The United States Federal Reserve will make the dollar stronger against other Western Nations’ Currencies.
Brent Johnson argues that, prior to 2018, global central banks injected liquidity into the “milkshake” of the global market, and now the combination of higher relative interest rates, the deepest capital markets, tax policy, regulatory policy, the US dollar payment system, and the US military has effectively “swapped out a syringe for a straw.”
Johnson argues that the deck of the global monetary system is stacked in the favor of the U.S. dollar, and that it doesn’t matter which central bank starts quantitative easing (QE) – but rather which central bank captures that QE. Watch the interview to explore his thinking in full depth. It’s a masterclass in macro and is perfect for investors of all levels.
It is a macro economic hypothesis that has enough merit to strongly consider. Many of the items are occurring now. For example, the USD, as of the date of this blog entry, is gaining strength after raising interest rates. Other western nations are seeing their currencies have historical lows, as compared to the USD. Other nations are suffering from price inflation that is worse than the United States(at this date). The point: To truly analyze what is going on in the “investment world”, a global macro view is extremely necessary.
Many Economists and Financial professionals are looking at the macro picture with only the United States in mind. “The Dollar Milkshake Theory” reminds us that there is a global marketplace, and the analysis must include emerging markets as well as established nations that are outside of the United States.