In this week's Stansberry Investor Hour, Dan welcomes Brent Johnson back to the show. Brent is the CEO of Puerto Rico-based Santiago Capital and creator of the famous "dollar milkshake theory." He has more than 13,000 subscribers on the Santiago Capital Substack.

Brent kicks things off by expressing his optimism for the U.S. and believes that, despite the supply-chain issues the country is facing, it will make the changes needed to come out of the crisis. That's not to say that there won't be pain along the way, but Brent says it will be better than most people expect. Additionally, he says that criticisms of the U.S. and the dollar are valid, but relative to other countries, they're in a much better position than their peers. And he tells listeners that you can still buy gold without being bearish on the dollar...

You don't have to hate the dollar, and you don't have to think the dollar's going to collapse, and you don't have to think the United States is going to go into the Great Depression to own gold. In fact, I have argued for a long time that a strong dollar is, in the long term, the best thing for gold. I don't see them as the mortal enemies that many do. And in some ways, they're complementary.

Next, Brent says that there's no need to be worried about gold overtaking the dollar as a reserve asset in central banks. A key contributor to that has been gold going up while Treasurys have gone down. But Brent's research shows that on a global scale, government bonds have been falling across the board. (The exception is China, due to companies not wanting to buy Chinese stocks or real estate and getting tax breaks from buying Chinese bonds). Brent then explains how the dollar will become broken the stronger it becomes, which would create more pressure on countries that have debt in dollars and could lead to a currency crisis and a great credit reset. And he shows how the U.S. could weaponize the dollar against companies that are indebted to it...

This is how the United States can use the dollar as a weapon... If they can put other countries under pressure, they can then negotiate better terms. And so if they raise rates or if they withhold supply or if they don't extend a swap line and a country comes under pressure because they can't afford to go buy those dollars that they now owe, that's weaponizing the dollar against that country... I think for much of the last 40, 50, 60 years, this process was managed for the greater good, and they didn't necessarily have a lot of strings tied to this monetary liquidity. But going forward... we're moving into this environment where we're not cooperating with the rest of the world the way we used to.

Finally, Brent criticizes the mentality that it doesn't matter which fiat currency you're holding, because they're all going to crash. He says that folks who work, own businesses, or have exposure to the geopolitical landscape should care about fiat levels. A sharp rise in one currency compared with another has been a key component in every global financial crisis over the past 50 years. And Brent states that the order of the currency declines matters. Folks who retreat from the market out of fear could be missing out on all the opportunities that happen before a major crash occurs...

The order of the dominoes matters, and it matters a lot... These games can go on for a very long time. I literally know people who haven't gotten back into the market since 2008 because "the next crisis is just right around the corner." And listen, it's not that they're totally wrong. There are a lot of bad things out there that could go really, really wrong... But that's almost 20 years ago now. And this could go on for another 20 years before it all comes down. Maybe it goes on longer than that... I think it's incredibly important to understand the problems and think about them. But it's also not healthy to only focus on the problems and not see the bigger picture.

Click on the image below to watch the video interview with Brent right now. For the audio version, click "Listen" above.

(Additional past episodes are located here.)

This Week's Guest

Brent Johson is the CEO of Santiago Capital. His previous experience includes auditing at Philip Morris Management, nine years at Credit Suisse's private client group, and nine years as a managing director at BakerAvenue, where he was the lead adviser for several of the firm's largest clients.

Brent is also a member of the Advisory Board for Monetary Metals, a platform that allows investors to earn a yield on gold, paid in gold, by leasing and lending to qualified precious metals businesses in the industry. He regularly gives interviews and speaks at conferences regarding precious metals, currencies, and macroeconomic trends. Additionally, he's well known as the originator of the "dollar milkshake theory," and his views have been quoted in numerous print, online, and television outlets.

Dan Ferris:              How does the world really work? Investors should be thinking about that. How did it work for the last 40 years? How is it likely to work for the next 10? And what are the big issues that you should be focused on that people tend not to focus on, and if they do, they get them wrong?

We're going to cover all that and more today with our guest Brent Johnson from Santiago Capital. I've been following Brent for about four or five years now. I think he's brilliant. He knows – he's forgotten more about this stuff than I'll ever know, and I'm really happy to get him on the show every now and then to pass along his, his latest thoughts. That's what he's doing for us today. So let's do it. Let's talk with Brent Johnson. Let's do it right now.

Brent Johnson, welcome back to the show. It's been a little while.

Brent Johnson:         Yeah, thanks for having me. This should be fun.

Dan Ferris:              Oh, always, always. I want our listeners to know that I very much enjoy following your work on Twitter, Santiago Capital on Twitter, and Substack as well.

So I – Brent did not ask me to do this. I don't make a penny from this, but I really recommend that you read his stuff. That's all I'm going to say.

Brent Johnson:         Thank you. That's very nice of you to say.

