DOLLAR MILKSHAKE THEORY

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29 Dec 2023

DOLLAR MILKSHAKE THEORY how Dollar "kills" other currencies

have you heard of the dollar milkshake theory? an economic thesis that predicts the US dollar will become far superior and dominant compared to all other (fiat) currencies by sucking the liquidity of currencies from other countries. The dollar milkshake theory is hotly debated in world economic forums to this day.

What should we do for people living in countries with weak currencies? And what is the role Bitcoin in dollar milkshake theory?

Dollar Milkshake Theory and how does it work?

Dollar Milkshake Theory was first popularized by Brent Johnson of Santiago capital. According to Brent Johnson, the more dominant currency will suck energy and value from other currencies. The Global Central Bank is making a milkshake with a large measure of liquidity that they inject through subsidies that have injected more than 30 trillion US dollars since 2008. The world financial system is now in the standard dollar system. And the international transaction system, imports, and exports are calculated using dollars.

The problem is that countries around the world have debts in US dollars. So when economic conditions worsen, other countries are obliged to buy goods using dollars and pay their debts in dollars. Whether we like it or not, we all need dollars. The rising price of the dollar will cause problems for other countries because the cost of imports and debts that must be repaid becomes more expensive. even though the dollar is printed a lot, the demand is still there. Although the dollar is printed continuously, other countries also print their currencies so that the exchange rate is relatively the same.

The Dollar milkshake theory analogy is like a milkshake. Where countries in the world are constantly injecting liquidity into the US Dollar. This milkshake is a mix of various global capitals. But the US government through its central bank policy sucks through a straw. How does it suck? The first is because the dollar is still considered a saving Heaven. The US Dollar tends to suck up investor funds globally during a crisis. For example investors in Japan, Indonesia, Australia and others sell their assets and move their funds in dollars, not into their own country currency, that is the reason why the crisis in other countries is much more severe.

Institutional and sovereign debt is still required to be paid at the dollar rate. So in times of crisis, institutions and investors will liquidate their assets to pay for maturing bonds, which are paid using dollars instead of local currencies. This is exacerbated by the Federal reserve's monetary policy that attracts foreign investors, of course they are attracted by higher yields or interest By making the interest rate higher than other countries, it makes investors more interested and the funds that go into the US Bond automatically strengthen the US Dollar, making an effect like a milkshake.

Bitcoin the milkshake destroyer

the dollar milkshake theory can only work if countries in the world use the Dollar or other fiat currencies as the main currency, but if the world uses Bitcoin as a currency, you can be sure the dollar milkshake will be destroyed.

As we know, Bitcoin upholds decentralization and becomes the main enemy of the centralization system, with the presence of bitcoin, economic intimidation from other countries can be avoided, this is the importance of choosing decentralized money plus the supply of Bitcoin is fixed and cannot be reproduced like fiat currency.