Self Storage Risk to Dollar and InvestmentsMay 25, 2022
Today I'm going to be diving deep into some critical numbers and we are going to be talking about some overarching themes. I want to put a lot of context to the overall position of the dollar and we're going to be looking at this from lots of different angles and trying to really get to grips of what's going on and the future of the dollar on the world. What that means and its overall significance being a world reserve currency is beyond impactful, it's even hard to truly comprehend. And when the reserve currencies shift, that is a fundamental shift in world order, and that can really challenge the countries and it creates massive contention, uprising, it can create wars, particularly world wars. It's a big deal in reserve currency.
Countries benefit from lots of things and they tend to prosper dramatically. So, the question is, what is the world's current reserve currency leader of the pack? the dollar? What is that outlook and what is either weakening or strengthening that dollar? And the reason I bring this up and why I want to talk about this is you hear so much and there's so much noise out there. People like to use single points of data to try to express views that fit narratives. But really, we need to look at this as a four-dimensional thing in understanding what position the dollar is and what its future may look like now.
The first thing that needs to be said is, obviously we don't ever know the future, and nothing lasts forever. And I mean this very seriously. The world reserve currency can change. The United States could not be the leader of the pack, but there are certain things that need to happen and that will be a very violent time.
Let's go through some of these numbers and it's going to kind of give you perspective. But once again, that does happen. There's nothing permanent and massive things change that we can't see and we don't know about and I want to talk about. Not so much dire scenarios in the future but understanding right now where it sits and the likelihood of different things changing, and it might give you a perspective on what would need to happen to change certain things.
So, we're going to dive in, and I want to start first by building an understanding for anybody in question what a reserve currency means. The United States has been a reserve currency now for a long time. What happened is we got off the gold standard and what we did when we got off the gold standard is we allowed ourselves to take on more debt. We allowed ourselves to manipulate money in a way that was much more beneficial it ever could have been before. But in the process, we also convinced all these countries that the dollar is better than gold and they should have their money not to be benchmarked off the dollar and they should have the dollar as the reserve currency as opposed to gold.
Well, this established us in a position to be a financial engine in the world, and this allows us to exact power and to leverage our money and position. It's a very powerful thing, and right now the standard for the exchange reserves.
So foreign exchange reserves, right? The dollar is around 62% of the overall holdings now. This is huge! To give you an idea on the absolute size of it: The euro is the next closest competitor at 20%. Of the holdings after that. The Japanese yen is 10% and it drops down to 5%. And when you look at China, it's 2%. It's just nothing. And when we look at the overall so when we're dealing with the dollar and the backing of the dollar and how people use it, how it works within society. We're really looking at a lot of changes over the year. How much do people trust the dollar? Where's money going? Where are the investors? The countries, what are they backing?
As you know from investment theory, we have lots of monies looking for Guild stability. We're trying. People are trying to protect from downside and then money moves in and out of countries depending on where large corporations take it as well as money managers and we're going to talk about the flows of money and where investment is going here in just a minute. But really, we want to look at a big picture and look at overall changes so when we look at a percentage of allocated reserves, the United States has less than it did in 2000. But with that said, there has not been one that has really stepped up and said that it took a large percentage of that share. Really the euro who is next in line is basically flat. It's one or two percentage points higher since 2002. Now other currencies have risen from 10% to 5%. And then the Chinese have risen from zero in 2000 to 2%.
Once again when you look at this, we're looking at how so? If we're looking at the overall reserve growth and where that stands. It's important to understand motives and why and what we see when we look at motives. So, when you're looking at the early 2000s that's going to be kind of saw a drop in the overall reserve growth as a total percentage, right? But the moment things started to get hectic and in the 2000s, particularly 2008, there was a massive increase in percentage, and we had a large growth in the change of reserves to the dollar, meaning that the dollar was up in overall reserve growth, right? That change started to go up and then what we saw after 2014 was a massive rise and change when we're looking at those reserves or how people view it.
