The Path to De-Dollarization

[@Jersderakerguoe]

The dollar is literally being destroyed / debased / devalued. The best performing asset in the history of the world is BITCOIN. BITCOIN is by far the best store of value. 10 years from now you’ll be thankful for every dollar you put into BITCOIN.

[@Michaelparker12]

Regretting missing out on earlier Bitcoin investments, I kept funds in a HYSA. Now, with $200k to invest, I aim to avoid FOMO and buying at the peak. What's the best approach for a newbie to navigate the market?

[@SandraDave.]

well the crypto market is expected to do way better than any other equity sectors this 2024 especially with the SEC crypto ETF approval but it’s a volatile market nevertheless and if you’re new to it, it’s best to reach out to an experienced adviser for proper guidance.

[@RaymondKeen.]

Yes, my asset manager advised I spread further into mutual funds and crypto Etf and boy am I glad I did. The whole idea is: Don’t get too greedy and also to exit at the right time, so generally I do find having an adviser very helpful, because what Avg. Joe really has time to watch and comprehensively analyse the market.

[@HectorWhitney]

could you recommend some good advisers? don’t get me wrong, I already have an asset manager for my 1m portfolio, but he seems not to know much about crypto.

[@RaymondKeen.]

There are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’ Melissa Terri Swayne” for about five years now, and her performance has been consistently impressive. She’s quite known in her field, look her up.

[@itsyouknowme]

Thanks for providing your insights every week Brent, for everyday people like me who are trying to navigate this crazy volatile world we live in

[@johnwilkins9936]

This is one of the best, simple to understand for the laymen, explanations of the role of the dollar I’ve heard in awhile. Really nice job.

[@thomaswest6650]

Thanks Brent! You should invite Hugh on, your straightforward style is a good balance to his wild mind.

[@trader8CTA]

Having Brent interview Hugh be a great podcast! - Hugh is the personification of "madness!"

[@jcgoogle1808]

Great video with great illustrative charts even if they're a few years old. I've been arguing lately that government debt should be included in money supply or at least as a proxy for the money supply portion when the Monetarists (like Hanke) use QTM to incorrectly claim,.. 1. inflation is solely a function of money supply and by that they mean M2. Not only is it NOT solely a function of money supply (Friedman said is was money supply growth as a percent of GDP minus real GDP growth) but it's more a function of the increase in government debt as a percent of GDP (or as a % of government debt although that wouldn't be mathematically correct) minus the real growth in GDP. Or,.. From QTM,.. MV=PY therefore dM% + dV% = dP% + dY% Using deficit spending or the change in debt rather than the change in M2 dDeficitSpending% - drealGDP% = dinflation% 6% - 2% = 4%. and 2. that if M2 shrinks we should expect deflation,.. even though the money supply grew by 40% between 2020 and 2022,.. they believe any reduction in money supply will even the actual 3% reduction after a 40% increase will cause deflation. No it won't. 3% reduction compared to a 40% increase is background noise,.. and during that time (the period where M2 fell 3%) the government debt has gone up by 8 to 10%. And we've had no deflation as of yet. This "long and variable lag" stuff is nonsense. The makes me conclude that there are 2 ways money is created,.. 1. by private bank generated debt and the fractional reserve banking system with the Fed reserve deposits as you illustrated as the base. The money supply has associated with it an asset and an obligation to be paid back. As it is paid back, the money created out of thin air goes back to the thin air from which it came. This money ebbs and flows with economic activity and therefore is not necessarily inflationary,.. because when it's paid off the money supply shrinks. And even if the Fed has excess reserves, as you pointed out,.. the banks may not want t lend it,.. and/or businesses and consumers may not want to borrow it. 2. by government debt,. which often goes directly in to businesses and consumers,.. so it's higher velocity money,... and even though it has a treasury eventually tied to it,... the debt is never paid off. When a government treasury matures, the government doesn't pay it off,.. it just issues another treasury to replace the ones that just matured,.. so the debt never gets reduced,.. and this portion of money supply never get's smaller. I mean everyone says treasuries are the same as cash,. why isn't it part of money supply? Or at least considered so when trying to predict inflation? Now I know bank debt is counted as money in circulation, checking, savings etc,.., but it all comes from bank debt. Your chart at 16:05 even shows the three,.. MB, M2 and Government Debt. I still think inflation is more generally a function of supply and demand. The supply and demand of resources, (and why higher oil prices kicked off the rise in inflation in 2021) labor, capital,.. etc (I mean they don't measure inflation by solving for P in MV=PY They get the prices of 100's of 1000's of products.) and the largest part the supply and demand of money,.. where money has 2 components,.. 1, private bank debt created money (which the Fed with its Monetary Policy has some influence over) where the money supply ebbs and flows with economic activity and therefore is not necessarily inflationary and 2. government debt (Fiscal Policy) which is never paid off and very inflationary. The two act like a phasor diagram in electricity of vectors in engineering,.. where 2. aligns with the vertical axis and 1. aligns with the horizontal axis. The greater the alignment with the vertical axis the greater the potential for inflation unless real GDP growth can counter it. We currently have deficit spending at 6 to 10% of GDP and real GDP growth at about 1 to 2%. A healthy economy would have deficit spending at 0 to 2% and real private sector driven real GDP growth at 3 to 6%. We could reduce our Debt to GDP is the fiscal abuse was limited to less than real GDP growth. The only time deficit spending is warranted is when real GDP growth is negative. So any one who speaks about government deficit spending having good and bad aspects,.. just doesn't understand,. that any investment spending to stimulate the economy when needed should be encouraged through the private sector. Government deficit spending should be a last resort when in a recession and even then it depends on what they're spending the money on. Helicoptering checks is not an investment. A Hoover Dam would be. You at least get an asset and possibly a return on the investment. There should be no deficit spending when the economy is doing well as they claim and as they've been doing the last 4 years. If the economy is doing so well,.. then why the need for all of the record (US bankrupting) fiscal deficits? There ya go. Again good presentation.

