2183: Dollar Milkshake or Bust: Is the US Currency Doomed or Destined for Greatness? with Brent Johnson

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Welcome to episode 2183 and greetings from beautiful Salzburg, Austria. I've been here before, but it's great to be back. It's just such a beautiful scenery. If you're watching on video, you see the beautiful scenery behind me. It's absolutely gorgeous here as Austria, Switzerland and you know, all of these countries, they're just so beautiful in Europe. That's why I come every summer. Even though Europe, sadly is falling apart. It really is. But that's another topic for another day. Okay, today our guest will be Brent Johnson, back on the show with his dollar milkshake theory and much, much more. This is a live in studio interview that I did with him just recently in Orlando. I think you'll really like this one, so stick around for the entire thing. And as always, if you're watching on any video platform, be sure to comment below. Ask your questions below. We love your comments. I try to read almost every one of them. I try to respond to a lot of them too. But always do comment below. We love your engagement and please share these videos as well, if you're listening on the podcast on audio only, check out the video because, you know, it gives you some backup information, some visuals and so forth that really kind of add to it. And please do share this with your friends, your family, your colleagues, whatever, so we can get the word out about all of these important concepts that we discuss. All right, so before we get into the interview with Brent Johnson, I want to talk to you about a couple of things. Number one is the news media here in Europe and how it is covering the absolutely tragic, crazy events we've had in the US Just recently. And I also want to talk to you about new homes and home builders and what they are doing to address the market and kind of game the system and why the statistics are wrong about what's going on with home sales, especially new home sales. So we'll get into that. You know, it's kind of a gray day out here. I think I'll take my sunglasses off, but then it's kind of bright, so I don't know what to do. But okay, sunglasses off. Here we go. Before we get to Bren Johnson, let's get into a couple things here. So. So first of all, of course, the crazy events of the assassination attempt against President Trump. I'm calling him President Trump because barring interference, that's what he's going to be again in November. I just can't see any other possibility. I mean, can you comment below if you see another possibility? I mean, his competition is comatose. I mean, we've all got to admit that regardless of your political leanings and with this assassination attempt, I think you're seeing a whole heck of a lot more support. Elon Musk agreed to donate $45 million a month to a super PAC supporting him. So that's absolutely shocking. Bill Ackman, of course, the hedge fund manager, Pershing Square came out and endorsed him. And you know, he's been endorsing the other party all along. But what is crazy, crazy to me here, here in Europe is that when I woke up in Davos, Switzerland, on Sunday morning, it was on the news. I turned to BBC, cnn, this was in the news. But literally the last few days, not a mention, not a word. It's absolutely shocking. It's like a memory hole in history is being created with the media. And I am starting to hear about the social media platforms now taking posts down, deleting things. And of course, they're always ghosting posts, Right? You never know who sees your post, right when you post something. And this is the absolute biggest problem humanity faces. As I said during the last big erection, using code words here, during J6, during all of this, as I said before, these companies are abusing the world and they should be indicted for crimes against humanity. The biggest problem humanity faces. Back then I said it wasn't Covid, it was the control of the information. And that is still the biggest problem humanity faces. So be vigilant about it, spread the word. And when something like this happens, you know, be sure to follow me on X or Twitter, be sure to follow me on Instagram, be sure to follow me on Facebook, on all the platforms, okay? I mean, except for X. What these evil companies are doing, it's terrible. But you know, it takes them a little time to ramp up their thought control their thought policing efforts. And when something happens right away you can get the word out and people will see it and you can share things and you have to share them, you know, via text message, via WhatsApp, via other ways and other platforms as quickly as possible to get the word out before the thought police start attacking and controlling everything. And listen, folks, I'm saying this regardless of what side of the political aisle you're on, what your beliefs are, I don't care. I think everybody should be able to speak freely and should be heard because that dialogue is just so incredibly important. Remember folks, the human race used to live in the dark ages, literally. And the dark ages here in Europe. I mean, one of the big things that brought us out of the dark age, as many historians think, was the simple idea of coffee houses. You've heard me talk about this before. Coffee houses where people could get together and share ideas. Now the caffeine probably helps because they talk a little more when they get caffeine in them. And that's what, you know, many historians believe was a big part of taking us out of the dark ages. So really important that we are able to share ideas and not have them memory hold in history to where nobody can hear about them anymore, where everybody just forgets about