 Hi everyone, it's MJ the fellow actuary and in this video We're talking about the potential end of the world Now normally I don't like to make videos on current affairs because or especially with regards to financial matters because I kind of feel like I Don't want to give a low-resolution opinion And there's so many things out there that one needs to consider before giving an opinion Especially someone let's say like me who's did my actuarial fellowship in finance People would expect you know my opinion to be a lot more educated So because of that I tend to stay away from you know the current financial news Because I don't want to just give a yeah a quick opinion on something without doing the proper homework but the current situation Because the consequences could be so severe I thought it's it's maybe worth talking about But of course I do want to just throw that disclaimer up there that my my knowledge on the subject is is very limited So please do your own research and yeah I remember just chatting to my parents about it to my dad's like oh Conspiracy theory and then my mom was really upset and because of course, you know if you tell someone it's potentially the end of the world They're gonna react in some interesting ways And that's also one of the things I want to do in this video is talk about how people are Responding other people in in finance. I mean just my LinkedIn. I posted, you know this question saying the US debt ceiling Is this the end of the world or or nothing to worry about and after a hundred votes had come in 70% were It's nothing to worry about Fortunately there was the 30% so I'm not like completely You know left field and and crazy, you know, they are 30% of people who are also thinking Yeah, maybe maybe something is up and of course the the stock market hasn't Reacted as much as one would anticipate that if it was truly gonna be the end of the world The yield curves of the US treasuries have have shifted, you know Especially if you compare it to some of the previous months So the bond bond markets are starting to feel it a bit But the equity markets aren't and the whole idea of if it's the end of the world Both of these things should should tank to to zero because the whole concept of money is that, you know It's the social technology that we use as a as a database In fact Elon Musk was even talking about this how money is a is a bit of a database of Recording who's added value to society and that kind of thing and it's my idea is that okay because you added value in the past We will give you money Which you can then you know Redeem for value in in the future from somebody else and then that person can redeem it for Other value in the future and it keeps going but money is definitely a Time-sensitive instrument and so I as actually is one of the first things we study is the time value of money because money also Changes throughout time, but money itself is like I say it's embedded in this whole concept of time And if it's the end of the world, you know, it's the end of the the future as we know it Now of course I say end of the world is like well Michael Why if the US debt ceiling, you know crashes or if America default? Why is that gonna gonna end the world? You know America's just just one country? I Think in worst-case scenario is if America was to to default and not pay back It's it's one of the things that I believe is holding China back from invading Taiwan Yes, if they invade Taiwan the rest of the world will be like, oh, what are you doing? You know kind of like ostracize them like what Russia and Ukraine is happening also, you know Taiwan is well fortified and will be difficult for them militarily to to take it on But I think one of the big reasons why they also Haven't wanted to invade Taiwan is because they own a lot of American debt and America as a way to maybe punish China might tell them well stuff you you know if you're gonna do this We're not gonna honor our debt obligations but if those debt obligations are not being honored because the Democrats and the Republicans cannot Reach a form of agreement Then yeah, it's it just makes that a lot more Likely and if China invades Taiwan Maybe, you know India starts going for some of that territory in the Himalayas first China or something else starts happening And you know could very quickly ripple into World War 3 nuclear where nuclear warfare and drone attacks. It's it just doesn't doesn't look pretty So this US debt ceiling in my opinion can impact that now One of the politicians I follow on tiktok Jeff Jeff Jackson. I think that's his name very cool guy it's and He was the first one who kind of like brought up that ooh, this is this is a problem so I'm scrolling on tiktok and Normally I see Jeff and he's got some cool little, you know things what's happening in Congress and it's and it's just interesting And here he was a little bit panicking like he he looked properly scared and you know doing a little bit of research since then coming in Well, not research just reading online articles and the the Twitter feeds of of McCarthy and Bernie and some Republicans and some Democrats. It doesn't look good. It doesn't look good. There's a lot of name calling now Fortunately, I've done a little did a little project for for my own government in in South Africa for one of the other political parties And so when I was spending time in Parliament, it was fascinating to see that once all the cameras were You know not in place that the political parties got on a lot better than than how they appeared So like in South African television, you know, you always see the political parties shouting at each other and I guess that's what makes for the best news material and Probably likewise in America, but when I was there and they weren't any cameras behind the scenes People are people and they were working and they're getting on and they're asking how each other's children were doing and it was very all very Amicable so I can imagine probably the same happens in America that once the cameras are not on everyone's faces That they're actually all working Collectively together so there is still hope. There's there's definitely a lot of hope in in that sense, but This is the problem is Also studying for