[@thewrightoknow]

Thank you Bret for taking the time with your insights and understanding of the market to communicate what we need to know. Bless you.

[@steve5976]

Thanks for everything . I appreciate this very much

[@zwelizungu3307]

It is clear based on Brent’s analysis that it is almost impossible to get out of the USD system without deleveraging except for some batter equivalent transactions to extinguish debt and other extreme means. It is Dollar Trap theory akin to Dollar Milkshake - excellent explanation Brent!

[@user-dixk2rx5gz8f]

Thank you, Brent! Your insight is appreciated!

[@patrickbarry8374]

Thanks Brent. Love the channel and appreciate your insights. You are doing a great job, Despite’s Jon’s absence. Keep it up!

[@jackgoldman1]

Thanks Brent for keeping the show alive and educating people. Good job.

[@jen8332]

Thanks Brent. I look forward to your weekend podcasts. I like the new format with you alone, as I find you get to the point in a more timely and effective manner. You're the best!

[@srivatsram1320]

Very helpful in understanding the whole situation. Please keep us informed.

[@peterburns1004]

Thankyou from Australia Brent I've been a fan for almost 10years........ And yes people here want me sent to a mental asylum when I tell them we are going to be crushed by the US dollar....... Love your work

[@lalautranziciji]

There aren't many videos like this on the Internet. Thanks for this.

[@Dom-ro7yr]

Thank you for your videos! You are the man! Nothing better that spreading knowledge, God bless you 🇺🇸

[@sandranewman3461]

You do a great job on your own with market analysis. You really don’t need a co host,,,,just great info 💯

[@trader8CTA]

Thx for another succinct and matter of factly presented talk...

