If you look exclusively at the balance sheet of the United States—record national debt, massive budget deficits, and political infighting—the logical conclusion is that the U.S. dollar is doomed. For years, that was the conclusion Brent Johnson, CEO of Santiago Capital, drew.
As a student of Austrian economics and a proponent of holding physical gold, Johnson was convinced the dollar was destined to collapse. But when the dollar surged in 2014, defying the predictions of the “gold bug” community, Johnson realized he had a massive blind spot.
In a recent episode of Y’all Street, Johnson explained how a weekend whiteboard session forced him to abandon his biases and birth the Dollar Milkshake Theory—a macroeconomic framework that has defined his career and accurately predicted the last decade of global currency markets.
The Eurodollar Epiphany
Johnson’s breakthrough came when he stopped viewing the United States in a vacuum and began viewing it relative to the rest of the world.
“If you do that same level of analysis on China and Russia and India and Turkey… you come to the same conclusion,” Johnson told host Tarek Saab. “I realized I was looking at things on an absolute basis rather than on a relative basis. And currencies trade on a relative basis.”
While every fiat currency is flawed, the U.S. dollar possesses an unassailable advantage: The Eurodollar Market. This refers to the hundreds of trillions of U.S. dollars loaned into existence offshore, between foreign parties. When an Indian company owes a Turkish company in U.S. dollars, it creates an unavoidable, structural demand for the greenback.
When a global crisis hits, foreign markets face a “global margin call.” To service their dollar-denominated debt, they must sell their local assets and buy dollars, acting as a massive “milkshake straw” that sucks global liquidity straight into the United States.
The Stablecoin Weapon
Many analysts predicted that the rise of cryptocurrency would finally break the hegemony of the U.S. dollar, offering a decentralized alternative to state control. Johnson sees it playing out exactly the opposite.
Rather than destroying the dollar, stablecoins (crypto tokens pegged 1:1 to the USD) are simply building new, highly efficient “plumbing” for the dollar to flow globally.
“The U.S. saw what was happening. They saw the power of it. But they also saw an opportunity where, rather than fight it, they could co-opt it,” Johnson explained, referencing recent U.S. legislation designed to foster stablecoin development. By integrating private crypto technology into the U.S. dollar, the state is actively expanding its monetary network, making the dollar even more accessible to populations in unstable economies like Argentina and Turkey.
The Death of Globalization
Understanding the flow of capital is critical, but Johnson warns that the underlying rules of the global economy are fundamentally changing. For the last 50 years, the world operated on the principles of globalization: whoever can produce the widget cheapest and fastest wins.
That era is over.
“The pendulum is swinging the other way now,” Johnson stated. “Price is no longer the number one determinant… Robustness and national security are the number one determinants. We’ve been in a period when profits were the most important thing. And now I think power is the most important thing.”
As the U.S. and China engage in a slow-motion decoupling, tariffs and capital controls will become the norm. The result will be a “harder world” with stickier inflation and less efficiency.
The Bottom Line
For investors, the lesson from Brent Johnson is clear: trade the reality of the board, not your ideological preference. You may hate the mechanics of the fiat system, and you may despise the friction of tariffs, but ignoring them will cost you.
“I kind of think the world needs some tough love right now,” Johnson concluded. “You need to understand this is the way it’s going to be. And the sooner you do, the sooner you’re going to be prepared for what comes next.”
Watch Brent Johnson break down the Dollar Milkshake Theory and global macro trends on Episode 33 of Y’all Street.
