Bankless - How the Stablecoin Milkshake will Redollarize the World | Brent Johnson

Episode Date: January 5, 2026

Brent Johnson returns to Bankless to update the Dollar Milkshake Theory and explain why the de-dollarization narrative misses the bigger trend. He argues markets may want out of the dollar, but the Eurodollar system keeps pulling demand back in, and “dollar down” headlines do not break the framework. Brent also covers how debt stress can spill into political instability, why stablecoins and the GENIUS Act could accelerate re-dollarization, and what this means for monetary sovereignty. We close with China’s counter-strategy and how Brent thinks about positioning from here. --- 📣SPOTIFY PREMIUM RSS FEED | USE CODE: SPOTIFY24 https://bankless.cc/spotify-premium --- 👑BANKLESS PREMIUM | AD-FREE & BONUS EPISODES https://bankless.cc/spotify-premium 🎯THE DEFI REPORT | ONCHAIN INSIGHTS https://bankless.cc/the-defi-report 💰ICO WATCH | UPCOMING PUBLIC TOKEN SALES https://bankless.cc/ico-watch --- TIMESTAMPS 0:00 Intro 1:20 De-Dollarizing vs Re-Dollarizing: Milkshake Recap 4:18 What a Sovereign Debt Crisis Actually Means 5:45 Central Banks as “Professional Can-Kickers” 8:56 Can They Slowly Let the Air Out? 11:03 Can AI Productivity Save the System? 13:06 2025 Setup: The Narrative for Dedollarization 18:06 BRICS: Conference Talk vs Structural Reality 23:37 Store of Value vs Medium of Exchange 34:24 “Crisis = Dollar Up” (and the April Exception) 39:06 Stablecoin Redollarization and the GENIUS Act 47:20 Monetary Sovereignty, Faster Bank Runs, Faster Dollarization 52:34 China’s Response: Two Currency Stacks 54:21 Positioning as an Investor --- RESOURCES Brent Johnson https://x.com/SantiagoAuFund The Dollar Milkshake Theory https://research.santiagocapital.com/p/the-dollar-milkshake --- Not financial or tax advice. See our investment disclosures here: https://www.bankless.com/disclosures

There is no question that there is a quote unquote desire for de-dollarization. The United States' ability to use the dollar as the global reserve currency has bestowed upon them this exorbitant privilege, right? And it is true. It's basically global seniorage, and which is the ability to print money for anything you want, if you want to get real simple about it. And as a result, that has engendered a number a lot of hate against the United States' ability to do this. Because the whole world uses the dollar when they operate on the global stage, the United States can then use the dollar to influence the economic outcomes of other countries. And there's a number of other countries that don't like that.

So there's a great desire to get out from underneath the thumb or however you want to define, you know, the dollar is a global reserve currency. But the ability to actually do it is dramatically different than the desire to do it. Brent Johnson is the founder of Santiago Capital. He's the creator of the Dollar Milkshake Theory. He last appeared on Bankless. Oh my God, almost five years ago. I can't believe we've been doing this podcast so long. It's crazy we get to say that as a time reference.

Brent, welcome to Bankless. Thanks for having me back. All right, first question. It's a high level, but I think it's the subject of the episode. Are we De-dollarizing or are we re-dollarizing? Well, I think individuals and perhaps certain entities may be de-dollarizing. but on an overall basis, I believe we are in the process of dollarizing. You were the father of the dollar milkshake theory.

That's what we covered in our episode five years ago. Can you recap what that idea was in 2021 and how it played out? Sure. So essentially the dollar milkshake theory was really a framework for how I thought a sovereign debt crisis would affect markets and asset classes. You know, at the time, interest rates were extremely low and had been trending down for 40 years. The debts had been trending higher for 40 years. And I thought we were at a place where the consequences of all that debt would come to four as interest rates for the first time and a long time started to rise. And so the prediction was that interest rates would rise. That would cause the U.S. dollar to rise because the whole world has so much U.S. dollar debt, that would cause a lot of volatility.

it would lead to a sovereign debt crisis, and ultimately you would see U.S. assets outperform the rest of the world because on a relative basis, it still had the best market structure, deepest capital markets, etc., etc. And so I thought the U.S. dollar would go higher. I thought U.S. assets, specifically U.S. equities would go higher, and I thought gold would go higher. And that's essentially what has played out from a directional standpoint,

but we never got the crisis. So it's one of those things where I'm happy we didn't get the crisis. You know, my life is better if we don't have a crisis. I don't, you know, sit here praying for the world to fall apart. But I think markets are structured in a way that you can't completely take that off the table. And so while the thesis perhaps didn't play out perfectly, it played out pretty well and has allowed me to, you know, kind of skate along these crazy markets for the last four or five years and kind of understand what was going on. on and why? As you think back to it, why didn't we get that crisis? Well, I think it ultimately comes down to the fact that governments and central banks are really powerful. You know, we like to

think of them as a bunch of clowns and idiots who couldn't manage their way out of a paper bag, yet here we are, right? And I think when we automatically dismiss their capabilities, we do ourselves a disservice. Perhaps they're misguided, perhaps they're arrogant, and perhaps they believe too strongly in their own abilities, but these are not stupid people. And I think, you know, perhaps they have a greater ability to manage things than we like to give them credit for. And I think ultimately that is what has happened. They've been able to keep the plate spinning, kick the can down the road, and here we are. There's always the addendum of so far.