[@sbain844]

Thanks Brent, but unless I'm missing something, de-dollarization means global investors moving away from dollar denominated assets, and thereby demanding fewer dollars to pay for those assets. That reduced demand for dollars should gradually reduce the dollar's value in terms of foreign exchange. I get that a cheaper dollar might make dollar denominated assets relatively more attractive, but that's just mitigation in the face of what is driving the dollar lower in the first place. The 'path to de-dollarization' is not determined by higher or lower dollar, the dollar's relative strength is a consequence of de-dollarization, not a driver of it. As to the survival of the international monetary system, it is doomed imo. Nothing can save it, the debt is out of control. I'm aware of the debt-deflation-theory, it rose as a theory to explain the great depression, but that can never happen again because the Fed will print to infinity to prevent it. IMO, the system will die in an environment of uncontrollable spiraling inflation as the printing accelerates. I don't see how deflation can occur for all but a blip before inflationary pressure is irresistible. One final warning - ALL hyperinflation episodes have resulted from excessive government spending and printing. Hyperinflation never comes from commercial bank lending alone, because the banks are constrained in the amount of lending that they can do. That is a key distinction here, I foresee no end to accelerating government spending until the system collapses, commercial bank lending is not the key driver here imo.

[@MilkshakesPod]

you cannot have hyperinflation of a debt based currency that has larger external demand than domestic demand and in which the newly "printed" money is in the form of loans rather than physical notes.

[@sbain844]

@@MilkshakesPod Interesting comment, thanks for the reply - I'll have to think about it. My initial instinct is that it is not about the high external demand for dollars, but more about how high that demand is relative to how high it has previously been. Everything in economics happens at the margin. Also, if I'm right about the newly printed money, it will be used to fund ever increasing amounts of government spending, and that is indeed the classic recipe for hyperinflation. If I'm wrong in this, I imagine that I'm wrong in a similar way to many other viewers, and I imagine that we would all really appreciate a video that really debunks my argument. That's just a thought though, I know your a busy man. Thanks again, Steve

[@sbain844]

@@MilkshakesPod I've thought more about this - particularly about the nature of the printed money. I understand that commercial banks create loans, and I understand that the Fed issues treasuries, but in the near future I see the Fed monetizing the debt in order to fund ever-increasing government spending, and to head off a liquidity crisis in the banking sector. For one thing, with the national debt being rolled over onto T-Bills instead of bonds, what happens when all/most of that rollover is complete? New issuance of T-Bills would need to approach $3 trillion per month! Who will buy all that debt? It won't come via the Yen carry-trade, that seems likely to end, and existing positions in that trade are in deep trouble. If the Fed tries to sell bonds, they'll need to offer a more attractive interest rate and that would again create a liquidity crisis. I think we are fast approaching the point where the Fed will need to monetize the debt to keep things from collapsing, so the printed money won't take the form of loans, it will take the form of new currency, sometimes referred to as hot money due to its highly inflationary nature.

[@karuonline3294]

​@@sbain844the Fed doesn't issue treasuries

[@sbain844]

@@karuonline3294 It's a distinction without a difference, but if you wish to pedantic then okay, they are issued by the Treasury department to be sold by the Fed onto the open market.

[@kandismueller830]

Thank you. As an old lady on a fixed income, I find your words comforting.

[@masonsteed7835]

Sounds like a fun summer trip. Glad to see you doing well my man!

[@Cedartreetechnologies]

Thanks for keeping with this channel, Brent. Great content.

[@afkhanop]

As always, clear, concise, and consistent.

[@buckrogers8672]

This was a high level presentation

[@PemmieM]

Great episode Brent! Keep the show going

[@Cindy-jl6tt]

Thank you again Brent :) You are much appreciated :)

[@deineintube]

Good production, great content clarity.

[@revpgesqredux]

Every video I can appreciate your nuance more... Although I knew right away that you and Jon were bringing excellent and nuanced analyses

[@TheMartinmarty]

auspicious, awesome, succinct and simplified explanation ... Many Many thanks and bless you Brent! from Far east fan.

[@Lights_Darks]

Thanks, Brent. Very helpful!

[@NWCalvank]

Probably the best podcast episode you've done, imho. I felt like I listened for months on end without any takeaways, but this one had substance I like this format. Thanks for keeping it going, Brent

[@josefwsteinerify]

Great job, Brent is the best IMHO!