actuarial science One of my specialty subjects was enterprise risk management, which was formed after the 2008 recession and the whole idea was this thing was formed so that we would never have another You know giant recession like that going forward the idea was that during that recession which interestingly enough China kind of played a big role in it because China in order to Increase its position in the global economy as as an exporter Wanted to artificially keep its currency low and so in order to keep their currency low They needed to sell their currency and they needed to you know buy something else with it That's this actually how they got a lot of the American debt that's which is making this problem a lot more prevalent So in order to keep their Chinese currency low The local currency load China went out and bought a lot of American Treasuries now because they are buying a lot of American treasuries They were pushing the price of those treasuries up Once the price of the treasuries were up as you'll know from financial maths The yield on those treasuries starts to dip now when those yields dip it means various payments can't be made Especially if you know you're using fixed rates or flow changes, but before getting into all the technical technical details and stuff What it essentially meant is that people or big institutions pension funds and big big financial players We're forced to turn to Novel instruments like mortgage-backed securities because these things were a way to provide yield Because the trustee US Treasury was getting bought too much by China They bought it. They bought the mortgage-backed securities, which had these really complicated copula models working in the background They said everything was okay Regulators gave it the triple a stamps and you know, you've watched the rest of the big short movie Of course, they all blame it on the greedy blank bankers, but there was definitely some geopolitics or geopolitical Investments that kind of causes whole thing in the first place and once again, this geopolitical investing of China is Raring its ugly head because like I said China owns a lot of the debt in fact that they don't own the most Japan I think owns the most because since 2018 China has been Like getting rid of the debt because of course if it eventually does want to take over Taiwan It doesn't want to hold it rather hold somebody else's debt So like I say that that Taiwan thing is I think it's it's more a matter of when rather than then if and this US debt ceiling crisis could speed up that that timeline Just like I said that could cause end of the world from a nuclear fallout if you know The war was to to escalate so it's not just like oh financial markets are gonna crumble and people gonna freak out But coming back to it's like I said actual science where we studied so we studied the subject called It's called F1 is 60 in South Africa. It's called was called st9 in in England Then they changed the name to SP none basically Enterprise risk management and the whole idea is that we learned all these complex models along with a whole bunch of other Things to make sure that the world's economy never fell like this again But there's not that many of us since since the inception, you know all those years ago Not many people have have written this exam one of the things that we study a lot in this exam is this idea of Systemic risk and that was the whole thing that you know America had this to this viewpoint that the big banks Lehman brothers these other big investment players. They were too big to fail too big to fail and Congress was like well, you know what? We're not gonna bail out these greedy bankers. This was the narrative So, you know, we're not gonna go ahead with the plan these things started Crumbling they did start failing the whole markets went into a bit of a free fall Congress quickly got together and then kind of kind of reacted and it was interesting because I mean I mean earlier this year We've almost had a bit of a bit of a banking run with Silicon Valley Bank kind of you know Basically collapsing and then American government coming in quickly and saying no no no no no we're gonna we're gonna save the day and When the market started to tumble that kind of put a lot of pressure on them to to act and get something done Whereas now the markets aren't reacting and that's so the Congress or the politicians There's no they can keep playing this weird game of chicken with each other because there is no Pressure coming from the market for them to to reach a deal But in my view that this is just gonna make it so that when there is the problem There isn't gonna be enough time and it's just gonna make the fallout, you know a lot a lot worse So like I say that is that's it's interesting. It's interesting how the market is not Not reacting Personally, I'm thinking, you know, I do hold a lot of S&P 500 I buy into just index funds And I'm now thinking like normally you just buy these things and you leave them and you know You go on with your life. I'm at that age where you know Putting towards savings for for later years and all that type of thing But now I'm this is causing me to have a bit of an an active involvement and maybe restructure the portfolio How should one restructure this portfolio? You know, I I was going in and looking at maybe some investment cars and saying maybe I should buy this or Audemars Piget and Rolex and fancy watches. I mean, I got this I got this cool little swatch of the other day, so it's not like I need something to tell the time but Maybe, you know during this uncertainty, you want a tangible asset that's not linked to you know, the financial system And it's weird like Nietzsche's chapter that he writes in that book thus spoke that Sarathustra He's got a chapter. They're called flies in the marketplace, which really Oh, it hit home where he just challenges the entire concept of value and calls it this one big illusion and Yeah, it's it's scary because you realize the financial system. I mean, well, this is the thing during 2008 They're talking about oh, it's just a house of cards and now it's fallen over and we also tend to see every ten years or so there's a bit of like a financial crisis and You know last one