Dan Ferris:              You bet. And you are sort of – I'm developing quite a little macro geopolitical posse here, and you're definitely one of those folks. And I continue – every time I talk to one of you, I have to reiterate that if you never cared about macro or geopolitics or anything before, you might want to get on the stick about that because I feel like things are changing very, very much, and that could interrupt this sort of regime that we've enjoyed for decades now. I'm going to peg it since like 1980, just round number there.

Brent Johnson:         Yeah.

Dan Ferris:              And if you want to change the date, feel free. But we – just throw money in your 401(k) and you don't know anything, and you're great, and you're really great, everything's fine. I feel like there's a chance that we are watching that change in real time. And 10 years from now, you'll look backward and you'll say, "Man, I wish I'd started reading this guy Brent Johnson in 2026," or so.

Brent Johnson:         Well, we – yeah, that's what we talk about and what we tend to write about is capital markets, geopolitics, the intersection of capital markets, geopolitics, and the madness of crowds because I think Madness is probably as good an adjective as any to describe the age that we are either in or going into very quickly.

And it's really interesting on the one hand. I kind of feel like this is what I've prepared my whole life for. And so, it's exciting, but it's also scary. And I'm the first to admit I don't know how it's all going to play out. And the consequences of how it plays out are enormous. That's what makes it both fascinating and terrifying.

Dan Ferris:              I'll never forget, I should say. Dan Ferris: I'll always remember the moment when I was sitting in a theater – I think my sister had gone with me, and we were watching Indiana Jones, the first Indiana Jones movie. And I remember thinking, oh, adventure means trouble and danger. That's what adventure means.

If you're not risking like life and limb, you're not having an adventure. And financial and economic and political adventures risk something else. And, eventually, who knows, life in them as well.

Brent Johnson:         That's exactly right, Dan. And people who have heard me talk before know that I love movies. I love good stories. And a story where everything goes up and to the right in a straight line is extremely boring. It's never going to win an Oscar and nobody's going to remember the story.

But if you have a few pitfalls along the way and you have the hero get into a hole and he has to dig himself out, that's what makes, that's what makes it pretty interesting. I feel like we've had a lot of peaks and a lot of holes over the last five years, and I feel like we're going to have the same for the next five. So, I don't know what's going to happen, but I don't think it's going to be boring.

Dan Ferris:              Yeah, I feel like our two big pitfalls, obviously, let's just say them out loud, COVID and what's happening with the Iran war right now. To me, those are like these two episodes that have demonstrated among other things, what we've all come to see as like a supply-chain vulnerability and the vulnerability of the U.S. economy letting other countries, usually namely China, do all kinds of things that we consider too messy to put in our own backyard, in short.

Brent Johnson:         Yeah, and I think – one of the things that we've been talking about quite a bit is that I think those days of having one supply chain are over. I don't think that's some great revelation on my part. But I think the consequences of that are still kind of underappreciated.

And it's my view – and I know a lot of people disagree with me on this – my view is that while it will not be easy and there will undoubtedly be pain involved, that the United States will be able to make those changes, not perfectly, but in my opinion, better than many people expect them to be able to make it. And I – but the arc is not known, the timing is not known, and the pitfalls are not known.

And so I think it's just really, really hard to bet against the United States when I – because I look at the whole world, and when I zoom out and I look at all the different areas of the map and If I were to be able to choose one of the pieces of the board, with all the problems that it has but also the advantages, I still land on the United States being in a relatively good position. And that has influenced my thinking for quite a while now.

It's not to say there's [no] trouble. And I think you're right to point out the current Iran episode is a perfect example of that. And I also think the reason that Iran is even happening is because of what you already mentioned. It's a supply-chain issue. It's a "great power competition with China" issue. It just so happens that Iran is a very, very important piece on the board. And in many ways, I don't even think it's about Iran. It's probably more about China than it is about Iran. But Iran happens to be a very important piece on the board.

And the last thing I'd say, and I know I'm rambling a little bit, but the last thing I would say with regards to this is –

Dan Ferris:              Ramble away.

Brent Johnson:         I think a lot of times people will dismiss the idea that there is some kind of plan with regards to Iran because they don't think [President Donald] Trump is smart enough to play 3D chess, or the government doesn't have some super big plan, or this is all just being made up as we go.

And what I would say to that is, it's not that that's totally wrong, but if you don't think that the people at the top, meaning the top of the Pentagon, the top of the White House, the top of the government, and not just in the United States, in other countries as well, if you don't think they play chess and if you don't think they don't think of the globe as a chessboard, you're wrong. You're quite simply wrong.

Dan Ferris:              Right.

Brent Johnson:         They do think of it that way. Now, perhaps they shouldn't, and perhaps the lower levels of society suffer as a result of them looking at the world that way. But they do look at the world that way. That is a fact. And I think it's really important to understand that.

Dan Ferris:              Yeah, established over many decades. You can say they're terrible chess players, as you said, that they shouldn't even do it. Think all that, but don't say – don't suggest that these people are sitting in the Pentagon saying, "Well, what's Trump going to tell me to do next?" Or something like that. It just doesn't, it's not totally improvised. It can't be.

Brent Johnson:         That's right. That's right.