So far they've been able to do that. That's right. When you were imagining a crisis, what type of crisis did you have in mind? Is this sort of a sovereign debt crisis where, like, get into the particulars of that because I think people use that word and they mean different things often when they talk about debt crises. Sure. So essentially a sovereign debt crisis is when interest rates start to rise in a way that the government or the political system in that jurisdiction can no longer maintain control. And as the rest of the world or whoever it is starts to, or even the local citizens start to reject the local bond market, the currency is not far behind. and you get into a situation where, you know, a sovereign debt crisis becomes a currency crisis.

And if you look back throughout history, currency crisis eventually become political crisis, because if you can't control the money in your jurisdiction, your administration is not going to last very long. And so, you know, in the past, when we've seen sovereign debt crisis and currency crisis, it hasn't been too long before the government fell and, you know, was replaced by either a new local one, or some kind of a cobbled together consortium of the preexisting parties. But long story short, is political, political crises and currency crisis often go hand in hand. As you kind of said, the kicking of the can down the road is something that we've just been watching the Fed do.

I remember in 2021, as you alluded to, we were all kind of just poking fun at the Fed. It's like, man, they're such idiots, zero interest rates for so incredibly long, distorting money. Oh, wait, no, they're whipsawing us into the highest interest rates in 30 years. And then the story of the last two years is like they had this narrow line to walk between inflation and unemployment to not get us into a recession. And seemingly they did that. They successfully kicked the can down the road. And so maybe they're just professional can kickers. And that's just what they're good at doing.

My question is you, Brent, is do you think that that makes the, what I think what I understand from your opinion is that the crisis is nonetheless inevitable? Do you think that that makes the crisis worse and more cute? Or do you think the fact that they are buying the time, they're able to diffuse the crisis, the inevitable crisis, across time? Do you think the crisis gets worse or better the longer they can save it off? Well, ultimately, I think it gets worse. And to your point, this is mathematical. It is a mathematical certainty that we will have a crisis. And the reason is because of the design of our monetary system is one in which money is loaned into existence.

And without getting in too far into the weeds of how this works, a system that loans money into existence has to grow because loans have interest attached to it. And so there's never, ever enough money to pay off all the loans plus the interest. And so you need a constant circulation of the currency. If that currency stops circulating, or in other words, people stay home, they sit, they put their money into their mattress and they sit on it, that leads to a credit contraction. And so, you know, this, it's funny that you ask or you say that that's what they are, their professional can kickers. And in reality, that is what their job is.

The primary role of any central bank, regardless of what it says on their website, regardless of what you were taught at business school, the primary role of every central bank is the perpetuation of the state. They are the lender of last resort. They are to come in, because, again, we're in this debt-based monetary system. when the debt stops moving or when the money stops moving, they have to step in. And their job is to step in and kick the problem down the road. So you have it exactly right.

Now, it's never expressed that way professionally, but that is ultimately what their job is. Hey, Bankless Nation, it's David. If you're hearing this, that's because you are listening to the free Bankless podcast feed. Did you know that there is a premium bankless RSS feed? The premium feed has extra interviews that I do for my own personal research and just deeper questions that I want answers.

about the crypto industry, questions that I want to answer so I can be more informed as an investor, both at Bankless Ventures and also just in my own personal portfolio too. Also, there are no ads, which means if you listen to the premium feed instead of the free feed, you'll get about 20 hours of your life back every year because you choose to support Bankless directly. So if you're interested in getting extra content all while skipping the ads, or you just appreciate what we do here and want us to keep doing it, we'd appreciate it if you signed up for Bankless Premium. And there is a link in the show notes to get started. Cheers to a good 2026. think they can, instead of a crisis, do you think they can just let the air out of the tire in a more

gradual fashion? We've had people like Lynn Alden on bank lists a couple of times before, and she goes back to kind of the 1940s, right? And the way the U.S. got through its massive debt problems was basically like devaluing bonds, devaluing the dollar over time. But it didn't culminate in a massive credit crisis, like the one that you're talking about, or is that encompassed in your idea of a crisis, like sort of the more gradual letting air out of the tire idea? Well, I think they can let a little air out of the tire for short periods of time,

but what they cannot do is over a 20-year period just kind of slowly unwind to this thing. That, I guess, nothing is ever impossible, but that is extremely unlikely. And the reason is, because, again, the design of the system, it mandates growth. And if you don't get the growth, all of a sudden you get these shocks from a credit perspective. And when the credit starts to contract too quickly, then you get in a situation where they are not only trying to plug the hole, but they have to plug it in such a way that it starts growing again.

And that, when you hear about central banks printing money, again, this gets a little technical and we could probably have a whole debate on whether or not, you know, the creation of bank reserves is actually creating money or not. But the point is, is that they have to keep it from contracting and do it in a way that not only stops the contraction, but then starts it to expand again. Again, it's kind of a systems level problem. The design of the system mandates that it is this way. So you can have short periods of time where the machine acts counter to what its design is supposed to do, but it can't operate counter to its design forever without having a big blow up. Well, what about it? What about the idea that we can grow our way out of this?

