Why Every Country Uses US Dollars (The Real Reason) | Prof. Jiang Xueqin

Added: 2026-05-25

[00:00:00]So now we go to America.

[00:00:03]Okay?

[00:00:04]And America has a different conception of the nation-state.

[00:00:12]Okay? So at this time in history, first of all, >> [snorts] >> um America is a very small place, 13 colonies. And the colony is controlled by these indigenous people, the Spanish are there, the Spanish are there, okay?

[00:00:28]And but the Americans are very, very ambitious. And they are expanding really, really fast.

[00:00:34]And Britain, the home country, actually becomes um afraid of America. Because at this time, about the 1700s, America has more people, it's wealthier. It's welcoming people from all around Europe. And so Britain tries to limit the expansion of America. Okay? It tries to say you can't cross the certain line, the Appalachian Mountains. America says, "Screw you.

[00:01:00]We're going to revolt, okay?" And this creates the American Revolution.

[00:01:04]And in 1789, um America creates the Constitution, which becomes the highest law in the land.

[00:01:13]And so at this point in history, America the American founding fathers, they look around the world, they know about the British system, they know about the French system.

[00:01:23]Um they're trying to grow the country as fast as possible. They're They have to fight the Spanish, the French, the British, and the indigenous people in their land. They're trying to welcome as many people as possible, okay?

[00:01:35]So they decide that the nation will become a game.

[00:01:40]Okay, a game where the citizen is a player.

[00:01:45]And the citizen is trying to maximize his wealth.

[00:01:52]Okay?

[00:01:53]And through this process of maximizing his wealth, trying to get as much wealth as possible, he will be energetic. He will work hard. And this energy will contribute to the overall wealth of the nation, which will allow America to go very, very fast. Okay? That's the plan.

[00:02:11]All right? So, for this to work, they have to control the game that has three major characteristics.

[00:02:19]All right? The first is that it has to be open.

[00:02:25]Meaning anyone can come and play. Okay?

[00:02:28]But that just means also limiting the history and the ethnicity of the uh place. Okay? So, the concept that America creates is the idea of melting pot.

[00:02:44]We welcome anyone who comes to America, regardless of your race, regardless of your history, regardless of your wealth, as long as you're willing to assimilate into America, into the melting pot.

[00:02:53]Okay?

[00:02:54]That's the first idea. Second idea is fairness.

[00:03:01]And the third is clarity.

[00:03:04]So, in other words, people are willing to play a game and work really hard to win this game if, first of all, they can play this game, they're allowed to play this game, they're not discriminated against.

[00:03:18]Um also, if the rules are really clear.

[00:03:21]Okay? You understand what the rules are.

[00:03:22]In America, the rules are very simple.

[00:03:24]You go to America, you follow the law, you work really hard, you get rich.

[00:03:27]Okay? Really simple. It's called the American dream, right?

[00:03:30]Um And the third thing, of course, is that the game is fair.

[00:03:37]Meaning the only criterion to generate wealth is how hard you work, how much talent you have, how much merit you have, right? The idea of merit.

[00:03:49]Okay? And look, this is true.

[00:03:52]When you go to America, you will discover this. If you work really hard, if you're really talented, if you're really smart, they will respect that, okay?

[00:03:59]I've been to a lot of countries. I can tell you that America in America, this is true. But is that true in Canada? I grew up in Canada, and they don't really care if you're ambitious. They don't don't care if you're smart. Don't care if you work hard. They don't care. They expect you to follow the rules and conform, okay? That's Canada. You go to China, okay? We all know what China is, okay?

[00:04:18]No one cares if you work hard. No one cares if you're smart. No one cares, okay? It's all about your guanxi, about where your family is, okay?

[00:04:26]But it's true for actually, this is true for most of the world. And I would say that the idea of merit is only true for two places.

[00:04:35]America is the most obvious example, okay? I've been to meetings where at first, Americans are like, "Uh this guy is Chinese. He probably doesn't speak any English. He's not that smart, okay?" So there's discrimination discrimination going on, but the moment I speak, the moment I try to make my case, they are win all one over by my logic, okay? By my arguments, by my creativity.

[00:04:57]And they welcome me into the club.

[00:04:58]That's the American attitude of being open-minded, of being generous, of appreciating talent above everyone else, okay?

[00:05:05]The British are The English are also very similar in that way, in that yeah, maybe they're racist, but if you can make a good argument in front of them, they will accept your argument, okay?

[00:05:16]But guess what, guys? Nowhere else is this true, okay?