Dan Ferris:              And, but I'm glad that you mentioned the U.S. because that was the first time – I don't know if you recall – but the first time we ever had you on the show. I wanted to talk to you about the Milkshake Theory because the – my whole career, which started in like 1997, my whole career, I started working for the parent company of the company that I, the origin company, I don't know what, the predecessor, I think you're supposed to call it. That was founded by the sort of "gold stock dollars going down the tubes" folks, the dollar doomers.

Brent Johnson:         Yeah.

Dan Ferris:              And they're still around. There's still plenty of them around.

Brent Johnson:         They'll never die. They're always here.

Dan Ferris:              Right. And it's not like the ongoing degradation in dollars compared to various assets is – it exists. It's real. We don't deny that. But the U.S. dollar seems, in the face of all those albeit valid criticisms, you could even say, it's still looking pretty darn good. It's still working pretty well.

Brent Johnson:         Yeah.

Dan Ferris:              Like, I don't need to do anything but use dollars in all kinds of places. And I use a debit card and a credit card and I don't need bitcoin or weird other stuff. I just use dollars all over the place. In taxi cabs in foreign countries, you can hand them dollars. It's just the way it is still.

Brent Johnson:         Yeah, that's right. And to your point, the criticisms are valid. The problems with America, the problems with the dollar are valid. But again, if we come back to reality, it's a relative world. And if there was another country out there in the world that was using, I don't know, let's say gold or some other kind of hard money and had done a good job of managing their finances and weren't in a fiscal imbalance or a trade imbalance, or a budget imbalance or didn't have too much debt, then perhaps that would spell some doom for the dollar. The bottom line is there are no countries out there like that. Or if the ones that are like that, they have too many other significant problems to realistically dislodge the dollar from its place as a global reserve currency.

Now, that's not to say – it's not to say that the dollar won't lose purchasing power. My response to that is the dollar is designed to lose purchasing power. The government doesn't want it to hold purchasing power. So if it loses purchasing power, that's actually working the way they want it to work.

And so again, it's not that any of these positions are wrong or the analysis is bad. It's just understanding what it's supposed to do and what it's not supposed to do. And regardless of what our morals or what our wishes tell us the world should be. This is the way it is. And that was a big lesson I learned. That was a big lesson I learned about 15 years ago.

Dan Ferris:              Yeah, that's been a tough one for me because I thought, we all think of it as – fiat currency is just darn evil and it's going to blow up just like all the other fiat currencies have always blown up. And it's hard to sort of step back and say, "Not what is right and wrong, what is happening? What are folks doing? What is really happening?" How is the world actually operating in this moment, regardless of my beliefs about how it should?

                             And that whole idea, even that gets bigger across all my thinking. It's just like – [Friedrich] Hayek has a wonderful quote about economics being about people learning about all the things they can't design. And you can't design – you can't say the world runs on your morality, right?

Brent Johnson:         That's right. That's right.

Dan Ferris:              And then the day you wake up to that, you go, "Oh, OK, so I can own gold and dollars."

Brent Johnson:         Well, that's the big thing. And I –

Dan Ferris:              Go ahead.

Brent Johnson:         Again, I'm glad you brought that up because this is a point that I like to make. You don't have to hate the dollar, and you don't have to think the dollar's going to collapse, and you don't have to think the United States is going to go into the Great Depression to own gold. In fact, I have argued for a long time that a strong dollar is, in the long term, the best thing for gold. I don't see them as the mortal enemies that many do. And in some ways they're complementary.

But my research has told me – and I think this holds true if you really analyze it – that a strong dollar will do more to wreck the monetary system than a weak dollar. In my opinion, a weak dollar just personifies the system and it perpetuates the system. But a strong dollar causes all kinds of problems and in many ways would force the system to be restructured. And if and when the system gets restructured –

Dan Ferris:              I'm glad –

Brent Johnson:         – I think gold will hold up its hand and say, "Hey, I am a valid and worthy candidate." Not that I expect the governments to go back to gold, but I think gold – if you look over the last 15 years, or let's say – since almost '20 now, since the global financial crisis, the dollar index was around 78 or 79. Today, it's at 100.

So, it's gone up 20% versus foreign currencies in 15 years. It's more entrenched today than it ever has been before. And yet gold has gone from $700 or $800 to $4,000. So you don't have to have the dollar falling or dying or going into hyperinflation for gold to do really, really well. And so I think once you get out of your head that the dollar doesn't have to die in order for gold to do well, the world opens up to many more possibilities.

Dan Ferris:              And never mind the fact that – it's sort of like the John Prine song "Dear Abby," which has a wonderful line in it that says, "stop wishing for bad luck and knocking on wood," which is what – if you think, if you think all these horrible things are going to happen, but you own gold, so you're going to have $50,000 an ounce gold, you are wishing for bad luck and knocking on wood. So never mind that even.

I'm glad we got here. And as I sort of hoped we would, the idea that you step back, be more objective, look at how the dollar actually works, and the fact that it's engineered, as you say, to lose its value over time, to decline in value over time, and you can still own gold even though the dollar is remains the world's reserve currency.