So AI is on the horizon, U.S. leads kind of capital markets. What if we push from the 2% GDP growth, get to something like 3%?000. or four percent. What numbers are really necessary? There is a way mathematically to grow away out of this problem. Sure. What numbers are we talking about? And is that a possibility? Well, no, if you can grow at three, four, five percent a year every year and the economy expands and as a result, the credit within that economy expands, this can go on for a very long time. And this is why I always, I always say, listen, I think that we will inevitably have a crisis, but I don't know for sure when it will happen, right? What I do know is that if you start with a number and you increase that

number every year forever, you eventually will get an exponential curve that goes straight up. And everybody knows from a mathematical perspective, exponential curves either continue going up or they crash. They don't level off, right? But the timing of which this happens, you know, I don't know. And so, but to your point, if we have some kind of productivity boom, whether it's due to some new technology, some new energy source, perhaps it's AI, perhaps they do universal basic income, which solves some short-term problems while creating long-term funds. Perhaps they can, you know, kick this thing down another five, 10, 15, 20 years. I don't know for sure, but what I do know is that the system must expand in order to survive.

And I think those who continually bet against the central bank's ability to kick the can down the road, Again, I think they're doing themselves a disfavor. I'm not saying you have to ascribe to them fantastic powers and the impossibility of messing up. I think they've proven that they mess up quite often. But I also think we can, if you've been constantly calling for a crisis every year for the last 20 years, perhaps step back and realize they're a little bit better at their jobs than you would like them to be.

So largely, as you point out, and I think it's very much true, Brent, you were right. as far as the direction of travel. I mean, U.S. capital markets have overperformed just about everything else in the world. The dollar has been a wrecking ball. The dollar did drink the milkshake of other reserve currencies of the world since 2021. When you first started to popularize that idea, let's talk about the setup now in 2025. People are saying that has started to reverse. We saw in the first half of 2025, the dollar was down 10%.

people once again are saying, okay, the reserve currency power of the dollar is over. We've got a different dynamic too. We have Fed rates going down. I suppose when you came on in 2021, they were beginning their assent up. Yeah, I think it was around that time. The case for de-dollarization, also from a narrative perspective, seems maybe stronger. And again, this is just from a narrative perspective, but we've got tariffs. We've got world, the world right now is so over-indexed. to U.S. capital markets. You wonder whether there would be a reversion to the mean here. We're at like 70% of all equities are U.S. dominated.

And historically, this never been, it hasn't really been that high. You've got property rights issues. I'd put in this category sanctions, the sanctions against Russia, where we went over and basically seized their d-bills. We seized their treasuries. That was pretty unprecedented. We've got fraying alliances the world over,

Like, where is the European American security lines these days? We've got political instability in various pockets of the world, including the U.S. We've got gold prices even going up. All of these people point to and they say these are indicators that the dollar is dying, that the world is de-dollarizing, not just in pockets, but from a global perspective. What do you make of our current setup in 2025? Well, I think a couple things. Number one, there's no question that there is a quote unquote desire.

for de-dollarization. The United States' ability to use the dollar as the global reserve currency has bestowed upon them this extravagant pleasure or whatever, however, whatever the right term is, you know, exorbitant privilege. Exorbitant privilege, right? And it is true.

It's basically global seniorage and which is the ability to print money for anything you want, if you want to get real simple about it. And as a result, that has engendered a number a lot of hate against the United States' ability to do this. And so there is, and because the whole world uses the dollar when they operate on the global stage, the United States can then use the dollar to influence the economic outcomes of other countries. And there's a number of other

countries that don't like that. So there's great desire to get out from underneath the thumb or however you want to define, you know, the dollar is a global reserve currency. But, The ability to actually do it is dramatically different than the desire to do it. And the reality is that the U.S. dollar network or the euro dollar network, that's the network for dollars and dollar-based transactions that exist outside the United States, it's the biggest network in history. And while it's easy to say we're going to leave this and go do something else, it's extremely hard to actually do it.

I would argue that the United, or that the world is more dependent upon dollars today than it ever has been in the past. The euro dollar market is bigger today than it ever has been in the past. The ability for countries to successfully leave the euro dollar market without economic punishment as a result, I would say is higher than it has ever been. And people will then point to things like China and Russia and the fact that they are doing some transactions, you know, outside the dollar and just amongst local currencies with each other. There is true to that. There's no question that they are trying to do that, but by and large, the Eurodollar network is still the preferred means of trade. And it's much different when China and Russia try to do something than when

Sri Lanka tries to do something or Turkey tries to do something or, you know, Bolivia tries to do something. And so, you know, to hold China and Russia up as perfect examples of the ability to de-dollarize is, I think, to misunderstand the overall problem and the size of the of the, of the issue. So I think there's a lot made about the de-dollarization from a narrative perspective, and it is a popular narrative, but from an actual implemented material change, I think there's been very little de-dollarization that has gone on. Of those arguments that the dollar bears make, which is the strongest to you? The biggest argument is that there are, let's just use the bricks as an example because that's the most popular one. I mean, these are real economies with real resources.