We're looking at the reserves that that's only part of the holding really. We want to look at not only how people are reserve, but how I'm viewing the safety of the dollar. The dollar is something that we can see people flee to for safety. There's another thing that we're trying to try to look at and I try to understand and that's the capital inflow. So, really when you're talking about the dollar, you're betting on the horse and jockey which is the United States as a whole. And when we're talking about currency, you have to understand that the currency is basically like a stock in a company, but we're not looking at it for its growth. I'm not looking for the stock to go up, I'm looking at its ability to be stable, pay its bills. Probably make money off it, right? It's supposed to be the lowest form of risk, and so that’s the United States as a whole. I want to see how the world feels about the United States and this is something that I learned that was important when I lived in Brazil. There were a lot of people that had a lot of problems with the United States, but all of them would have given almost their life to send their kids there, and I learned that foreign views of the United States are very contradictory. What I mean by that is people say things but do completely different things. Everybody hates the leader of the pack, and the United States is imperfect, and there's a lot of really reasons to hate it, right? But at the end, there's kind of a bias toward the winner, and we do see that in the form of the fact that capital inflows do not reflect overall sentiment.
So, when we look at the overall capital inflows into the United States, it's exploded since the early 2000s. When you look at its growth rate by 2015, I mean it really picked up. When we're looking at inflows and trillions of dollars of foreign direct investments to the United States in 2000. In 2000 it was 1.2 by 2020 was 4.6 and we basically saw it took from 2002 to 2012 to double and then it had more than doubled in the next five years and continued to go up. There's this massive growth, right? When it seemed like sentiment was overall negative and what we saw is China started to directly invest massive amounts after 2012. So did Europe. Europe started to explode. Third, direct investment into the United States after 2013, doubled by 2015. I mean it was massive increase. Since 2000, an increase from 1 trillion to three trillion by 2020 and growing.
And this is an annual foreign direct investment into the United States, so the other superpowers are just dumping money into our country. And when you look at where that money was going, I was almost more surprised than anything. In 2000, 40% of it went into manufacturing. I didn't see that coming. When we looked at the other sectors that was really pouring it. We had financial insurance which makes sense as the financial power of the world. But then you add wholesale trade holding companies which are not banks which, I think, that's more kind of like me. What do you have banking for? National Scientific Technical services. That one I would have thought was more of a leader of information, retail trade and when I look at the percentage, I think it's important to know.
What I did was I took a lot of these things and I tried to understand what that capital meant going into it. That means some of these are more financially heavy and the sectors themselves are bigger. They need more capital, and so that can change the percentage. Just because manufacturing was the top doesn't mean that technical, service professionals, and scientific were at the bottom. It's just a difference in percentage. Overall, it's really a wide range: manufacturing and financial insurance are the top; wholesale trade is number two; holdings companies, banking professionals, information and trade are number three.
The reserve currency is very stable, as we've seen in recent downturns but also when things are good. So, in downturns we see this this switch in this rush to safety of the dollar. But then as things start to get good, we see a doubling up on capital inflows into the United States. So, although there's all this talk and sentiments, it’s just talk. Everybody talks. It’s crazy and bonkers, but that's why I love economics is because you say one thing, but then you spend your money on another. If I really want to know a person, I don't care what they say. I really care what they spend their money on because that will tell you more about a person than anything else, because they're putting their money where their mouth is, right? That's an actual action. That means it's a sacrifice. What that tells you is priorities. That's what really matters.
So, when I'm looking at this and all of this noise in the world, I start to say, now, hold on here. What's going on now? The next side of this is I have to understand competition. In order for the United States to lose its standing, there has to be a clear competitor that can replace it. Meaning all this capital in the world with all these countries that hold this money, I've got to move into a currency or a reserve that I believe is a strong and stable as the US dollar. So first of all, we look at the engine that drives growth: the United States. Money around the world is betting on our economy. As opposed to other economies, dollars are flowing in en masse. It's just mind boggling when compared to how much money flows in here compared to the rest of the world.