With this in mind, do you make anything special? Because many people do make something very, very – they make this point about gold overtaking dollars in central banks as a reserve asset. Tthey hold –

Brent Johnson:         Yeah, no, I – listen, I think it's a really important thing to understand and it's valid. Now, I will say a couple of things. Actually, I'll sell several things because this is actually kind of central to my overall framework.

Dan Ferris:              I might have known that.

Brent Johnson:         So, you've seen these charts where gold as a reserve asset is rising and Treasurys as a reserve asset is falling. And those charts are absolutely correct. There should be an asterisk, though. Because part of the reason those lines have crossed the way they have is because the gold price has gone up a lot and bond prices have fallen a lot.

It's not specifically that number of gold units have been purchased and number of bond units have been sold. That's part of those charts. But a big part of the charts is just the fact that gold has gone up 4x or 5x and that bonds have fallen 20%, 30%, 40%, depending on where you're at on the curve. But when I first started talking about the Milkshake Theory – God, eight years ago now – the very first thing I said was that I thought we were finally at a place where after 40 years, interest rates were going to start to rise. And I said that that would cause bond prices to fall. So I am not shocked at all that bond prices have come down.

And as part of that very first time, I said we'll eventually get into a period of time where the dollar and gold rise together. Now, since then, I think when I first said that, the dollar index was at 88 or 89, and today it's at 100. And over that time – so it's gone up, gold has gone up. And we said that the reason we thought gold would go up a lot was not because the United States would start buying a bunch of it, but because foreigners overseas would be the primary driver. And that's exactly what we've seen as foreigners have purchased fewer Treasury bonds. They're still buying Treasury bonds – and foreign holdings of U.S. Treasury bonds have never been higher than it is today. But they're not buying them at the same rate, and they're buying gold at a higher rate. But that's a big part of why we've seen that. I do think we'll get into a period where all sovereign bonds will get repudiated – will get sold.

And we're already starting to see that. If you look at yields around the world on sovereign bonds, whether it's Europe, whether it's Japan, whether it's some of the other smaller Asian countries, you see the yields rising as those bonds are being rejected. One of the very few outliers is China. Their yields have been coming down. The reason their yields have been coming down is because it's not an open market. Ninety-six percent of all Chinese sovereign bonds are owned by Chinese entities. And they are going through extreme deflation right now.

And so, because Chinese entities don't want to buy stocks in China, they don't want to buy real estate because they have a real estate crash in China, they're just buying Chinese treasury bonds because they get a tax break to buy those and they know they'll get their yuan back.

And so – but I think if you look overall, I do expect gold to remain a primary holding of central banks. The one thing I would say in addition to that though, is those actions have consequences. And what I mean by that is last year, a number of central banks purchased gold, or over the last several years they've been buying gold. Part of the reason they buy gold is they want to have something in their treasury besides U.S. Treasury bonds. Also, they know their own local currencies are not doing very well, and so they want to, they want to hold something that, that, that retains value. Another reason is they want to be a they want to have something other than dollars because of what happened with the Russian treasuries or with the Russian foreign exchange reserves in 2022. But ultimately, they're still building up reserves that they can liquidate in a crisis in order to get dollars.

And so that's I think that's a big reason why we saw gold have while it had such a great year last year. As soon as the war kicked off this year and liquidity started to dry up, risk started to rise, and countries needed increased dollars to buy now higher-priced oil, food, and other needed commodities, they started selling gold to get the dollars to then buy those commodities.

And so you saw Russia sell gold this year, you saw Turkey sell gold this year, you've seen the Gulf states, which are primarily impacted by the Iranian episode, sell gold this year. And I don't think that's an accident. If you have two parts of your reserves, one of them is suppressed and the other one has gone up a lot, it's not surprising that they sell the one that has gone up a lot in order to get that liquidity.

So I think until the system resets, and whether that happens next year or 100 years from now, I don't know. But until the system resets, people, institutions, corporations, governments, they still need dollars to operate on the global stage. So if you are going to operate on the global stage, you still need dollars to do it. That may change someday, but as of right now, that is still the way it is.

Dan Ferris:              Yeah. And I think, Brett, you may have been the first person who introduced me to the idea, and the reason I'm talking about this is that when people talk about – the dollar doomers always point out that the U.S. government has $40 trillion in debt. It's a real point. It really exists. I get it. But I think you may have been the first person to point out to me that all the dollar-denominated debt around the world, it just creates more demand for dollars. It's just – it's self-perpetuating in a way.

Brent Johnson:         And this is where the intersection between capital markets and geopolitics comes in, because the reason that that debt outside the United States exists – so, first of all, let me step back. You're right. The United States owes like $40 trillion. Everybody knows that.

Dan Ferris:              We owe it to ourselves.

