I love seeing two smart, knowledgeable people respectfully disagreeing and working through it point by point. Kudos to you both!
@BoomBustProfits
6 ай бұрын
Brent is overrated & achieved semi financial celebrity status for what is a poor metaphor.
@willnitschke
3 ай бұрын
@@BoomBustProfits Nope.
@Bullypulpit
6 ай бұрын
Looks like I picked the wrong week to quit smoking.
@DuderScooter
6 ай бұрын
😂😂🙏🙌
@jsc3739
6 ай бұрын
And I to sip the final drops from my milkshake...
@E_Clampus_Vitus
6 ай бұрын
😂😂😂❤
@427vot
Ай бұрын
Looks like I picked the wrong week to stop sniffing glue. 🤣🤣🤣
@mm-zw1zc
6 ай бұрын
Excellent debate. However, there is one point I expected Bob to bring up, but he did not. Brents reason for the squeeze is the interest on the debt, and there was agreement that if there was no interest then the squeeze would not be needed. But, the point I don't get is why a loan can not fail or be re-written in another currency, and where the interest part is not paid directly, but moved, or paid in a form of a tangible asset. For example, if I default on my mortgage, the dollars in that loan disappear, BUT the creditor gains the house. Even if fractionally reserved, most loans are written with some backing asset else the creditor fears not getting paid back. So, the dollars can disappear, but what happens is a taking of the assets. Now I agree with Brent that this could cause a chaotic event and scramble by debtors to not let that happen. But, the creditors also do not want such an event in bulk because it means they must somehow sell or take management of the backing asset. So they would be strongly incentivized to negotiate for some other form of debt forgiveness, such as to rewrite the loan where there is payment in an alternative such as gold or bitcoin.
@ConsciousOne369
6 ай бұрын
Good points, I concur/agree with your opinion/points.
@willnitschke
3 ай бұрын
If you debt contract is denominated in USD but you can't repay in USD, offer the counter party Vietnamese Dong and see what happens.
@mm-zw1zc
3 ай бұрын
@@willnitschke The Dong is not a tangible asset. The point above is that the offer to the counter party is a house or gold or lithium batteries, or integrated circuits, or something else other than fiat. Generally contracts get written with a backing asset as collateral because the counter party understands that there can be risk in non-repayment.
@willnitschke
3 ай бұрын
@@mm-zw1zc Sarcasm aside, if I'm running a business I must receive a standarised unit of exchange, as I've got my own bills to pay. I'm not a hock shop.
@willnitschke
3 ай бұрын
@@mm-zw1zc Oh, nothing is loaned without collateral if you're talking about loans. Business contracts typically require pre-payment for international orders. Financial institutions do need to post collateral but it doesn't need to be a physical asset like an office building.
@MBarberfan4life
6 ай бұрын
The reason people get confused by the milkshake theory is because the term "dollar" is ambiguous. It could refer to your purchasing power, but it could also refer to the dollar as compared to other currencies.
@JK360noscope
6 ай бұрын
BTC
@donwhite3237
6 ай бұрын
Great discussion. Clarity for me comes around 54:00 to 59:00 with the chairs in the room analogy.
@AustrianEconomist
6 ай бұрын
100% agreed. That’s when it clicked for me too. The cigarette analogy confused the heck out of me 🤣
@cwalenta656
6 ай бұрын
Glad Mr. Rickards wasn't invited.
@FreeMarketState-o7l
22 күн бұрын
This is the one of my favorite videos from these two individuals.
@Georgggg
12 күн бұрын
Dollar milkshake event is essentially fiat currency spiral deflation, which theoretically possible, but never happened in history.
@jimkozubek4026
6 ай бұрын
Santiago was leaving for the rest of his life and he hadn't called a soul and he hadn't packed a thing. Can you explain that?
@jeffreygoss8109
6 ай бұрын
This was an excellent discussion.
@orthodium
6 ай бұрын
The analogies between fiat and physical objects is inherently faulty, since fiat is non-physical as far as its backing is concerned, and can be diluted at will. It’s more like a game of musical chairs where the number of chairs not only doesn’t reduce but even increases, albeit the size of each chair is continuously collapsing into zero.
