YouSaid · the spoken record

Brent Johnson

lines on the record: 96
first: 2024-08-08
most recent: 2024-08-08
sittings or episodes: 1
sources: podcast

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“Not in a deep recession camp, and right in 2022, the NBER did not declare a recession. I think economists now view that as a midcycle slowdown in real. That is to say, inflation adjusted growth because inflation was so high and price oil went so high. But that was not a recession. And so that sounds like if you think there's going to be a slowdown, you think it's somewhat unlikely that it will be a MBER declared actual serious recession, but a mid-cycle slowdown is always possible. Brent, thanks so much for coming on. People could find you on Twitter at Stantiago AU Fund. Thanks again. I'm glad your internet connection worked out. And thanks everyone for watching.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“We're due for a 70 or 80% correction, and it's going to take us 15 or 20 years to crawl out of it. I think that's possible, but I don't think that happens for another several years. Again, can I be wrong? I can absolutely be wrong. I think you need to be prepared for all scenarios, but as of right now, I'm not in the lingering recession camp right now.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“So, in general, I'm not in the recession camp. But I think if we do have one, it would be kind of like the one we had in 2022, where markets pulled down and then we kind of had this V-shaped run out of it. It's funny because we had the V-shaped run in 2020. We had the V-shaped run in 2022. I think we're at a point where it becomes harder to extend this overall game than it has over the last 20 or 30 years. And as a result, I think things will move quicker than they typically do. I still think they're going to take longer to play out than most people, but I do also think that the speed with which things happen will increase. And so my base case is that we probably will get a lot of volatility, perhaps another hard drawdown sometime over the next six months. And then I think we would come out of it perhaps similarly to what we did in 2022. I'm not in the camp that says, you know, we are now at a historical high, something like 1929.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Well, Brennan, I really enjoyed our full conversation about the dollar. I think we've gone very in depth, which is very good. It's such a fascinating topic. I mean, you could say it really is the most fascinating topic. My final question for you is less bird's eye view more to the nitty gritty with what people in the markets are dealing with today, particularly in the economy. You said that we could have a month drawdown, a six-month drawdown, but that ultimately you think you expect the U.S. stock market to go to all-time highs. Are you in the camp that the US economy is going to recession? That is a view that people have had since really late 2021 that has not played out. However, the data today, maybe it's not as bad as people in the market are pricing in, pricing in two double cuts by the Fed, but it is quite bad. So what is your economic view about whether the US is going to go into a recession within capital R? And that is to say,”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“From engaging with the rest of the world. He's been putting policies. He's been kind of in a certain way doing the make China great again or now, whatever. He's doing many of the things that Trump is proposing doing. And he's been doing them for longer than Trump has been doing them. So, you know, when people say that the U.S. is thinking about pulling back from being the global hegemon and they're going to focus more domestically, this isn't just a one-sided thing. China's doing it too. Russia's doing it too. The dollar beats other currencies. And when dollar beats other currencies, there's a number of historical examples that you can look at to see kind of how to play that.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Well, I think what I would say is if China decides to Abandon the dollar system and Russia decides to abandon the dollar system. They can do that and they can become less global rather than more global. And again, the outlet there will be their currencies. China has enormous problems right now. Their stock market is down tremendously. They have some social unrest that Z has had to deal with. Their real estate market has gotten absolutely crushed. Their banking system is doing everything it can to deal with with the bad loans on its balance sheet. And what eventually ends up happening is the release bow for those kinds of problems ends up being the currency. Sure, sure. They can kind of shut themselves off from much of the world and here's the thing is I think a lot of people don't realize this. This is largely what Z has been doing. Z has been kind of pulling back.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“I think that's absolutely right. So I've seen you talk about this, Brent, about how using the dollar as a weapon. And the U.S. has used the dollar as a weapon. You could say successfully against Iran, against Venezuela, against countries that are much smaller. But when it comes to going against Russia, and particularly China, do you not think it would be a mistake to use the dollar as a weapon? Because, and I'll say what I agree with you on most things, is that I think that global dollar system is stable and will last a lot longer than a lot of people expect and that we get kind of an advantage. We get to print money that then we get to exchange things for goods that other countries produce. But I mean, the factory of the world, you know, maybe not an AI, but in a lot of electric vehicles, as well as so many other stuff, is in China. And don't you think that would put the global dollar system at risk? Because, I mean, if Russia can figure a way to function, I think China probably could.