They make up a large percent of the world's population. And so the idea that the United States can just ignore those countries, that's also wrong. It's not that we can just ignore them. It's not that they're not important. It's not that they don't have economic power. They absolutely do. And so if those countries ever actually did get together and really work together in a cohesive manner and accept the pain that would come along with de-dollarization and say no matter what happens, no matter how hard the economic blowback is, we are going to do this, then that would be an argument or a situation that the United States would have to take notice of. But I just don't, again, I think they're very good at going to conferences every year

and say we are going to one day in the future do this. But they've been saying the exact same thing for 15 years, and they've never actually done anything or not much of a material consequence. And part of the reason that they haven't is that the dollar network is that the dollar network is the preferred method of private businesses all over the world. In other words, the United States didn't go to the world after World War II and say you have to use the U.S. dollar on an international basis. The dollar was the global reserve currency, but nobody said that China and Turkey have to trade with each other using dollars. Nobody said Japan and the Philippines need to use dollars

when they're trading amongst themselves. But the private market did it because it was the fastest. cheapest. It was the most efficient and it was the most commonly used form of money on the global stage. And so it was a private market solution to the problem. And so when you now have politicians on the top trying to say, we are going to do something different, the private market has long ago rejected the idea of doing it that way. Now, that's not to say that these countries and their political systems are not powerful and that they could not impose certain requirements or regulations on the businesses within those jurisdictions. But it's, again, it's not as easy as and efficient as just saying, we are no longer going to use dollars and we're now going to use rubles or

reaos or whatever it is. To get everybody in that transaction and that supply chain to agree to new terms is a huge, huge undertaking. And one that largely, again, the market has already solved. So it's In many ways, it's a government and politicians trying to solve a problem that doesn't exist. Do we even know if, for example, China even wants this, wants the trade and just the rest of the world to denominate in the UN? Because maybe it seems like, oh, well, they probably want what we have because we have it and it's pretty cool for us. It's called an exorbitant privilege. Why wouldn't they want that? But at the same time, we know that China actively discourages, like, overconsumption domestically.

Like they don't really want to have their populace be consumers. They want their populace to kind of have like grit and to work hard and not to have growth via consumption, which goes to, which kind of just tells me that they don't exactly want the same things that we have. So do we even know if China wants the yen to be like some sort of economic epicenter in the same way that the dollar is? So I think it's a pretty good question. I don't know that they necessarily want it the same way that the dollar is. But one thing I would say is having the exorbitant privilege or having the global reserve currency, it is like having the one ring of power. Having the global reserve currency bestows so much power to that jurisdiction that it's really hard to imagine a politician who tends to be power hungry to begin with saying, I don't want that. And the other thing I would say is that all of these countries who are critical of the way the United States,

uses the dollar as a weapon, for lack of a better way of saying it, they all use the exact same methods that the United States uses on a global basis. They use it domestically on their citizens. All of these countries operate fiat currency systems. All of these countries have central banks that loan money into existence. All of these central banks devalue their currency over time. The fiat currency loses value over time. So the idea that they're very happy to do it against their own citizens, but they're not, would not be willing to do it to another country. To me, doesn't make a lot of sense. But that doesn't necessarily mean that they necessarily, you know, want to replace the euro dollar system with their currency overnight either. I think there's

perhaps, again, we get back to desire versus ability, right? It's very easy to say, it's very easy for me to say, I don't want to play on the PGA tour when I don't have the ability to play on the PGA tour, right? Now, if I was the greatest golfer in the world, right? Now, if I was the greatest golfer in the though, it might be a little different. I might be showing up at Augusta wanting to play in the masters. So again, ability and interest are two different things. Okay, let's sharpen that a little bit different and take the point that ability to get away from the dollar versus interest, which is maybe high in getting away from the dollar. These are two different things. There might be an area where countries have a greater ability in terms of a key function of money

or a key function of the dollar, right? So economists generally think of a monetary instrument as having store of value, unit of account, medium of exchange. What if it's the case that the network effect of the dollar for medium of exchange and unit of account is very high? But store of value, at least store of value growth moving forward, maybe that's less of a network effect, or at least the marginal store of value increase

has less of a network effect lock-in. And this seems somewhat intuitive if you consider, okay, central banks have balance sheets. All of the brick countries have balance sheets in central banks. The question of what do they purchase or what is their portfolio, their reserve asset portfolio, is an outstanding question that I imagine they have to address on some regular cadence. And they could choose to purchase treasuries and U.S. bonds, or they could choose to purchase other store-value monetary assets. And we have seen gold appreciate a massive amount over the past year since 2021, including in 2025 this year. And some people have looked at charts and they say, well,

if you look at kind of gold appreciation and you look at the 2022 Russia sanctions, starts appreciating right after those sanctions. Maybe the brick countries are looking at what happened with the sanctions, let's say, and marginally deciding that they want less true. Treasuries moving forward and more gold, a store of value that the U.S. can't censor or seize or freeze. What do you think of that? Maybe on the edges, in the store of value use case, the value of, or the dollar network effects are fraying at some level. Do you think that's an argument? Yeah. So, so first of all, yes. The short answer is yes. And that, if you think about what the milkshake theory said, it's part of it. Because what I said at the, the time was the dollar and gold will rise together versus all other Fiat currencies. What you have to remember about the currency market is it's a relative gain. As one rises,

it falls versus another one. So the fact that the dollar can outperform all other Fiat currencies, yet still lose purchasing power on an overall basis. And that's, and so I think that is definitely possible that. And if you go, again, if you go back to the idea originally where I that interest rates were rise and we would have sovereign bonds be rejected, or in other words, they would not be bought to the same extent as they previous were. That is kind of what happens in a sovereign debt crisis. Sovereign bonds are not bought to the same extent they were. Governments or individuals or institutions choose to buy something else other than sovereign bonds as a store of value, as the currency loses value. So I think we've seen that play out,

