was called the denarius. Pure silver, trusted everywhere. But then the emperors started debasing it. They needed money for wars, public works, bribes probably. So they took coins, melted them down, mixed in cheap base metals and then they reminted them at the same face value.

3:58So by 265 AD, towards the end of the glory era of Rome, what was once pure silver was now only 5% silver. What was the result? Hyperinflation. Prices literally went up 1,000%. Trade collapsed. People started to barter rather than use money. And what did the wealthy do? That's what you want to learn, right? They bought real tangible assets. Everybody else, the peasant class, got financially destroyed, and it contributed to the fall of the Roman Empire.

4:28And then you can skip forward a little bit, but the Germans, I'm one of those. Weimar Germany, 1923. After World War I Germany had massive war reparations to pay. So the government just printed money, lots of it, right? So by 1923 one US dollar was worth 4.2 trillion marks. One loaf of bread was 200 billion marks. I remember the Deutschmark. They got rid of that in some crazy scheme to never mind debase the German Deutschmark. Never mind.

5:28Don't need to get into the whole European disaster. Let's focus on the American one for a moment here. What happened? Well, savers, wage earners, suddenly had no money. It wasn't worth anything. But people who had debt, lots of it, guess what that debt was worth? Nothing, right? So it was easy to pay off.

5:44So you bought a house for 10,000 Deutschmark and well, you now had 200 billion you spent on bread. So you could just go to the bank and go, here's your 10,000. Actually, I'm going to give you 200 billion just for giggles, right? Buy yourself a loaf of bread with it. So can you see what happens to debt in mass inflation? That's what the government's counting on. And that's what the wealthy are counting on because they own the land and the factories and the real assets.

6:10And then a little bit closer to home for many of you, the Nixon shock, right? Nixon decoupled the dollar from gold. Same thing the Romans did essentially. And what happened? Well, money printing is the new flavour of the month. Global debt's gone up 3,000% since, and we've had no end to monetary crisis, and they'll continue forever after.

6:30So maybe you think, Felix, I've heard this before. It doesn't really matter to me. It's going to continue this way. I used to think that. And then I realised after I dug into this a little bit more that this is the easiest and the surest way to build wealth that you will ever see in your lifetime. This is a tremendous opportunity.

6:47In fact, I'm actually writing a book on this right now, which we're hopefully going to put out fairly soon. I think it's that important. I think every man, woman, and child needs to understand this to build tremendous wealth over the next decade or two. And the ones who don't understand it will just wake up one day and will be impoverished. And it's a sad, sad truth.

7:05But there is no real way out of this, right? The alternative is austerity, that doesn't happen. The US isn't going to default. No one wants to raise taxes. You could grow the economy like mad. It's very, very unlikely. It's a possibility but it's very, very unlikely. The maths doesn't really add up.

7:22So what's the actual path forward? This is the key you need to understand because only one path makes sense from a Wall Street perspective and let's face it, they run the country. In fact, they run the world. It is a controlled wealth transfer, intentional strategic inflation and asset repricing.

7:38So here's how this works. The government calls it quantitative easing because it's a term so vague that nobody understands what the heck that means. You will now. It's money that flows into the financial system. It increases asset prices. Think stocks, think real estate, think commodities. So if you own assets, you get wealthier. If you hold cash, you get destroyed.

7:58It's a tax. It is a wealth transfer from the savers, the salarymen, the middle class to those who understand the game. So you can be a salaryman, you can be the middle class. If you understand the game, you can benefit like the wealthy.

8:12But what Wall Street doesn't want you to know is this crucial skill. It's that investors focus entirely on what to buy. They worry for days and weeks what stock to buy, what crypto to buy, what bit of real estate to buy, and then they just hold and pray that it's going to keep going up. But you see, the professionals actually have a rulebook. They know the specific rules for when to take profits, when to cut losses, when to rebalance. And that is honestly what I think separates the 1% from everybody else. It isn't really smarter picks. It is probably just better selling.

8:43Now, that's something you may want to learn. I was very lucky. I got taught this by my Wall Street mentors. And if you wish to potentially learn from the same Wall Street mentors that I learned from, provided you're actually serious about your portfolio and wanting to learn, then you can still book a call with us, which is free of charge where we walk you through what that looks like. It's a mentorship programme and we will take the people who it's right for, make sure you're happy with it, we're happy with you and we'll potentially then take you on to the same path that I've been on, which is to actually understand how this works.