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Well, the only thing with regard to this topic, Jack, all you have to know is every time Japan or China and Russia do something that's a 3D chess move and every time the United States does something, it's checkers, they're infinitely smarter than the United States. They can't do anything wrong in the US is just, you know, I'm being sarcastic here in case people can't tell.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Bearish expectations were in 2022. But I think I don't really know, but I suspect Russia is doing something to keep the plate spinning. And some people will really, for some reason, feel very negative if I say this. But I think Russia could be selling its gold. And maybe that's why gold was performing so poorly up until recently.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Yes, I think it's fair to say, Brent, that Russia, relative to the wildly bearish expectations of when Russia first invaded Ukraine, the expectations were that their economy would shrink by 20%, the rule would collapse, and the rule did collapse for a very brief amount of time. The unemployment had an economic collapse. That hasn't happened. I mean, inflation went as high as 15%. The ruble collapsed and then restored its value, although it has been weakening. And real GDP for 2022, it was negative, definitely a horrible year under a non-border war, but definitely better than expectation. But I just think it goes to show that the economy is not always the quality of human life. I mean, I think that it's just a brutal, horrible war. But yeah, the financial system of Russia has not collapsed by nearly as much as I think the median expectation was and definitely the most.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Fed will be as eager to hand out dollar liquidity to a country or an economy that is not aligned, quote unquote, geopolitically with the United States.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Government started running a budget deficit for the first time in a long time. They had to change the way that they taxed their energy companies and get more taxes out of them because of this budget deficit. So not everything is perfect. Not only that, but recently there was an article between about the Russians who were selling things in Yuan. Now they have all this yuan they can't use. You know, when they were selling it in rupees, they have all these rupees they can't use. And so, you know, while they have survived, they haven't figured out a final solution that fixes all their challenges. And in the meanwhile, the US has been securing its allies as well. And so, you know, but I think this is going to continue, Jack. I think these sides are being drawn. Sides are being chosen. And, you know, the next time there's a global crisis, I don't think the...”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“The right way to say it, you know, you make people choose sides, you can put them under pressure. If you can put somebody under pressure, you can get them to do what you want them to do easier than if they're not under pressure. And if you really want to stick it to them, you can cut them off from complete dollar supply. And again, I know people say, well, it didn't hurt Russia. Well, you know what? Not everybody is Russia. You know, and yeah. And to think, listen, Russia has done well over the last couple years, but they haven't done everything perfectly. It's not like things are rosy over there. People say, oh, you go to Moscow, the restaurants are full, and the taxi cabs, there's a line to get in taxi cabs and everybody's happy. Okay, sure. I'm not saying that that doesn't exist, but the Russian...”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“We're picking sides. By the way, which side are you on as your economy continues to fall and your currency continues to crumble and you're having trouble getting US dollar financing? You know, and then, you know. Basically, it's a way of”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“But there's also a secondary effect, and that is to put the rest of the world under extreme pressure. And all you have to do is go back to 2022 and see it. You know, I was talking to people in positions of power and policymaking in DC in the summer and fall of 2022, and they were getting calls from all over the world saying, what in the hell is Powell and Yellen doing? They are killing us, right? You know, in many ways that was the US saying, you know, we're still the hegemon. If we so choose, all we have to do is push this button and your economy comes under extreme pressure. Oh, and by the way, we've got these two economies that are kind of rivals of ours. Russia and China, and they're kind of aligning and they're forcing people to pick sides. And so, you know, if.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“All of these advantages that I've set the US has and the US doesn't, it also gives the United States the ability, if they choose to, to use the dollar as a weapon. And that's exactly what we saw in 2022. Sure, the interest rate hikes were intended to slow the economy and get inflation under control. Absolutely.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Plentiful than it has been over the last 20 or 30 years. But all of that US dollar debt still exists and therefore all of that US dollar demand still exists. And when you have the same level of demand with falling supply, what happens to price? Price rises. So I think it is not impossible for the dollar to fall. I just think it's very unlikely. And if it does fall, I don't, I think all that does is it encourages more borrowing in US dollars, kicks the can down the road, and we end up right back where we are two or three years down the road. And the other thing we haven't really talked about this, Jack.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“No, I think it perfectly aligns with it. And I listened to your interview with Pettis, and I think he's largely correct. I mean, it's just literally just a numbers game. I mean, that is the way the system works. Again, as we move forward in time, my guess, and I think this is a, I don't think I'm way out on a limb by saying this. I think we are moving into a time that is less cooperative on a global stage than it has been. I think we're moving into a time where cooperation between countries is going to come with certain strings that didn't come before, regardless of whether the Republicans or Democrats are in the driver's seat for the next presidential administration. I think more protectionist policies will take place than we've seen over the last 20, 30 years. And as a result of all of those, I think dollar supply will be less.