Brent Johnson: The Game is Rigged for the Dollar

Brent Johnson: The Game is Rigged for the Dollar

Brent Johnson joins the podcast to discuss the global economy, the role of gold, and the dominance of the US dollar despite currency debasement. Keith and Brent discuss why the other currencies are derivatives of the dollar, the rigged nature of a closed system, and how to overcome Gresham’s law.

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Podcast Chapters

00:00 Brent Johnson

01:01 Dubai’s rise

03:03 China’s potential

05:37 Investing in the Middle East

07:27 The Dollar Milkshake Theory explained

09:29 A relative game of debasement

11:59 Inflation and deflation

13:17 The milkshake theory and its application in recent years

16:40 The dominant currency

18:55 Currency pegs

19:40 Comparing derivatives

24:44 Dollar derivatives

26:20 Goldbugs

29:01 Monetary Metals

29:48 Dubai’s advantage

33:33 From London to Dubai

38:53 Overcoming Gresham’s Law

42:14 Gold Interest vs Bitcoin

43:29 The Value of the Dollar

44:06 Owning Both Dollars and Gold

46:20 Challenges of New System

49:55 Government failures

51:12 Join us in New Orleans!

52:04 Subscribe!

52:12 Monetary Metals


Benjamin Vern Nadelstein:

Welcome back to the Gold Exchange Podcast. My name is Benjamin Vern Nadelstein. I’m joined, as always, founder and CEO of Monetary Metals, Keith Weiner, and our special guest today, CEO of Santiago Capital and the inventor of the dollar, Milkshake Theory, Brent Johnson. Welcome back to the podcast, Brent.

Brent Johnson:

Thanks for having me, guys. Looking forward to it.


Now, Brent, before the podcast started, we were talking about gold and Keith’s trip abroad. And I thought, okay, guys, we need to let the rest of the world in on their inside scoop. So, Keith, I’ll start with you. There is a lot of talk between East and West. Hey, China, Saudi Arabia, India, Russia, all these guys are going to take over the global capital world. Everything that you thought about the West and them being the global hegemon, wrong. It’s all going to the East. So, Keith, I’ll give you about 10 seconds, up or down. Where do you think we’re going? East or West?

Keith Weiner:

I think nothing’s going to replace the US dollar in the world of paper currency. However, Dubai is certainly building a world-class, first class city for business and finance. And if you haven’t seen it, I haven’t been there, I recommend people to see it. What’s going on there is almost unimaginable. It is a wealthier city with better infrastructure than anything we have in America. And finance is a big part of their plans. There’s a lot of finance going on there. Saudi Arabia wants to outdo Dubai with their own special city they’re trying to create. I’m a little bit skeptical of that. It’s just like how every city in America wants to outdo Silicon Valley. So here in Phoenix, they have Silicon Desert. In New York City, they have Silicon Alley. There’s all these different Silicon places, but nobody ever out Silicon Valley. Silicon Valley, there’s one that has a network effect once that’s cemented in place. Dubai has that for the Middle East. I’m skeptical of a Saudi city or whatever, but Dubai has to be seen to be believed. And I think it’s going to continue to grow and continue to boom. And Western governments would be smart to take heat and adjust their policies not to bleed any faster than it already is.


And Brent, I’ll send it your way. There’s a narrative. Hey, there’s this battle between East and West. Of course, not the people of the East and West. We love each other. But sometimes the governments of the East and West, okay, well, China might be taking over and they’re going to be the new global superpower. What do you think about that?

Brent Johnson:

So I don’t think that China is going to be the new superpower. I don’t completely rule it out, but I feel like when I talk to a lot of people, that’s just a given. And that China is on the rise, the US is on the demise, and it’s just a matter of time before China takes over as the global hegemon. I just don’t think that that is as likely as everybody else just accepts it to be. And It’s also think that, I think, Keith was just talking about Dubai. I happen to think that the Middle East is going to continue to rise in importance around the world. It’s always been an important place. That’s why the political and religious volatility that go along with it have always been a bit of a problem because it is at a crossroads for the world. It’s the heart of the old spice trades. If you know anything about history or anything about the history of business, I mean, the Middle East is an enormous part of it. I don’t expect that to change and I expect that to actually rise. I think it’s interesting to hear these comments from Keith regarding Dubai.