and I would expect that to kind of continue to play out. But what I don't think we will see, I don't think we will see a situation where the rest of the world decides to buy gold and euros and yen and yuan versus the dollar. They may choose not to buy any fiat currency or any sovereign bonds at all, but I don't think they're going to choose to buy Chinese sovereign bonds or European sovereign bonds or African sovereign bonds over U.S. treasuries. The other thing I would say is I find it to maybe amusing is the right word to use is that it started off that the dollar is going to die. Well, then the dollar is not going to die, but the dollar is going to lose global reserve currency status. Well, maybe it's not going to lose global reserve currency status, but it's going to lose global reserve asset status. And so I think everybody so badly wants the U.S. or the U.S. dollar to, quote, unquote,

fail in some form or another that every time it doesn't quite work out the way they thought it was going to previously, they come up with a new way to define its failure. And the reality is, is that for all of the problems that the dollar has and for all of the problems that the United States has, which they are legion, we could spend 10 hours going over all of these, on a relative basis, the dollar in the U.S. still looks pretty good versus any other choice in the world, at least from a fiat currency perspective or from a government perspective. Now, that doesn't change the fact that I think we will see these things like hard assets, whether that's gold. whether it's, you know, copper, whether it's other, you know, perhaps, perhaps Bitcoin plays a role. I think there will be continued awakening that fiat currency loses value and it's not necessarily a great long-term store value. And so other assets will become reserves as opposed to the traditional of just buying sovereign bonds. So to make that prediction concrete, because another way I have seen the dollar bears maybe goal post move,

to your point is to shorten the time window and they'll say, Brent, look at this year, look at 2025, the dollar is down 10%. Do you expect that to continue or do you expect the dollar to regain that ground? So it depends on timing. So I have not changed my opinion that this will ultimately end

in the US dollar going much higher versus the other fiat currency. So again, to your point of a timeline, when I first started talking about this was 2018, and the DXY, the dollar index, was at 89 at the time. And now it's at 98 or 99, so it's 10% higher. And yet everybody thinks it's debt or it's going to die, right? It's 10% higher than when I first started talking about it,

but everybody thinks that it's last, you know, this is it. This is finally at where it's actually going to finally, you know, get destroyed. But I don't know over the very short term. I could easily see the DXY go back to 96, 97, 95. I mean, that could happen in a couple of weeks. But ultimately, the way I think that this will play out is that the dollar will go higher. And the reason, not because the dollar is so great, but because so many other parts of the world are in trouble. China continues to deal with an incredible debt deflation as a result of their over-leveraged real estate market.

Europe has an incredible amount of problems now with their declining industry. and the fact that they're going to have to pay for their own defense going forward that they haven't had to historically. So China is going to have to print yuan. You know, Europe's going to have to print the euro. You know, Japan will inevitably have to print more yen because, you know, they just don't have enough growth to support what they're doing. So even if the U.S. prints more dollars on a relative basis if the rest of the world is printing as well, I think ultimately we get into a scenario where the dollar rises versus foreign currencies. Now, whether that happens in the next six weeks or the next six years, I'm not smart enough to know that. But I do not worry about the dollar going lower. If the dollar goes lower, that tends to signify that liquidity is plentiful, that credit is being expended, and that asset prices are probably rising.

What causes volatility, what causes me to worry is if the dollar starts to rise. Because when the dollar starts to rise, it puts pressure on the whole world. and when pressure starts to build up, inevitably something breaks. So that's kind of the way I think about it. When we talk about people who think the dollar's dead, dollar's finally dead, dollars going to zero versus the fact that the Dixie is up 10% in that time frame, aren't we kind of conflating two different things? Because there's dollars versus other fiat currencies, you know,

and like the dollar is the worst currency except for all the other. And then there's dollars versus a basket of goods, you know, a steak, food, gasoline, housing. and I think like it's I think you know the average listener myself will say oh yeah the dollar is trending towards zero versus all of the stuff that I need to buy in order to live but it's going up versus other fiat currencies which are just going to zero faster so aren't there two separate conversations here there's the dollar is the best fiat currency to own and hold bonds in but it's still not what I want to hold because it's not going up versus like any other investment asset that I'm going to hold correct Yeah, that's correct. And so again, you know, the dollar milkshake theory, just so we're clear in case anybody is kind of new to this, the theory was never that you should hold on to a bunch of dollars and just sit there and wait for them to go higher. But what it does say is that certain assets will perform a certain way based on the fact that the dollar will rise versus other foreign currencies. And the simple fact is if you look back at every crisis for the last 30 years, a global financial crisis of some kind or another, it has always coincided with the dollar going higher. Again, the dollar going lower versus other fiat currencies is not something to worry about, really, from a market's perspective. But whenever we get into some kind of a crisis,

the dollar goes higher. And what I would say to your, so, because all fiat currency loses value over time, that is one of the reasons that we invest. It's one of the reasons we have a stock portfolio. It's one of the reasons we buy gold. It's one of the reasons we put money into real estate and crypto and other commodities is to, as the fiat currency loses value over time, your portfolio rises and hopefully is outpacing inflation. But from a capital markets perspective, you know, I'm an investor. I manage portfolio. So I'm interested in what capital markets do.

And from a capital markets perspective, the United States dollar going higher versus foreign currencies is incredibly important, right? and because that is what causes things to break. It's what causes credit contractions, and it's what ultimately causes crises. And so from a financial markets perspective, I don't really have the luxury of ignoring of what the dollar does. And in other words, I can't just focus on the fact that it tends to lose value over long periods of time. I have to focus on what it does on a more interim basis because that will affect all the other assets in which we have exposure. One last pressure test of this from recent events, Brent, was a couple of times this year, and I'm not recalling the exact dates.

