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Comment by ViVr | Hacker News Reader

It's a theory by wealth manager Brent Johnson that the next big recession will trigger an enormous demand for dollars. The dollar will rise against most other currencies and non-US bonds thus sucking up all the liquidity (that's the milkshake part).

He's been on many podcasts to explain his theory and provide updates. I will link you an interview at realvision from september 2020 timestamped at 51:55 where he goes through it in summary: https://www.youtube.com/watch?v=h_HCIyc6MaA&t=51m55s

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I hadn't heard of the theory before but in googling it I came across this video[0] from mid 2019 where he claims the demand for US dollars will be driven by rising interest rates and a shortage of dollars. Obviously things went a very different direction in in the past year and a half or so as the Fed has kept interest rates low and monetary supply has increased. So it's odd to see him arguing in the video that you linked from late last year that the same outcome will result from very different circumstances.

[0] https://www.youtube.com/watch?v=2qTOWuL7Zco

I prefer to get my economics pop-econ-theory from Lyn Alden.

She has a very good post about this same topic titled "The Global Dollar Short Squeeze":

https://www.lynalden.com/global-dollar-short-squeeze/

Recommended.

1. 2008 recession was offset by both US Fed, PRC, et al. buying lots of UST and stimulating global economy.

2. 2020 was offset by US Fed buying tons of UST and USG printing USD. However, global economy cannot magically expand by 40% or whatever is required to balance that expansion of USD. Hence a persistent supply chain crisis.

In current geopolitical climate, no foreign state will buy lots of UST. US Fed is still buying lots of UST, causing a liquidity glut causing inflation. Global economy physically cannot expand at the necessary rate to absorb this inflation, so stagflation or financial collapse is the only way forward for America.

For item 2, you may want to consider how the Fed stepped in to hush up the reverse repo inter-bank lending in Fall 2019. That rolled into 2020 bailouts.

Any articles you can point me to? I can’t find anything about this.

This september 2019 article from Financial Times might be a start.

Why is the Federal Reserve pouring money into the financial system? Answer lies in short-term issues and structural market changes https://www.ft.com/content/345da16e-d967-11e9-8f9b-77216ebe1....

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