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“It in America, so it's higher tariffs and it's getting out of trade agreements where, as Trump would say, China can rip us off. I don't think I would use that language. Regardless of, you know, and Biden has put terrorists up or not taken tariffs down to the era of globalization, let's build everything in Vietnam, like that's over. How does that impact the global dollar system and the financial system that we've been talking about”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Yes, I mean, when PAR breaks, to use the Perry Merlings ultimate Pozara language, like if a bank deposit at Lehman Brothers is no longer worth a bank deposit at JPMorgan, that's when things get hairy in the financial world. I recently spoke with an academic, I respect it greatly, Michael Pettis, who said that the reason that the US government runs such a large fiscal deficit is not because we are so irresponsible. We love printing money and, oh, China has this huge trade surplus because they're so thrifty and they're so hardworking. It literally is just mechanical if China runs a very large trade surplus and the US has a trade deficit mechanically what he was saying, and he knows a lot more about this than I do, that the US either has to have high unemployment or run a large fiscal deficit to offset that and therefore the choice is easy. Run a large fiscal deficit. We can't have 13% unemployment, especially if you're a politician. What do you think about that theory and if we're going into a world where”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“I think would cause great volatility. And again, I go back to my 25 year chart times of great volatility lead to the US dollar rising.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“No one in the euro dollar market can print base money. The only way they can create more euro dollars is by using their own balance sheet, risking their own balance sheet, and creating a new loan. The US is the only one who can create new US dollar-based money. And then they can ship that outside the United States in which it becomes euro dollar-based money. But the euro dollar system cannot create it on its own. And so I think it's possible as we move forward in time, as we get more nationalistic policies, which I think we are regardless of which administration gets in. As we get into a time of greater geopolitical conflict rather than less, I think this ability for euro dollars and US dollars to exchange immediately at par may be put to the test. And that in itself”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“That will, to a certain extent, potentially offset the tariffs. But if they cut interest rates again, but the tariffs could offset the interest rate cuts as well, because you're restricting funding to the rest of the world. And so just because they want these things, it doesn't mean they can actually get them. Printing money, lowering interest rates, that doesn't necessarily help with inflation, which is another one of the things that Vance and Trump say that they want to attack. But what I think is very interesting is for many years now, 50, 60 years, we've had this US dollar market and euro dollar market in which the two were totally fungible. And as a result, they're priced euro dollars are priced at par. They're worth 100 cents on the dollar for a US dollar.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Yes, and this is when I'll say just because you hear a politician say something doesn't mean it's possible to actually do it, right? They will get up there and they'll say, we want to bring jobs back to the United States. We want to put up tariffs to the rest of the world. We also want to bring down inflation. Oh, and by the way, we want lower interest rates. Tariffs, if they lower interest rates.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Can all at once decide we are no longer going to use the dollar. All of the euro dollar debts are automatically transformed into this new thing, then potentially they could possibly work their way out of this. But if you've ever been in a meeting with more than three people or if you've ever gone to a family dinner and tried to get everybody to agree, you know, good luck. I think that that would be characterized by great volatility. And as I said before, If you just look over the last 25 years, anytime there's been great volatility, there's been a rising dollar.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“And there is so much demand in that euro dollar market that no matter how much money the If someone like Trump or JD Vance were to get into the White House. And now they put up tariffs. Now they say, you know what? We're fine helping out the rest of the world, but we're going to help ourselves first. And the way we're going to do that is we're going to swim down to the bottom of that swimming pool and we're going to put a bunch of cement over that drain that sends dollars to the rest of the world. Now, if you're a local company, if you're a US company and you need funding, just come to the Fed. We'll stand ready to help you. But if you're a foreign manufacturer, if you're a foreign trading partner who thinks you're going to access our cheap financing and then turn around and sell your goods into the United States at a lower price than we can produce here, good luck. Now, what happens when they cut off that dollar supply to the rest of the world and the rest of the world has to go buy dollars that are now rising because the supply has been cut off? What happens to those other countries' economies? So again, if the rest of the world”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“The rest