The dollar just gained a new global weapon

Brent Johnson, founder of Santiago Capital and creator of the Dollar Milkshake Theory, joins the Gold Exchange Podcast to discuss rising global uncertainty and the forces reshaping the financial system.

The conversation explores geopolitical fragmentation, sovereign debt risks, the role of the U.S. dollar in global markets, the growing importance of gold, and how emerging technologies like stablecoins could influence the future monetary landscape.

Transcript

Monetary Metals:

Welcome back to the Gold Exchange podcast. My name is Ben Nadelstein. I am joined by our good friend, Brent Johnson. Brent is the founder and CEO of Santiago Capital. He’s the host of the Milkshakes podcast on YouTube, and of course, he’s on the advisory board of Monetary Metals. Brent, welcome back to the show.

Brent Johnson:

Thanks for having me. We’ve been trying to catch up for like a month now, so I’m glad we’re finally doing it.

Monetary Metals:

Brent, there’s probably never been a better time to talk to the inventor of the Dollar Milkshake Theory. We have the President of the United States, who in some ways is trying to take more control over the value of the dollar, the independence of the Federal Reserve, and of course, US Treasuries, all under his purview. Where does Brent Johnson see the Dollar Milkshake thesis in how it’s playing out in 2026?

Brent Johnson:

So it depends on how you look at it, right? So the Milkshake always had two components to it. One was that it was a framework for understanding how capital would react if we went into some sovereign debt crisis. And then it was also the finale of that sovereign debt crisis.

So we never have actually gotten the sovereign debt crisis. We’ve gotten close a few times. I still think it’s possible. I don’t know whether it will happen, but I still think it’s possible. But the framework for understanding the capital flows associated with us moving towards one worked fantastic.

And what I mean by that, I’m sure some people are sick of hearing about this, but for those who are hearing about it for the first time, essentially in the mid-2018, I think the dollar index was at 89. It was below 90 at the time. And I essentially said that I thought that after 40 years of interest rates going down, that they would start going higher. And I thought that would have a number of knock-on effects, both good and bad. Now, interest rates didn’t start rising right away. They went down initially, but they did end up rising quite a bit, as everybody now knows.

And I said that higher interest rates in the US would pull capital into the dollar make the dollar stronger versus relative fiat currencies, which it did in a fairly big way through 2012 or 2022. It went from 88 in 2018 to 112 or 113. In in 2022, and since then, it’s pulled back about 10% or 15%. So it’s if you really zoom out, the dollar has gone sideways for 15 or 10 years, but that’s despite all the money printing, all the bailouts, all the stimulus.

So the more controversial part of the theory said that even though interest rates would go up, and even though the dollar would go up versus other currencies, that gold would also rise, and that US equities would go higher. And I said all of this would be characterized by crazy volatility along the way, but essentially dollar up, bonds down, gold up, US equities up, and that capital would flow from the rest of the world into the United States. So all of those things that have happened. The only thing that hasn’t happened is the crisis. And to be honest, I’m okay with not having a sovereign debt crisis.

That doesn’t actually… Sounds pretty interesting, but I don’t know that it sounds fun, right? Okay, so that was a long way of getting around to answering your question. The short answer is I don’t know, but I think all of the variables are there for us to have a sovereign debt crisis. And the dollar is a big part of that. Trump and the Trump administration clearly wants the dollar weaker, but I don’t think they want the dollar as weak as many others seem to think that they do. And even if they want it dramatically lower, I’m not sure that they can get it without some crazy, crazy policies put in place.

And I don’t think we have had the events yet that would allow them to put those policies in place. And I think those events that would allow them to put those policies in place would probably initially send the dollar higher. So that’s a long way of saying, I don’t know, but the framework is a good one for understanding the type of period that we’re in right now. And the last thing I’ll say before I bore everybody to tears with this is in the very first time I ever talked about this theory, I said, this is not a scenario where the dollar remains the global reserve currency.

This is the process by which I think it could potentially lose the global reserve currency. It It’s just that the path to losing it is the DXY rising rather than the DXY falling. So anyway, that’s a long way of saying I don’t know, but I’m very interested.

Monetary Metals:

And Brent, one of the things that I’d like to discuss with you is these stable coins. These are tokens or coins, cryptocurrencies that have a one-to-one or a supposed one-to-one backing with some stable asset, whether that’s a US dollar, whether it’s gold, whether it’s some other asset. A lot of people have said that this has actually increased the dollar’s hegemony.

And now, because anyone in the entire world, if they have a smartphone or access to a crypto exchange, they can buy US dollars, that this has cemented the US dollar, that basically there’s now another chance at life for the US dollar to assert its hegemony. It’s almost cemented its status as a US reserve currency around the world. When you think about this stablecoin argument that, yes, maybe with Trump, he’s pushing these other countries to think about diversifying away Pay from the dollar. But with the power of stable coins, the actual citizens of those countries can move with their feet, vote with their currency, and choose the US dollar rather than their own local currency.

Brent Johnson:

Well, for anybody that’s saying that, I totally agree with you. And I think I’ve written two reports on this in the last four or five months dealing with this exact issue. Without making too many bones about it, I think that stable coins, and specifically US dollar of stable coins, there are other stablecoins, and we can talk about those as well.