@moviehipster
5 ай бұрын
Nobody smokes dollars, they always exist. Bad analogy.
@willnitschke
3 ай бұрын
@@moviehipster That's not the issue. The issue is not the monetary unit or the cigarette, it's the promise to repay in the agreed unit. A promise (debt obligation) is never a "physical" thing.
@oilman7718
6 ай бұрын
Outstanding discussion! I think I'm starting to understand some little bits of the complexities of a global debt-based monetary system thanks to Brent, George Gammon, Jeff Snider, Joseph Wang and a few others. One nuance that I think I grasped for the first time here is the role of interest in a system where money is loaned into existence: That is, if I heard Brent correctly, because of interest (on top of principle), the demand for dollars in the entire system always exceeds the supply, which correspondingly results in a requirement for exponential growth to avoid a system-wide collapse. Probably because of my (retired) engineering background, I'm cringing a little. It seems like a debt-based monetary system is effectively an unstable chain reaction that is doomed to either grow exponentially until it explodes, or be slowed to a trickle by activating an emergency trip system. It makes me wonder if there wasn't some fundamental ancient wisdom inherent in the early Christian and Islamic admonitions against "usury".
@justb8706
6 ай бұрын
You’re doing better than I am. For the life of me I will never get my head around how there is value in buying debt. On an elementary level, I don’t quite understand how debt is valuable. Maybe I’m misunderstanding it by viewing debt as a net negative.
@georgerogers1166
6 ай бұрын
Exactly. Fractional reserve banking is precisely a ponzi!
@willnitschke
3 ай бұрын
@@justb8706 Because good debt might be income producing for you, or income saving.
@willnitschke
3 ай бұрын
It is unstable, which is why central banks set-up swap lines to release pressure.
@justb8706
3 ай бұрын
@@willnitschke it’s the concept of “good debt” that gets me. How can there be profit in debt? How is it ever certain?
@Rdo_ss
6 ай бұрын
Bob has the best jokes
@patrickcasper7487
6 ай бұрын
Theres also the possibility that substitution takes place to pay off the external dollar debt. In fact, its pretty much a certainty that it will. If Im owed debt in dollars, but my debtors have no dollars and I know their chance of getting dollars is low then Im likely to renegotiate the debt in terms of another currency which I find to be sound. In the case of that happening, the likely substitute will be gold and silver and the dollar purchasing power will not rise as he states here. Just another possibility to consider.
@LegalAutomation
6 ай бұрын
If your employer called you tomorrow and said that he doesn't have any dollars to pay you, but that he will pay you in Colombian Pesos, would you accept? And even if you do accept... The first thing you are going to do is run to the closest currency exchange facility and swap your pesos into dollars. The reason is because you have no use for Colombian Pesos.
@drdrifter2424
6 ай бұрын
I was thinking the same thing and I think Brents response would be that even if thats the case with 90% of the parties involved (that they would just renegotiate the debt), that the people who demand they get their dollars, is enough in itself to trigger the milkshake. Don't get caught without gold/silver/ammo in this scenario.
@rakadus
6 ай бұрын
Not only must the monthly compensation needs to change from USD to Pesos, the 401k contributions also need to be redesignated in Pesos. It's easier to start for transactions; just easier only. This itself will take a lot of effort. Then trying to redesignate 401k contributions is a humungous effort. Might not work at all and might not be accepted.
@PRMD
4 ай бұрын
Bob totally caught Brent with that cigarette analogy😂
@BoomBustProfits
6 ай бұрын
Tired of hearing about this absurd (& poor) metaphor for the relatively slower decline of the USD...It only over complicates what it obvious.
@geneeverett7855
6 ай бұрын
Facts!
@PelDaddy
6 ай бұрын
Love the musical chairs analogy. Understanding this is critical. The Theory of Money and Credit explains all this (but in a much less easy to grasp manner). I hope my investment advisor has such a deep grasp of these concepts. I suppose I should ask him, or hire Brent. Thanks.
@sirpsychostee11
6 ай бұрын
Loved the ZeroHedge debate - awesome he is back!