I knew that there was stuff going on there. I’m certainly not as familiar with it as he is. I know that there are stuff going on in Saudi Arabia. I know that they want to diversify away from just being an oil exporter. And I know that this is one of the ways they’re trying to do it. I feel like having listened to Keith here a little bit, I need to get a trip over there and see this for myself because I am of the belief, and I’m going off on a little bit of a tangent here, but I think that the Middle East is going to be important for a lot of things, not just for gold. My thesis is that over the next, I don’t know, I hate putting timelines on these things because it’s very hard to predict these big macro moves. I tend to think that we’re going to have a lot of volatility in the years ahead. I think when that happens, obviously, I’m known for thinking the dollar is going to go higher, but I also think gold is going to go a lot higher as well. On the other side of the dollar going higher, I think that that area of the world, Middle East, Eastern Africa, Western Australia, the whole area circling the Indian Ocean, I think is probably going to be the best place in the world to invest.

I think they may have some trouble over the next few years, but I think if you get the opportunity to buy some assets at distressed prices in that area of the world, once we get on the other side of whatever conflict that we’re going to have, I think that is probably the biggest growth area for the world. It has the best demographics, it has the lowest levels of debt, it has fantastic natural resources. You get a lot of things going for you. If you have all those things already and then you can get in at a good price, your odds of doing poorly are greatly diminished and your odds of doing really well are greatly enhanced. I’m really interested in this part of the world.


Brent, I want to ask you now. So you have this thing you’ve called the dollar milk chick theory for those who have not heard about it. Clearly, you’re not on Twitter and you’re not following Brent. So just pause this interview right now and follow Brent. But let me see if for a dumb guy like myself if I can summarize what the theory entails. So a lot of people have looked at the United States and looked at our monetary and fiscal policy and said, hey, there is literally zero chance we will ever pay back this debt. It is growing exponentially. Our GDP, or what is even productive of the GDP, is certainly not growing exponentially. So that’s a big problem. Our government has borrowed or printed or whatever term people want to use, way too much money that they’ll never be able to pay back. Therefore, our currency must be going to zero at some point. That framing totally fails to look relatively between our currency and the rest of the world’s currencies, because other currencies are in the exact same problem that we have with central banking, central planning, and irredeemable credit or currency, and they actually have worse GDPs, worse economies, and worse troubles than we do with free speech, freer markets, freer economies.

And so if you’re thinking like an Austrian economist on the margin, you might suspect that the dollar will not actually collapse first to zero. Not ever, but just not first. But the marginal currencies will collapse first. The currency in Lebanon, the currency in Argentina, the currency in China, and the currency in Japan way, way, way long before the currency in the United States, the dollar. If that is true, those marginal currencies, all the capital stuck in those countries will flee to the United States, the strongest currency, the strongest economy, that will relatively push up our dollar, pushing down their currencies. The more that continues, this spirals until this same problem that’s happened in all the marginal currencies happens in the main currency, the US dollar. From there, who knows what happens? Have I gotten the dollar-milkshake theory close to correct?

Now you’ve gotten it extremely well described there. I mean, that’s essentially what it is. I think if you just go and analyze the United States alone on its own, it’s really hard to come to a conclusion other than it’s in a lot of trouble. I don’t deny that at all. I used to believe that as a result, the dollar was going to fall precipitously and the US was going to fall versus the rest of the world. However, once I realized that I had not given the same level of analysis or the same critical eye to the rest of the world as I was putting on the United States, I realized, Holy cow, I’ve been way too focused on one part of the world and not focused on the rest of the world. When you realize that global capital has to go somewhere, the big asset allocators are not just going to sit in cash. They’re going to put their money into assets. It becomes a relative gain. Then you have to stop completely analyzing things on an absolute basis and start to analyze them on a relative basis. That’s when I started to figure out that the dollar was going to rise versus foreign currencies.

That would cause all kinds of problems. Essentially, you have described it very well. I think what will happen, and the reason I think that this is important now is because of all the debt in the world. I feel like we’re towards the end of this grand super debt cycle. I think you’ve probably heard a lot of other people talk about this. I’m not the only one. It’s not that it can’t get bigger. It’s just that it’s gotten to such a size. I think there are going to start to be ramifications of debt and you’re already starting to see it. As a result, I think all the policies that we’ve really seen a lot post-COVID and post-global financial crisis, I think those are going to continue. I think over time, Fiat currencies are going to be debased. I don’t really think there’s a whole lot of other choice. The problem is, and this is probably the hardest part for me to explain to people and it’s where my communication of it to others gets tripped up the most, is the dollar-milkshake theory essentially says all Fiat currency is going to get debased, including the US dollar.