Brent Johnson:         Yeah. What not as many people know is that the rest of the world owes far more than $40 trillion. They don't owe it to the United States. They owe it to each other – and it's in dollars. So, if the United States has a problem with $40 trillion debt, how does the rest of the world not have a problem with $40 trillion in debt? And it's in a currency that they can't print. So, they have to go buy it somewhere. They either have to earn those dollars or they have to go on the open market and buy it. And the fact that they have to service all that U.S. dollar debt and pay off all that U.S. dollar debt creates an automatic demand for dollars.

And where it gets even more – what's the right way to say it – entrenched is that – and this is why this – I know I'm jumping around a little bit, but part of the reason I say the weaker dollar just perpetuates the system is [because] the only way to increase liquidity in the system is to increase the amount of U.S. dollar debt. Because when the U.S. government, whether it's the Treasury or whether it's the Fed, they are the only ones that can create base money. That's reserves. But then those reserves are used, those reserves don't go out into the global economy, they get traded. Those reserves are used as collateral to loan new money into existence.

So the way the world gets flooded with new dollars is new debt is issued. And with that new debt comes the liquidity.

Dan Ferris:              Right.

Brent Johnson:         So the only way to get the dollar index to go lower is to increase the amount of debt in the world. And so there's a timing mismatch. There's immediate liquidity, but there's delayed demand, because you get the supply of dollars immediately, but the demand to pay them back doesn't come for one, two, three, four, five, 10 years. But eventually that demand does show up. And then that's how you get the dollar going higher again.

And so, it's – I always tell people that the best example of this and the easiest one to look at is COVID. Let's just use the last five years. The dollar went up very quickly during COVID, so the Fed came in, they did [quantitative easing], they opened swap lines, they did these bailouts, they did [Paycheck Protection Program] PPP loans, they flooded the system with liquidity. And the dollar fell a lot. Asset prices went up a lot. We had inflation because now there's more money in the system. But then a couple of years– and everybody said the dollar's going to zero. This time it really is it.

But then a few years later, all of that money that was loaned into existence, you have to start paying it back. And in 2022, the dollar index went to a 30-year high. It went to like 113 or 114 or something like that. And that is a result of all that liquidity that was generated had U.S.-dollar debt attached to it. And as that debt started to come due and as the Fed started to raise interest rates, it put a squeeze on the whole world that had borrowed those dollars. And it caused the dollar to go higher.

So it's kind of a mind meld. You've got to flip the way you think about things. But once you see it, It's kind of like The Matrix. Once you see it, you can't unsee it. But it is a little bit counterintuitive to understand how that happens in the first place.

Dan Ferris:              So, tell me then, Brett, how you said earlier, and I've heard other people say this, too – other folks that I have a lot of respect for – that the dollar won't become broken through weakness but through strength, through great strength. Can you give me an albeit hyper-simplified scenario or some explanation of that?

Brent Johnson:         Sure. Well, long story short, I think what happens is, again, as I said, if the dollar gets weaker, just more debt gets created, right? Credit gets extended. But when the dollar goes higher, that puts pressure on anybody who has borrowed them. And then that's how you get defaults. You get a credit crunch, you get defaults, and then you get a liquidity crisis. But in that scenario, the dollar is going higher and higher and higher.

You have to understand the reason the central banks, governments, monetary authorities, the reason they do stimulus, the reason they do bailouts, the reason they do quantitative easing is because the currency is getting stronger, not weaker. If the currency was getting stronger, they wouldn't have to create more of it. Or I'm sorry, if the currency is getting weaker, that means there's plenty of it. They wouldn't have to create more of it.

Dan Ferris:              Got it.

Brent Johnson:         It's only when it's going up and it's creating pressure that then they have to come in and supply more liquidity. And if they can't create it quick enough or fast enough or get it to the right places, then you get a credit crisis. And that is something like 2008. It's like something like 2020, and then that's what that's what would cause a reset. That's what would cause a reset.

And so it's very possible that we will eventually get into one of these currency crises or sovereign-debt crisis where the dollar is going much higher versus foreign currencies. Foreign currencies are losing value Perhaps gold is going higher because it's one of the few safe havens, but it's putting a tremendous amount of pressure on the global monetary system, and that forces the world to come together and figure out a new solution. They reset it, they wipe out the debt, they forgive the, you know, the liabilities, and that's how you get your reset. But again, it's a stronger dollar that causes the reset, not a weaker dollar.

Dan Ferris:              Right. And I should have intuited this because a stronger dollar is a more expensive dollar, right?

Brent Johnson:         That's right.

Dan Ferris:              It just takes more to get it. You need to give up more stuff to get it, more labor, more assets, more whatever. And so that naturally creates a stress on things.

Brent Johnson:         I think a good way – that's exactly – and I think a good way to explain this is let's pretend five years ago when gold was around, I don't know, $1,200 or $1,300 or wherever it was, let's say you borrowed $1 million in gold – or units. You borrowed a ton of gold – the physical unit, not the price, but the physical unit.

Dan Ferris:              Right.

Brent Johnson:         And then it was a 5-year loan, and this summer it comes due. Well, you borrowed it when it was at $1,200 or $1,300. Now it's $4,000. So now it's going to cost you a lot more to pay off that loan. That's the same dynamic that the rest of the world has to deal with dollars because they borrow in dollars because you need dollars to operate on the global stage.