9:14Get real strategic guidance on a daily basis, live one-on-one from guys who've managed billions of dollars for 10, 20, 30, 40, even 50 years on Wall Street. So if you are interested in that, then you can click on the link down below in the description, felix.org/freedom. I call them freedom calls and we'll walk you through it.

9:35So let me show you exactly how the system works. It's not a conspiracy theory. It's basically basic accounting and a bit of financial engineering that most people don't understand because it's a weird thing and we don't get taught it. Remember how I said there was $100 trillion in debt? So the question is who's paying for it? I mean, it sounds

10:28Like a weird riddle, right? If everybody's in debt, then why is anybody lending to anybody else? It just sounds impossible. But here's the answer, and it's going to blow your socks off. We're lending to ourselves. So let me prove this to you.

10:42In the United States, there is about $38 trillion of debt and counting every day. And it's divided into 2 categories. There is first what they call intragovernmental holdings. That is debt the US government owes to itself. Just think that through. So the Social Security trust holds $2.4 trillion in government debt. Federal employee retirement funds hold trillions more. The government is literally borrowing from its left pocket to pay its right pocket. So that's the government itself.

11:10Then there is about $29 trillion in debt held by the public. So who's the single largest holder of the public? It's the Federal Reserve. It's America's central bank. They own $6 trillion of government debt. So the government borrows money and its own central bank buys the debt by creating new money. So the government is lending to itself through itself.

11:32Now who holds the rest? You lot. American citizens. Your pension funds, your 401ks, your bank, your insurance companies, your mutual funds. They all buy government debt. And they're considered the safest investment on earth by the way. So when you worry about the national debt, here's the twist. You're probably one of the lenders. Your retirement savings are funding the debt you're worried about.

11:55And then the foreigners, well, yeah, Japan holds a trillion a bit. China holds about $700 billion a bit. Why? Because the US buys their products. US buys Toyotas and electronics and all sorts of stuff. And then they get paid in dollars, right? So now these countries have trillions of dollars. So what do they do with them? They buy the safest assets they can find, US government bonds. So the US sends them dollars by buying their stuff. They send the dollars right back by lending it to the US government. It's a beautiful circle and that's true globally.

12:27So governments around the world borrow from their own banks who then create money. They borrow from their citizens' savings and pensions accounts. They borrow from other countries who borrow from their citizens. And round and round and round she goes. Now, some people hear this and think it's a fraud or a scam, but it's not. It's actually just the modern financial system. The question isn't whether it's real, it's whether it's sustainable. And that's what we need to talk about next.

12:55And let me tell you why this affects you. If say you have $100,000, well done on the whole saving. And say we have 5% inflation. I know the government currently claims it's 3% inflation, but you believe that, you believe anything. Say it's 5% inflation for 10 years. Your 100k becomes $61,000. So you lost $39,000. If you put your money into stocks, decent stocks, and they went up 10% a year, that would give you $259,000. So the difference between not knowing what to do with your money and knowing what to do with your money is almost $200,000. That's how important this is.

13:35Now, if you did this over 20 or 30 years, and this is how long this is going to go on for, in my opinion, the numbers would get shockingly larger. So, what do we own? How do we deal with this? Honestly, if you own high quality companies with pricing power, that means their customers are loyal. It's hard for their customers to go elsewhere. Their income, their revenue, their profits will grow at least in line with inflation because they can pass the cost on to the sucker that is the consumer.

14:03So the S&P 500, it's a bit small on here, but since 1926, it has given us a 10% return per year on average. I'm not promising you the future will be the same, but people always say, "Oh, you can't make 10%. It's really hard." It actually is surprisingly easy. At least over the last 100 years, it has been surprisingly easy. Of course, past returns don't predict the future and all that kind of stuff, but you get the idea.

14:28Now, real estate is another thing that works quite well in inflation times because rental income goes up in line with inflation. So, therefore, it is a hedge against inflation. Once again, there are some other things you could own. Commodities, real resources like gold, right? Silver's been on a crazy run, right? We've been enjoying that one. Gold was $35 when Nixon nixed the gold standard. Is that where the phrase comes from? Nixed. It is at present, of course, not $2,000. That's just insanity. It is something like $4,000, I think. Round about that. So, that's a pretty sweet return, right? That's all inflation.