@Marcasecas
6 ай бұрын
54:30 Good explanation👌🏻
@analysisonlight605
6 ай бұрын
Great Debate!
@quietlike
6 ай бұрын
YES!!!!! This is what I wanted to see, no jim rickards or that other dude!
@jtimmer1969
6 ай бұрын
Great Guest timely topic. Huge advantage of having a working trader on who can help put some real world spice on top of sound theory. Well done both of you.
@jim3232
6 ай бұрын
If you want to save yourself some time, just watch the last three minutes, “there will be an intermediate period when the dollar rises before it collapses.” Otherwise, Great show, Bob!
@astralislux305
6 ай бұрын
Brent is right when you consider the volume of Eurodollars out there. No currency has ever faced this situation.
@bigqueue
6 ай бұрын
That was an absolutely awesome discussion, and I have to say it truly describes how the larger World economy is such an analog place. People always think in terms of up and down left and right good and bad, but most things in the world are actually quite analog and the result of that is that things do not always go in the direction that they are ultimately going to end up in. There are many times when in electronics a signal will go through wild oscillations before it finally goes to zero. There was one point in the cigarette discussion where at some point we will end up in a hyperinflation or very fast evaluation situation.
@andhaiden
6 ай бұрын
Bob, you’re always explaining for the people at home, but what about for us homeless people? Where’s our explanations?!?
@modelmark
6 ай бұрын
You wonder:if everyone sees dollar dependence as a risk, why couldn't the eurodollar parties not come together and replace the dollar amount on their contracts with gold? If both lender and borrower see $ as a risk, why not?
@willnitschke
3 ай бұрын
They don't see it as a risk. Something can be a risk even if it's not recognised as such.
@supersam1914
4 ай бұрын
Great discussion thanks guys
@MrGunnar69
6 ай бұрын
If all countries in the West were on a gold standard before WW1, what significance did the British pound have as a reserve currency? If a Spaniard were to invest in something in France, it doesn't matter which king is on the coin, right? The same for countries' reserves, what matters is the number of gold bars, not if there is a British king stamped on the gold.
@josephsloop8865
6 ай бұрын
Because the value of the currency and interest rates fluctuate based on the demand and supply of the currency. There wasn't a gold standard before WW1. There was a gold EXCHANGE standard, where currencies pegged their value to gold. People didn't use gold to exchange for goods and services -- they used their currencies, redeemable for a certain amount of gold. Such a move caused imbalances where currencies would appreciate/depreciate based on monetary policies and thus gold would be reallocated to compensate. The gold moves would signal to the monetary authorities to either tighten or loosen, and thus checked the central bankers to an extent. Example is that post World War 1, the United States had a huge appreciation of the value in USD as European countries devalued their currencies and came off the gold standard. Gold exports became more profitable from London to New York. The dollar strengthened against the pound, but the dollar's exchange rate was the same price for gold, causing an arbitrage environment. Dollars could be bought at a cheaper price using gold, then converted back into pounds for a stunning profit for London bankers and investors. You could go to a London bank, redeem your pounds for a certain amount of gold, convert that into USD, then convert the USD into a greater amount of pounds. This would cause a gold shortage in London and a surplus in New York. Theoretically, this would signal that England's central bank should tighten its monetary policy and the U.S. should loosen its policy. That's exactly what happened in the mid-20's. England would end up going through a bust, while the U.S. enjoyed a boom for a few years before going bust as the gold-inflows reversed into outflows after Europe's economy started recovering. Interest rates started to rise in the U.S., money was tightened, and the U.S. economy crashed in 1929.
@ILikeMilk-es5ii
6 ай бұрын
Awesome as always
@jmwSeattle
6 ай бұрын
Being a superpower is totally different from the issue because what gives a country military power could change enormously.