It’s just that the US dollar will get debased at a slower rate than everything else. That is how you get the dollar rising versus all other currencies. But then when you have gold rising versus the dollar, you have gold and dollars rising versus all the others. And that can be… So you can have an inflationary environment in the United States with the DXY or the dollar index or the dollar relative to other currencies rising. And if you knew that was happening, it would be very easy just to go buy assets that did well inflation. You sit back and you ride the wave. The problem is because the whole world runs on the dollar, and when I say the whole world, I’m slightly exaggerating, but not by much. If you want to be an operator on the global stage, you need dollars. That may change someday, but right now you need dollars. And so the whole world has a lot of US dollar debt. They owe US dollars, they trade in US dollars, they get financing in US dollars. They get financing in US dollars. The problem with the US dollar rising versus foreign currencies, even if all Fiat currency is getting debased, is you end up having situations where you get…

Outside the United States, you get inflation in local currency terms, but you get massive deflationary pressures in US dollar terms. That leads to potential defaults. And when you have defaults, money gets destroyed, it disappears, it disappears, it disappears, it disappears, it disappears, it disappears, it disappears. And so you get supply shocks, supply of dollar shocks. And so you can get these terrifying, deep… Even if you’re in an overall inflationary debasement of currency trends, you can get these deflationary shocks along the way that just wreak havoc. That’s what we saw several times. We saw it a lot during 2008. We saw shades of it in 2018. We saw shades of it in the fall of 2019. We saw it in a big way in 2020. And then last year, we started to see it a little bit again. But if you look over the last, let’s just use 15 years since the global financial crisis, or if you just look over the last four years since 2008, five years since 2018, over that time period, despite all the bailouts, despite all the helicopter money, despite the stimulus plans, the dollar has risen versus foreign currencies. Gold has risen versus the dollar and versus foreign currencies.

Us equities have risen versus not just the dollar, but versus all its global peers. You have this situation where the milkshake is largely playing out. Now it’s not perfect, and I’m certainly not going to get everything right. Often we’ll explain how I think this is going to play out, and then I’ll show how this has played out over the last year. Then they’ll say, Yeah, but it didn’t happen here, and this didn’t happen there. I am not going to get this 100% right. Of course, I’m going to get some things wrong. But I think largely the thesis has played out. I think it continues to play out. I think it does a better job of explaining why things have happened the way they’ve happened than anything else I’ve come across now. That’s not to say that other people haven’t been right, and it’s not to say that I would love to come up… I would love to anybody that has explanations of why things have happened the way they’ve happened, I’m always open to reading it. If it can help me become a better analyst and a better investor, as a result, I’m all open to it.

But I think by and large, my framework has helped me get through the last five years with an amount of clarity, and as a result, peaceful sleep at night without totally freaking out about what’s going to happen next day. Anyway, so that’s a long, rambling answer to your question, but that’s my framework. I think the way you explained it’s pretty good.


Keith, I want to give it to you. Brent saying, Hey, if there’s any updates to my framework, I want to hear it. How do you see this dollar, their currency derivatives, gold, and then, of course, the nexus of all these factors playing out? Because it really is not helpful for someone to say, Hey, all currencies are getting debased, and that’s my analysis. That is true. But if we’re all falling out of a helicopter and I am the only one with a parachute, it’s not helpful to say, Well, we’re all falling out of a helicopter. It’s like, Well, yeah, but maybe I have a parachute and maybe I’m 50 feet above you. It doesn’t mean we might not all fall or we might not all hit the ground. It’s just where we are relative to each other. Maybe you’ll grab onto me. Maybe that’ll pull me down. To just say, Well, we all fell out of a helicopter, therefore.

Brent Johnson:

It’s useless.


It’s not really that helpful.

Keith Weiner:

That’s the answer to Paul Krugman that says, Well, we owe it to ourselves. And so the analogy is there’s two of us standing here and I steal your wallet. The balance sheet between us hasn’t changed, right? We still have a hundred dollars. But now I’ve taken that away from me. I agree with Brent’s Milkshire. As soon as I heard about it I was like, yeah, this makes sense. And I probably go more extreme and I say the other currencies aren’t competing against the dollar. They’re dollar derivatives anyways. And then Jeff Snyder top that. And he said the entire world is basically a dollar world. And the other currencies are, I don’t think this is his term, but basically local Scripp, like going to some town in West Virginia, like it’s a coal mining town, and they don’t have dollars there. They have Scrip. But the Scrip has no value other than that you’re buying stuff that the coal mining company bought in dollars, obviously, and they sell the coal for dollars. So it’s a dollar world. I just had a conversation earlier today with an investor based out of Finland, and he’s done a lot of business all over Europe.

