Brent Johnson introduced his dollar milkshake theory months ago. Which is a cool named and well explained summary of today’s geofinancial set up. As I wrote in a post some time ago, even today and despite all the haters, the US dollar stands strong as the only reserve currency.In a world where nationalism is prevailing and a guaranteed safe world trade order fades away, the milk shake theory holds that as most currencies face a crisis the only safe haven currency remaining is the US dollar. So while I agreed with this theory before it even existed, the milkshake theory describes NOT a happy story. The story ends badly for most players in the world economy. Before the US dollar faces a crisis all other currencies would face an existential crisis.
Analysts that don’t consider the geopolitical aspects of the global financial system, claim that the dollar will lose its value as the Fed keeps printing trillions of dollars through QE and that the US national debt is unsustainable.
While financially it can make sense that oversupply of dollars will weaken the dollar, when you consider how the global financial system works and who sets the rules of the game, you can envision other more likely ways of how it will turn out. And it’s not the dollar who will take the burden in the short term.