them. So critically important. So please do follow me on the other social platforms. On X or Twitter, it's Jason Hartman ROI. On Instagram, it's Jason Hartman1, just the number one. And on Facebook you can find Jason hartman.com and just follow me everywhere because it's really important that ideas get out there and they get shared. You know, when I see things that I know are going to be attacked by the thought police, I share them immediately. And you should do the same thing because they're already starting to do it with, you know, the events of last weekend. That is what's happening. Okay, now, new home sales. Let's talk about this. So this is more fake news, all right? Because what's happening here is that you are hearing, and I predicted this and I've talked about it just a little bit before, but I want to go into a little bit more before we get to Brent Johnson. It'll only take a moment. But you're hearing things like new home sales. This is volume right on the screen. It says new home sales decrease to 634,000 annual rate in April. Meeting home prices down 6% from its peak. But what they don't tell you is more important than what they do tell you. That's usually the case with any story, with any media. What they don't tell you is more important than what they do tell you always remember that. But the real question is why? Why would new home prices be down? We have a housing shortage. Anybody who disagrees with that is absolutely out of their mind, right? They just don't know the data or they're manipulating the data to make fake data to support their case. I mean, the housing shortage is a real thing, right? We can disagree on the numbers and the amount, but the fact is we can't disagree that there is an overall systemic shortage of housing, right? So why would new home sales prices be down while they're down? Because the affordability crisis. Housing affordability, the lowest it's been in four decades. So the new home builders, like any good business people, are addressing that problem. And how are they addressing it? Well, if you're watching on video, check out these images, right? This is Dr. Horton, the largest homebuilder in America. And they have super cheap homes, super small cheap homes. Look at this. From 1045 square feet, no garage, not even a carport sometimes. I mean, we haven't seen houses built like this in decades and decades. You know, the last time I can think of any real number of houses being built without garages or even carports was the 50s or even the 40s in the post World War II baby boom, before the big romance with cars became a thing in America, right? It's just crazy. They're just building really, really small houses, two bedroom houses rather than three and four bedroom houses. Look at this one. Look at the finishes. These are like almost tiny homes, right? They're almost to the gray of tiny homes. They've got Formica countertops. Again, we're going back to Formica, right? What happened to granite and Quartz. And all these beautiful finishes, right? Look at the moldings in this picture. They're just basic moldings, right? Basic cabinetry. Yes, it's modern because it's a new home. But again, really basic finishes, really small sizes, no entryway. You know, you just walk right into the living room. Like. Like a little tiny house, right? Look at this. I mean, you can see it in the picture. Just really basic finishes for mica countertops. Really cost cutting. Look at this, this house, San Antonio. I mean, look at how cheap this is, right? They're building little tiny houses. This one's 1200 square feet. And this is just like the post World War II Baby Boom House. We're going back to that, except now it's on a much smaller plot of land where you're just right next to your neighbor. Like they build all new homes nowadays. And again here, looking at the finishes, lower ceilings, cheaper cabinets, cheaper countertops. Just cheaper, cheaper, cheaper finishes all the way around. Look at the bathroom here, right? Really small, basic bathroom, nothing glorious at all here. Formica countertops, low cost cabinets, low cost plumbing fixtures. Like, look at the faucet in this house. It's just a very cheap, basic faucet. You know, everything just being very, very basic in all of these houses. Go back to this kitchen photo and look at this kitchen faucet. This is like the cheapest faucet you can buy at Home Depot, right? You know, instead they used to have these faucets that, you know, had that pull out things so you could scour the dishes and aim the water where you wanted. And look at the range hood here. There's no microwave. This range hood above this electric, cheap stove. I mean, it cost nothing. You can buy these range hoods for nothing. Just go on Home Depot's website and look it out. Inexpensive. The lighting fixtures are, the plumbing fixtures, everything. So they are addressing the market as they should. So just wanted to share that with you. That's why the statistics are misleading when they say new home prices are down. It's because what's being sold is a less expensive home. It's not the same home as before. You've got to compare apples to apples to really peel back the layers of the onion and understand what is truly happening in the market. All right, without further ado, let's get to Brent Johnson. Here we go. Thank you for joining us. I am here with a live interview. We don't get to do too many live interviews, so this is really exciting with a prior guest who is returning to the show and that is none other than Brent Johnson, CEO of Santiago Capital and the creator of the Dollar Milkshake Theory, which is a very famous cool theory that we'll give them just a second to explain that to you because I think that's important. Brent, it's good to see you.