But there was some sort of crisis type of event, may have been a Trump tariff announcement, may have been a war or some sort of event. And what happened was something interesting. So there wasn't a flight immediately to treasuries and dollars. Those instruments actually went down during these crisis type events this year, these cattle. type events this year. Gold went up instead. Does that start to chip away in the thesis? I mean, the entire dollar milkshake theory thesis is when there's a crisis, people are going to stack dollars and they need dollars. But we saw a few times that didn't happen this year. Why? Well, so I think you have to be careful of equating dollars and treasuries. Again, the thesis was never that treasuries

would rise. I always said interest rates would rise. If interest rates rise, treasury bonds fall. And that is treasury bonds falling, whether there are U.S. treasuries or foreign treasuries falling, that is what causes a sovereign debt crisis, right? So a sovereign debt crisis is what the whole thesis was about is about bond prices falling as interest rates arise. Now, what you're, I think what you're talking about is in April when the tariff kind of tantrum kind of took off, there was a period of time where the dollar lost like 5% over a short period of time and U.S. equities fell and everybody said, this is unusual, this has never happened before. That's actually incorrect. The exact same thing happened in March of 2020 and the exact same thing happened in

September of 2007. So I'll explain why this happens. It goes into the fact that the rest of the world for a long time, let's call it 20, 25 years, has invested their surplus or their excess savings into the United States. you could argue that's an example of the milkshake, the United States sucking up the capital from the rest of the world, right? What happens then when you get into a slowdown or some kind of an initial crisis, especially if that crisis is not just localized in the United States, but if these foreign companies are also, or these foreign investors who have their assets in the United States are also feeling pressure in their local domestic markets, is they will sell their U.S.

dollar assets and repatriate those funds back home because there's a local crisis that they're dealing with. That exact same thing happened right before the crisis in October of 2008, there was a 10-day period where the U.S. dollar lost 5 percent and U.S. asset prices fell. In March of 2020, there was a 10-day period where the U.S. dollar fell 5 percent before the the big crisis when the dollar turned around and went higher. And so that same, and the reason is foreigners are selling their U.S. dollar assets and repatriating them back home. Now, what happened in both 2008 and 2020 is that the crisis continued to worsen and when it got

worse and there was a global margin call on the dollar than the call quickly reversed and shot higher. So in the Q4 of 2008, the dollar went higher very quickly in the second half of March of 2020. the dollar turned around and went higher very quickly. I would argue that had it been allowed to play out in April of this year, the same thing would have happened again. So again, it's not totally unusual for in the initial stages of a crisis for the dollar to fall and U.S. asset prices to fall,

because that is an example of the rest of the world tapping their piggy bank that is the United States and bringing assets back home. Now, if we were to go forward into a crisis and it were to continue to escalate and foreigners continued to sell U.S. dollar assets and continued to sell the U.S. dollar and that lasted through an actual crisis, then I would say that the theory was wrong and it did not play out. But as it is right now, you know, I think there's a little bit misunderstanding of what happened in April and whether or not it had ever happened before. But to your point, they did not buy it. U.S. treasuries. And again, that, and they did buy gold, right? So again, that goes back to a sovereign debt crisis where the rest of the world is not buying sovereign bonds, but they're looking for something like gold or a superior store of value. Let's look at the dollar milkshake on a move forward basis because I've heard you say something pretty important happened this year. Maybe we'll say the milkshake got another straw in it, which in addition to the euro dollar straw, we now

have stable coin redolarization. The Genius Act was signed this summer. What was the significance and strategy behind the Genius Act? And what do you think it does for redolarization? Well, I have to say, to explain my answer, I have always historically been very skeptical whenever the name of a new law comes out because it typically says the exact opposite of what's actually going to happen. Uh-oh. Right? But This is a case where I actually think it is the name is appropriate. You think this bill is genius? I think it is genius.

I think it is scary how smart it is. Was it accidentally genius or intentionally genius? I don't know. That's the part I'm still trying to figure out. We don't know how it got named genius, correct? I'm sure Trump had something to do with it, right? The stable genius. There's two bills.

One was called stable. One was called genius. It ended up being the genius act that got through it. Yeah. Yeah, well, he's a very stable genius. And so I was very skeptical of stable coins. I mean, this is the thing. Stable coins have been around for, what, 10 years now? They're not exactly new. I was very skeptical of them initially because I thought they would come into conflict with the state. You know, the state, whether you define that as the United States government or the Chinese government or whichever jurisdiction you're in, money, they are always very protective of money because money is one of their biggest tools. And so when stablecoins first came along, I said, listen, I don't know who will win the battle, but the United States will not just sit by and let stable coins take over everything and compete with the US dollar. If they wanted to fight it, there's many things they could do. And then when I looked at the initial players in the stable coin market, I felt that they were

very sketchy to say the least and went down that rabbit hole a few times. And because of what I found down there, I just didn't really embrace the technology. This is an example of I didn't like the people involved, so I just dismissed the technology. And that was a mistake on my part. I've done that. And the technology is pretty clever. It is a way for it's so long story. So the US passed the Genius Act, which basically is authorizing stable coins, right? It's a little bit more convoluted than that, but that's the way we can describe it. And the fact that this is an example of the state embracing the private innovation that the private market developed. And I believe they are now going to use it to further their own power as opposed to losing power to this technology.