[00:05:20]It's not China. You have the best argument in the world? No one cares.

[00:05:24]Right? Okay? So we There are lots of issues with America, but in all honesty, America is a place that really does appreciate merit and which really does reward merit. And that's why everyone wants to go go to America.

[00:05:37]All right?

[00:05:39]All right. So, the question then is, how did America create this system? Okay.

[00:05:45]Well, it did so through the constitution?

[00:05:48]The idea of the constitution is to create a game and make this game above power. Okay?

[00:05:56]And how they did that is creating a system of government that checks and balances each other. So, you have the president.

[00:06:09]YOU HAVE THE CONGRESS, OKAY?

[00:06:13]And you have the Supreme Court.

[00:06:17]>> [snorts] >> Okay. The Supreme Court, it's very simple. It's to interpret the constitution.

[00:06:26]Which is the highest law in the land, okay?

[00:06:32]And then the powers of the government are divided equally amongst these different branches.

[00:06:38]So, the Congress could create laws and control spending, okay? What's called the purse.

[00:06:47]The president has war powers, basically, or the sword.

[00:06:52]Okay? But if the president were to declare war, he needs Congress to approve because Congress has to give them money to start the war.

[00:06:59]Okay?

[00:07:00]And um the idea that the constitution is the highest law in the land means that it's really rule of law.

[00:07:10]Okay? So, even though you have this government system in place, you also have another parallel system called the judiciary, the court system, which protects property rights in the same way that they do in um Britain.

[00:07:25]Okay? Does that make sense? So, so the very idea is that this is a game and the government is a system to maintain the openness, clarity, and fairness of the game. And because of this, America was very quickly able to dominate the world. Okay?

[00:07:47]The thing about this game, okay, that's very important for us to understand, is it is expansionist.

[00:07:54]Okay?

[00:07:56]So, what happened is that in its history, America faced certain challenges to this game, and this game won out every single time, okay? So, the first major challenge to this game is called the American Civil War.

[00:08:11]All right. So, let me explain what happened.

[00:08:15]From 1861 to 1864, the Civil War was fought between the North and the South.

[00:08:21]This was a clash of economic systems, okay? So, the North played the game, okay? And so, it believed in free labor.

[00:08:32]The South was its own independent economic system that focused on agriculture.

[00:08:39]And so, it used slave labor.

[00:08:46]For many Americans in the North, slave labor was offensive because it corrupted the game, okay? Because remember, America was founded on the idea of openness, fairness, and clarity.

[00:09:01]But if you're a slave, that's not fair, okay? Cuz you were born a slave, and you can never participate in this game.

[00:09:08]And so, they fought a Civil War to decide which who would triumph in the end. And of course, the North won because the North focused on free labor.

[00:09:18]So, that meant that there were more people in the North, that meant that the North was wealthier because of manufacturing, and that meant that the North were more energetic.

[00:09:28]Okay? So, they defeated the South.

[00:09:30]And so, that was the first major challenge.

[00:09:33]Now, the game is spreading, okay? It spreads across America, and now it stops because America can't expand anymore, okay? It basically conquers the West.

[00:09:46]And and now the game is an issue because of the nature of money.

[00:09:51]The problem with money is that ultimately it the the longer you play this game at the end of the game one person controls all the money, okay? Does that make sense? That's a problem with capitalism. That's a problem with this game.

[00:10:09]So now now that the frontier has been settled, now that the borders have been controlled a few people are now controlling all the money, which leads to the Great Depression, okay? So now the solution is America has to go and conquer the world, which it does, okay? In World War II, America conquers the world. And so now what America needs to do is spread this game throughout the world. And it does that by creating the US dollar.

[00:10:36]Okay? So, 1945 America wins the war. A year before, in July July 1944, for 1 month what happens is that America organizes something called the Bretton Woods Conference in New Hampshire, okay?

[00:10:54]And the idea of the Bretton Woods Conference is to establish the world game, okay?

[00:11:01]Before America's game was limited to America, but now America wants to scale its game to the entire world, okay? So how does it do that? Well, first thing it does is it makes the US dollar the reserve currency of the world.

[00:11:22]All right. What does that mean? It means that every other currency has to be derived from the US dollar.

[00:11:30]Every other currency will find from the US dollar.

[00:11:34]Okay? Which means that if you have Kenyan dollars, you can now um change it for US dollars, which is what's valuable. The Kenyan dollars is just not valuable, okay?