of the world can't get away with this to the same extent is they don't have the same external demand for their local currency that the United States does. Let me give you just a quick analogy. I think a lot of people think of the US dollar supply as like a swimming pool. And the swimming pool is full of water and that's dollars. And when the Fed starts printing more money, they start pouring more money into the swimming pool. And before long, that swimming pool is going to fill up and it's going to overflow and those dollars are going to flow over the yard and out into the street. And that's all this excess liquidity and that's all this inflationary pressure and that causes the dollar to lose value. That's not necessarily wrong, but what they're forgetting is that based on the design of the system, there's a drain at the bottom of the US dollar swimming pool. And that drains out into the rest of the world, which is an even bigger swimming pool, probably 10 times the size of the US swimming pool called the Eurodollar market.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“If you look back over the last 40 years at all the monetary policies that the Fed has done, the extraordinary monetary policies, the bailouts, the stimulus plans, the QEs, the operation twists, the plaza accord, the Louvre Accord, I think one out of 20 was designed to strengthen the dollar. All of the others have been done to weaken the dollar. Now, if the dollar is this failing currency that can't stand on its own two feet and is destined to end up in the ash heap, why in the heck does the Fed have to keep weakening it, right? Yeah, because the reason is because there is so much demand for dollars outside the United States that the US can quote unquote get away with profligate monetary policy and budgetary policy because there's so much demand for the dollar outside the United States.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Again, most countries will never choose a default on a currency that they can print. But when you remember that the rest of the world also owes tens of trillions in US dollars, I think it's very likely that those countries do default, right? And then people will say, yeah, but then that just all falls back on the Fed balance sheet and they'll have to just print the money. Okay, let's say that that's correct. They will be printing the money in reaction to a rapidly rising dollar. Because as those defaults happen, you get a credit contraction. And when you get a credit contraction, you get a contraction of supply of currency, of dollars. As the contraction of the dollar supply intensifies, the price rises. The price rising is what causes the Fed to go to QE. Again, I think sometimes people get the cause and effect messed up. They say the Fed prints money and therefore the dollar falls. No, no, no. The dollar rises, and that's why they have to go do.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Right, and the yield curve control you reference, it's only a handful of examples I can think of Japan control Reserve Bank of Australia briefly attempted Yukur control in the World War II, US did yield curve control. But it's a quite, I think it's fair to say it's quite uncommon, definitely an unconventional monetary policy tool. Oftentimes central banks do things like let's say the Federal Reserve buys a trillion dollars worth of bonds. People think refer to that as yield control or quasi-yield control, which it's literally not. I mean, it's literally not. Yield current control is targeting specific yield and printing as much money or burning as much money as to use a cryptophrase, burning the token until it was within a certain band and doing a trillion of quantitative easing or quantitative tightening is just, it's not that it just isn't. So when you say your repudiation, I think what you mean is kind of a soft default where it's defaulting via.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Again, it deprives them of the much needed liquidity that they need. And so it becomes this vicious cycle where dollar strength begets dollar strength, capital flows into the United States beget more capital flows in the United States. As capital flows into the United States, it deprives liquidity that the rest of the world, as the rest of the world is deprived of liquidity, their economies turned down even more, as their economies turned down even more. There becomes even more demand to get into the United States. So it just, it goes around and around and around. And I think, I don't know, but I think when it finally gets away from the central banks, including the Fed, and they can no longer control it, that's when you get that crescendo higher, which will ultimately end, as I said, the very first sentence, the very first time I talked about this stuff, this will all end very, very badly. It just won't end yet.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Weakeens and their economy slow, then I think the capital people that do have capital are going to send that to the United States because if you can just sit in dollars and the local currency loses 5 per 10 or 10%, you make five or 10% just for sitting in the global reserve currency and doing nothing. And then if the U.S. is paying for 5% on its money, now all of a sudden you've got a 10 or 15% return, right? And then if you decide to buy some US equities that happen to go up 5% or 10%, you've got a 22% return or whatever it is. But the point is this is the disadvantage that these other countries have. The other thing is we went back, you know, referring back to what we talked about earlier, if countries are going to put caps on their interest rates via some monetary policy, then how are they going to compete with the U.S. Treasury that's yielding 5% or 6% or 7%?”