Much Debated Brent Johnson USD Theory- counter argument laid out..
Judge for yourself..who is likely to be right
In this video, I discuss Brent Johnson's "Dollar Milkshake Theory" and why I think it is wrong. I contrast it with my own theory ("Dollar Bloody Mary Theory"), which I believe is a better hypothesis of how Federal Reserve monetary policy actually works, especially in 2020 and going forward.
In contrast to the dollar milkshake theory, I believe that whenever there is a sharp spike in the US dollar, the Federal Reserve will simply print more money, buy more US Treasuries, and extend more currency swap lines with other central banks. A very strong US dollar is like a wrecking ball for the global financial system: it leads to both lower stock and commodity prices, as well as to international investors dumping US Treasuries and other US assets to raise USD.
Due to the US's large negative net international investment position, the Fed can never again let the USD rise a lot, since it will lead to international investors dumping US Treasuries and other US assets. The US economy is now so hyper-financialized that it cannot withstand the higher interest rates that would come with investors dumping Treasuries.
If necessary, the Fed can bring the entire Eurodollar system onto its own balance sheet by just printing a lot of money and propping up asset prices. This is extremely bullish for both gold and Bitcoin over the coming years.
The dollar milkshake is over. All that's left is the dollar bloody mary, where we are forced to pile on more debt and print more money ("hair of the dog that bit us") in order to treat our financial hangover.
Not investment advice! Consult a financial adviser.
Here is Brent Johnsons Opinion-
Brent Johnson: Updating the Dollar Milkshake Theory and $5000 Gold