[@AllNighterHeider]

Its clear, from the various times meeting you, that you are a genuinely good dude. You and your work are very appreciated Brent. Thank you sir

[@c2plex]

Good stuff Brent, thanks for the info!

[@markz.5891]

Nice work young man.

[@pearlperlitavenegas2023]

John & Jane Doe APPRECIATE this channel!!!💯👍

[@pauldichtel6410]

Short & sweet! A good summary with some explanation of why dedollarization can lead to a strengthening dollar.

[@MacroMama]

Thank you, Brent! Always appreciate your insight especially during such “bumpy” times in the world!

[@dbtoney1]

Thank you for channel. I'm not getting alerts when you post eventhough I'm subscribed. but I went and searched for an update.

[@marketrooper6473]

This was so so so good! I can't follow everything 100% but 70% yes and I'm learning so much. Thanks for these videos Brent!!! They're so insightful

[@sageknoll3285]

Great title for the show. And the content delivered. I’m looking forward to the Masterclass!

[@Jimmy-MUFC]

Thanks Brent. This video would have saved me from months of research. I'm just a naive rookie who would watch this over and over again.

[@Венцислав-р9д]

That was great! Thank you, Brent!

[@jantarai362]

Always waiting your show love to hear from you

[@smithbrady6173]

Very nice, understandable presentation, thankyou !!

[@michaelc7302]

thanks Brent!

[@rylanshearn5280]

Very good thoughts, they also match with the long term seasonality of September being a down month followed by uptober.

[@yakovgoldberg7108]

thanks

[@johnny_blades]

Brilliant! ...thanks 🙂

[@stoneyj1a1]

If they cut now, its political to help Kamala. Growth is strong, inflation is still high above target, job market still tight, housing still inflationary, M2 is growing again. We have a few weeks to see if the Fed is truly unbiased or not.

[@billjames9945]

@stoneyj1a1 your logic doesnt make any sense. If everything you said is true, than cutting rates wont help Kamala. If the economy is truly strong then a cut isn’t necessary and thus won’t help her. If anything, that would hurt her because it would add inflationary pressures right before the election when inflation is one of the biggest headaches for the Kamala campaign.

[@sethmiller5414]

Great content. Thank you

[@yeliangarcia4623]

I've been to St Barts twice and would love nothing more than to return at some point and meet Hugh on the island!

[@rodrigoeugenio8283]

Thank you!!

[@markhow4266]

Excellent info. Thanks

[@insomniactravels6185]

Excellent explanation of everything, as usual. Been following you for a long time and will continue to do. Miss having you being a resident of the SF Bay area, tho... 🙂

[@RichardSKLim]

No one explains our monetary system and how it works, better than Brent Johnson.

[@ghostloadgg]

thank you brent appreciate your thoughts

[@charlescartwright3145]

Thanks 💼💰 Brent much gratitude

[@shakeyspizza01]

Nice Program

[@harryharry3193]

BETTER by yourself.

[@buckrogers8672]

Agreed

[@jonvonderhaar7060]

Thanks for that presentation. I have a topic or question if you think it would be helpful and that is if dollars start or continue to come back to the US and in particular investments, it would seem like there is less demand for dollars in the rest of the world, i.e., there are fewer investment opportunities in the ROTW and fewer dollars are circulating. Can you comment on this?