So, first of all, the engine right? The thing you're betting on when we look at the fat, we're betting on this happening then when things are going wrong, where do they run to? They run to the dollar because they bet that the dollar will be stable until the last. Now obviously there are changes and there are weaknesses. Once again, we're looking at other countries and replacement. It's not who's the best, right? It's not even that. It's simply looking at who people are going to bet on in comparison to others. It's not that anyone's perfect. It's not that anyone's even great, you just have to be better than the rest. That's all that matters, right? So, people vote with their money, and if I got to pick something, if I have a trillion dollars, and I say okay, it's between that and China. I'm going to look at overall yield growth, but I'm also going to look at safety protection. Where am I putting my trillion dollars? Because if I lose this, it bankrupts my country. If I lose this, it bankrupts our firm or shareholders and everything else, right? So, it doesn't matter what they think, it doesn't even matter what their perspective is on the politics or anything else like that they're betting on. An example of this is found with our last president, Donald Trump. The talking points about him were that every country hated him. There was all this negativity. They said your country is burning and you're losing. But, in that time, the dollar reserve currency grew and so did capital inflows into the United States by massive amounts, not small amounts. Like the growth year to year supercharged. That's a big disconnect. When I look at what's the theme, what is said and then what those countries are doing and how things are actually performing, and this is really important to me because once again, I don't care what people say or what they think…I care what they're going to do and that's how I look at our investment strategy. When I'm looking at the capital that people are giving us that we’re allocating within the economy, I'm looking at individual markets. I want to be pragmatic and so should you. I talk a lot about when making an investment decision, try to analyze your own biases, take them out. You need to listen to everything, but you don't accept everything, and you need to see how bits of information play into the larger investment.
That's on a macro and a micro right? When I look at certain things, there's certain economies that I invested in in the last two years that I wouldn't have three years prior. Three years prior, I would have said that was the best that that local economy. That we're putting 10s of millions of dollars into that is not the best place for our money to go. Three years later, I say, nope, it is. And then I'm putting my money there. Why? Well, I'm pragmatic and things changed, and my views are less important than the reality of the situation. The investment in what's going to happen, and I have to be willing to understand that and change. If you're not, you have no right to be taking other people's money because it's not about you, right? It's about your return. How much you can yield and what you can. Do solemnly matters, and you don't want to be giving your money to people that are. Using your money to express their overall world views. When you need that money to survive, that's different when you're talking about donations, hand-outs, that's something totally different. And that's how I look at other countries. You say something, but what are you doing and what does that really mean? Because if there was a change in this that would start to get me really nervous about overall economic long-term performance to the United States because capital drives investment, it drives all of the innovation. It drives everything that we need for our economy to outperform.
So, compare that to other countries. More capitals coming here. More demand. We are going to outperform other countries, right? The thing is I've got understand the number one competitor. It's now in the world. When we look at competing economies, who we view as enemies of our ideals of capitalism and democracy against a terrorism threat, Aryanism and communism, and different things like that. The world is still kind of divided up like that in money formation, which makes a lot of sense and I'm going to dive into.
But the first thing we need to hit on is the number one…currency…that we could even have an argument that could probably replace the United States, which is obviously the second largest one which is the euro, which is 20% right now when we look since 2002. In the early 2000s, we had this overall international role. That role went up but then by 2008 it dropped. It dropped back down to where it was in 1990 or the 2000s and we saw a stabilization after 2015 where it stopped dropping. It plateaued. So basically, over this time it's been broadly flat now. Not that that's a bad thing, but it's considered stable, but one of the things that we had a problem with is we learned during the financial crisis, which was so interesting to me. Interesting to me when I was studying. Overall, what was happening in the United States and then other countries in the United States. We had a financial institutional problem associated with debt. Leveraging obscure products that got super out of control, right? But what we found with the euro is that the countries were the ones that got out of control. That is a very different thing. I mean, you had some countries that had basically tainted themselves, right? And there's a few great books on it that you can read up.
We had countries within the European Union that weren't collecting tax revenue, they were just loading up on debt and most of the world had no idea the position they'd got themselves in. They were essentially like our banks. Nobody knew what was really going on. And then when the water went out we found all the countries that were swimming with their shorts off and the United States was in a position to where they could stabilize what was going on and fix it. The other countries were not. And so, they said,
“It was our banking system that caused the crisis.”