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Or cap on yields, whether it's by QE, cap, or whatever it is. But then that is going to cause their currency to lose value versus the US dollar. And if their currency loses value versus the US dollar, then that's going to put incredible pressure on their economies, right? They still have to buy needed inputs, commodities, energy, whatever it is. And that's priced in dollars. If you have any doubts about this, just go back to 2022 when the DXY went to 114 and see what was happening around the rest of the world. So this is also why I don't think this is all going to happen tomorrow. I think this is going to play out over a number of years. The first thing that countries will do is they'll try to cap yields. Again, whether it's via QE or some kind of an interest rate cap or monetary policy, that's what they will try to do. But then the outlet becomes the currency, right? And then as the currency weakens, that will lead to other things. And as the currency...”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“No, no, listen, you're hitting on a very key issue. And this goes back to part of one of the fundamental reasons that I've pounded the table on my views is that if the rest of the world, local currency debt, Going to have to properly print their currency.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“The budget deficits despite the trade deficits, despite all the newsletters that have been written since 1978 about the impending doom that it just hasn't happened yet. Now again, I'm not saying that it won't happen, but I'm explaining why it hasn't happened yet. If you look at all the disadvantages of the United States, there are several. If you look at all the problems, there are several. But if you look at the advantages that it has, and then you compare it with the same level of analysis to the rest of the world, the US just has a number of advantages. The rest of the world just doesn't have. And on a relative basis, that's allowed them to keep going.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Their currency is rising in value. So it's just a much more difficult time for the rest of the world, the United States. It doesn't mean that it's impossible. It doesn't mean that they can't do it. It's just that the rest of the world has an incredible amount of challenges that the United States doesn't. And that is literally the result of having the global reserve currency. That is the benefit of having it. And that's why it's like the one ring in the Lord of the Rings. It's the ultimate power. That is global seniors, the ability to print money for free at no cost to yourself. That's global seniorage. And that is the privilege of the global hegemon. Now, that has negative things as well, but that's the big advantage. And that is why the United States is in the position it's in, despite all the debt, despite...”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“One of the key things to understand about financial repression is that the rest of the world cannot financially repress their economies to the same efficiency or with the same efficiency as the United States. And the reason is because they're damned if they do or damned if they don't from a currency perspective. If the rest of the world were to do QE in order to stimulate a slowing economy, that weakens their currency. But then that makes the dollar stronger and it crushes them from a funding perspective. Conversely, if the dollar gets weaker and their currency rises, then how can they financially repress if their currency is getting? How do they inflate away their debt?”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Trade can still take place. Cheaper goods from other countries flow into the United States. Can work with that. That's kind of what we've seen over the last couple years. But we get into a situation where if the dollar starts to rise precipitously, whether it's 5% or 10%, that starts to put real pressure on these economies. Even though their currency is getting weaker and it should make their goods more affordable, it's putting an incredible amount of pressure on the debt that they owe. And here is.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Here's the interesting thing. Part of the reason that the rest of the world suffers when the dollar gets stronger is that the rest of the world owes just as much in dollar terms as the US does. I mean, I think a lot of people know that the US owes $35 trillion now, right? Well, if you add up all the debt from the rest of the world in dollars, it's over $30 trillion as well. They can't print it. They have to go buy it on the open market. So as the dollar gets stronger, that debt is actually rising in terms of their local currency, right? So that's one of the reasons. So here's with what you're just talking about, in some ways a stronger dollar does help them because that means their currencies are weaker. As long as it's in moderation, the problem is when we get a surging dollar or, you know, again, if the dollar just kind of goes sideways and trends up a little bit, that's not necessarily a bad thing because in that environment, credit can still get extended.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Much higher than they are many economies around the world are melting down and all the liquidity in the world gets squeezed into the United States. And then that will bust and then we'll go off to go on to some new trade. But I think that's still several years away.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Some of it, I think, is going to go into U.S. large cap equities. I think in many ways U.S. large cap equities will become the new treasuries. And I think when that happens, as capital flows into the United States, what's the first thing? If you have foreign capital and you want to invest in the United States, what's the first thing you have to buy? Well, the first thing you have to buy is dollars because you can't buy Apple with yen. You can't buy Apple with rubles. You can't buy Coca-Cola with Lyra. So the first thing they have to buy is dollar. So they buy the dollar and then they use those dollars to go buy US assets. And so that is the method via which I think at the end of this big crescendo of liquidity, we'll get this huge blow off top, dollar goes higher, US equities go higher, gold goes with it, you know, yields probably.