was 2008 Then the the 20 teens do we call it the 20 teens? What do we call it the 20? Whatever's of 2010 to 2019 like nothing really bad happened I mean, yes, the 2020s have been have been crazy with you know, of course with covert the war in Ukraine Like I say the Silicon Valley thing and all the crypto crashes that are happening That's also just putting a lot of pressure on on tech stocks and and all that so We definitely going through a bit of a crazy crazy time And I wonder maybe that's why the mark is not reacting because it's just like we've already gone through so much but Like I say, I'm I'm very very surprised that we're not taking this more seriously or I'm asking friends Who are no work at investment companies like hey, you know, you is dead ceiling. What are your thoughts on this? And they're like, oh No, I haven't they're like I'll get back to you Michael. I'll get back to you I haven't haven't really looked into it And I'm like, what are you doing at an investment coming like this and this but but y'all it's fascinating how People on don't seem to be concerned with this and and I hope they're right I really really hope that you know the American government sorts their self out and they get this Thing in place and it's and it's good My non-financial friends have chatted to them about they're like, well, why should why should we care in South Africa? Why should we care in South Africa if America defaults and I'm like Because you know when America sneezes the the rest of the world gets sick We are so integrated with them and also if America defaults on their treasury bonds What faith or investors gonna have in any other sovereign bond people gonna start dumping bonds left right in Santa Like it's literally gonna test the financial system. That's what I said. It's systemic, you know, the US debt ceiling Well, well, this is another this is another Interesting aspect to it that I've been reading this, you know the 14th amendment and there's the platinum coin And it's all this talk basically saying that even if the debt ceiling isn't renewed It doesn't necessarily mean that treasury will default because there are some other options as well So and I don't know that's just giving people a full sense of comfort or if that actually is a safety net so that hey This whole debt ceiling is just one big song and dance It doesn't really matter at the end of the day because America can print these platinum one trillion dollar coins and say Hey, look, we've got the money, you know Don't worry the debt is gone because we just created an asset Which like I say, it's interesting because it plays straight into Nisha's chapter of flies in the marketplace And how value is this illusion and there we're gonna see like normally when they do quantitative easing They do it at a rate and it's not in their headlines too much So people don't really know that more and more and more money is getting pumped into to the system and Inflation is is eating away at that hard-earned cash that you've that you've worked so hard to to acquire So but if they were to go and literally print, you know trillions of dollars on on little platinum coins, I think Yeah, more people start waking up to this idea like saying hey, why why is the American dollar actually so valuable? If they can, you know make a single item with a trillion dollars like so there's but that could prevent the Default from happening. It could then speed up the inflation of America Which then will also cause their interest rates to go up which weirdly enough causes their borrowing costs to then go up Which therefore causes their deficit to keep going up and suddenly you find yourself in this very Unfortunate death spiral Which like I say that's maybe more it's not a dramatic end of the world nuclear bombs We all die, you know on the second of June It could be more of a slow, you know, like like, you know like in Game of Thrones They have like a really long winter. We could have like a really long Recession where it's just doom and gloom, but we still survive. It's just Miserable for the next 10 years I don't know what's worse on the get-in or a or a drawn-out financial Winter, but all in all it's like I say it's not looking good. Of course tomorrow. I don't know I could wake up tomorrow and Hey turn on the news and see McCarthy and Biden shaking hands and being a crisis averted and then you know This video becomes very old very quickly and it's like oh look at look at MJ fear mongering us, you know, oh MJ He's so paranoid I'm hoping that's the case really really I'm hoping that's the case and not the alternative of People saying why was MJ the only one who was talking about this on YouTube? Why was everybody else, you know pitching in and saying hey, this is this is potentially a big big issue Because yeah, it's America isn't a weird state where it just keeps borrowing money and you're like are they ever gonna repay it back? So that even that question starts now popping up But like I say this is just me. I mean it's late. I should be in bed I should be sleeping the stuff's keeping me up. So thought let me just Let me just talk to the camera. Let me talk to the camera and Yeah, just just basically say some of my thoughts out loud So no, I know it wasn't a very structured video There wasn't a script. There wasn't a you know set guard on like I spoke about this then that then this you can see it Is a little bit all over the place So feel free if I kind of went off or broke a tangent of thought and you want to know more happy to engage in In the comment section. So feel free to do that. But otherwise Yeah, hopefully it's not the end of the world Because there's some cool Pokemon tournaments that are coming up in June that I want to go in inter and play and compete in so yeah, hopefully the the Americans don't ruin the world and We can go go and play in that that fun card game But until then I hope you guys are doing well. I know it's exam season for for some of the students So I hope you're starting hard and not watching this video focusing your exams not on the world economy But for those of you who have finished and yeah keen to hear your thoughts on on this whole issue But as always, thanks so much for watching. Keep all everyone and cheers