But the next crisis that unfolded wasn't a problem with our banking systems. It was the fact that those countries had taken on astronomical debts. The countries basically acted like banks, which is obviously bad. And what we found was strong countries like Germany that had great banking systems, they started after bailout. The European Union all a sudden looked very weak. We didn't even know if the euro was going to survive. In fact, a lot of the stronger countries wanted to stop bailing out the weaker ones, with which they had limited control. And what I learned through that period of time was that when times are good, the euro is really good. And that's what we see when we look at the euro's overall strength. When times were good from the late 1990s to 2005. In 2006 that role went way up, right? That role of the European Union it took on way more of a role in the world stage and during good times, the euro was strong. In fact, it was great. Then when things weren't good, it nearly fell apart. And when you're looking for safety, those things are a big concern.
Now I'm not worried about the euro or the country going anywhere. We view it as a stable currency, but I think there was a reality that came after 2008 that said, you guys really mismanaged your affairs, and your power is really weak. And thank goodness we had Germany and their banks to really offset this. They kind of stabilized things and they and they brought it back. But you never know when that happens and it doesn't always work out like that. So, what we found was there was this lack of central control. There was this lack of central knowledge. It was like what was really going on and that I think, really pointed out a lot of weaknesses in the euro that didn't exist in the dollar and so we had more of a flow. And the dollar looked safer than the euro at that time. So, it really stopped and didn't pick up after that 20%. But still, it is the second most important currency in the world. And when we look at its importance, we need to look at a few levels. We need to look at the foreign exchange reserves.
International debt: we looked at international loans, the foreign exchange turnovers, plus the global payment currencies. These things are not all the same, and the way that the currencies are used within them change. The dollar is the leader in all of these, but in some areas it's way more international debt. For example, the dollar just trounces everything…except the euro is held fairly stable in comparison. So, the euro and the dollar in all these different scenarios either shrink or grow by basically the same rate – except global payment currency.
This was super interesting to me, and when I looked at it, I started to dive into it. With the global payment currencies, the dollars and the euro were very close. How they calculate that is based upon which countries use entering which. That makes sense because there's so many countries within the euro.
So, when you're looking at the foreign exchange turnover rate, the euro held up a little better, but it's still obviously the dollar that dominated that, but I think that that held up a little better now. In any case though, it doesn't matter if it's the dollar, the euro. The euro trounces any other leading thing which, when you look at leading thing, you have the Japanese yen and then you have the Chinese yuan. Those two things that are next, they don't even reach 50% of the euro, which is roughly 5% for the Japanese yen and like 2% for the Chinese yuen. So, you just need to understand they’re not even comparable, right? When we looked at China and China was suddenly making these great strides which I'm going to talk a lot more about China. That's important. We're going to break into this data and we're going to look at it. I have stacks of these graphs and charts and data which I break up when we try to develop a whole picture on what's going on. But when you look at, I'm going to stick with the euro for a second. We're going to move to China. OK, so interest rates within the euro right now are negative. It kind of suffered a black eye after the recession and its overall weakness. It was able to stabilize it, but one of the reasons that it was able to stabilize was because of the dollar and they are an ally of us.
So, the United States sends a lot of our dollars into their banking systems and between Germany and Germany and Britain and you have a couple others, but you have some really bad players in that European Union as far as government affairs with France as well as others that are just, you know they really mismanaged their affairs and it's not something that if I was looking at a company, I would bet on to be stable. There's a few hiccups and these guys could really suffer. Now when you look at whether, it's Britain or Germany, they are super stable. Germany is probably one of the most stable countries in the entire world, and I think it would be a very different thing if Germany wasn't a part of the European Union, but also the European Union has a problem of resources size. So, when we're looking at all of them together it looks big, but there are economies singled out when you're looking at capital inflows where people are betting on these stagnant economies.