Yeah, thanks for having me. We've been talking about doing this for, I think, nine months or something. We finally get around the Internet.

It's been a while. And last time we were on Zoom, of course. But since we're both speaking at this conference, it's great to be able to talk to you in person and do this in person. So first of all, since you are so famous for it.

Yeah.

Just tell us about the Dollar Milkshake Theory real quick. And this, by the way, plays into the debate about the value of US Dollars as the global reserve currency and so forth, and how important that is and why it may or may not continue.

Yeah, sure. Thanks for inviting me on to do it again. To make it very simple, the Dollar Milkshake Theory is really just a framework for how I see the markets playing out in the years ahead. Now, I started talking about this in 2018, really kind of ramped it up in 2019 because I thought we were approaching a sovereign debt and currency crisis because of all the huge debts in the world. Now we haven't had the sovereign debt and currency crisis. We had a pandemic crisis which kind of kicked everything down the road. So I think we will still have a debt crisis, but I'm not smart enough to know whether it comes next week or next year. But I manage money for a number of high net worth individuals. And so while I'm always trying to make money, I always have to be on the lookout for these rogue waves that come and, you know, cause a big drawdown. Sure. And I am of the belief that debt does matter. At some point, there will be consequences. So I had to come up with a framework and a way of explaining to my clients what I thought would happen if this ever happened.

Okay, so before you go ahead, debt does matter. You're talking about U.S. debt, right? We were $35 trillion or so. That's what you're talking about, right?

Well, I'm. I am talking about that, but I'm also talking about all the debt in the other parts of the world.

Okay.

And that the distinction that you just made is actually a key part of the thesis, because I think what happens is a lot of people, for many good reasons, the US is the global hegemon. It's the biggest economic market in the world. A lot of people from around the world sell their goods in the United States. And as a result, everybody focuses on the US's economic situation. And if you analyze the US economic situation in isolation, the only conclusion you can come to is that we are way over our skis. We, you know, spent way too much money, we've taken on too much debt, and it's going to end really badly. And I think a lot of people do that analysis and come to that conclusion and therefore think the not only is the US empire going to fall, but the dollar is going to get inflated away and go to zero. And I used to think that way myself. But the problem with doing that is we don't live in an isolated country.

Right?

It's a global world.

And it's a question, of course of compared to what exactly? Because you can, you can argue about how bad the US is and how poorly managed it's been, but compared to.

Everybody else, that's exactly right. And so my mistake many, many years ago was that I did that analysis on the United States and I basically looked at it in isolation, in a vacuum. And again, you come to some really terrifying conclusions when you do that. Once I started looking around the world and analyzing the other countries to the same extent that I was analyzing, I said, holy cow, the world has a big problem. But on a relative basis, the US is actually in better shape than the rest of the world. Or if you think they're not in better shape, they have a number of advantages that the rest of the world doesn't have, which I think will allow them to manage, quote, unquote, the crisis better than some other countries.