But it's really a way for the United States to extend the dollar network throughout the world on a much faster, cleaner, more efficient basis. And you can get into a situation where the world voluntarily adopts the U.S. dollar stable coin as the preferred medium of exchange. And what that does a couple of things. One, it extends the United States power to these other jurisdictions, and it steals local sovereignty from the local government. And so to me, it's a great stealth weapon that the United States can use as a tool. I'll give you a very good example.

Like right now, you know, there's an aircraft carrier and many warships parked. off the coast of Venezuela. And that's a kinetic threat to Venezuela. And the idea is that if Venezuela doesn't do what the United States would like them to do, they could drop bombs on Venezuela, right? Well, the U.S. could also airdrop U.S. dollar stable coins to anybody that has a digital wallet in Venezuela and dollarize the economy very quickly because the Venezuelan currency is not very strong and not very usable.

And if they were to do that, that would in many ways undermine the local government in Venezuela. And again, if the idea is regime change, what's better than destabilizing the local government? So I think there's many, many ways that the United States can use these stable coins as a way, they can use it as a geopolitical weapon. But what it also does is it creates a new. system that can be ported from the old Eurodollar system to this new system. It's kind of the Eurodollar 2.0. And the Eurodollar system is something that the United States has great influence over, but doesn't have complete control over. But I think this is a method via which they could get more control over the rails or the plumbing, however you want to describe of the U.S.

dollar network outside the United States. Estimists for the Eurodollar market are above 10 trillion. I've seen estimates like 13 trillion or so. Right now, stable coins are $300 billion, something like that. So just small in comparison. Most of the usage so far has been crypto-native usage, crypto-exchange, crypto-trading, that type of thing. Secretary of the Treasury Besson says you think stable coins can get to the $3 trillion mark in a few short years.

What do you think? How big does this get? I think it could easily get to be $3 trillion. I think the estimates for $5 to $10 trillion are not out of the realm of possibility. And it could potentially be higher than that. Once you understand how big the network for dollars is outside the United States,

you start to realize how quickly this could grow and proliferate. And part of the reason I believe this is it's already happened. The growth of the euro dollar market, post-World War II through the 60s and 70s was large. And then after the United States got Saudi Arabia to price oil and dollars, and then the whole world needed dollars regardless of whether they liked them or not, the explosion of the growth of the euro dollar market, like I said, if you just got a fraction of that from the traditional euro dollar market now into this stable coin market,

you could get $3 trillion there very easily. So, I mean, to me, it's not only infinitely scalable, but it can be used in a way that is surreptitious or stealth to where the other countries might not even initially realize what is happening. Although I think the rest of the world is starting to wake up to this fact and you can see them making their own headlines and their own comments about it and you can tell that they're scared. And the thing I would say about it is they should be because it is really powerful or potentially really powerful.

Few people in crypto put real skin in the game when they make public top or bottom calls. The DeFi report is one of them. The week before the October 10th flash crash, Michael from the DeFi report emailed his entire newsletter, saying he's going aggressively risk off and sold the majority of his book from crypto into cash. This is when ETH was about $4,000 and Bitcoin was 110. Michael runs the DeFi report, an industry-leading research platform built on data, cycle awareness, risk management, transparency, and most importantly, skin in the game. We like Michael at Bankless.

We like his analysis, and that's why you hear him on the Bankless podcast about once a month. And the Defi Report is giving Bankless listeners one free month of access to the Defi Report. So if you're looking for some sharp data-driven analysis to make better informed decisions around your portfolio, you can learn why and how Michael called the top and what he's doing next, all in the Defi Report Pro. Check it out. There is a link in the show notes. There's a couple of data points that I want to connect with you, Brent. I remember one of the big discussion points after the collapse of the Silicon Valley Bank was

that this was a bank run enabled by technology because there was an app on people's phones that they could just hit the withdraw button. And we've never really seen banking infrastructure in such a very well-finentially connected equilibrium before. That was one of the main reasons why SVB collapsed. I want to connect to that data point, understanding that that's one of the reasons why SVB collapsed.

I want to also connect that to just the fact that there's, Me and Ryan are investors in the crypto space. We like to invest in startups that we think can grow very, very quickly. One of those categories that we've been investing in are stablecoin startups in developing countries. That can dollarize developing countries because one of the best places to have stablecoin adoption in the last three years has been Africa. But also the TAM too. These developing countries love dollars. So connecting the idea that we can get dollars into the nooks,

and crannies of developing countries faster than we've ever had before. I would go to think that this actually, like, accelerates the, perhaps the violence of the dollar milkshake theory. It can happen more rapidly. We can actually get dollars into countries faster than we've ever had before because we have the rails to do it. So what do you think about the impact of stable coins under your dollar milkshake theory with just the monetary sovereignty of,

developing countries. How do you think all of these things are going to interact? Yeah. I mean, like I said, I think this is an incredible tool that the United States can now use. I mean, I think they could, let's just go back to Venezuela again. I mean, I think they could dollarize the Venezuelan economy within a few days of not a few weeks. Yeah, but Venezuela's not going to like that. But what can they do? This is my point. Like, what can they do? Yeah, they can shut down the internet. They can make it illegal, which they will. But it was also illegal to use dollars, you know, in these countries before. You know, whenever there's a currency crisis, laws are put in place and restrictions are put in place and capital controls are put in place

that make it illegal for the rest of the country to, you know, use another currency. But yet, black markets still exist. And the reason they still exist is the motivation to get out of that local currency is stronger than the motivation not to break the law. And, And I think to your point, the technology that allows them to do this with the touch of a button on their phone, rather than going down to the local kiosk or local market and exchanging physical dollar bills or going to their local bank that may allow them to hold dollars and stand in line to take them out, it can accelerate the entire process. And you can go through the entire life cycle in 48 hours rather than 48 days. or it lends the potential for the acceleration and the speed with which it to happen to increase. It doesn't necessarily guarantee that it will. It just means that it increases the ability for it to happen.