Now, again, it doesn't matter whether you think they should borrow dollars or not. They do. And there's a lot of – like I said, there's tens of trillions of dollars that have been borrowed by global borrowers, non-U.S. borrowers. And so, as the price of the dollar goes up versus their own currency, it's more expensive for them to pay back. And this –

Dan Ferris:              I'm curious if you have a number, Brett, on ex-U.S. dollar-denominated debt.

Brent Johnson:         Well, the Bank of International Settlements did put out a report two or three years ago that they said it's at least $80 trillion. And that's all that they could sort of measure. So, my guess is it's over $100 trillion.

But what this causes is – the reason this is important to understand is because this is – I don't know, you've probably heard me say this before, but other people have said it as well– is this is how the United States can use the dollar as a weapon. Because if they can put other countries under pressure, they can then negotiate better terms. And so, if they raise rates or if they withhold supply or if they don't extend a swap line and a country comes under pressure because they can't afford to go buy those dollars that they now owe –

Dan Ferris:              Mm-hmm.

Brent Johnson:         – they can then – that's weaponizing the dollar against that country. And then they can say, "OK, we will give you a swap line, we will give you this liquidity, we will grant you this new loan if you do these things for us." And I think for much of the last 40, 50, 60 years, this process was managed for the greater good, and they didn't necessarily have a lot of strings tied to this monetary liquidity.

But going forward, I think we, as you very rightly pointed out at the top of this episode, we're moving into this environment where we're not cooperating with the rest of the world the way we used to. Things are not being negotiated on a multilateral basis. They're being done very transactionally on a bilateral basis.

It's hard to imagine Trump sitting by and letting the Fed extend a swap line to the [European Central Bank], which then bails out Airbus if Boeing is in trouble. And so I think going forward, you will see the U.S. put much more stringent strings on these swap lines and this dollar liquidity. And if they do provide that liquidity at all, there will be some specific actions that are required to get that.

I think a good example that we could use – and by the way, I know this is not just me coming up with this theory – Scott Bessent, who's the Treasury Secretary, has literally come out and said this. And he has given examples of how he has done this. And so, again, this is not theory. This is real-world stuff.

I think a very good example, probably the best example, is Argentina. Argentina came under pressure last fall. They had been given some liquidity from China. They had a swap line from China. But the United States, with its now focus on Western Hemisphere, didn't want China in Argentina. So they say, "We'll give you a swap line, but you got to reject the swap line from China." And so, the United States bailed them out.

And then it just so happens that Argentina also has numerous natural resources, energy, farmland, water, rare earths. Who do you think is now – this isn't explicitly stated, but who do you think is now in line to get those as those assets get developed? They're not – I can tell you they're not going to go to China.

Again, I'm not saying these things should be done. I'm not saying it's the right way. I'm just saying this is what's happening and it's important to understand this. Again, this is the intersection of capital markets and geopolitics. And for many, many years, it didn't matter. I think it matters now.

Dan Ferris:              I agree. I agree. That's where we are. And the understanding is more important than ever for Just, I think it's more important for regular folks, you know, who listen to this podcast and read our newsletters and stuff.

Brent Johnson:         One thing that – can I make a point on that really quick? Because I always like to make this point because I often will talk to people who will either say or they'll show me this picture of all these skydivers, and all of the skydivers have a currency on them. And it'll say they're all crashing. It's just one is falling, one's going to crash last.

Dan Ferris:              Right.

Brent Johnson:         And it's not – it's an accurate description of what's happening, but it's used in a way that to say that it doesn't matter. "They're all going to crash, so it doesn't really matter which fiat you hold because they're all going to crash anyway." And that is completely wrong.

I'll tell you why, is because if all you care about is purchasing power, if you don't have a job, if you don't have a business, if you don't have to pay any bills, if you have a secondary or third source of income that shows up every month that you don't have to go out and earn yourself, then perhaps fiat currency doesn't matter. And perhaps the relative levels of fiat currency doesn't matter.

But if you do have a job, if you run a business, if you operate on the global stage, if you care about capital markets, if you care about geopolitics, the relative levels of fiat currency are probably the most important thing that nobody understands.

                             And if you go back and you look at every global financial crisis for the last 50 years, every one of them had an element of a currency rising very fast versus another currency, because that is how countries end up getting in trouble. That's what causes liquidity crisis. That's what causes bailouts. That's what causes credit crunches.

And so, it's really, really important. If you don't have to worry about– if the only thing you have to worry about is purchasing power, you are an extremely lucky individual because most everybody else in the world does have to worry about things other than purchasing power. So, I think it's really, really important to understand these dynamics regardless of who you are.

Dan Ferris:              Right. I'm glad you mentioned purchasing power because I'm realizing – well, let's say we get into this ultra-strong dollar environment that we mentioned a moment ago where the dollar gets broken by being too strong. But when the dollar's strong, certainly U.S. wage earners would like that, wouldn't they? That would be good for them.