[00:11:45]All right? They also agree on um exchange rate.

[00:11:51]Okay?

[00:11:53]Okay, does that make sense? Okay? And this this is the system that we have to have today, okay?

[00:11:57]All right? The global reserve currency is the US dollar. That's what's valuable. The renminbi derives its value from its relationship with the US dollar. The renminbi is not valuable by itself, okay?

[00:12:08]All right? That's number one.

[00:12:10]Um okay. So, now you're like, "Wait a minute here."

[00:12:15]If this is true, the US dollar can the the Americans can just put as much money as they want. And so, to solve this problem, uh the Americans said, "The US dollar will be pegged to gold."

[00:12:29]Okay?

[00:12:32]Does that make sense? Okay, meaning like you can always take your US dollar and change it for gold. And because there's a limit to gold, there has to be a limit to the US dollars, which keeps the system stable.

[00:12:41]Okay?

[00:12:42]All right? That's number one.

[00:12:44]Number two is America needs to expand this game, okay?

[00:12:50]Because it is in competition with the Soviet Union, which is against this game, okay?

[00:12:55]So, it creates two new organizations to spread the game throughout the world.

[00:12:59]And these two game And these two organizations are called the World Bank and the International Monetary Fund, the IMF, okay?

[00:13:06]So, um I'm So, for the sake of simplicity, okay? Understand this.

[00:13:14]The World Bank, their job is to give you loans.

[00:13:18]Okay? So, let's say you are China and you are poor, right? You need to build dams. Well, the World Bank gives you money. And when it gives you money, what it does is it allows you to start playing this game, okay? It allows you to participate in this game.

[00:13:33]Now, what always happens is um eventually the countries borrow so much money, they have to go into debt, and they can't pay off the money, right? So, then what happens is the IMF comes in and changes your government and its economic policies to make it conform more to the game.

[00:13:53]Okay? Does that make sense?

[00:13:55]And the its main mechanism is called privatization.

[00:13:58]All right? So, what the IMF says is, "Okay, well, you're inefficient. You can't pay off the debt because you're inefficient. You're inefficient because the public should not be in control of the infrastructure. The public should not be in control of water, okay?

[00:14:11]Private companies should be in charge of the water, electricity, and the land, okay?"

[00:14:16]So, uh >> [clears throat] >> the goal of the World Bank and the IMF is to spread the game throughout the world. All right?

[00:14:23]Okay.

[00:14:24]Then in um 1947 they create create something called the GATT, okay? The GATT is a General Agreement on Tariff and Trade. So, this is the WTO basically, okay? That changed into the WTO in 1995.

[00:14:42]All right? So, it's basically an agreement on free trade.

[00:14:45]Okay? Does that make sense?

[00:14:47]1973 um SWIFT SWIFT [snorts] is an agreement um amongst different banks in the world on how to transfer money, okay? So, for example, if you want to transfer money from China, yuan renminbi, into America to go to university, right? Guess what, guys? That That's That's go through SWIFT, okay?

[00:15:13]So, now it allow it allows for more cooperation among banks in the world to use US dollars.

[00:15:19]All right?

[00:15:21]Um Now, the last thing is okay.

[00:15:27]How do these countries get together and decide on how to cooperate economically?

[00:15:32]And the answer is the Bank of International Settlements, okay?

[00:15:38]Okay? And this is the idea is that the central banks of different countries get together and they agree on certain policies.

[00:15:47]All right? And this is all done privately, in secret. No one knows about them, okay?

[00:15:52]All right. So, this is the game that America uh creates. It's very simple, okay?

[00:15:59]Um and there are other components, but but we'll focus on this now. Throughout the semester, we will focus more we will focus on how this game is played specifically, but first I just introduce it to you. All right? Okay.

[00:16:11]So, now let's talk about how the US dollar conquers the world.

[00:16:17]All right.

[00:16:21]So, for the longest time, um this system works well, okay? The United States is in in competition with the Soviet Union.

[00:16:29]But over time, the the Americans start to abuse this system. So, they pay for things they can't really pay for. For example, the war in Vietnam. For example, the space race. For example, something called the Great Society, okay? They're just spending too much money. And other countries start to freak out. So, France basically withdraws all all its gold from the United States.

[00:16:49]So, in 1971, >> [applause] >> what Nixon does is say, "You know what?

[00:16:56]Um here's the secret, guys.

[00:16:59]We actually don't have have enough gold to pay off everyone, okay? So, screw this.