And he’s talking about different companies and what their values are and everything was dollar, dollar, dollar, dollar, dollar, dollar, dollar. There’s no mention of euros or any other currencies. I thought, well, that’s interesting. Here’s a European thinking that way. I met with a, you’ll find this interesting, Brett, I think, I met with the family office in the Middle East and the principal and his attorney slash over there. And so in their particular country, as in the UAE, the currency is pegged to the dollar. And unlike a lot of these other pegs, theirs has been table flat for 20 plus years, really hasn’t. The euro is nominally pegged to the dollar, but you can see they keep adjusting the pegs. They can’t hold the line. The zombie horde is pushing on it and they keep retrieving and they plant a peg, but it’s only temporary. But in the case of some of these Middle East countries, the pegs really are stable for a variety of reasons. And there are two interesting things that came with that. And I said, well, sure, the local currency is stable in terms of dollars, but there’s always a risk that pegs can snap.

And so if you really want dollar exposure, why would you hold the local currency versus holding real dollars? And they looked at each other and he turned back to me and he said, that’s our investment strategy. Exactly. We want to have real dollar. They have gold, they have other things, but for currency exposure, it’s real dollars and not proxy dollars that are pegged to the dollar. And then he said, our economy is effectively dollarized because of the peg. He said, so we enjoy most of the advantages of the dollar minus one. And I said, what’s that? And he said, we don’t enjoy the low interest rate. So the flip side of maintaining the peg is you have to screw around with the interest rate to make it attractive for people to buy your currency. So local businesses, if they have access to dollar credit, then they have access to dollar interest rate. If they have to borrow on local currency, it’s as stable as the dollar, but the interest rates are much higher and therefore they’re not competitive, certainly in a global stage. The local markets are much less efficient because the interest rates are much higher.

Even there, this peg currency, it’s still a mess. But we’re trying to think of it domestically as a result of this.

Brent Johnson:

I think a good way to explain this for people who are very into gold and believe in hard money as opposed to Fiat currency. One of the things that helped me explain this idea to them is that, first of all, I think we can agree that as gold proponents, we are probably in the minority of the average person around the world. Now outside the United States, gold is a lot more popular, but largely in the Western world. And I would even say even in the Eastern world, on average, the average person is not as-.

Keith Weiner:

Let me say to the objective. So history of Turkey, some of whom I trust to know about substance. They said the average person in Turkey would have at least 10 grams of gold. Sorry, everybody would have minimum 10 grams of gold. The average person would have a lot more than that. It’s ubiquitous. In India, it’s ubiquitous. So at least in those countries, now that’s not the same as Saudi Arabia or UAE, but in those countries, everybody has gold. It’s just taken for granted, of course, you have gold. Sure.

Brent Johnson:

And so the way I’ve helped explain it, let’s just use the West as an example. I think it’s fair to say that people who hold gold or who are advocates for gold are in the minority. And people in that group would go further and say, not only should you have exposure to gold, but you should have exposure to physical gold. Because while an ETF or a mutual fund or one of these gold derivatives are not really gold. And there will come a time where the gold price may do very well, but your gold derivatives won’t be worth very much. This is the same thing with the dollar and foreign currencies and these pegged currencies. These pegged currencies or these other foreign currencies are like gold ETFs or like gold derivatives, and the dollar is the equivalent of gold. Now, I know in your mind you’re saying, No, the dollar is not equivalent to gold. I tend to agree with you, and I’m sympathetic to your point. But if the whole world believes that Fiat currency is the system and there are systems in place set up that these big asset allocators, they cannot just wake up one day and go put 50 % of their portfolio on gold.