[@louiswoodhill9437]

Bank reserves are not the same THING today that they were before the Fed started paying "interest on reserves" on October 7, 2008. Now what matters with respect to money creation by banks is not the amount of reserves, but the relationship between the IORB rate and the 3-month UST rate. This is because banks create the marginal USD by buying USTs, not by making loans. Right now the 3M UST-IORB spread is -0.27 PP, which is the most negative that it has been since the -0.33 PP of March 2020, when the country was entering a violent monetary deflation. The Fed would need to cut its FF and IORB targets by at least 50 bp to move the 3M UST-IORB spread into positive territory (and that assumes that their action did not produce a corresponding fall in the 3-month UST rate). The commencement of IORB in 4Q 2008 was a catastrophic error that paralyzed the Fed's monetary control system and produced the most violent quarter-over-quarter monetary deflation in all of U.S. history (to find the second worst, you have to go back to 1782). The Fed should phase out IORB and shift to targeting and stabilizing general commodity prices rather than interest rates. Targeting an interest rate yields a system governed by one equation with two unknowns. Such a system is indeterminate and therefore prone to running away into inflation or deflation/recession. In contrast, targeting general commodity prices would yield a determinate system, stable money, stable financial markets, and a stable economy.

[@nancycampbell1314]

I agree with you here that the system has changed and I have brought this point up with GG several times with no satisfactory response. I’m hoping Brent might read your comment and respond regarding both the changed system and the fact that through regs banks have been financially disincentivized to lend (balance sheet expensive) and private credit has expanded to fill this role and is quite robust. This has been an unaddressed question I have had on this theory shared by Brent and GG that I would love to have Brent’s thoughts on. Thanks for articulating this issue well.

[@WarrenRoddy]

This is your best description of the Milkshake Theory.

[@WalkingTemple-ws2si]

I'm wondering if I should buy some gold now or wait until there is a stock market correction? Is this a good time to get positioned in gold?

[@adicostea]

nice & interesting. I would be curious to understand what bank reserves are

[@kkay1961]

Great show thank you.

[@tylerstevensx]

When you say “there’s more US dollar debt outside the US than inside the US”, are you referring to all the bricks countries too?

[@jeffb4515]

What are some good hedges to prepare for rate cuts?

[@holycameltoe124]

I laughed at the title and then I saw it was you now I’m shocked and listening closely.

[@jonathanlee5185]

Thanks 👍

[@normal_norm2627]

So Brent. Will the USD go higher when it's being hyperinflated away or will it go lower? There's only 2 paths forward, massive deflation or hyperinflation, right? So if / when we get to the point where US citizens start buying up hard assets because the dollar is inflating away, will the dollar go UP or DOWN.?

[@revpgesqredux]

SO, how right, if any, am I to say that you can't dedollarize without deleveraging OR defaulting.

[@revpgesqredux]

And if I am right.... Or to the extent I am right... Does defaulting break down into two pieces: war with the non-nato world, and the great reset with the peasants of the NATO world??

[@revpgesqredux]

In extremis, ultimately, I mean??

[@mattbittner775]

👍

[@dankienzle5240]

Gaping holes in this guys understanding: the concepts of hyperinflation, fiscal dominance and government spending

[@mcrider95466]

Best video ever, in my opinion. Agree 100% with Mr 🥛 shake.

[@ats89117]

When you talked about the process of how hedge fund managers pick ideas to pursue, you kind of skipped the first step, i.e. how well have hedge funds done over the years relative to other trading strategies?

[@simondennison8499]

Good podcast, although I don’t get how non-monetary commodities are 2nd to last behind real estate in the pyramid. I think they should be around listed stocks - they are more cash-like

[@masonsteed7835]

I noticed our national debt is now actually greater than money supply measured by M2. I know m2 is not a full measure of dollar supply, but is there anything of substance here or is this just an eye popping stat? Also is it incorrect to think that the national debt could become a lead for future M2? I assume they would have to have that dollar supply to pay off that debt level at some point. These two datapoints overlay nicely on FRED

[@billwkr2869]

Nice

[@dwdwone]

By paper money, I'm assuming you mean in hand or inside a mattress aa opposed to in the bank?

[@dougberman9076]

I know you're a smart guy but whenever I listen to you (or read your postings) I end up more perplexed than I was beforehand.

[@TwoDollarGararge]

That's most economist unless it's ugga booga big by asset my fund buys.

[@jimmyolsenblues]

❤❤❤❤❤❤❤❤❤❤❤❤

[@bob89]

If the dollar drops, won’t that make oil go higher (or at least stay elevated)?