Right. And when you say crisis, you mean the debt crisis. What define debt crisis?

Let me take a step back. The entire monetary system is a debt based monetary system. So money gets loaned into existence. And as money gets loaned into existence, you know, the economy grows, asset prices rise, but for that to continue, money needs to continually get loaned into existence. If it doesn't, then it starts to contract. And in the credit contraction you start to get defaults. And when one default happens, it has the potential to cause another to default to happen. So we have a system that expands and contracts. Expands. But over time it goes like this. The problem is if you let it contract for too big a period of time, it'll collapse. That is why whenever we do get these credit contractions, sometimes if they're very severe, you get monetary authorities, central banks and governments coming in to backstop the contraction and the Issue that we have now is that the whole world is in this situation for a long time. If one country got in trouble or one region got in trouble, you just take your capital from there and you go somewhere else. Problem now is we're very much in a globalized world. Everybody has these big debts. The rest of the world has as much debt in US Dollars as the United States has in US Dollars. So to your point at the beginning, everybody knows the United states has like $35 trillion of debt. It's an astronomically large number. It can never be paid off.

Right.

What most people don't know is that the rest of the world, entities outside the United States owe $35 trillion or more in US dollars as well. And they don't owe it to the United States, they owe it to each other. This is the euro dollar system, all right, which has gone largely unnoticed by many people for many years.

Trying to kind of make that famous.

Yeah, exactly. So despite the fact that it's the biggest market in the world, many people don't know about it, especially people in the US because people in the US Only have to think in one currency. If you grew up anywhere in the world other than the United States, you learn to think in two currencies, local currency and the dollar, US Dollar. And so this kind of get the dollar milkshake theory says yes, if we get into one of these crises, the governments, the monetary authorities, they will try to save the system. They will probably do that by printing more money or doing bailouts or doing stimulus. But I think all that new money, that liquidity that gets created in response to a crisis will get sucked up into the United States. And so that's the milkshake. The central banks in the monetary, they will mix this liquidity. But for many reasons, again, some deserved, some undeserved, the US has many advantages, I think will pull that capital into the United States and it deprives capital to the rest of the world. So you get this kind of vicious cycle. So I think we could have a big blow off top in the US where everybody else is experiencing economic pain to a greater degree than the United States. And it doesn't mean that things are good. I want to be clear. It doesn't mean things are good in the US Just better than elsewhere.

It's compared to what is always the question. So the milkshake is the idea, and I know you got that from a movie, and maybe you can explain that real quickly, but the milkshake, you know, with a milkshake, you Have a straw, Right? So tell us about that and the sucking up of dollars. Sure, yeah.

So the reference came from a movie called There Will Be Blood and it's about this ruthless oil executive who just all he wants to do is grow his business and crush his competitors. And one of his neighbors is trying to sell him his property. He says, listen, if you buy my property, you can have all the oil underneath it, right? And he says, well, you know, I really don't need to buy your property because I have a straw. And if I stick the straw down into the ground on my side of the fence, I can still get the oil up. That oil I can. He says, I can drink your mil milkshake. The US has many advantages that the rest of the world doesn't. Again, it's the biggest global market. So anybody from around the world who produces things wants to sell it into the United States. Everybody has US dollar debt in the world, so everybody needs US dollars to repay the debt. To repay the debt. And if they don't repay the debt and they default on it again, they're defaulting on each other. They're not defaulting on the United States because in the Eurodollar market it's a bank in England making a loan to a corporation in Turkey, or it's Japan, a Japan manufacturer doing dollar based vendor financing to a supplier in the Philippines. So again, they're not. All these loans don't come from JP Morgan or Bank of America. It could be Deutsche bank extending a loan to an Italian manufacturer. So if those loans get defaulted on, they're not defaulting on a US institution, they're defaulting on an international institution which causes that contraction that we talk about.