15:10You could buy Treasury inflation protected securities. I don't think they're going to make you wealthy, but they're also not going to make you poor. And then you could go international. Why? Because you want a complex life. You love researching foreign markets because

15:43You understand your own US market so very well already that it's boring, right? This doesn't really apply to most people, does it? I always say when people throw this out there, you think Indonesia is going to be more stable than the US. What do you know about Indonesia? I'm sorry I'm picking on Indonesia. It's just a random example, right? Be careful with that, that's all I'd say, because you don't understand it.

16:05What do you want to avoid? Long-term fixed bonds. Bonds with a fixed interest rate that are 30, 40, 50 years long. They're likely to get destroyed. Cash is going to get destroyed. And the other thing is that you don't want to be all in on one thing because this is going to create more fragility in the system. It's going to create more ups and downs. Certain sectors will occasionally collapse. You don't want to be 100% in those. You want to spread yourself a little bit smartly.

16:30And then some thoughts on selling. People always say this, decide an exit price when you buy. I think it's terrible advice, but I put it on here because I wanted to tell you that it's terrible advice. What you actually want to do is you want to let your winners run. A little bit more complex, but definitely worth it. Trading stops is a decent way to do that, by the way. And you also want to cut your losers fast.

16:52Definitely now 7 to 8% is a random number. It depends on what you own. You can't apply that to everything, right? Apple is going to move more slowly than the latest quantum stock. Rebalancing is also something you may want to start doing, at least a review. It depends on where you are in your journey in terms of income level, retirement, and so on. It makes it a little bit more conservative, but it can also potentially lose you some of the big beautiful rallies. So I am also not a fan of selling too early, but it's something that can make sense for some people.

17:20And the other thing is, look, never go against the Fed. That's an old rule of Wall Street. Never ever fight the Fed. The Fed is just someone you can't win against. So when they start cutting rates, when they start printing money, we go risk on. At least me and Winston, you obviously got to decide your own thing.

17:38But yeah, this is an important lesson. I think that retail investors spend 90% of their time picking stocks and 10% managing their exits, if at all. The pros spend 10% of their time finding opportunities and 90% managing their risk. So they're not smarter, they're actually just better at selling. That's one of the things we really focus on in our mentorship programme. So if you're interested in that, if you're serious about that, book yourself that free call at Felix Friends Freedom.

18:05And what happens next? Well, there is a workbook you can work through. You can chew through that, it is down below as well, Felix Protocol. But this is the timeline that I see. The Fed is going to start cutting more aggressively. The new Fed chair will be apparent and we will therefore start listening to him and no longer to Jerome the money printer Powell. So that will be positive I believe for the market. More volatile but positive.

18:30And I think we're going to get inflation. I think inflation is going to stick around at higher levels. It's the only way to deal with the debt, which means your salary is going to suck. Your cash investments are going to suck. Your fixed income investments are probably going to suck. But if you're in the right things, we could have some really, really beautiful outperforming years ahead. That's my expectation.

18:52And then in the longer term, well, we get the digital dollar. Its reserve status I think is going to be challenged, possibly not through another currency but through some sort of crypto shenanigan which may or may not be ruled by the. But really, real assets win, that's what I put here in quite small. And the wealth transfer is a real thing and it's been happening for decades, especially since the 70s, but it's going to accelerate once again and it's going to be harsh for people who don't understand it.

19:18So I put a 5-step action plan on here. Take a screenshot of that, 1, 2, 3, where quick enough, or you can always scroll back. And take advantage, if you're serious, of our mentorship. And if you are getting started, you're curious, you want to dig deeper, download all that good stuff from our free workbook and our free community, felix/resource. And don't focus on the unfairness and the corruption and whatever people talk about endlessly. Just focus on what you can now do with this information for yourself and your family.

19:48That's the thing you can control. Everything else is just going to happen anyway. So focus on that and your life can be tremendous, can be wonderful. You can benefit from this a lot. This could be your lucky break. So if you got some value out of this, share it with a friend and all the best.

20:29Felix and Winston here and I need to tell you about the Federal Reserve's secret plan because that could literally either protect you or it could leave you in pretty dire straits because