@markbalentine-w6d
6 ай бұрын
hahaha this is a reference to kelsi milkshake song Milkshake Song by Kelis
@sbain844
6 ай бұрын
The nuance here seems to come down to the difference between a commodity money, and the fractional reserve fiat garbage that we actually have. With fiat, when the bond market collapses, we could get a 'debt deflation theory' nightmare with deflation and a rising dollar - but the Fed won't allow it, they'll print to infinity rather than allow it to happen. Now, with regard to the Eurodollar market, I think Brent is mistaken. The debt in the Eurodollar market will not continue to exist when the bond market starts to collapse - the Eurodollar market does not create bonds, it creates a different type of asset more akin to 'fugazzi' debt. While the Fed will mitigate the bond market collapse via massive bailout packages, the fugazzi debt will lapse without value. This will, of course, collapse the global financial system, but that takes us to Jim Rickards' point. Jim Rickards was correct in that, when the bond market hits the rocks, the endgame will be upon us with the FED running a new BTFP mark 2 program to infinity. What may have briefly began as deflation will quickly turn to sky-high inflation, maybe even hyperinflation. Maybe there's a window of opportunity to buy the dollar before it collapses, but why risk it when it would be far less risky with much more upside potential to put your money into gold.
@TheLegacyHero
6 ай бұрын
"While the Fed will mitigate the bond market collapse via massive bailout packages, the fugazzi debt will lapse without value" If they are dollar-denominated assets/debt, it will create demand for the dollar by those individuals/organizations else their credit ratings collapse and the banks that lent them will collapse. Otherwise, their operations will completely cease and individuals/organizations will do everything possible to keep the lights on at the end of the day. Dollars will be bought off the foreign exchange market to pay for these debts, pushing the value of the dollar up relatively speaking. This happened in 2008 and its aftermath as well as Covid and its aftermath. This is the essence of Brent's milkshake theory, and it's a nuanced one. Rickards' failure to understand this concept is why he has been relegated to predicting the imminent demise of the dollar for the past 15 years -- a prediction that while ultimately will be true, will not play out until Brent's theory plays out first.
@sbain844
6 ай бұрын
@@TheLegacyHero I understand the argument, and I did mention that there may be a window of opportunity where the dollar rises. However, I think that the size of the debt this time is so large that when the financial dam bursts it will very quickly flood the market. In other words, it could easily be that all fiat currencies are quickly abandoned - perhaps by all western countries nationalizing their banks and immediately making all of their govt bonds whole via enormous amounts of money-printing. That's the sort of situation that could lead to hyperinflation. I certainly wouldn't want to be invested in the USD in that situation, gold would be a much safer bet.
@dashphonemail
6 ай бұрын
Cigarettes aren't loaned into existence with an expectation that you'll be paid back with more imaginary cigarettes
@aleksandarlazic4620
6 ай бұрын
I know nothing, but - if someone owns me $100, - he doesn't have $ but has coffee - I do not want $ anymore but could use some coffee - I see no problem $ is used out of convenience, but if it is not convenient anymore, everyone can repay each other in some other convenient way. The only business in trouble is $ printing business. By printing I mean business of loaning money into existence.
@PelDaddy
6 ай бұрын
Bob is making Mises' point (The Theory of Money and Credit) that inflation benefits the borrowers over the creditors. Brent is making the point that the money supply is majority imaginary, literally loaned into existence by fractional reserve banking (credit expansion). That was the distinction Brent was trying to make between cigarettes as a consumer good vs. as money. If the cigarettes are money, and the majority of the cigarettes are imaginary then the supply is instantly contracted in the event of a run on cigarettes and defaults on the cigarette debts. The defaults actually lead to credit contraction, and a dramatic drop in the imaginary supply that was loaned out to begin with (the fractional reserve loans). So both the demand AND the supply fall, though likely the supply falls even more than the demand, or there is some back and forth in the process (which I think is the real point of the whole conversation here... the dollar will go up and down, but mainly up relative to other currency until such time that it collapses as well due to even more defaults, and then gold (as usual) wins). Very interesting discussion, and it is fun to see you guys have the sort of conversations I have amongst friends.
@moviehipster
5 ай бұрын
Im going to trade my imaginary chair for an imaginary bite of an imaginary bitcoin, then buy a real chair, a lazyboy chair, and sleep off this headache, wishing i had a milkshake.