As you're saying that, I was sort of thinking about Arab Spring in 2010 and how that was an outcome of basically the U.S. inventing social media in 2003 with Facebook and then it culminated and we have Twitter and now we have the overthrow of governments. I wonder if something like that could happen, if there could be a stable coin-style Arab Spring in some country and this causes revolutions, right? No, it's, listen, it is a perfect example

because that could happen. And the other thing I would say is anybody who thinks that this is just some wild idea that I came up with in a fever dream a few nights ago, this is established doctorate. in military handbooks. They know how to use money as a weapon. There's an entire handbook from the U.S. Army called Money as a Weapons System. So the idea that the military doesn't know how to use money in a local jurisdiction in which they are using, having military operations,

they absolutely do know how to use it. So it's not a stretch to then put a new technology on top of that pre-existing doctrine in a way to deliver it even. faster and more efficiently. And so, you know, for anyone who thinks that this is just a big, a big exercise in brainstorming, I would encourage you to think differently. That's fascinating. And of course, crypto has been designed to be capital control resistant. So it's the perfect medium for this kind of economic weapon to be delivered. This is part of the genius is that, again, I think the state has co-opted the private market technology that was invented to get away from the state control is they have actually figured

out a way to use it to their advantage. Wow. It's it's kind of scary, to be honest. Let's talk about another geopolitical player, which is China and their reaction to this. We had Michael Howell on recently who published his Global Liquidity Index. Fantastic. He actually recommended your work when he was on our episode. And he talked about the possibility of two global currency states.

kind of emerging, sort of the U.S. stack where you see it's America, you know, trademark, and it's the dollar and it's stable coins versus China. And they're trying to keep stable coins out. They see stable coins as an apex predator. They're going with the one. They're going with this quasi, central bank digital currency, centrally controlled type thing. They're not doing the private money ledger at all. There may be they're buying more gold in an effort to back one. So these two stacks at play and his whole friend. of things is this is the next capital war to play out. What's your take on that? Do you, like, do you think that there's two? I think that's probably right. Listen, we are, we are going through

a global divorce between China and the United States. Both sides want the divorce. Both sides are making moves to ensure that they come out on the better end of the deal. But it is going, there's no question that it's going to happen. It's just a matter of when does it happen under what circumstances and what systems are used post-divorce, right? And so I think it's highly unlikely that the United States will use China's system, and I think it's highly unlikely China will use the United States system. So as a result, you're going to probably have two systems, and the way that Michael Howell frames it, I think, is very appropriate.

Now, exactly how that looks, again, I don't know. But I would be surprised if China were to use a U.S. focused system and vice versa. The stable coin dollar milkshake, your idea behind re-dollarization, as we draw this conversation to a close. Let's talk about what do investors do about that? So there's a prediction that the dollar will be the best of the worst fiat. Understand that is a prediction moving forward that falls out from your theory. What about other assets?

Like, what does gold do moving forward? How about U.S. equities? How about equities in general? How do investors really position for this future? The problem right now is everything is either at or near its all-time eye. Now, Bitcoin has had a pretty significant pullback over. over the last month or so. But equities are still near their all-time highs. You know, real estate is still pretty high. You know, bonds have surprisingly had a pretty decent year this year. And from a

historical perspective, you know, they've had a little bit of a rally here. So it's really hard to get excited about buying anything when everything is at its all-time high. But I do, or near its all-time high, but I do, I continue to favor the United States and its markets over the rest of the world. I personally don't see a big reason to go searching on the other side of the world to place investments in order to get an extra one or two percent return, but also having to accept the increased risk that goes along with it. And so, you know, obviously having something that cannot be debased is important. I always recommend that people own gold. If you don't already own gold, you missed a hell of a run, but it doesn't mean that you can't buy some now and just

hold on to it for a long period of time. I continue to think that the U.S. stock market will, if we're going to have a global growth, I continue to think the United States will favor in that. Again, I don't think we're going to have a situation where the rest of the world grows and the United States goes into some severe recession. So, you know, but I would also have some money on the sideline. I don't, I would not have everything invested right now. I would have, you know, it doesn't necessarily just need to be sitting in, in U.S. dollar cash, but, you know, maybe you have some two-year bonds that, you know, are paying you a three and a half, four percent. And, you know, you just sit there and wait for a better opportunity to deploy that. Brent, this has been great. That money on the side,

I'm guessing you're recommending that's going to be dollar denominated. Is that, okay? Absolutely. The best of the worst fiats. Brent, thank you so much for joining us today. This has been great. Thanks for having me. Bankless Nation, got to let you know, none of this has been financial advice. Financial markets are risky. So is crypto. You could lose what you put in. But we are headed west. This is the frontier. It's not for everyone. But we're glad you're with us on the bankless journey. Thanks a lot.