[@georgetau3044]

Serious question what happens to people who are not invested in the stock market how do they survive in this ponzi economy?

[@Erikpdx]

"I thought today we'd talk a little more about the dollar" - every episode 😅 i was hoping to hear why you think the market would have a correction before the next Fed meeting

[@kartikpareek-nn4fb]

Brent you know what You don’t have to do this, But you do! Also it’s not a service to the public, it’s just something that you like to do. Some ex junkie who is recovering and focusing on CFA exam, you have no fucking clue how much you have contributed to my life You, Peter, Mike, George, Jeff, Lynn and sometimes Erik Townsend But boy you and Peter I love you too, and one day I’d be wealthy enough to afford to meet with you guys P.S. imma take peters side and grill him too

[@stephenlaurence8650]

What about creating Government (central and local) fiscal deficits debt-free spent into the economy and employment for positive outcomes with no claim on it in the future. Commercial banks can still use fractional reserve lending as long as deposits have security. I believe all new money does not have to be created as DEBT!

[@vlcheish]

5:05 "there was an attendee there who shall rename nameless uh but super super smart guy" Was it Roaring Kitty?

[@CyanAblaze]

the base money vs. non base supply distinction is an old fashioned view. base money doesnt prop up the rest of money. base money is insignificant and the flow of digital ledger entries sustains its own value. the real "base money" would be the sum of the best collateral.

[@mr.q8023]

You haven't been posting on Apple Podcasts since Aug 5th

[@mark_zettel]

What is the Macro Alchemist? (newbie)

[@josephlim8941]

So markets will roll over in next days ahead, Sept meeting cuts 50bpts, markets rally two days and then roll over hard. But you said the markets will recover by end of sept cause it’s a good buying (risk assets). Is this the end of the supposed crash and we’re back to a bull market for another 10 years. Typically, when rate cuts happened, markets lose up to 50%. So I should be saving my cash until end of sept when markets lose 35-50% and then V shape rebound immediately. Why buy gold?

[@zenzenzenx]

Many thx for the explanation. Finally got a good handle on Milkshake Theory, the USD and relationships to markets. Phew, that's a good 5 yrs since I first listened to this theory. Slowly the SYSTEM is becoming clearer. Looking back, I got on the dollar-demise bandwagon on some videos showing the fractional reserve system, schilling gold bullion as the only hard money asset. Recent times there have been many de-dollarization pundits, apparently having surface level spin of the system. What is clear, even as the drifting multipolar world that's evolving; I finally am of the view the dollar is not unravelling anytime soon. The SYSTEM is huge and complex with extreme interdependencies. Even the camp on other side, the BRICS etc will not want the dollar to unravel. They themselves lose a lot in such a situation. Moreover there is no alternative mature enough to take over. So the journey continues, with pretty dramatic bursts of bubbles here and there.

[@vktravellog1242]

What happens if all the loans default?

[@igors615]

It will be funny time when DXY goes up along with gold. Last chance for people to get enough gold.

[@brettr2123]

Brent, how does it factor in having the U.S and the E.U confiscate western denominated money from Russia? It seems like over the medium and long term that could cause a recalibration of reserve assets amongst non Western nations.

[@teragaga]

So well explained, clear, calm concise. Thank you !!! 💯

[@randyromano2854]

The dollar doesn't need to rise to de-dollarize: Everyone just pays off their balance as they are doing now while not taking dollar-denominated loans.

[@clffeingold]

Makes sense that the dollar debt is a major factor. But if the US can steal Russian FX reserves, why can’t other countries decide to default on their dollar debt as they transition to the BRICS Unit?

[@JasonAlberty_v2.0]

If an African country has many natural resources attached to much dollar debt, do they really need dollars first to payoff? Why would these countries simply not walk away? They still have the actual assets at the end of the day.

[@xyz1663]

If u owe dollars… u need to pay dollars. U can’t pay back the loan with any other currency. They need to go and acquire dollars to make dollar payments.