Spoiler Alert ⚠️
This article will not dive deep into the numbers, the impact & the current effects of this amazing theory, we’ll stick to the concept, Brent Johnson’s thought & explain this as if you were 5!
Let’s get started with this 🥤!
Explain the dollar milkshake theory in the easiest way you could bro 🥺
The world is a crazy crazy place, and the people who run it are even crazier!
The dollar milkshake theory is a way of explaining why people like to hold dollars in their wallets. It says that when people have a choice of different things to hold in their wallet, they will choose the one that stands out.
If I gave you a choice, you might choose a chocolate milkshake over a plain vanilla milkshake. People too will choose to hold dollars because they taste well (we mean, they are valuable) . This means that dollars are in high demand, which makes them worth a lot.
📌 Superior a.k.a Level 2 Explanation
The dollar milkshake theory is an economic concept that suggests that the demand for a particular currency, such as the US dollar, can be influenced by the availability of alternative investments. The theory is based on the idea that investors will choose to invest in the currency that offers the best combination of stability, return, and accessibility.
According to the dollar milkshake theory, when investors have a choice of investments, they will tend to choose the one that offers the most attractive combination of factors. For example, if a particular currency offers a high interest rate but is not very stable, investors may choose to invest in a different currency that offers a lower interest rate but is more stable. This can affect the demand for the first currency, leading to changes in its value.
The dollar milkshake theory is often used to explain why the US dollar is the dominant global reserve currency. The theory suggests that the US dollar is attractive to investors because it offers a combination of stability, accessibility, and return that is unmatched by other currencies. As a result, investors around the world tend to hold large amounts of US dollars, which helps to support its value and maintain its status as the dominant global reserve currency.
So, who is Brent Johnson & why does he think so?
Brent Johnson is a wealth manager at Santiago Capital and a General Partner of the IceCap Strong Dollar Fund. Brent has had a multi-decade career in finance and has been responsible for managing billions of dollars.
Because the world is completely run by fiat currencies, cash whose value is not backed by some physical good such as gold or silver, Brent expects a massive devaluation of currencies across the board. Because of the U.S. is a relatively safer, stronger economy, he expects capital to flood into its domestic markets
source & courtesy: https://www.goingdeepwithaaron.com/podcast/brent-johnson
You could watch this video & skim through the entire conversation about this theory
Here’s a great read to know more about the $ milkshake theory
👉🏼 https://www.techinasia.com/dollar-milkshake-theory-means-crypto