Silver to $39.50: Up 9.4% Past 30 Days
At the recent Rebel Capitalist Live event in Orlando, Mike Maloney sat down with Brent Johnson of Santiago Capital to explore a surprising trend: gold and the dollar rising together. Known for his contrarian Dollar Milkshake Theory, Johnson challenges the conventional belief that these two assets can’t move up in tandem.
Most investors operate under a simple assumption: when gold rises, the dollar falls, and vice versa. But according to Johnson, we’re witnessing something that many consider impossible — both assets rising simultaneously.
The Dollar Milkshake Theory in Action
“Fiat currency loses value over time — that’s just the nature of the beast,” Johnson explained to Maloney. However, he argues that the U.S. dollar maintains significant advantages over other fiat currencies, creating a unique dynamic in global markets.
Johnson’s thesis, known as the Dollar Milkshake Theory, suggests we’re entering a period where all fiat currencies lose value against gold, while simultaneously, all other fiat currencies lose value against the U.S. dollar. Think of it as a race to the bottom where the dollar is simply losing more slowly than its competitors.
The evidence? Over the past several years, we’ve seen gold perform “dramatically well,” particularly in the last two years, while the dollar has strengthened against its fiat peers over both short and long-term timeframes.
China’s $60 Trillion Problem
While media attention often focuses on U.S. debt problems, Johnson presented a forensic analysis showing China faces potentially far greater challenges.
“Their banking system has $60 trillion worth of loans in it,” Johnson revealed, putting this staggering figure in perspective: “The entire United States economy is $28 trillion.”
This means China has created $60 trillion of debt in just 25 years — more than the United States has accumulated in its entire 200-year history. If U.S. debt concerns investors, Johnson argues, then China’s debt load should be absolutely terrifying.
The Foreign Investment Trap
Johnson explained how China achieved its remarkable GDP growth over the past quarter-century: through massive foreign direct investment, which they then leveraged through their banking system to create loans and pump money into the economy. This strategy worked brilliantly — as long as capital kept flowing in.
The critical vulnerability? China maintained its currency peg to attract this investment. But if capital begins flowing out and China lacks sufficient dollar reserves to maintain that peg, the consequences could be severe.
“The last time we saw a small devaluation of the Chinese currency in 2015, it caused havoc for two or three weeks in global markets,” Johnson reminded Maloney. The crucial difference now? “Fifteen years ago we were not in an adversarial relationship with China.”
But China’s problems don’t stay in China — and that’s where things get truly concerning for global investors.
The Global Dollar System at Risk
Johnson emphasized a critical point that many investors miss: “The entire world runs on dollars.” This means any problem in the U.S. dollar system isn’t just America’s problem — it’s everyone’s problem.
This interconnectedness was painfully demonstrated during the Long-Term Capital Management crisis and the 2008 Global Financial Crisis. As Maloney noted, derivatives connect every major economy so tightly that “if any major economy sneezes today, the whole world catches a cold.”
Gold: The Portfolio Cornerstone
Despite the complex macroeconomic dynamics discussed, Johnson’s investment philosophy regarding gold remains remarkably simple. “I don’t really care what the price does,” he stated. Whether gold rises every day or experiences pullbacks, Johnson views it as providing “a great foundation for an overall diversified portfolio.”
His reasoning? In an age of unprecedented uncertainty — with massive debt loads, geopolitical tensions, and potential currency crises — gold serves as the ultimate portfolio cornerstone. It’s not about short-term price movements; it’s about long-term wealth preservation.
What This Means for Investors
The Johnson-Maloney discussion reveals several critical insights for investors:
- Don’t assume traditional correlations will hold – The gold-dollar relationship may not behave as expected in the current environment.
- Look beyond U.S. problems – China’s debt situation could trigger the next global crisis, despite receiving less media attention.
- Prepare for currency volatility – A Chinese yuan devaluation could cause widespread market disruption.
- View gold strategically, not tactically – Focus on gold as a long-term wealth preservation tool rather than a short-term trade.
- Understand systemic risks – In our interconnected global financial system, problems anywhere can quickly become problems everywhere.
The Path Forward: Currency Debasement and Portfolio Protection
The Johnson-Maloney discussion illuminates a sobering reality: we’re entering uncharted territory where traditional market relationships break down and new dynamics emerge. With China sitting on a $60 trillion powder keg and central banks globally locked in competitive debasement, the stage is set for outcomes few investors are prepared to navigate.
Johnson’s Dollar Milkshake Theory offers a critical framework for understanding why gold and the dollar rising together isn’t just possible — but already happening. As fiat currencies globally spiral toward debasement, the dollar may “lose the least,” while gold remains the only form of money immune to printing presses — making both vital assets in a defensive portfolio.
The question isn’t whether to own gold anymore — it’s whether you own enough. Watch Mike’s full interview with Brent Johnson to understand why this “impossible” scenario is not only possible but already underway.
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