But I think US dollar stablecoins have the potential to be as transformative to the monetary system as when Bretton Woods was set up, and then also when the US broke Bretton Woods and removed the dollar from the gold standard. Those two events had huge ramifications for the global monetary system. I think stablecoins have the potential to do that.

Now, whether they will or not, the future is still unknown. But I have come around to the idea that these are extremely powerful tools, and I’ve gone as far as to say it’s a stealth weapon of empire. And many other countries around the world are waking up to this fact, and they are terrified, and they should be. So, yeah, I agree with it.

Monetary Metals:

There’s this barbell happening where, on one side, you have the US dollar just dominating this currency competition between paper or fiat currencies. Most people aren’t going to pick a Turkish lira. If they have an option on their smartphone, they’re going to pick a US dollar simply because that cleanest dirty shirt in a laundry argument, well, none of them are great, but I’d rather pick the US dollar versus the Argentinian peso, for example.

And on the monetary front, whether it’s Bitcoin or gold or silver, really gold and silver have dominated this monetary question where people ask, If I really want to hold value for the next 100 years rather than the next 100 minutes, I think I’m going to own some gold. Do you think that because because of this bifurcation in currency and money, that all of these secondary monies, whether it’s Ethereum or other cryptos or these secondary currencies, whether it’s the Ghanaian currency or the Indonesian currency, these are going to really fall by the wayside in 2026?

Brent Johnson:

Well, I don’t know about 2026, but yes, that’s what I believe is going to happen. And if you think about it, what you said at the very beginning, this barbell where a number of people are fleeing to gold, but within the fiat community, everybody’s fleeing to the dollar. That is essentially what I laid out in my Milkshake theory and my Milkshake framework. And quite honestly, this is one of the reasons why I have enjoyed talking to Keith over the years, because I felt like he understood where I was coming from.

For the most part, agreed. We don’t know. It’s fun because Keith and I don’t always agree on everything, and it’s fun to argue with him on the things that we don’t. But for the most part, we come at things from the same place, and I think we both try to approach these things rationally. And so he’s been a great person to bounce these ideas off from time to time, because these are two different worlds. And this is what I try to make clear, is that I’m not claiming the dollar is a great currency. I’ve never said it’s a fantastic store of value.

I’ve never said that everybody should love the dollar system. I’ve just said it’s the best out of the bad choices, and that much of the world doesn’t own gold. And while even if a big percent starts to buy them, there’s still an enormous amount that are going to be transacting and operating in fiat currencies. And for the allocation that’s over there, the dollar is going to do much better than the other currencies. Not only that, but the dollar strong versus other currencies has dramatic impact on financial markets all over the world.

So I like to tell people that if all you’re worried about is purchasing power, and as a result, you’ve decided to buy gold or real estate, or Bitcoin, or whatever your preferred method of a store of value is, then consider yourself very lucky, because anybody that lives outside the United States has to worry about it. Anybody that runs a global business or operates on the global stage has to worry about it. Anybody that travels internationally, even if they’re not in business, they have to worry about it, because the dollar versus other currencies is one of, if not the biggest variables in global commerce.

And so it is It may not be important to you, but it’s important to many, many people around the world.

Monetary Metals:

What do you make of this argument that other countries, specifically after Russia’s foreign exchange reserves were frozen, thought, Hey, you know what? We’ve been buying gold in the past, just to have some diversification here, but now we really better start buying some gold in case we want to do something naughty, and we don’t want to be on the beating end of the stick from the US dollar. Do you think that that is actually a viable strategy?

That’s why these central banks have been buying gold. They’ll be able to use it to maybe transact net purchases. Hey, you buy oil from us, we buy grain from you. We’ll settle the difference not in the dollar, but maybe in gold. Do you think that’s a viable strategy for these emerging markets countries, these BRICS block countries? Or do you think that this is really more marketing and PR where they say, Oh, trust me, we’re getting rid of the dollar. We won’t be so reliant on US hegemony. But in reality, when the shoe drops, that they will actually need dollars at the end of the day?

Brent Johnson:

Well, I think it’s all of the above quite honest. So I do think that… It’s funny because I always have to tell people there’s a short term analysis, a medium term analysis, and a long term analysis. I think in the very short term and in the very long term, people can look back at that period of time when the US or the West confiscated Russian assets and see that as a watershed event that really changed things, again, both on the short term and the long term.

I think there’s a medium term that if you’re just I’m measuring things on the medium term, maybe it’s not such a bad, maybe it wasn’t such a bad move. But I think it’s clearly led to people looking for diversification. And I think that’s pretty clear in the short term. And I think it will be pretty clear in the long term. I think the medium term is still yet to be determined. But that’s the first part of your question. The second part is, is it a viable strategy for these other countries? Will it work? Well, it will work because it’s worked before. And so this is something that I always say.

People will say, gold won’t work, or the tariffs won’t work, or authoritarian governments won’t work. And I’m always like, of course they will work. They might not work the way you want them to work. They may not be cheap. They may not be efficient. They may not be fun, but they will work because that’s how the world operated for much of history. So I do think it will work, but I don’t think it is easy. It’s not a foolproof solution.