Would it be fair to say that that's kind of like, you know, in the old system, which is not fractional reserve banking, fractional reserve lending. Right. But in the traditional banking idea, right. Of old, you know, a bank takes deposits and then it makes loans and it acts as this arbiter of this scenario. Right. Isn't that what the U.S. is doing? So they would be defaulting on the U.S. how are they defaulting on each other? Because the U.S. is the arbiter, like the old fashioned bank of that. Right.

So the US sits in the center of it. But again, if a bank in France extends a dollar based loan to a company in Turkey and the Turkish corporate goes bankrupt, it's the bank in France that's losing the dollars. It's not the bank in America that's losing the dollars.

Oh, so it's just because of the dollar being the reserve currency then.

And it's. And it's the. It's the denomination of the loan that has been extended. Yeah. So if France was extending the loan in Turkish lira, it wouldn't be the same situation or in euros. But the issue is that after World War II, the US became Global Reserve currency. Shortly after that, countries outside the United States started trading with each other in dollars just because it was the global reserve currency. In 1973, when the US signed the deal with Saudi Arabia, the oil for dollars, it made the whole world need dollars to buy oil. So over that time period, this huge market for dollars grew up outside the United States. And. And that market is much bigger than the market for dollars inside the United States.

Right. That's really interesting. That's a really interesting point right there. And everybody needs to just realize the absolute brilliance of the way the US that just won that deal, you know, from Bretton woods onward, I mean, it put the US in an incredible position.

You know, I would argue, really, that is the greatest deal in history. History. It's better than the. The, you know, Seward's purchase of Alaska. It's better than the Louisiana Purchase.

Yeah.

I mean, I put it because it's. It's. It's a lot. It allowed them to not only stay the hegemon, but extend their hegemony to a greater extent.

Right. And I would argue that the second greatest maybe con in history would be 1971, when Nixon closed the gold window. I mean, because somehow all of the world just kept on doing the same deal.

That's what. That's why it's so important. Had. When he cut the gold from the tether. Yeah. The peg to the gold for the next year and a half, there was a lot of volatility, and there was questions whether the US Dollar would remain low reserve currency. So this deal that, you know, the US Signed with Saudi Arabia, it was critical to not only keep the global reserve currency, but to solidify it.

Right. So. So that came about a year and a half after the night the Nixon speech, the famous speech. That's interesting. So, you know, I'm not a believer in MMT or modern monetary theory. However, I do think it has some brilliance to it, for sure. And it sounds like that plays into what you're saying, because the. One of the brilliant things about mmt, which I am not a believer in, I think it's kind of a fantasy. Okay. Honestly. But this whole idea of creating a need for your own currency by issuing debt and Then require or taxes. And requiring it to be paid back in that currency creates demand for it's. That's a brilliant circle.

Exactly. To your point, I think my guess is if we sat down and really went through it, I think you would agree that MMT is the way things are currently working.

They kind of are.

But taking them to their extreme extent would blow things up.

Right.

And so I often tell people, don't ignore MMT because mmt, in my opinion, explains the way the system works, whether you like it or not. It's just if you took it to its full extent, it ends badly. And so, and so to, again, to your point, MMT is important to understand. Again, the US has the ability to print the money.

Yeah.

And the thing is, they don't even really have to print it. They can just spend it and then tax it back. Or the debt that's associated with it creates demand for it.

Loan it into existence.

Yeah, yeah.

Right. So the question is, you know, I mean, with all of the doomers out there, you know, led by maybe Peter Schiff, he's been on the show before and of course you've debated with him. How long can we keep this game up? I think is, you know, at some point you said if MMT is extended to its, you know, it wouldn't work at some point. And I agree with you. But can we just kind of keep playing this game for a long.

Well, I think. I think we can play longer than most people think.

Yeah.