@Marcasecas
6 ай бұрын
31:05 True. The system can not be stopped without destroying everything. And not stopping it will end up destroying everything. The future looks great for the few that know how to sail the coming storm and horrible for the masses.
@steve5976
6 ай бұрын
I agree with Brent . Dollar and gold go up together. The thing people are missing and that is left out is that on the OTHER SIDE the dollar 💵 isn’t the world 🌍 wide reference point . Gold and Bitcoin are new reference point and dollar doesn’t buy as many world 🌍 goods.
@justb8706
6 ай бұрын
Appreciate the discussion, but you could’ve summarised this into five minutes, and just said our entire economic system is fake because government creates money. A true free-market sans government involvement would avoid all this garbage re currency value dependent on debt
@georgerogers1166
6 ай бұрын
USD the cleanest rag in the sink.
@kevinyaucheekin1319
6 ай бұрын
Really is not Gold & silver real money. Fiat not hard backed by Gold has a very short run. It's dead long lived the once & future King. 😊
@andrewkerr5296
6 ай бұрын
@@kevinyaucheekin1319 Dude if Currency is determined by Government is FIAT no matter what it's backed by
@georgerogers1166
6 ай бұрын
Of course. Once the pyramid of bank created dollars crashes the central bank has a choice of: backfill and hyperinflate, or have massive credit expansion.
@Alexdegreit
6 ай бұрын
Bob Murphy is too nice to crush Bremt ideas. Brent is obviously wrong and we are still discussing what's money
@chesterg.791
6 ай бұрын
This dude's brain thinks by using movie references.
@dondit
6 ай бұрын
Brent forgets deleverage happened with other currencies in the past so it is bound to happen. It’s not invincible. However until oil link exists he is right. After it’s unlinked with Oil dollar is done. As long as US shoot on its foot through sanctions unlinking with dollar of all commodities will continue.
@ginamurray711
6 ай бұрын
😅😂❤Bottom line: America is not going to let them walk away. It’s either Uncle Sam or nobody.
@droneblake8968
6 ай бұрын
The cigarette analogy is flawed on the simple basis that people don’t just destroy the dollar they work for, even if you spend it all, someone else now has that dollar. So the analogy is flawed at the start. You need a currency that doesn’t just literally go up in smoke as soon as you have it
@weslee511
6 ай бұрын
Good discussion because you can see the crazy theorizing and manipulation needed to run a ponzi like current monetary systems
@imajinl.
6 ай бұрын
The title😂
@99Nafets
6 ай бұрын
That title though 🌶️😂
@yotamgilad600
6 ай бұрын
Not that I'm an expert, and I appreciate if somebody would school me, but for some reason I feel like this debate is relevant for crypto (coins) currencies if you consider a blockchain as a market (that may or may not interact with others).
@duong055
6 ай бұрын
Jim Rogers believes that dollar will rise the next crisis, similar conclusion by Brent Johnson
@nacetroy
6 ай бұрын
Bob and Brent - couldn't you explain the cigarrette analogy here as Bitcoin? One reason why Bitcoin can't replace the fiat Eurodollar is because the difficulty in figuring debt. 20 Bitcoin in debt for Bitcoin taken out when BC was worth $13,000 is obviously much different than 20 Bitcoin in debt when the BC is worth $50,000. Dollar amount and blockchain is not part of my analogy, the scarcity of BC, as in Brent's description of dollar scarcity despite a change of currency from Eurodollar to something else.
@coleewert9407
6 ай бұрын
If everyone wanted to claim their real chair or $1 Trillion US at the same time how would you guarantee your are being presented with authentic value? Would everyone get told their $1 Trillion is real and the government print the debt as real dollars?
@drdrifter2424
6 ай бұрын
I was thinking that the musical chairs reference was a better fit, where bitcoin is in the center behind the curtain, the partygoers (hodlers) are the people in the room dancing and have created a rumor that when the curtain drops, everyone is going to be rich, and the people who keep paying higher and higher prices are basically bribing the bouncers just to get inside. As soon as the music stops, curtain drops with nothing behind.
@drdrifter2424
6 ай бұрын
And the bouncers are giving kick backs to the partygoers who started the rumor.