And just because you own gold, I don’t think it solves all the problems in your life. It certainly helps. And gold, I think, is a weapon everybody should have in their toolkit, but it doesn’t solve everything. And then the other thing, and so I think for some countries, it will help them. For others, it won’t. But you have to remember, if you are now using gold, let’s say you buy a bunch of gold and you have gold because you don’t want to use the dollar.

Well, then you’re essentially saying, I’m going to use my gold to buy things. And it won’t be too long until you’re out of gold, right? So you better be making some money somewhere else that you can replace that gold that you are now spending, or else you’re just kicking the can down the road.

So it’s not that it won’t work, but again, it’s just not a perfect solution. And then the other thing I would say, and this is a two-part answer, is that when governments around the world buy gold, and this includes the United States, I think they buy it for a couple of reasons.

Number one, they buy it for insurance because they just don’t know. I think the people at the top do know that it’s basically a Ponzi scheme or that the monetary system is fragile, because when you loan money into existence, it’s only a matter of time before it eventually cascades lower. But that could be 10 years. It could be 180 years, right? There’s no knowing exactly when that moment comes.

So I think they own it for insurance reasons. I think a lot of times when these countries are buying gold, the reason they’re buying gold is not because they wake up in the morning and say, wow, that J-Pal is really out of control, and Donald Trump is not somebody that can be trusted. I think they wake up every morning and say, holy cow, my local currency lost value versus the dollar again.

And if I’m going to continue to operate my business or not lose all of my purchasing power, I need to get out of the Turkish Lira or whatever it is, right? The Bolivian Florence or the Columbian peso. And over the last year, some of these countries’ currencies have strengthened a lot. But it doesn’t change the fact that over the last 10 or 15 years, they’ve all lost dramatic purchasing power versus the US dollar or versus gold.

And so I think they’re buying it in many ways to protect against their own fiat currencies. And also, I think they know that in the coming years and decades, they’re going to have to devalue their own fiat currencies in order to meet all the obligations that they’ve set forth. And so they’re buying gold as an insurance policy against their own debacement.

And finally, I think one of the reasons that governments own gold is because if they’re holding on to it, that means the citizens are not. Gold is a tool that citizens can use to fight back against the theft of purchasing power by governments. And so in the same way that governments put people in prison because they want to control them, they throw them in a vault in a basement, they can do the same thing with gold.

They can throw gold in a vault in a basement, and that’s a form of control. Control. By them controlling it, it keeps somebody else from controlling it. And so I think you put all those things together, and you realize that the last couple of years, the level of uncertainty in the world has certainly risen in the last couple of years.

And I don’t think it’s too big of a stretch to think that it’s going to become even more uncertain over the next few years, that people want to have something that does well in times of uncertainty. So I think you put all that stuff together, and it’s not too hard to understand why gold is at $5,000.

Monetary Metals:

What do you think about this idea that we’ve hit a, at least maybe, local maximum in terms of globalization? And from maybe this point forward, for maybe the medium, short term, we’re going to see more fractionalization, less globalization, And like you said, or our friend Thomas Sowell quotes, there’s no solutions, only trade offs.

And yes, we’ll have maybe less efficient goods, less efficient capital transactions across borders. But in terms of local policies to help their currencies, there will be a more multipolar world where maybe there won’t be a single reserve currency. Countries won’t have free and open trade with each other. There might be more tariffs, more nationalism.

Do you think that we’ve hit a local maximum in terms of the amount of global cooperation, or do you think Trump is an aberration? And six months from now, the Democrats will take office, they will push for more globalization, and this orange threat will be gone, and then we’ll all sing Kumbaya together. Where do you think we’re going in the next medium to short term.

Brent Johnson:

So I think this is actually central to my overall thesis. I think the pendulum of history for the last 40, 50 years swung towards globalization, towards cooperation. And in that environment, the most important thing was who could produce the widget most efficiently and the fastest, right?

And I think that pendulum is now swinging the other way. And efficiency and speed are no longer the primary determinant on whether or not a project gets funded or not. Now, things like durability, sustainability, and national interest is a more important driver than simply price. And so I think the world is definitely fracturing. And I think it’s going to… That speed of which it is fracturing is going to pick up. I do think a few years down the road, you will see greater more cooperation within regions, even though you will have less cooperation on a global basis.

So I think you will probably see more cooperation within certain countries in Asia. I think you will see more cooperation with countries within the Western hemisphere, Middle East. I think a lot of that stuff is not there yet, and there’s a lot of fireworks that are going to play out along the way.

But I do think we’re going to a more regionalized and less cooperative world. And when I tell my son this all the time, and anybody else that will listen to me, I said, “You will learn more about how to invest and think about the world by watching the Game of Thrones series than you will by reading every economics tech book taught at business school.”

Because all those texts that I studied and everybody else taught at business school are a output of the last 40 or 50 years and the liberal world order that was overseen by the rules-based order. The rules-based order is going away. Trump has done more to tear down the rules-based order, which, by the way, it is a real thing. It’s not just a term.

There was a rules-based order that was put up by the allies, post-World War II to create a more harmonized world and with less chance of a war breaking out. It was also a form of control that the West could use to subjugate the global south. So there’s two sides of it, but it is a real thing. And that is what produced this pendulum swinging towards globalization.