I'm only looking at this as the United States compared to the rest of the world. These are booming right? But most of these economies within the European Union they're fairly stagnant. They have very, very high social programs that they can't afford. And so there us a balancing act between the strong and the weak. But also, what you can bet on meeting the total economy, manufacturing, technology, everything included. When you single them out, it's very small.
And although we have states which are separate, we're all together. We can't separate ourselves. That's not how it works. The European Union is separate, so those are some of the things that when you're looking at with the European Union, the strengths, but also the weaknesses that happened. I do believe that the euro is obviously the next best solution compared to the dollar, but that is a lower solution that the world is betting on as of now. So, when I'm looking at the overall debt securities associated with the world, meaning international debt securities that are being traded OK, so the US dollar since 2005 has risen dramatically to 65% where in 2005 the European Union held over just over 30%. That has dropped down to 20%. So, we see drops also in other formats. And what we look at when we're looking at the currency dominated debt insurance right? So that overall composite of the foreign debt insurance. When you look at like 2008, the United States was in chaos. It kind of suffered quickly and the euro went from 2002 and it met the United States at this weird time in 2008 at 40% of the currency dominated debt insurance really quickly, but then it immediately reversed, and it was very clear at that time.
When people were worried about the United States through this sudden crisis in 2008, there was also a realization. Now, we saw that the European Union has these big problems, and the European Union went from 40% down to 20% and the United States shot immediately back up to over 60% and now is almost at 70%.
So, this is a key time when we're looking at these currencies and there was this clear understanding, so this is the number 2, right? OK, we're talking about the second largest currency in charge. We're talking about the one that I think is the most viable now. The one that we hear a lot about is China. Now there's a reason we hear a lot about China. That’s because China in many aspects is considered the United States’ number one competition. Now it's considered this because of growth rate, economic power, and its overall growth. The China has a very real probability of surpassing the United States and its total economy. The economic growth has slowed down dramatically. It's been gone for 12% to whatever it is now, like 6% and that growth rate is estimated to keep slowing. In fact, in the next 5-10 years, it's estimated to be more of the United States.
Every country goes through growth and contraction phases. In the United States, we went through our growth phase. We had the industrial revolution, right? We went into a technology revolution. But our land has been segmented. The resources have been taken from our economy. We went through a massive growth phase. Our liabilities were low. Our liabilities are rising. Our production is lowering. Regulation is higher, the cost to do anything is higher. We are a stabilizing, stagnating economy. It's just true. In the last 10 years, China was the opposite.
Now it was the opposite because it was held back due to its very strict communist ability. And what happened was the emperor at the time sent some people out around the world. They came back and they told the emperor. This was in the 80s and the early 90s. They realized that they were falling behind. So, the Emperor went out and he went and looked around and he came back and decided that this was true. They sent all these people to our colleges to learn and then to come back and implement and he started to open segments of the economy to capitalism. This is very important because this was the first time in the world that we've had a communist country bringing in capitalistic ideas to run side by side. So, China was the first one that said,
“Maybe capitalism isn't that bad. We’re a communist country, let's try to overlay it, but we're not giving up power. We're still going to be communist.”
That allowed certain parts of the economy to explode and grow. All this pent-up demand and billions of people, and it started to see the effects of a capitalistic society. And what it does when it has all these low hanging fruits and it can capitalize on them and that created enormous growth rates, and they kind of segmented each out. And there was this idea that China is coming up. It is going to go all capitalist. In fact, Hong Kong is now this bright, shining star. What has happened in the last little while is that China kind of put a damper on that. The first thing that happened was China taking over Hong Kong. Which was a travesty to Hong Kong and travesty to the people. What did this mean for personal freedoms? I mean, the stuff that goes on in China is horrendous by our Western American standards, right? I think it's horrendous by any standard. But it's especially insulting to us and when you look at what they do to their people, everything else is a travesty. But when they took Hong Kong over, it was kind of like a huge gift to the United States because what it did was all of these people that are investing massive capital into the into Hong Kong and China with the thinking that there was going to be a real fundamental change. The takeover and the rigorous rules applied over Hong Kong because that was held by it was a British colony at one point, and they had a treaty and a relationship with China. Their term to that agreement was coming up. When it came up Hong Kong, China had promised they weren't going to do certain things, which they totally just ignored, and they did it anyways and they really imposed a lot of the communist things on Hong Kong. We saw a flee of capital at that time, but it really showed kind of China's true nature and it was like, oh, maybe we're really not turning around here. That's created an overall weakness because you have to understand it's in really socialist countries and really communist countries.