There’s investment committees they have to get through, there’s position limits, there’s all kinds of hoops they would have to jump through to do that. So in their world, the US dollar is the thing that everything is based on. And you might not like that and that might change someday, but as of right now today, that is the case. So if we get into a crisis, the dollar is going to be that thing that is underlying, and the dollar derivatives, in other words, foreign currencies, are going to be the things that fall in value. In the same way that physical gold would be the thing that holds value, but these gold ETFs fail. I think once you understand that’s the way the system is set up, it helps understand the progression of things and how things will likely go. I am a huge proponent of gold. I’d said from the very first day that I mentioned this whole Milkshake theory, I said that in the end, gold will win. I think that is the asset that everybody will ultimately flee to as this current monetary system, Fiat, however you want to describe this, as this crisis develops, I think ultimately gold is the one that comes out on top, but it’s not going to be a straight line.

And the dollar will do very well if for no other reason than that the game is rigged in the dollar’s favor. I think it’s really important to understand that. And that is what has led me to this whole dollars and gold theory, where dollars and gold rise versus everything else, and then ultimately gold wins. I just don’t think we’re to the final chapter yet. I think a lot of people are frustrated with the way the global economy is. They’re frustrated with these rolling crises that we have, and they want to just get to the end of the book or the end of the movie, get everything past us and be onto something new. I would like that as well, but I just think we have several more chapters to play out before we get there. I’m cognizant of the fact that we could get to the end of the book very quickly. Maybe I wake up tomorrow and that’s the final chapter. But I also think it could take several more years before it fully plays out. As such, as someone who manages capital for other people and as a fiduciary of their capital, I have to understand the system in which I operate.

The system in which I operate is the one that I try to explain via the Dollar Milkshake theory.


Brent, I really do like that analogy, which is, hey, if you’re a gold bug, what is your standard argument? Etfs and other derivatives that are not physical gold might not perform as well as the actual true underlying asset, physical gold. If you take those exact same arguments, which people are for when they’re gold bugs, take that exact argument and swap out a couple of words. The US dollar is that base asset. The derivatives based on that asset are the euro, the Yen, the euro, which are derivatives of the US dollar currency. Everyone would say, well, yeah, of course, in the time of crisis, the actual underlying asset, the US dollar, will probably perform better than all these underlying derivatives, which base their value and could have very different performances. And so it’s funny to hear Gold Bugs tout one argument, but not another.

Keith Weiner:

The hardest thing, I think, of that whole argument or that sequence is arguing that the other currencies are dollar derivatives. And now the gold bugs being a very small minority, certainly in the west of everybody, I think a lot of them are just looking for whatever rationalizes confirmation bias that gold’s going to go up. And it’s because the dollar is going to hyperinflate versus all the other currencies. But the more sophisticated investors just absolutely balk at the other currencies being dollar derivatives. And that’s an argument that has to be made and proven. And I’ve written a ton about it. I think Jeff Snyder is probably the one guy who’s probably written more about it than I have and talks about it a great deal. That, yeah, they really are dollar derivatives. They really are. Now it’s pretty clear when you have one of these golf currencies that is pegged to the dollar, why that effectively is a dollar derivative, but why is the euro a dollar derivative? It’s less clear. And you can point to look at all the dollars they have on the balance sheets of all the European Central Bank and the Bundes Bank and all the others.

But people don’t really get that relationship. These are dollar derivatives, and therefore they can’t survive the collapse of the dollar, even if they somehow last until the end. If the dollar were going down a flame, so would they. And they’re going to go down first for the reasons of why a gold ETF is going to go down before gold. If I see a reason, and so I think that’s the intuitive part. But them being dollar derivatives is the part that people bark at.

Brent Johnson:

Yeah, and you’ve discussed this with me before, and I think you’re probably the first person who explained it this way. And I was like, that’s a very good way to explain it. And it’s basically saying that you can’t expect a call option on Apple to keep value while at the same time having Apple go to zero. If Apple goes bankrupt or goes to zero, those Apple call options are not going to be worth anything, right? And it’s the same thing with other currencies and the dollar. The other thing that I want to say, I want to make sure people hear this because I think sometimes when I get into these discussions and I use the term gold bug, people will think that I’m making fun of them or it’s some derogatory term. I don’t think of it that way. I actually consider myself a gold bug. At heart, I am a gold bug. But I’ve had to, in order to understand what’s going on in the world and in order to effectively manage other people’s capital in the world in a fiduciary manner, I have to understand the world as it is, not the world as I want it to be.

Even though I am a gold bug at heart, I have to operate in the real world as it is right now. And if and when that world ever changes, I would be in favor of gold having a much bigger role than it currently does. But this is just my little disclaimer that I don’t want people to think of when I say gold bug as a negative thing, I actually consider myself one. So if you think I’m making fun of you, then I’m making fun of myself at the same time.