And it’s what eventually led to the deconstruction of American manufacturing prowice. I think that is swinging the other way, and we are now more in a world of hard power than we are of cooperation and efficiency. And I alluded to this earlier, but I think if you don’t know what the world, the word real politic is, I think you should go look up that word, because I think that’s what we’re in now.

And the example that I will use from history is that when Pompey, who was a Roman general, he was invading, I believe it was Sicily. I think it was Sicily. And the governor of Sicily, He said, You cannot do this. It’s against the law. And he said, Don’t talk to me about laws. I’m carrying a sword. And so I think that’s where we’re at, to be quite honest.

And all of these people that are saying what Trump is doing or what other countries are doing is against international law. Well, international law only applies if it can be enforced. And if the United States breaks the international law, the only way that that gets changed is if anybody — nobody can force the United States to change.

And I am of the opinion that for better, for worse, and many people think it’s for worse, I feel the United States, despite all its problems, is the most powerful entity in the world, and it’s not going to do anything that it doesn’t want to do. And does that mean violence and bad things will happen? Probably so, right?

I mean, we have a President who literally went in and kidnapped the President of another country, and nobody did anything about it. There was a few complaints, but who did anything? He also threatened to take Greenland. Everybody got up in arms, but the United States now has a greater presence than Greenland.

He told the European Union members that you have to spend 5% of your GDP on national defense. And they’re not there yet, but they’re starting to spend more on national defense. The US occupies an Air Force base in the middle of the Indian Ocean, thousands of miles from any continent that it doesn’t even own. The country that does own it tried to give it back to another country, and Trump told them no. So that’s real politic. Another example is that the government of Panama gave the leasing rights to the Panama Canal to operate a Chinese company.

The United States said no, and the Panama government reneged on that contract and took it away from China. So the people that tell me that the United States can no longer influence activities on the global stage, I mean, just look at those four or five things, and nobody’s been able to do anything about it. Now, maybe they will be. Maybe that will change. But as of right now, that’s what’s happening.

And I think that’s a big part of all the uncertainty. It’s those types of activities that’s causing the whole world to say, oh, my gosh, the rules-based order is gone. What are the rules? So they’re not even certain what the rules are anymore. They’re not entirely sure whose side they should pick.

Perhaps they don’t want to be on the side of the United States, but then they look around and say, whose side do we want to be on? Because if we get in a fight, do we really want to fight the United States? And this contributes to this uncertainty. And it’s funny, when I look at markets, they’re all priced, with the exception of gold, which is saying, hey, look at me.

I’m telling you, the world is not perfect. All other markets, with the exception of Bitcoin, is near its all time high, right? And so I feel like markets are largely priced to perfection in a very, very imperfect world. And I know I’m rambling on here, but I have to tell you, I don’t necessarily like what I think is going to happen, but it’s fascinating. For somebody who likes the things that I like, I like geo politics, I like markets, I like thinking about the madness of crowds and the way psychology influences human activity. It’s It’s fascinating. This is like the Super Bowl.

Monetary Metals:

We are either lucky or unlucky to live in fascinating times. Brent, I want to ask you about the potential competitors, the guy who can say, You know what? We’re tired of you breaking the rules. We’re going to put you back to put you back in your place. And that is, theoretically, China. Where does Brent Johnson see China?

Are they a paper tiger where they’re printing all this money, there’s fake asset bubbles everywhere. There’s empty cities. Or is China an economic powerhouse that is going to take make more and more of the global stage for themselves, and the US will actually have to compete, compare themselves economically, culturally to China and say, Hey, maybe this is a multipolar world where we don’t get to do what we want with zero checks and balances. There might be a check and balance in China. Brent Johnson, what do you say to that?

Brent Johnson:

So I think it’s a little bit of both. But here’s how I’ll frame this. I think China has a lot more problems than people realize. And I can go into some details on this. But I would say that, listen, the rest of the world has problems as well, including the United States. Clearly, the United States has some problems.

The thing that you have to remember is that every country, not just the United States, but every country in the world, operates off of the same debt-based monetary system. There is no country in the world that is on a gold standard or some a hard money system, which means money is loaned into existence, and every country in the world is in this same situation.

And so whenever you are in this situation and your debts have grown exponentially, all of them are in danger of being a paper tiger if we get that deflationary wave. So this is not unique to China, but China is certainly not immune from this, right? And I think the popular narrative is that China is just outclaim the United States on every level, and we are just left to flail in the wind.

And behind the scenes, I can tell you that is absolutely not the case. What essentially is going on right now with China, because, again, everything is about China. Venezuela is about China. Iran is about China. The tariffs are about China. It’s all about China. And the reason why is because for many, many years and decades, again, we hollowed out our…

You could argue national security, or we’ll just call it national industry, in favor of the cheapest widget. But the US has finally woken up to the fact that on the one hand, this has been good for the financial interests in the United States. It hasn’t been good for the United States as a whole, especially from a national security perspective. And they are now in the process of trying to right that wrong. And as a result, they’re playing tougher with China.

But I think it’s a misunderstanding, and I think people certainly misunderstand me when I say what the United States is trying to do with China. And that is that they are not trying to crush China. And so the people that think the United States and the Trump is trying to crush China, that’s wrong.

