Any believers in the dollar milkshake theory ? What is that ?
Well, essentially, what the Dollar Milkshake is, is how I think a sovereign debt crisis plays out. The powers that have been able to prop up the markets with QE and bailouts and stimulus plans, but essentially what it is, is that I believe once we enter a sovereign debt crisis when debt finally matters and whether that’s tomorrow, next week, or next year, I don’t know the timing. But when we get into a situation where debt finally matters again, I think that the dollar is going to rise dramatically versus all other fiat currencies. And while it will probably in the very short term, be bad for risk assets such as we saw in March of 2020.
Now, it doesn’t mean it’s going to be a straight line, it doesn’t mean it’s going to be easy, but I think that’s where it goes, DXY at 110 in 2-3 years. The milkshake name comes from the fact that since the global financial crisis, central banks and monetary authorities around the world have just flooded the world with liquidity, again, the bailouts, the QE, the monetary stimulus, the government help. And so my contention has been that for a number of reasons, the US dollar will have the straw versus all the other currencies. And for better, for worse, like it or not, the dollar will suck up all that liquidity that’s been provided to the markets.
And so we will have a situation where we may have inflationary pressures and in US dollar terms even though the dollar’s going higher, and I think we will outside the United States, we will have inflationary pressures in local currency terms, but deflationary pressures in US dollar terms, which is the worst of both worlds. And so it really does become this self-perpetuating disaster, for lack of a better word. this is not a story that ends well. Even if the US outperforms the rest of the world, it doesn’t mean it will be a great place. Again, it’s all relative. And that’s what I always try to explain. It’s all relative.
Ultimately, Given the rate hikes coming I think two or three years from now commodity prices are much higher. I think the food price is much, much higher. and as the markets are coming down there will be higher demand for cash.
Regards:
The believer in the dollar milkshake theory himself
Now, it doesn’t mean it’s going to be a straight line, it doesn’t mean it’s going to be easy, but I think that’s where it goes, DXY at 110 in 2-3 years. The milkshake name comes from the fact that since the global financial crisis, central banks and monetary authorities around the world have just flooded the world with liquidity, again, the bailouts, the QE, the monetary stimulus, the government help. And so my contention has been that for a number of reasons, the US dollar will have the straw versus all the other currencies. And for better, for worse, like it or not, the dollar will suck up all that liquidity that’s been provided to the markets.
And so we will have a situation where we may have inflationary pressures and in US dollar terms even though the dollar’s going higher, and I think we will outside the United States, we will have inflationary pressures in local currency terms, but deflationary pressures in US dollar terms, which is the worst of both worlds. And so it really does become this self-perpetuating disaster, for lack of a better word. this is not a story that ends well. Even if the US outperforms the rest of the world, it doesn’t mean it will be a great place. Again, it’s all relative. And that’s what I always try to explain. It’s all relative.
Ultimately, Given the rate hikes coming I think two or three years from now commodity prices are much higher. I think the food price is much, much higher. and as the markets are coming down there will be higher demand for cash.
Regards:
The believer in the dollar milkshake theory himself
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