So I am of the opinion again, because the debts are enormous. And, you know, Mike Green has talked about passive investing and how the rise of passive investing could cause everything to go up, but can also cause everything to go down to the very down together very quickly. So I think you need to be prepared for a bad outcome, but I don't think you should be betting everything on the bad outcome because I do think this can go on longer than many people think again. So I've been in this business for 25 years now. I started just before the dot com crash in 1999. And in 2000 and 21 people were saying this is the end. And then miraculously, we had a boom. And then it happened again in2970. This is the end. Right. And then we had Covid and people said this is the end. But, you know, here we are, we're back at the highs. The plates are still spinning. I think there's a lot of people, especially the doomers, who think central bankers are a bunch of stupid idiots who don't know what's going on. And I think that's a wrong way to think about it. I think they're actually incredibly smart people and perhaps they practice voodoo that you don't agree with. But they've kept the plates spinning longer than many people have. Have predicted. It would not surprise me at all if this goes on for another five or 10 years. I think it could easily happen.

That's it.

Years from now.

I would think it could go on, on much longer than that. Sure.

It absolutely couldn't. So that's, that's. I think people need to have a plan for bad things to happen, but I don't think you can just sit there on top of a mountaintop in isolation and say, it's all going to happen tomorrow.

Right. Yeah, I agree with you. Well, a whole bunch of thoughts come out of that, Brent. Number one is that famous quote, you know, how does the world end? Not with a bang, but with a whimper. And that speaks to the idea that this is just sort of a progressive thing. We're inflating away the debt. You know, for many, sadly, their economic situation gets a lot worse because they bear the brunt of that, that inflation, you know, it just sort of keeps going and it's like this progressive thing, the idea of, you know, you keep kicking this can down the road. And then the other quote it reminds me of is the investor complaining that the market's irrational. And I'm right. Well, the market can remain irrational longer than you can remain solvent. And, and that's the thing that so many people, they think the jig is going to be up, and I think someday they'll be right. But it could be 100 years from now, you know, and what happens when the jig is up? Like, how does that look?

So I, I think part of this is related to we're now in this culture of, like, instant gratification. You know, swipe left, swipe right, go on to the next post. Right. Read this on Twitter. Then you don't like it, go to the next one.

Very short attention span.

Very short attention span. Right. And so I think people, because they're used to that kind of environment, they think that we're going to have this big event, everything's going to get really bad, but then everything's going to be solved and then we're onto a new system.

Right.

And everything's fine.

Yeah.

And I just don't think that's the way it is. I think, you know, it could happen very quickly, but this could happen. This could, like we've just said it could take five or 10 years. We could have moments of real craziness and then it gets good again. Craziness and good again. So we could have another 20 years. Like we've had the last 20 years. Right. Three different major crises, but yet everything is still functioning and asset prices are higher. That, that could easily happen. But the thing that I think many people get wrong, and this is something that I hope doesn't happen, but I think is more likely to happen than not, is let's say we do have this big crisis. Let's say we do have this big moment. I think more than likely what comes next is more authoritarianism and more government control than less. A lot of times people will compare the United States to the. To Rome. Right. And there's a great book called the Storm before the Storm. I don't know if you've read it, but I have not.

You should, but I know the Rome story.

You know, this book takes place from like 110 BC to 60 BC. It's like a 50 or 60 year period. And eventually, you know, in all the parallels to the United States, it's incredible.

Yeah.

But what people don't realize is after that book ends in 60 BC, Rome still existed as the dominant power for the next 400 years.

Yeah.

What came next was the dictators. That was the fall of the Republic.

Right.

But what came next was more authoritarian, more centrally controlled power. And that's my biggest fear is that's kind of where we're headed. You know, again, I hope I'm wrong, but that's what it seems.

Well, that's what we have seen so far. Just, you know, in the last couple of decades. I mean, every crisis brings a new level of more laws, more intrusive situations with the government intruding into our lives. I mean, you know, in, in the past with my businesses, the idea of banking just used to be this thing in the background. Now I spend hours every week on banking.