And here’s the reason why. So the two things that Trump wants more than anything in the world are his face on Mount Rushmore, because because he wants to be known as the greatest President in history. And you can’t get your face on Mount Rushmore if China surpasses you under your administration. That’s just those two things just don’t go together.

But he also wants to be seen as this fantastic dealmaker who is overseeing this prosperous United States and global economy, right? You can’t do that if you crush China, because if you crush China and China collapses, that’s going to take much of the world, including the United States, with it. The two economies are too symbiotic and too tightly entwined right now to not get hurt under that scenario.

So even if Trump did want to crush China, he certainly wouldn’t want to do it before the midterms because that would lead to a global financial crisis running up to the midterms. And he’s probably not going to get reelected if his great deals have led to a global financial crisis. So what they essentially have is a hostage exchange going on. The United States needs rare earths and critical materials from China.

I’m very generalizing here, but this is a sense. China needs technology and advanced chips from the United States. And so we have agreed on a detente, and we’re exchanging those things back and forth. And behind the scenes, each side is working feverishly to become independent of the other. So it’s almost like a pre-determined divorce. We’re getting divorced in two or three years. We both want the divorce, and we agree not to fight too much in front of the kids while we’re doing this.

But behind the scenes, I’m trying to get my resources figured out and make sure I have a place to live and that I don’t need the wife, and the wife is trying to figure out where she’s going to live and how she can keep the most of the assets, et cetera. But that’s That’s essentially what’s going on. China’s economy is not as strong as everybody thinks, but neither is the United States. It’s just that the system, the system itself is rigged in favor of the United States. I’m not sitting here saying the United States is so much better than everybody else. I’m just saying the game is rigged.

If you’re going to bet against a rigged game, you You better not only hold all the cards, but you better own the biggest guns and the biggest bodyguards and the biggest… You need a lot more than just the cards. If the game is rigged against you, you need more than just the cards. And I think the game is rigged in favor of the United States. And so if it comes to an epic battle rather than an amicable divorce, then I would rather bet on the United States than on China.

Monetary Metals:

Brent, all right, there’s this chance of an amical divorce between the US and China. There’s also a chance for a major blow-up and a big fight between the US and the rest of the world, where potentially this Dollar Milkshake Thesis plays out because in a time of risk and people are worried, they just go to that safe haven asset, which has historically been the US Treasury, the US dollar.

What is the status of the US Treasury versus the US dollar? How important is it to think of them as similar assets versus different assets? And when we talk about global liquidity, how important is it to separate the US dollar as an asset versus US Treasuries as an asset?

Brent Johnson:

Well, so now you’re getting into the heart of all the things I talk about here. And this is a very confusing topic for many people because many people do equate dollars with treasuries. And it’s understandable why, but there’s a critical component to understand. And the critical component to understand is that treasuries falling in price can lead to the dollar rising in price.

And so if you think about it, the whole Milkshake theory was predicated on the potential for a sovereign debt crisis and a currency crisis. Because I said at the time, interest rates would start to rise. And when interest rates start to rise, and this includes the United States, when interest rates rise, bond prices fall.

And as bond prices fall and people start losing money in an asset, they haven’t lost money in the last 40 years, that starts to change the psychology of it as an investment. And it can lead to an even bigger outflow. And so I am not surprised at all that treasure… And I also said, gold is going to rise in price. It was because that would be a place that people who had previously been buying treasuries would start buying gold.

And I even said that I thought this would be driven by the international community more than the domestic community. The reason is because as treasuries lose value, the dollar typically typically goes up. And as the taller typically goes up, that helps its purchasing power.

Now, it doesn’t mean that it has great purchasing power, and it doesn’t mean you can’t lose purchasing power. It just means it helps it relative to other currencies. And so as interest rates rise in the United States, it makes the dollar more attractive. And so the relationship between the dollar and treasuries is actually inverse from a price perspective.

But if you can So let’s say right now, so let’s look at it right now. You buy treasuries right now, you’re buying them at a 20 or 30% discount to where they were trading a few years ago. And if you hold on to them Until maturity, you will get your money back. And if interest rates go down along the way, you could make a lot on the upside. So you’re getting that… You’re able to buy discounted future dollars, right? And that interest rate It is telling you that’s what the market thinks is the appropriate rate to be compensated for waiting for that future event.

But that doesn’t mean that… Just because you can buy treasuries at a lower price than you could a few years ago, it doesn’t mean that the whole world is rejecting them. It just means they don’t want to pay the same price that they used to pay. And you can also get into a situation where they don’t want to buy US Treasury bonds at all, and interest rates go higher in the United States.

But that doesn’t mean they’re going to be flocking to buy British Treasuries, or Japanese Treasuries, or Chinese Treasuries. And my point has been, if the US Treasuries are crashing and nobody wants to fund them, no other country in the world is going to get funding either. So this idea that the US Treasury bonds are going to crash because nobody wants to buy them, but Japan is going to be a safe haven or Europe will be a safe haven, I think, is to misunderstand what a sovereign debt crisis actually is.

