#THERE WILL BE BLOOD MOVIE#
In There Will Be Blood, there’s a scene in the movie where this oil baron is negotiating with one of his neighbors. You called this scenario of the dollar rising in value while other currencies decline the “Dollar Milkshake.” Why a milkshake, of all things? There’s just no alternative for settling debts around the world. Like it or not, whether you think it’s appropriate or not, whether you think it’s sustainable or not, the fact is there’s an incredible amount of demand for dollars right now. And since the dollar is the global reserve currency, there’s just simply a lot more demand for dollars around the world than there is for euros or yen or pounds. Under those conditions, the relative value of a currency comes down to the level of demand.
For more than a decade, but especially since the pandemic, all countries have been using the same basic policies to manage their economies: a mix of fiscal stimulus and low interest rates to encourage growth. The reason the dollar has been getting stronger is because it is the best of a bad bunch. They understand things in their local currencies, but then they also conduct business and financings in dollar terms. So people outside the United States have grown up thinking in two different currencies. So not only do we use the dollar for our local day-to-day business and purchases, but the dollar is also used throughout the world. And the reason is because, with the United States being the global leader, the global hegemon, we have the global reserve currency. Why is the dollar getting stronger - and why should people care?Īs Americans, we are trained to think in one currency - that being the dollar. Johnson, who thinks in real time about financial news on Twitter under walked us through the logic that led him to predict these events and what he sees happening next.
(In another commonly used metaphor for this idea, the dollar gets so strong that it becomes a financial wrecking ball, smashing overseas economies large and small.) Over recent weeks and months, the greenback has strengthened enormously against all the world’s other major currencies, from the pound and the euro to the Japanese yen and Chinese yuan - creating an increasing amount of chaos in financial markets, with Great Britain at the top of the list. financial system’s strengths - especially the value of the dollar against other currencies - can end up hurting the rest of the world and may end up, eventually, making things even worse domestically. To get a better understanding of what’s happening at a structural level, I spoke with Brent Johnson, the CEO of the financial-advisory firm Santiago Capital, who laid out the problems in the global economy years ago with his “Dollar Milkshake Theory.” The core of his thesis has been that the U.S. prime minister Liz Truss unveiled a budget proposal that, during normal times, would have been unremarkably conservative - but instead triggered a deep sell-off in the British pound, nearly triggered a Lehman Brothers–like domino effect, and compelled the International Monetary Fund to regard the United Kingdom like a struggling third-world economy. Last week, that reality became more apparent after new U.K. The view from beyond our borders, however, has largely been even bleaker - so bad that the American economy is now viewed as an enviable bastion of strength amid a collapsing global system. Daniel Day-Lewis’s character inspired the “Dollar Milkshake” theory.
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