Yeah.

I mean banking should just be like air. I don't think about it.

It should be like a utility.

Yeah.

It's like all encompassed.

But, but with the, you know, with the Patriot act and the, know your customer and that banking has become insanely complicated. Your bank just won't do anything for you anymore. You know, there's just a million regulations with everything. I used to never think about banking. It was this thing in the background. I just.

And that will probably continue. I think we'll probably continue to see the small regional banks be put to the wayside and the bigger banks will get bigger.

A good comparison might be doctors. Right. And how you can't really have many doctors in private practice anymore because the burden of managing all the insurance and the complexity of that whole system. Small doctor, can't do it anymore. It's just too complex. And so the weight of this bureaucracy just keeps getting heavier and this authoritarianism keeps getting heavier. But you know, that can go on for a long time. So, okay, what does the debt crisis, end of the world scenario look like? Like if it happens in 10 years or you know, a thousand years.

Well, what, what I, what is it?

What, what happened?

What I think happens is you start to have currencies around the world start to fall in value dramatically versus the US dollar.

All right.

Because if we get into a situation where the US has to print more money, the rest of the world's going to have to print more money too.

Yeah.

Because there's so much demand for dollars and there's not as much demand for the other currency, the dollar, even though that they're printing more of it probably rises in value versus other currencies. That's a problem because all these other currencies or all these other countries have dollar debt. They earn, it gets more. So as they start to, I think as they start to default, you start to have crisis, you know, jump from one country to another, kind of a crescendo type thing. And I think as that's happening, I think the capital that is available, the liquidity that there is there rushes back into the United States as again the relative.

Right, the storm. Yeah.

I think probably what happens is we get a big blow off top of some kind. I think the dollar goes higher, I think gold goes higher, I think stocks go a lot higher. I think real estate prices probably go higher.

Yeah.

But then that will come to an end at some point too. And again, I don't know if that's a six month thing, a six year thing or a 60 year thing.

Yeah.

But I think we have much higher to go before we have this ultimate crash. Now, it doesn't mean. I want to be clear. Everything's kind of at its high right now. Gold's at its high, the stocks, bitcoin, real estate. We could easily have a correction. It wouldn't shock me. I kind of expect one. But I don't think this next correction is the final, the final thing. Final thing. Again, I think this is going to take several years to kind of play out.

Yeah, I couldn't agree with you more. And you know, Brent can you explain weak dollar, strong dollar versus inflation deflation? And I think people make a mistake with that because most people think of it as like within the United States. Right. But it's really how does it impact someone in the US and then outside of the US and the rest of the world?

So I've always been clear, since the very first time I mentioned the, this dollar milkshake theory that I thought the US dollar would rise versus other currencies. So it's a, again, it's a relative game. And the strong dollar, because the whole world runs on dollars, a stronger dollar tends to put pressure on countries whose currency isn't the dollar.

Right.

But it doesn't mean you can't have inflation. A lot of times people automatically think the dollar rises, that's deflationary. All you gotta do is go back to 2022, the dollar went to its 30 year high versus other currencies and we had a raging inflation.

Right.

So people need to like get that out of their mind because even the dollar may be rising versus other currencies, but it may be losing purchasing power. But here's why.

But the loss of the purchasing power is within the U.S. yeah.

Yes. Outside the United States you're owning dollars. That's very strong. And so, but, and sometimes people will say to me, well fiat versus fiat doesn't really matter, it only matters to currency traders. But that's completely wrong. And I'll tell you why is because even though you might be losing purchasing power, if you think the relative level of currencies doesn't matter, it's because you are a privileged American who has only had to think in one currency.

Right.