And I don’t think treasuries need, quote unquote, saving. I just think they need to pay a higher price for people to keep buying them. Now, it’s possible, this is not my base case, but it’s possible we go into another liquidity crisis due to downturn in economic activity combined with a fractional reserved debt-based monetary system.

That typically leads to the dollar rising, and it also typically leads to people rushing to the US Treasury bond as a form of safety. If that happens, it’s possible the Treasury bonds will rally in price and interest rates will come down. It’s also possible that the bonds just stay where they’re at and people go to gold or buy T-bills rather than long-term bonds. There’s no guarantee they will go under the long-term bonds. So I don’t worry about the US Treasury not being able to fund itself, but I’m not convinced that interest rates won’t go higher either. I don’t know if that helps answer your question or not, but that’s my take on that.

Monetary Metals:

Brent, last thing I want to ask you before we get to the rapid fire round is about this idea that, hey, there is no alternative, right, Tina? There is no alternative. You got to go to the dollar, you got to go to the treasury when things get hairy. But because of these stable coins, because of these ability of crypto exchanges to say, hey, pick your asset, you can be in whatever country, you can very easily with high liquidity, move from gold to crypto to dollars to stable coins to a thousand other assets to real estate.

Do you think that that has made the competition when it comes to, wow, crisis mode, where do I put my capital? Do you think that has really put more of an edge on the competition for something like a T-bill?

Brent Johnson:

Well, I think it’s increased the competition when volatility is low and there’s an economic expansion. I think that if we get into a liquidity crisis on either a regional or global level, that would change. I would not expect Bitcoin or some of the other crypto-based assets to rally or rise in value in some a liquidity event. I would expect them to fall, just like all other assets typically do in that environment, and potentially fall even more, because in many ways, I view crypto, and I’m not talking about stablecoins here.

I’m talking about the crypto assets that are not tied to a fiat currency, or at least not tied to the dollar. I view them as pure speculation on global liquidity. And as long as liquidity is high and the expectation for there to be more liquidity, which would then lead to debacement. People are going to look for assets that do not get debaced when currency is expanded. The problem is that when the currency goes the other way and it no longer expands, and instead it contracts, those same assets, in my experience, have fallen in price. And I think that partially explains why Bitcoin has fallen in the last six months.

Number one, I think it got a little bit too far ahead of itself on the back of the debacement And then secondly, I think it’s showing that now that the debacement trade is not showing up as quickly, or at least not to the extent many people were forecasting, that is coming back.

I also think the rise of US dollar stablecoins and the fact that they have for the most part, been blessed by the United States, and that we’re not going to go attack these things, and we’re not going to outlaw them, and in fact, we’re going to begin to embrace them, has led those who previously used Bitcoin as a way to bypass US dollar are now using stablecoins to do the same thing, or US dollar stablecoins to do the same thing.

Monetary Metals:

Brent, I want to take us into a rapid fire section. This will be a lightning round where I ask you questions all over the map. You can answer as short or as long as you like.

Brent Johnson:

That’s what I like.

Monetary Metals:

Okay. All right, so let’s start with the first one. Here’s a fun one. Which country is going to be the winner of the Olympics, whether that’s culturally, most medals? In terms of the Olympics, how important do you think that is as a, Hey, country won the Olympics, China, the US, maybe Canada. How important do you think the Olympics are?

Brent Johnson:

That’s a really good question. I think they’re important on an emotional level. I don’t know when the rubber really hits the road, whether they matter, but it certainly helps with national pride and the way a country views itself. And psychology can go a long way towards whether you’re successful or not. So I think Norway has more gold medals than anybody in history, if I have this right, for Winter Olympics, despite being a relatively small country. But I think, to be honest, I haven’t really paid that much attention to the Olympics this year. I think the United States was ahead. They beat Canada in hockey, and I think that’s all that really matters, right?

Monetary Metals:

Next one for you, Brent. Let’s talk about nearshoring. So obviously, there’s been some issues in the mining sector in Mexico. Obviously, Canada is right next to the United States discussing pipelines and bridges and on and off again type of relationship. How important do you think this nearshoring is going to be in the future, where it actually matters, where either physical assets are, critical minerals or materials are? How important is near-shoring going to be in the future?

Brent Johnson:

I think it’s incredibly important. And I think it’s so important that I’m actually very, very cautiously, and just… I don’t want people to misinterpret this. I’m becoming more bullish on Central and Latin America as a result. I’m not saying this is all going to be a smooth transition. I’m not going to say it’s been going to be easy, but I do think that the Western hemisphere will become more integrated than it has been for the last couple of decades.

And I think Latin America and South America are potentially the biggest beneficiaries of that. There’s certainly some problems that are going on. We’ve seen that in the last couple of days in Mexico. Obviously, the situation in Venezuela is not perfect. The situation in Argentina or Brazil is not perfect. But I do think that these challenges will be overcome to a greater extent than many people believe. I touched on this earlier, and I think many people think that because the tariffs will cause prices to rise and it leads to less efficiency, that it won’t, quote, unquote, work. And again, I think it will work. It just won’t work the way people want it to.

