Summary of "The 7-Stage Cycle: How Every Reserve Currency Collapses (Dollar = Stage 5)"

The 7-Stage Cycle: How Every Reserve Currency Collapses (Dollar = Stage 5)

Overview

The video outlines a recurring seven-stage historical pattern that every global reserve currency has followed before collapse. The U.S. dollar, reserve currency since 1944 (81 years ago), is currently in Stage 5 and entering Stage 6 of this cycle.

This is not speculation but a mathematical and historical pattern repeated over six centuries across four prior reserve currencies:

Portuguese real (1450s–1530s)
Dutch Guilder (1640s–1720s)
British pound (1815–1920s)
U.S. dollar (1944–present)

Definition of Reserve Currency

A reserve currency is:

Held in central bank reserves globally
Used to price global commodities (e.g., oil, gold, wheat)
The currency in which international trade is denominated

Reserve currency status grants an “exorbitant privilege”: the ability to print money, run trade deficits, and borrow at lower rates due to structural global demand for bonds.

The Seven Stages of Reserve Currency Lifecycle

Military Dominance and Trade Route Control Control of critical global trade choke points backed by military power. Examples:
- Portuguese naval dominance in 1400s
- Dutch East India Company military power in 1600s
- British Royal Navy in 1800s
- U.S. Navy post-WWII The dollar achieved this in 1945 and maintains it today.
Massive Trade Surplus and Wealth Accumulation Exporting more than importing, accumulating wealth globally. Examples:
- Portugal (1500s)
- Dutch (1600s)
- Britain (1800s)
- U.S. (1945–1970) The U.S. gold reserves peaked at 20,000 tons in the 1950s.
Formalization of Reserve Currency Status (Peak Power) Official adoption by other nations through treaties or pegging. Examples:
- Portuguese real in 1500s
- Dutch Guilder mid-1600s
- British pound at Congress of Vienna 1815
- U.S. dollar at Bretton Woods 1944 This stage marks the peak; after this, trade surpluses reverse to deficits (Triffin dilemma).
Deficit Spending and Living Beyond Means Shift from producing/exporting to consuming/importing. Examples:
- Portugal mid-1500s
- Dutch 1700s
- Britain early 1900s
- U.S. from 1971 onward The U.S. trade deficit reached approximately $800 billion annually by the 2000s.
Currency Debasement and Money Printing Debasing currency to finance deficits, causing inflation and loss of purchasing power. Historical examples:
- Portuguese real debased 1550s
- Dutch guilders in 1700s
- British pound during/after world wars

U.S. entered stage 5 in 2008: - $3.5 trillion printed (2008–2014 Quantitative Easing) - $7 trillion printed (2020–2022 COVID response) - Inflation surged to 40-year highs in 2021–2022

Dollar debasement impacts the global economy due to its reserve status.

Loss of Confidence and Search for Alternatives Nations reduce dollar reserves, diversify into alternatives like gold, euro, yuan, or other currencies. Examples:
- China and Russia reducing dollar reserves since 2010s
- Russia sold nearly all U.S. Treasuries post-2014
- BRICS exploring a new currency
- Saudi Arabia accepting yuan for oil (2023)

Dollar share of global reserves declined from 72% (2000) to 58% (2024). Stage 6 is unfolding now, signaling an accelerating transition.

Replacement and Collapse The reserve currency is replaced by a new currency or basket of currencies. Historical replacements:
- Portuguese real replaced by Spanish silver peso (late 1500s)
- Dutch Guilder replaced by British pound (late 1700s–early 1800s)
- British pound replaced by U.S. dollar (1945–1960)

No clear single replacement for the dollar yet; potential scenarios include: - Multipolar currency system (dollar, euro, yuan, gold) - IMF Special Drawing Rights basket - Digital/crypto currencies (though governments unlikely to cede control)

The transition is expected to be chaotic and painful due to the dollar’s global embedment.

Macroeconomic Context and Risks

The U.S. dollar’s average lifespan as reserve currency is ~80 years; it has been 81 years since 1944.
Massive global dollar-denominated debt (~$70 trillion in bonds) creates systemic risk.
A dollar collapse would trigger widespread defaults globally, affecting emerging and developed markets alike.
The transition will be more disruptive than previous ones due to the dollar’s global dominance.

Investment and Risk Management Recommendations

Holding dollars is a risk, not a safe haven.
Diversify out of pure dollar assets but don’t abandon dollars entirely (necessary for U.S. residents).
Hold assets that preserve value across currencies, such as:
- Real estate
- Productive businesses
- Commodities (gold, oil, etc.)
Monitor key indicators of stage six:
- Central bank reserve data (declining dollar reserves)
- Trade agreements settling in non-dollar currencies
- Gold price surges
Understand this is a mathematical and historical cycle, not political or conspiratorial.

Key Numbers & Timelines

Dollar reserve status since 1944 (81 years)
U.S. trade deficit approximately $800 billion annually by 2000s
QE money printing:
- $3.5 trillion (2008–2014)
- $7 trillion (2020–2022)
Inflation surge in 2021–2022 to 40-year highs
Dollar share of global reserves down from 72% (2000) to 58% (2024)
Historical reserve currency lifespans: 80–110 years

Disclaimers

This is not a prediction of immediate collapse or U.S. failure.

Not financial advice or a call to panic sell.

Emphasizes historical patterns and probabilities, not certainties.

Highlights political difficulty in reversing deficits and money printing.

Presenters / Source

The video is presented by an unnamed narrator/historian/economist who references historical data and economic theory (e.g., Triffin dilemma). No specific individual or organization is named in the subtitles.

Summary

The video presents a detailed, historically grounded seven-stage cycle that every reserve currency has followed before collapse. The U.S. dollar, after 81 years as the global reserve currency, is in stage five (currency debasement) and entering stage six (loss of confidence and search for alternatives).

The cycle predicts an eventual replacement and collapse within the next 10–20 years unless significant political and economic changes occur. Investors should diversify away from pure dollar exposure into real assets and monitor global indicators signaling the transition.

The coming shift is likely to be chaotic and impactful globally due to the dollar’s unique role.