Capital is dangerous. I don't care if you're Ecuador, I don't care if you're Africa or somewhere else. If you or your company put a billion dollars into infrastructure and then the country just says,
“Oh well, that's great. We're taking that over now.”
This happens all the time. So, after companies have lost billions and after countries have lost billions, they learn this quickly. I don't want to do that. So, when we see China doing this, it was like,
“Oh, geez, this this isn't a good thing.”
So, it made them seem less secure. Obviously, it made them seem as if they could lose everything and they don't have a stable outlook for the future. The United States does. Their dollar is stronger than all these other countries, right? There are more inherent freedoms, right? That showed during the lockdowns, right? So, all the other countries that complain about the United States and our lack of lockdowns and everything, all their money was pouring into the United States. So, once again it's this we say one thing, but we do another thing. So, we say that's wrong. But we actually believe that's the correct thing to do economically, and we need get our money out of here and put it in there.
So, when you look at China it was kind of one of those things where it told the world, we're not quite going where you want us to go or do. That gave a United States a big boom as far as being the reserve currency.
So, now let's go to the next part of all of this and let's take a high-end view here. Let's look at these segments of these countries, our allies as well as our enemies for this reserve country that we call the United States. Now when we look at our enemies, China is number one economically, but they're also number one in another key factor…military. OK, now this is another thing that I love to bring up and talk about those other countries that give us crap for it. We spend stupid amounts of money in the European Union’s military, and I think there is an endless number of problems. With the industrialized military complex that we have going on, its involvement in politics, it's involvement in lots of things. OK, I think that it got totally out of control, and I think it was Truman who warned us in his exit speech about it. I completely agree with those things. It needs to be revamped, but we need to look at this at a wholesale.
So, first of all our number one competitor is Europe. Now you have to understand Europe and their massive social programs are largely benefited from the United States and it is a critique that I have when they say things like your social programs are weak. We would never let our citizens go through what you guys let them go through and it's like, well yes that's true. But also, our military is basically covering you so we as U S citizens are paying for a huge portion of your subsidized programs. The United Kingdom, which has the biggest military, is only 7.6%. Of the United States. So, China’s and Russia’s military are multiple times bigger than the European Union. If it wasn't for the United States. The European Union would easily be owned by China and Russia, like it wouldn't even be a competition at all. The European Union's military is so small that it is basically defenseless against their number one enemy Russia and it is the United States that is essentially their military. That goes the same with Canada and Australia. Canada's military compared to the United States is only 2%. Australia is 3%. They're nothing. It's like basically just our tank department, right? So not only the European Union, but all our allies, we are the military for those countries which costs the United States astronomical amounts because China has 32% of ours and is growing rapidly.
So, when people criticize our military, I have a real problem with the people that I'm spending my tax money on to protect, critiquing me for spending my tax money on that. It kind of bugs me, as you can probably tell, because it's our people that die. It's our money that has to go to this. And when we spend money on that, we don't get to spend our money on social programs like you do in France. Well, you know you have literally hundreds of billions of dollars in military that we're paying for, and we are the ones protecting against the fastest growing army in the world, which is China, which was nothing 15 years ago and now it's 32% the size of the United States. It is bigger than all the European Union plus Canada, Israel, Brazil, South Korea, Japan. It's bigger than all of them combined. We are the only military that can even put a dent in China, and it is growing at a much faster rate than we are going growing in 20 years. China at their growth rate on their military will be well over 50% of the United States military.
That should be alarming to the rest of the world. And two, we haven't even brought in Russia. you take out the United Kingdom when you look at Germany, France, everyone else Russia's military is bigger than, and it's bigger than theirs by a lot of these cases.