Brent Johnson:         Yeah, that's the other thing is that – when the dollar is strong, it makes it easier for U.S. wage earners. Now, it doesn't make it– doesn't necessarily mean it's easy.

Dan Ferris:              No.

Brent Johnson:         It doesn't mean – you can have inflation, you can have rising prices with a rising dollar, but it's easier for the –

Dan Ferris:              But it's relative.

Brent Johnson:         That's right. And so, and here's – and so let's go back to the 3D chess players. The 3D chess players know this. They know that war is a relative game. Now, whether it's an economic war, whether it's a social war, whether it's a literal kinetic war, it's a relative game. And there are going to be casualties, unfortunately. But when they measure whether it's going to work or not, they know they're going to get punched. But can they still stand while the other guy falls? That's kind of the analysis they use.

And so I think this is a good example of Iran. The idea that the U.S. military did not know that the Strait of Hormuz could be closed, or they did not know that Iran had drones that could hit ships, and they did not know that Iran was a mountainous region that would be extremely hard to do a land operation – it's, again, it's extremely silly. Of course they know these things. Now, just because you know these things doesn't mean you necessarily have a perfect plan that can avoid them, but they do know them.

And I think they did the analysis and they said, "OK, if we do this, these really bad things can happen. On the left edge, we get World War III. And on the –" I guess if you look at the full distribution, on the left edge, you get World War III, which they definitely don't want. But on the right edge, it works. And I think they can live with everything other than the left edge.

In other words, if we don't get – if things are bad but we don't get World War III, we can live with that because while it will be tough, we're better able to handle that than the rest of the world. And if it happens to work, then that's good for us.

Now, many of us don't necessarily like that decision methodology, but again, we get back to that's the methodology that's used. And the reality is, is that Southeast Asia, Africa, many of the European nations, even China would suffer much more from the strait being closed than the United States. It's not that $6, $7, $8 gas wouldn't hurt in the United States. It would definitely hurt, but it wouldn't hurt as much as it would hurt the other countries.

Dan Ferris:              Right. Yep. And in a bigger way, too, getting back to the original Milkshake Theory. If you hate the U.S. dollar, well, by definition, you – it doesn't make sense not to hate all the others even more. And if you think the U.S. dollar is going down, well, then you have to think every other one is going down first, right?

Brent Johnson:         That's right. That's right. So the order, in my opinion, the order of the dominoes matters, and it matters a lot. And the other thing is, these games can go on for a very long time. I literally know people who haven't gotten back into the market since 2008 because the next crisis is just right around the corner. And listen, it's not that they're totally wrong. There are a lot of bad things out there that could go really, really wrong.

But that's almost 20 years ago now. And this could go on for another 20 years before it all comes down. Maybe it goes on longer than that, but this is not – I don't want people to think that I'm – I don't want people to be Pollyannish and not worry about the problems or not think about the problems. I think it's incredibly important to understand the problems and think about them, but it's also not healthy to only focus on the problems and not see the bigger picture.

Dan Ferris:              Right, exactly – and not see the opportunities. You see the Strait of Hormuz, and everybody goes, "Oh, everything's too expensive. Oil's more expensive." And then they start listing all the sulfur and the naphtha and all the other things that go through there. And then, if you really think it through and keep going, you might do as I've done and bought a chemical company or two because you know that the U.S. Gulf Coast is like the low-cost chemical cracker of the globe, right?

Brent Johnson:         Yeah.

Dan Ferris:              So you'll wind up, and if you just follow these things down, forget about what you think ought to happen, as we've been saying and saying, and what is happening and what should happen next – what could happen next, is likely to happen next, I should be saying. You wind up with finding some opportunities that you might not have expected to find, right?

Brent Johnson:         That's right. And I think some of the – for me, I think the big effects from Iran are really not even felt yet. I think they're more likely to be felt later this fall, even early next year. [Crosstalk]

Dan Ferris:              Absolutely.

Brent Johnson:         Yeah. I've – we, in the spring, we started buying corn and wheat. It's funny, because this has actually worked out pretty well so far. We'll see if it will continue to work out – but we expected that we started buying, but we expected prices would go down over the summer, um, partly because we thought there would be at least a short-term ceasefire or some kind of a pause. But then we thought we would buy, we would add to our positions if that happened, which we did. And now they've started to come back up.

But I don't think – I think corn and wheat, soybeans, soybean meal, I think these could really do well kind of late [fourth quarter], early next year, because I don't think we're going to know until late [third quarter], early [fourth quarter] what the crop yields are going to be like.

And I think the crop yields have a very high potential of being affected as a result of a lot of the fertilizers, chemicals, [and] other needed inputs for agricultural planting seasons didn't make it out of the Strait in the spring planting season for the Northern Hemisphere or the winter planting season for the Southern Hemisphere. And you combine that with this year as an El Niño year.

It's a – and this, it's not necessarily a prediction. It's just a setup. I see the setup. I see the potential for it. I don't know for sure what's going to happen, but that's a setup I'm willing to play, right?

Dan Ferris:              Yeah.