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“I've said there's going to be terrifying drawdowns along the way. Perhaps we've just started one now, but when that abates, I would expect those flows to keep coming back. Because where else are they going to go? Again, are you going to buy either the treasuries or the equities of an emerging market who has less liquidity than the United States? Again, maybe you are, but I believe capital will continue to flow to the United States. And if you think about all the money that's in fixed income. And we get into a situation where yields are now permanently higher or potentially going higher, especially in countries or economies that aren't as liquid and not as favorable as the United States. If money starts to leave, all those fixed income markets, where is it going to go? Now, I know some people are going to say it's going to go into gold. I agree. Gold's probably going to go a lot higher, right? But it's not all going to go into gold. It's not all going to go into Bitcoin.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“But the way that I think we get into a situation where the dollar rises significantly and U.S. equities rise significantly is because I think we have reached a point in global debt where debt is going to start to be repudiated, including U.S. Treasuries. Now, I want to be clear here I still think the rest of the world will buy treasuries more than they will buy US treasuries more than they will buy other countries' treasuries. They may prefer other asset classes to treasuries in general. As money flows out of bonds, especially other countries, sovereign bonds, I think one of the places it will find a home is in US equities. And to a certain extent, I think we're already seeing that. Again, just go back and look at the”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“People will say that I never said bonds were going to fall. Many people think that I'm a Treasury bull. I'm actually not a Treasury bull. People will say that I never thought that said that gold would go higher. So again, I'll refer back to the very first time I ever spoke about this publicly. One of the key points was that interest rates would rise and bond prices would fall. So I am actually not a long term Treasury bull. I understand completely how it's possible that they will rally and perhaps interest rates will go back to zero. I can't rule that out in some kind of a massively deflationary scenario that would make a lot of sense.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“I think what is ultimately going to happen, and again, I'm going to say this because I have been accused of changing my story”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“I know what you said is empirically true. It's very interesting to me as a debate about why it's true, why the dollar squeezes when there's a global recession or global crisis, given that the rest of the world is a net creditor to the US. In other words, the US should need the other world's dollars not the way around. But I think it's that even though the rest of the world sends more money to the US than the US finances the rest of the world, the liquidity-dependent financing that's like more short-term is a lot more dollar-based. At least that's one theory that a leading scholar, Bob McCaulay from the former of the BIS said to me in an interview. But regardless of why it's the case, yeah, what you said is empirically true. During crises, there is a dollar squeeze. So Brad, I understand in a gently rising dollar such as we've had recently, the market can go up, but explain how...”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Because that's what the system demands. That's the way the system is designed. And so to think that that isn't going to happen again to me is quite a leap. And that is why fiat versus fiat matters.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Rising causes it or whether the dollar rises in reaction to it. I think that's kind of open to interpretation. But when the dollar rises versus other currencies, really bad things happen because that's what forces liquidations. And when liquidation start in a debt-based monetary system where credit has to expand or it crashes, that's what leads to crashes. And all you have to do is get a chart of the DXY and go back 25, 30 years. Every time we've had a global slowdown, every time we've had a crisis, 100% of the time it has coincided with the dollar rising versus other foreign currencies. Now, if you are convinced it's going to be different this time, then be my guest. Bet your whole portfolio that way. I would strongly recommend against it because again, it's probably not different this time. The reason the dollar has risen during all those previous crises.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“No, no, exactly. But the idea gets put to me all the time that the DXY doesn't matter because all fiats getting debased. And therefore, it doesn't matter whether the dollar rises versus foreign currencies or not. That is probably the biggest myths conception that I can think of. And if I could dispel one myth today, it would be that. Very few things in global finance matter more than the relative level of the dollar versus another currency. Because when a dollar rises versus other currencies, it puts an incredible amount of pressure on those countries and those economies and the debts that they have. And including the United States. But what causes crises, what causes liquidity events is when the dollar rises or whether the dollar”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT
“Here's the other thing, too, is this is really important to understand, especially for listeners who are perhaps not versed in finance and, you know, haven't been on Wall Street for 40 years and may perhaps don't understand all the lingo. And they're kind of, actually, I should take a step back because even people have been on Wall Street for 40 years often get this really messed up.”
2024-08-08 · Forward Guidance · The Rug Pull on Global Liquidity | Brent Johnson on Unwind of the Yen Carry Trade, and the Exaggerated Rumors of the Dollar’s Demise · IDENTIFIED FROM THE TRANSCRIPT