So, when we look at, the threats and the global stage of a reserve currency. How we play a role in it. You have economic, but then you also have military force and our lack of subsidies and the things that we spend money on. A large percentage of this goes to our allies of which, frankly, we don't really get a whole lot from. Now we get to be the reserve currency, and that's kind of the deal. But other than that, that's money we don't get to spend on our citizens. So, when you look at the United States, some of the biggest problems that I have is how much we spend as taxpayers on the rest of the world that we get nothing from. And so, we don't get those social programs.
The next thing is overall spending. When we look at the spending of the military in the countries and what is exported and imported, our technology but also our healthcare, the amount of healthcare they came through our capitalist nature in the United States. That is exported all over the world, which then gets to be used by subsidized countries which we pay for here. So, when we look at our role on the world, it's very 4 dimensional. It's very entrenched because our biggest competitor as a reserve currency is fully dependent on the United States. If the United States failed, the next biggest reserve currency would be at absolute risk of literally completely being taken over. So, a lot of the countries they say a lot about the United States, they don't like us, yet they're fully dependent on us. They use our dollars, and they invest in our economy. All of this leads me to say right now our biggest risks right? China is the number one risk for the United States, its military power, its economic power, but a lot of the rest of the world? Not a lot. Most of the world does not trust China, which they shouldn't. China notoriously does not hold its international agreements. It breaks promises. It does what we would consider egregious things to its citizens. It's completely communist and it's a big threat to the world.
So outside that which is the number one threat which the European Union agrees with us on that then you have the European Union. Both of these are a fraction of the United States in economic and military might. When you're talking about the European Union, it's nothing compared to us. So right now, the European Union, it stabilizes off our dollar, it invests in our dollar, and it depends on us for protection. So, when is that going to become the reserve currency? How does that become a reserve currency when it's dependent on us just to be doing a lot of those normal things? Once again, these are nothing. I'm not saying Europe is bad, in fact they do an unlimited number of things better than we do in the United States. But when we're talking about a reserve currency, when you're talking about a superpower, and military might has stabilized for one of the largest peaceful times in the world.
You need to look at this as a big picture. Since the world wars, the United States being a superpower and the reserve currency has stopped. Most major world wars as a percentage of warring nation. This is the longest time of peace we've ever had. It's really actually shocking the amount of peace the world has gone through because the United States had this massive club which it abused. I'm not saying it didn't do anything else, but that stopped all countries for more. You want to mess with Europe? We're going to nuke you. That's a pretty big threat for the rest of the world, right? And we've already shown that we'll do it. That created the stage. Good or bad doesn't matter.
I'm talking about stable economies growing and us investing in them, them investing in us and you. Betting on the horse and jockey? That's what you're doing here. You're betting on the horse and jockey. Our jockey is very limited in the United States as shown with Donald Trump and Joe Biden and everybody else. We like to complain about the President, but they're gone in four years. They don't matter, they're irrelevant. The president is not going to change your life. If you haven't gotten that yet, you're not an adult. Donald Trump isn't going to ruin your life, and Biden is not going to ruin your life. Donald Trump is not going to save your life and Biden is not going to save your life. And that's why the United States is a good investment. Because they matter very little in the long run.
Now it makes a lot of noise, and we fight, and we hate each other and that is also one of the best things about the United State: people. You got other countries looking at the United States saying it’s a mess, you're always fighting. Yeah, but we can fight. We have the ability to fight and we do fight. If we don't believe in something, we fight for it. Whether it's your side or not. You need to be proud that people fight because what it shows the rest of the world, that this what it looks like. Instability is a contained crisis…meaning it's part of the process. We have been fighting internally in the United States over what we should be doing, what we shouldn't be doing, social outlooks, economical outlooks. We fight over it all here and we have very, very ranging views but we don't massively move the needle. And that is really important because what it shows the rest of the world is they can fight within the United States, but it's contained and limited. In most parts of the world, that is not true at all. When they fight, governments crumble. It's completely unstable. We manage the chaos here. It's not pretty. But we allow it, and frankly, I think it's good.