And because there's so much debt denominated in dollars as the dollar rises versus other currencies, even if you're in an inflationary environment, the dollar rising can cause these short term pull downs, drawdowns because that's what causes a credit contraction. The dollar rising is what causes these credit contractions that we've talked about. And during credit contractions, asset prices tend to fall. So you could have inflation, inflation, inflation, inflation boom, a big deflationary shock. Inflation, inflation boom. And so I think even if you're in an inflationary environment, which we are, I don't think you can ignore the design of the system means that it's always prone to these defl. Shocks to the downside.

Fair enough. However, deflation, I always say deflation is the worst of all economic maladies. So the central planners, I mean that is probably the thing they are most Fearful of.

Absolutely.

Right. So they will always jump in and, you know, stop that from happening. Now the question is, can they, can they?

And how levered are you during that drawdown phase? And can you, you know, can you stay liquid longer than the markets can stay?

Right.

Or so if you have a lot of leverage, you have to be able to stay in business for them to come in and save it. Because they will come in and say, yeah, right, right.

But it's in their interest, it's in.

Their interest to save it and it's.

In their interest to have inflation because they're inflating away their own debt. I mean, you know, one of my famous strategies is like your dollar milkshake to me is inflation induced debt destruction. Right. You know, I say investors buy income properties, they use mortgage debt, they pay back the debt in cheaper dollars over time because the dollar is being debased. So their debt, their debt, the servicing costs go down and their debt balance goes down vis a vis inflation. And so the government wants inflation. I mean, the Fed officially wants inflation at 2%. But you know, when you owe money to China and you have inflation and you inflate away your own currency, that's a great deal for you as a.

U.S. that's why governments all run on fiat currency, right? Yeah, yeah.

Because they can play this game. They couldn't do it if it was tethered to gold, for example.

Sure.

Right now. Interesting. So any other predictions you want to share or anything? You want to share A question I didn't ask you, just, you know, perhaps.

Naive in saying this, but I actually think I'll be able to manage the financial craziness in the years ahead. I think the big unknown for me is the social craziness that I think is coming. Yeah, I think we've seen that already. And I think as we move towards the election this fall, I think we're going to have an election where neither side accepts the other the outcome. One of the sides will not accept the outcome. And I think that's going to cause a lot of at least short term volatility and strife. So my recommendation to people, and I say this all the time, is find people who, you know, trust and love who have an opinion different than yours and talk to them because it's going to be important. I think, I think if you start like walling yourself off as it's, it's, it's us against them.

Right.

That's how things get really, really bad.

Yeah, right.

And so I think that's kind of where the politicians are pushing us. And so I always say don't let the politicians push you there.

Yeah. And you know, that's also in the past, you know, 20 something years. How it's why this division keeps getting bigger is because the tech companies sort of push us into our echo chambers because all their algorithms feed us what we already believe and agree with. Right. And so, you know, it's we, we have to understand we are being manipulated in that way. And you know, it's hard just to sell advertising and products, but it works. And, and it does make us more like ourselves, which is not always a good thing. We need to be exposed to other points of view and other other ideas. So it's a very good point. Brent, give out your website.

Oh yeah. So I have a website that's just santiagocapital.com that has my contact information. My business is managing money for high net worth individuals. I also do a weekly show with my friend John Kutzmeda. It's called Milkshakes Markets and Madness. You can find it at milkshakespod on Twitter. I'm on their Santiago capital on Twitter and if anybody wants to join us, we'd be love to have them.

Good stuff. Brent Johnson, thanks for joining us. Thank you so much for listening. Please be sure to subscribe so that you don't miss any episodes. Be sure to check out the show's specific website and our general website, hartmanmedia.com for appropriate disclaimers and terms of service. Remember that guest opinions are their own and if you require specific legal or tax advice or advice in any other specialized area, please consult an appropriate professional. And we also very much appreciate you reviewing the show. Please go to itunes or Stitcher Radio or whatever platform you're using and write a review for the show. We would very much appreciate that and be sure to make it official and subscribe so you do not miss any episodes. We look forward to seeing you on the next episode.