And I can’t sit here and say that I love tariffs, and people that tell me the tariffs are a tax and they’re inefficient. Okay, well, I’m fine with that, too. I don’t I like it, but I agree with you. But that doesn’t mean it’s not going to happen anyway. Taxes are a tax as well, and taxes are still here, and they’re not going away. So just because something is a tax doesn’t mean it’s going to be gone.

Monetary Metals:

Next, I want to ask you about this tariff regime. Obviously, there’s been some constitutional threats to the whole tariff regime in general. Where do you see the tariff regime going forward? Was this a tool that President Trump used to make people come to the negotiating table? Is he going to have less tariffs than when he started his presidency? Where’s the tariff story going forward?

Brent Johnson:

Yeah. So I think with the recent ruling on the tariffs, I don’t think that that means that they’re going away. I think tariffs are here to stay. I think this is part of this new power competition. I think it’s part of the world going back to a one based on power as opposed to efficiency. The fact that one channel was taken away from the Trump administration doesn’t mean that all channels have been removed. I don’t think they are shocked by this decision.

I know they don’t like the decision, but I don’t think they were shocked by this decision, both Bessent And let nick have, over the last couple of months, indicated that should the Supreme Court rule against them, that there was other avenues that they could take. So I would expect, if anything, for Trump to ratchet up these tariffs as as opposed to dial it down. And again, I just think that this is one thing people need to remember. If the United States were to say, We are no longer going to employ any tariffs, they would still have a tariff policy. Because every other country in the world does use tariffs.

And so if you don’t have a tariff policy, and everybody else does, it means you do have a tariff policy. You’re just not involved in the negotiation of terms. And the other thing I would say is, if you don’t like tariffs, I completely understand.

But if you don’t understand that the hollowing out of the American industry was why Donald Trump rose to power, then you have to have a really good plan for how you’re going to bring those jobs back and make the US more competitive rather than just doing the same thing that we did for the last 20 years, because what we did for the last 20 or 30 years sent those jobs overseas.

So it’s hard. I’m not saying there’s not other options, and I’m not saying I like the tariffs, but I do understand what he’s doing and why he’s doing it. And again, if you think of it from a national security perspective and trying to build up a national domestic-based economy and bring back higher paying jobs, you start to understand why they’re being put in place.

Monetary Metals:

Brent, talk to me about the BRICS Alliance. Obviously, in the past, we’ve pooh-poohed the idea that, Hey, this is one economic unit, BRICS. They’re all for one and one for all, when in reality, there’s obviously quite a bit of tension, to say the least, between these countries. Where do we stand on the BRICS currencies? Has really anything materially changed in terms of a currency pact, in terms of these countries working together or working against each other? Do the BRICS continue to not really matter in the eyes of Brent Johnson?

Brent Johnson:

It’s not that they don’t matter. I’d like to make fun of the whole concept, not because I think the individual countries are not important. They are important, and they are powerful, and they have a lot of population. They control a lot of resources, and you put them all together, and they’re an economic force.

The problem is, is they’re like a hand with the fingers spread out as opposed to a fist. Yeah, we’re all part of the same hand, but until they really come together and stick together through thick and thin like a fist, then a lot of their power is disseminated. And as it relates to… And I always tell people, if they’re going to join some currency, you don’t have to wait for that.

You could go by, take the five countries, put 20% of… Or take the four or five, put 20% of your portfolio in each of those five currencies, and even throw a 25% allocation to gold on it. And I don’t think it would have performed that much dramatically better than the dollar, because all of these currencies are down 15 to 20% versus the dollar over the last 10 or 15 years.

So if you really believe they’re going to launch something and the gold is going to be part of it, well then go put it in your portfolio. The idea is to get there ahead of people, not wait till everybody else is doing it. And so I think that in many ways, the BRICS is marketing more than anything. It’s not that they’re not trying, but no material progress has been made.

If I went through all the different things the BRICS have tried, whether it’s the EU on, whether it’s Instex, whether it’s Inbridge, whether now they have the unit. You go back throughout the last 10 or 15 years, there’s always some new platform that they’re going to use to circumvent the dollar. And it’s not that these platforms haven’t worked. It’s not that they haven’t been operational. There’s just no material volume on it that has in any way constrained the dollar.

I mean, you look at the amount of US dollar debt in the world. In the Euro dollar market, it’s greater than it’s ever been. That’s the rest of the world still relying on the dollar. You look at the foreign ownership of US assets, it’s never been higher.

You look at the foreign ownership of US treasuries, it’s never been higher. Now, Is gold risen as well? Absolutely. But no other country is making up ground on the United States as the United States loses ground to gold. And so I think anybody who is hoping or praying or planning on the BRICS being some a savior should go watch a Charlie Brown cartoon and watch what Lucy does with Charlie when they’re playing football.

Monetary Metals:

I want to ask you about a country that’s not in the BRICS, which is Japan. Obviously, for many, many years, there’s been this threat of the Japanese trade falling apart, the Yen dollar currency trade, this hedge trade that has been happening for many, many years. Every time there’s an issue in the Japanese market, whether it’s demographics, whether it’s bond prices, whether it’s inflation, here comes the unwind of the Japanese Yen carry trade, and yet things continue apace. So, Brent Johnson, how important is Japan, their currency, their bond market? How important is this Japan Yen carry trade going forward?