[00:17:03]We're not going to peg the gold uh the dollar to gold anymore, okay? Do you understand? You can now you can now no longer redeem your US dollars for gold. It's done, okay? So, now what happens is the US dollar becomes a Ponzi scheme.

[00:17:20]All right?

[00:17:22]What is a Ponzi scheme?

[00:17:24]A Ponzi scheme is basically the US dollar is valuable because people want to use it.

[00:17:31]Do you understand? There's no value in itself. It's only valuable because people want to use it.

[00:17:37]So, now Nixon has to go and create demand for the US dollar, right? So, the first thing he does is he goes to Saudi Arabia.

[00:17:47]>> [clears throat] >> And he creates something called a petrodollar.

[00:17:55]Right? The idea of the petrodollar is very simple. Saudi Arabia, which is the largest oil exporter in the world, will only accept payment in US dollars.

[00:18:04]Therefore, if you want oil, you have to have US dollars, okay?

[00:18:09]That's the first thing that Nixon does.

[00:18:11]The second thing that Nixon does is actually even more important.

[00:18:14]What does he do? Do you guys know?

[00:18:17]He visits China.

[00:18:19]Okay?

[00:18:23]Not only does he visit China, but he's established a framework in which America will give China everything, okay? In 1980s, what happened?

[00:18:35]America gives China its market access.

[00:18:40]Right?

[00:18:43]Now, US consumers will buy goods from China.

[00:18:46]That's a huge deal, guys, okay? That's number one. Number two is America gives China FDI, technology, education.

[00:18:58]All right? Imagine what happens. Amer- America gives foreign investment to China, gives all this capital to China, gives all this technology to China, right?

[00:19:08]All these mil- military secrets that America has, it gives it for free.

[00:19:13]And not only that, but America educates the Chinese elite. Okay, 1980s, all these Chinese students, Chinese students for graduate school, go to America to learn American technology.

[00:19:25]Okay? And the third thing, and this is the most important, is military protection.

[00:19:36]All these conflicts that China has with Southeast Asia, with Japan, Vietnam, America will now protect China.

[00:19:43]When Chinese ships export goods to Europe, Africa, and the United States, the US Navy will now protect these Chinese ships. Do you understand?

[00:19:51]And you're like, "Oh my god!

[00:19:54]America gave China everything!

[00:19:59]America made China rich.

[00:20:01]Why would America do that?"

[00:20:03]And there's one answer, and only one answer. It's to make you China use US dollars.

[00:20:10]Okay?

[00:20:14]It's that simple. Okay?

[00:20:16]So, now when China trades with the world, it gets US dollars in return.

[00:20:21]Do you understand?

[00:20:23]Okay? And the entire idea is to make the world addicted to US dollars.

[00:20:29]And now that the world is addicted to US dollars, now that the world depends on US dollars, America can now control the global economy, okay?

[00:20:38]So, 1999, >> [clears throat] >> I'm sorry, 1991, >> [applause] >> the Soviet Union collapses.

[00:20:49]Okay?

[00:20:50]And now America is the only game in town. There's no one who can challenge the supremacy of the Americans.

[00:20:56]And so, now what happens is America creates something called the New World Order.

[00:21:01]The New World Order is based on global trade.

[00:21:04]But because United States controls the US dollar, it that controls something called pricing.

[00:21:13]Pricing just means that the Americans can decide the value of everything, okay?

[00:21:19]So, what America does is create a price hierarchy.

[00:21:23]So, at the very bottom are resources.

[00:21:28]But, above that is manufacturing.

[00:21:33]Then there's knowledge.

[00:21:36]And then finance.

[00:21:38]>> [applause] >> Okay? This is the price hierarchy for the world.

[00:21:44]All right? And it divides the world into a division of labor, okay? So, what is resources? Well, guys, it's Russia.

[00:21:53]Okay? Then doesn't make sense?

[00:21:55]Russia, Africa, South America.

[00:21:58]What's manufacturing?

[00:22:00]China.

[00:22:03]What's knowledge? Europe.

[00:22:07]And what is finance? America.

[00:22:12]Okay? Doesn't make sense?

[00:22:14]So, what's going to happen is that America is going to take its manufacturing and transfer it to China.

[00:22:19]Okay? Because it's cheaper for China to do it than for America to do it. And all America is going to do is finance.

[00:22:25]Okay? What is finance? Finance is just the creation of money.

[00:22:29]For the purpose of creating more money.

[00:22:31]Right?

[00:22:33]Okay. So, this is the system in place.