Brent Johnson:         Now, the other thing is if you zoom out and you look at corn and wheat just from a really, really long-term chart, they're close to their lows. So, it's not that they can't go lower, but I think – I don't think they can go a lot lower, but I think they could go a lot higher. And so, that's an area that we've been investing in this year and we think has potential to pay off later this year, early next year.

Dan Ferris:              That's what I'm talking about. How do you play these? How do you buy them?

Brent Johnson:         Well, we do both through some companies and the futures. And so, it was just kind of a pure play for us on the move of the commodity.

Dan Ferris:              OK.

Brent Johnson:         There's, there's some ETFs you can buy, too. The ETFs aren't great. It's always better to buy the futures than to buy the ETFs. But there are numerous ways to do it.

The other thing that I – I haven't heard too many people talk about this, and we'll see how it plays out, but I think another ramification of an ongoing crisis in Iran is the MRO market, which is maintenance, repair, and overhaul for wide-body jets. It just so happens for many reasons over the last 20 years that the Gulf region became one of the key places where MRO happens for wide-body jets. And wide-body jets do the most for cargo.

And so the, the reason this is important is if these maintenance, repair, and overhaul operations are not done on a specific schedule and if a date gets missed, by law, these planes get grounded. And if the planes get grounded, they don't fly. And if they don't fly, then the goods don't get moved. And then you end up – you have one supply-chain crisis end up affecting another supply-chain crisis or causing another supply-chain crisis. And so, that hasn't really started to show up yet, but I think that has the potential to show up [this fourth quarter], [first quarter] of next year.

Dan Ferris:              That is interesting. Do you want to share a ticker symbol or no for that one?

Brent Johnson:         I try not to give specific ticker symbols. I'm regulated by a couple of different agencies, and I've got to be very careful of giving specific advice.

Dan Ferris:              Fully understood.

Brent Johnson:         But go – I can say this: Go to Google, go to Claude, go to ChatGPT, put in "MRO" and look for the top public companies and you'll get a bunch of the list.

Dan Ferris:              That's right. Google publicly traded MRO stocks and you'll be there. I would imagine there's not 100 of them, right?

Brent Johnson:         Yeah.

Dan Ferris:              All right. Well, that's awesome. Those are two really good ideas.

I think this is actually a really perfect moment to ask our final question, which is, it's the same for every guest. I'm hoping that you don't remember. I've asked you before when you've appeared on the show. I hope you don't remember it. It works – I feel like it works better that way. Whether we have – sometimes every now and then we have a nonfinancial guest – same identical question. And it is simply this, it's for our listeners' benefit: If you could leave them with one takeaway today, one idea, what would you like it to be?

Brent Johnson:         There are so many good ones, but I think the most important one is to understand the difference between what you want to see happen and what is likely to happen. We all want the world, or many of us want the world to be a specific way. Unfortunately, it's just not that way. And the nicest, most moral, most ethical way of doing things is not necessarily the most likely way things are going to happen.

And if you are going to put your hard-earned money on the line, you better have a very good reason for doing so. And it better be more of a reason than just you want to see it happen. And so, when you're putting your money to work, do a very, very cold-hearted analysis of what you think is actually going to happen before you do that.

Dan Ferris:              Boom! Love it. I love that. Of all the things we talked about, I'm glad that's the one that you homed in on for the final question. So, thanks for that. And thanks for being here, Brent. It's always a great pleasure to talk with you.

Brent Johnson:         Thanks for having me. Happy to come back.

Dan Ferris:              If you remember nothing else from this podcast, nothing else, please remember Brent's takeaway. Don't look at the world as someplace where your investing is based on something that you want to happen, or that should happen, kind of a moral view or a political view. Believe me, I made all those mistakes, and you don't want to make them.

Look at how the world actually operates. Look at what is actually happening and take that personal, political, or moral viewpoint out of the equation, and I promise you it'll be 10 times easier to look at what's going on in the world and say, oh, I see this implication for what's going on in just say the Strait of Hormuz today, so I think this is a pretty good setup as Brent described in the case of corn and wheat. I think this is a pretty good setup and I think this is a reasonable bet to take. This is low downside and high upside as he described it.

You may not agree with that viewpoint of his, but that thinking, that is what I want you to do. That is what we all should do when we look at the world, especially when it comes to geopolitics and macro themes. Those are the most dangerous places for a highly moral or personal political viewpoint to take over your thinking and send it down the wrong pathway. So I'm just going to, that's all I'm going to say because I want to double down on Brent's final thought and tell you that that really is very, very important, especially when it comes to macro and geopolitical-based investing.

So another great conversation with Brent. We've had him on before, we'll have him on again. Really brilliant guy that I just want to check in with on a regular basis so you can hear what he's thinking.

So another great interview and another great episode of the Stansberry Investor Hour. I hope you enjoyed it as much as we really did. And remember, click like and subscribe and sign up for our free daily e-mail.

Announcer:             Opinions expressed on this program are solely those of the contributor and do not necessarily reflect the opinions of Stansberry Research, its parent company, or affiliates.