Brent Johnson:

Well, I think it’s incredibly important. But one thing you got to remember is that the carry train unwinding is when the Yen strengthens. And so I don’t think the Yen is going to strengthen a lot. Although if it does, you need to aware of it, because if the Yen carry trade unwinds, that means the Yen is now strengthening versus other currencies, and that people that borrowed in Yen and invested it abroad are now selling those assets abroad and bringing that money back into Japan, and that is pushing the Yen higher.

That would also tend to indicate, though, that interest rates are going higher in Japan, and that would be really bad for Japan’s bonds. Again, we get back to the Interest rates going higher may be good for the currency, but it’s bad for the bonds. And they’ve already got a huge amount of unrealized losses on their books. And so I ultimately think the Yen is going to go to 200 and then 300.

But if we got into an environment, a liquidity crisis, a short term liquidity crisis, would probably see the Yen rally versus the dollar. And if you get into a situation where the Yen is rallying versus the dollar, and the dollar is rallying versus all other fiat currencies, that’s mother of all liquidity nightmares, because that means that capital is just rushing back into the two most important funding currencies, which is the dollar in the end.

Monetary Metals:

What are some other gold stories that maybe gold investors should be wary of going forward?

Brent Johnson:

Well, I think a big one is the gold miners, right? And not just gold, but I’ll use gold as the example. It’s really all natural resources. I think we can get into a situation where commodities, gold included, traded at different prices in different regions. Historically, because we’ve had this one supply chain in this globally efficient market, a commodity in Africa traded at the same price as the commodity in Japan. And if there was any If a price difference, the market would arbitrage it out relatively quickly. I’m not sure that that will continue going forward, especially if we have de-globalized markets.

That’s number one. So if your project is based in Africa and gold trades at one price, it may not be as successful as if it was located in another jurisdiction that’s trading another price. But along those same lines, you could have a price higher in one jurisdiction, but that also coincides with capital controls or confiscation by the local governments, right? So I think what we’re going to see in the months and years ahead is these countries that are in trouble from an economic perspective will start to reassert their right And they will say, these are national treasures.

No, these foreign interlopers should not be in here stealing what is rightfully our local citizens’ assets, and you’re gone. So I can see that type of stuff happening. That also goes along with swap lines, US dollar swap lines that have been extended in the past have typically been extended with a small interest rate associated with it. But other than that, no real strings.

I think any swap lines that are given in the future would have huge strings attached to them. That could potentially cause another country to then have to put capital controls on something like gold. And I think, honestly, I do think that what you guys are doing is pretty unique and pretty interesting. I believe that as the gold price has risen, clearly, that increases the interest in gold from people who otherwise would not have been paying attention.

And I think as there’s an increase in attention to the gold, then there’s going to become an increase in attention to different ways to own it and different ways to use it. Traditionally, there’s been basically two ways. You either own bullion or you own the miners. And the risk risk level associated with bullion is dramatically different than the risk level associated with miners.

And in many cases, they’re far apart, and there’s not much choice in between. And so I think you guys, and this is one of the reasons why I joined you guys was because I felt like you guys were trying to actually put money, gold as money back into the system and use it as a productive good rather than something that you just hoard. And I felt like when you look in that stack from really safe bullion to higher risk gold miners, there’s a huge gap in there that can easily be filled.

And I think that’s something that you guys have done a good job of, and I’m excited to be a part of. So I think gold I spoke at a conference over the weekend, and I said, I think people in the traditional finance world very much underestimate the power of gold. And I think many people in the gold world underestimate the power of the dollar. And I don’t think that they are the mortal enemies that many people think they are. I think there’s a place in a portfolio that you need to understand both. And they do different things at different times, but that doesn’t mean they’re not both important.

And so, yeah, I think even if you understand the dollar is the strongest fiat, that’s not an argument for not owning gold, and vice versa. Once you understand that gold is the most traditionally safest relic in the world, it doesn’t mean you you shouldn’t understand what the dollar is doing versus other currencies. Basically, keep an open mind, and you just might make it through this mess.

Monetary Metals:

Brent, what’s a question I should be asking all future guests of the Gold Exchange Podcast?

Brent Johnson:

I mean, you should ask them what will they do to to understand the dollar’s role in the world if it doesn’t fall in the way that many of them think it will. And I get asked all the time, at what level of the dollar would I admit that I was wrong? And so you should ask them, at what level of the dollar would they admit that they are wrong?

Because so far, whenever I’ve asked them, they always just say, well, it’s just a matter of time. Just wait. Just wait. And that’s fair. But if people are going to ask me, at what level would I admit I’m wrong, I’d be curious know at what level they’d admit that they were wrong.

Monetary Metals:

Brent, always fascinating getting to interview about economics, macro, and markets. Where can people find more Brent Johnson, more Santiago Capital, and of course, Markets, Milkshakes, and Madness?

Brent Johnson:

Yeah, so we do the YouTube show every week, Milkshakes, Markets, and Madness. You can find us there. I’m pretty active on Twitter. Santiagoaufund is my handle. And we talk about stablecoins.

Monetary Metals:

Brent, as always, an honor to get to interview you, and it’s so great having you on the Monetary Metals Advisory Board. We’ll have to have you back on again soon.