@8mpgmafia109
5 ай бұрын
Host can’t be serious with he’s cigarette analogy 🤦♂️
@paulcopper929
3 ай бұрын
Brent is wright. When you barrow US dollars you have to repay the loan in US dollars.
@thomashandy8985
6 ай бұрын
Y'all making me dizzy 😮
@moviehipster
5 ай бұрын
The Ashtray Theory Sucks! Nobody smokes dollars, Bad analogy, let it go.
@ConsciousOne369
6 ай бұрын
There are no equilibriums except for God. But certainly no 100% equilibriums in economics if we are talking about real life.
@carbonfibercrypto2919
6 ай бұрын
brent was not convincing here
@sorrycharlie4127
6 ай бұрын
BOB'S BACKPEDALING! I will say Jim Rickards is very smart guy! Albeit a very large ego. Let's not forget there's some very bad actors at play here and we don't know what their intentions are... Nefarious for sure!
@geneeverett7855
6 ай бұрын
Sounds like Brent is moving the poll goal post. So tired of this nonsense theory
@geneeverett7855
6 ай бұрын
Brent lives in fairytale world. Ignores Brics & fact saudiis & Japan trade in eastern currency in edition to dollar. Won’t age well aside from a ultra short term spike
@mwase7782
6 ай бұрын
as well as the states weaponizing the dollar against Russia. Why would another country like China want to buy more or even keep those dollars? Why would countries not in the west or allied with the west want the US to have control their holdings and freeze their assets if they disagree with you? They are even considering using Russias 60 billion against them and sending it to Ukraine. Big mistake. China the largest holder of us treasuries definitely won't be increasing their holdings. With a conflict vs the US looking likely, they're probably going to sell off as much of those treasures as possible.
@YouilAushana
5 ай бұрын
What if ai invented a currency?
@kevinyaucheekin1319
6 ай бұрын
Brain milkshake theory? 😂
@chrislemieux2747
6 ай бұрын
Jesus fuckin christ
@jimsummers487
6 ай бұрын
Farmers would never be the ones with money… Agriculture is the main reason that we have illegal immigration… What kind of cigarettes u smoking ?
@geneeverett7855
6 ай бұрын
Claiming God’s people has nothing to do with isreal government committing genocide. What a fake and nonsense take Bob. Bring Dave smith back to debate
@noSirIDontLikeIt
6 ай бұрын
Brent is a theoryless man. All he wants to do is sit next to a gold bug who says change all your dollars for gold right now, and say: wait thats not too bright. Obviously that IS NOT TOO BRIGHT. But to think he is intellectual.. o boy. Prove me wrong with this episode and say something positive an actual opinion.. Brent has opinion: of course I own gold cause someday it will crash, BUT i own USD cause it has a lot of legs. WOW. Incredible take.
@moviehipster
5 ай бұрын
Gold! In 80 years! Just keep waiting
@noSirIDontLikeIt
6 ай бұрын
If gods people kill civilians, then god (Jesus dad) wants civilians dead. Bob knows this. That’s why any sympathy for civilians dying is known to Bob to be hate speech. Love god, and his people. He had a son with a Jew named jesus
@geneeverett7855
6 ай бұрын
Wow he really takes this view? What a fake ass
@noSirIDontLikeIt
6 ай бұрын
Bob is real libertarian! Any criticism of genocide is going against the hand of god. Not many can admit this but Bob believe it. Civillian deaths dont make it okay to criticize gods chosen people. God chose King Charles as well. Thank you Bob
@noSirIDontLikeIt
6 ай бұрын
I want to make fun of bobs Zionism in comments but Brent is such a bozo
@ConsciousOne369
6 ай бұрын
To counteract Brent’s point, even the base paper dollars bills get loaned into existence when they get printed … kzitem.info/door/PLF8DmRT1QYbIOFukrxrcst0IwiHHgykjS&si=OIWXgOJIhgxvGJ_Q
@dyingalive
6 ай бұрын
great talk, shall relisten
@DuderScooter
6 ай бұрын
You could not have picked a better name for this episode 🥲
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