You want people to be able to jump on a podcast and piss everybody off. The number one threat to the United States is canceling people. It's limiting people to be able to speak, it’s over-reaching regulations. I think that the tech companies are a huge threat. They're monopolies, they own the Internet, and I don't believe in monopolies. You know the Gilded Age had all these problems. The tech companies have all these problems, but our government has already shown that they'll breakdown monopolies. So, short term problems, right? People believe that eventually the government will get around to it. You'll break it up and you're going to limit even monopolies powers. So even though they are monopolies, we're still going to limit it when we don't like it, we're going to uproar and then our political system will eventually break up those companies to limit their overall power.
So, I we don't believe in centralized power in government, we don't want it in the economy. Because we want individuals to be able to fight to break up. And right now, we are skewed in the United States way too far to centralized power both in the government and economically. It's clear you can't argue with it right? And those things need to be rebalanced. Those things always happen. After a long periods of peace social upheaval follows economic disparities, right? These economic disparities or discrepancies between the wealthy and poor are mainly driven through technology because technology is aggregators. They consolidate. You have five companies that now are the most valuable companies in the world. They own the complete Internet, they own everything, right? That's a problem. We're going to have to work on it, right? The government has too much power. Now we need to work on that as well, and the United States will do it. We'll get through it, but it's going to be messy people. And we're going to have periods where the pendulum swings in the United States probably way further than in other countries.
But we know that the pendulum swings, and that's the key. It doesn't stay still. Now for us as citizens in the United States, it's our job to actually fight too. When we see things that are not right, we need to stand up to them. When we see things that are wrong and we talk about it, a lot of people don't understand that the income discrepancies between the super wealthy are largely concentrated into two problems and two problems only. Technology and the government. The government, through its bailouts and through everything else, has devalued the dollar, which increased assets. The rich got richer because the government was making them richer. Well, you want to stop making the rich, richer. Stop printing money and increasing the value of the assets. If you want to get rich by assets. And that's the thing. In the United States we can. In China you are very limited, hence why they have a housing bubble and what happened with their housing prices there. It was their only method for people in China to really gain wealth in the United States. We have the opportunity now when it gets too far apart, you have a subclass of poverty that are in cyclical poverty.
Now I am a capitalist, but I know what poverty looks like and I know what cyclical poverty looks like. This is poverty that people can't get out of. It is not a pull your bootstraps up situation. I lived in favelas in Brazil for years where we flushed our toilets with a bucket right? There were people with fully automatic weapons in the streets. And this is a country that didn't allow weapons. None. And if you look at this poverty and the people that I loved, that I lived with in these favelas that were my family, that you know I lived with them 24/7. I didn't go home. I didn't even talk to my family. It was just there in the early 2000s. There wasn't pulling up your bootstraps. This was a systematic, pushing down of people in poverty by a corrupt government.
Well, in the United States we have segment of the population that is in cyclical poverty. They can't get out of it, and it's embedded into them. This is something that my father broke out of. And he was in extreme poverty. He had to poach deer out here in Idaho for food. When I say poverty, I'm not talking about like poverty we see today in the United States. It's not comparable. You know people that are on their iPhone running around and you know it's not. He didn't have communication. He didn't have a bathroom he didn't have running water. This is in freezing cold, Idaho, meaning in the winter he had to go out to an outhouse. My dad is 60 years old. He's not old, right? But this is the poverty that he lived in. He didn't have a father. All his brothers and sisters ended up being drug addicts, died and were homeless. He was the only one that broke out of it. I know what this kind of poverty does to other countries…what it does to us…how it changes the human mentally, how it changes them. My dad was the exception.
The point is that some poverty you just can't get out of and we need to do things to help it out. The goal is that you don't have centralized power, that it's decentralized, meaning that you, me, everybody, has power not only to vote but to have economic power and you don't want that massive discrepancy. And right now, we have a system where basically political and economic power is held within five companies and that's a problem. But at the end of the day, in the United States, we've shown that we'll take care of these problems. The pendulum swing is a good thing, and the rest of the world sees that. The world sees that the U.S. is a mess, but it’s a stabilized mess and will bet on it.