Keith Weiner:

It’s one of those things where people are guilty of assuming what they must prove. Today the world, gold has not got a monetary role. And even the central banks that are buying gold, it’s not gold backing the currency the way it was, let’s say, before 1913, just isn’t. You can, and I’ve never taken a fan of that. And I know you say don’t imagine the world as it could be, just focus on what is. And I think of myself in that category. But at the same time, I’m building a company with a mission to change the world and bring gold back into the monetary system. But that involves all the necessary hard work saying, where are we today? And if I want to pave a road from here to there, I have to understand every bump along the way. I have to understand the development. Oh, there’s a couple of rivers to cross and there’s a big canyon over here and here’s a radioactive zone or whatever it may be, you’ll have to look around. There’s all these things you have to deal with. Otherwise, you’re just trying to teleport to the end. And so, okay, and at the end of the day, we’re going to have unicorns and rainbows and sparkles and everybody wins and you’re like, okay, you’re just another idiot utopian.

Brent Johnson:

I’m curious, what is the the businesses that are taking place and that are sprouting up and that are increasing in volume in Dubai. Are these exchanges? Are these just wholesale marketplaces? Are these retail marketplaces? What is happening in Dubai and I guess maybe the greater Middle East that you see that is potentially not only profitable for people who are aware of it, but are so world changing that if and when we do get a new monetary system, that it could be a big beneficiary of it?

Keith Weiner:

I think it starts with regulatory and tax arbitrage. So all businesses have to be licensed in Dubai. And unless you’re in Emirati, which is a tiny fraction of the population to be allowed to be on their soil, you have to have a visa. And so it’s not like America, where, first of all, 300-something million of us have a right to be here. And then everyone else, if they can get a visa or whatever, it becomes permanent. And to buy your visa is tied to your job. You lose your job. You’ve got 30 or 60 days to get another job or else you’re done and they force you to leave. Every business is licensed. That said, unlike the regulatory state here, they don’t turn the licensing thing into this subjective and ever more onerous process. They just want to know what you’re doing. And then after that, it’s like, okay, the license is approved. You’ve got it. It’s relatively cheap. Then enforcement is okay. Are you doing the business that you said you’re going to do? Okay, great. If you’re not, if you’re doing other things, they can shut you down, which isn’t good. But from a regulatory perspective, it’s a hell of a lot less onerous than it is in the Western world.

And from a tax perspective, they’ve not had a corporate tax or personal income tax. Now they’re just instituting a corporate income tax. I think it’s nine %, which doesn’t make me happy, but it’s a hell of a lot less than anywhere else. Even in Singapore, which is the Vonset Bow tax, reaching this 15 %. So that’s the first thing. Then in terms of gold specifically, I mean, it’s a gold culture. The Arab culture has always valued and appreciated gold, let’s just say, much more than the American culture does today. And then you also have a mix of people from South Asia, India, Pakistan. So you have a mix of… And Turkey, you have a mix of cultures that are all gold loving, gold appreciating. The next thing is you have probably all or virtually all the gold from Africa is now coming to Dubai. I may be hyperbolising slightly when I say all. If you ask anybody in London or Zurich about gold coming from Africa, they’ll all roll their eyes. Oh, my God. There’s no AML. This is all conflict minerals and child slavery and narcotterrorism, gold and all that. If you ask anybody in Dubai, they say, oh, no, we’re a very serious jurisdiction.

We take AML, KYC seriously responsible, cold sourcing. I think they’re certainly cheating there, but the jurisdiction realizes that they have to get a handle on this. But I think they’ve been less onerous and less crazy about some of this regulation, making it easier for traders to spring up in Dubai to import all that gold from Africa. And I don’t think most of it nowadays, I mean, historically, it’s probably a different story, but I don’t think most of it nowadays is literally black gold that’s coming and sheeding and being smuggled, whatever. To get the paperwork to get the gold into Dubai, you have to prove with the sources, who doesn’t mind? Are they compliant? Are they licensed in their jurisdiction? Are they paying their export duties and whatever? But then all that gold comes to Dubai because it’s easier to get it there than it’s what they’ll lend or anywhere else. And then that makes them a hub for physical trading. At the same time that London is becoming more onerous, more taxy, less connected to the EU, and therefore they lost some critical mass there. And I think I see the locus of the physical gold market just logically segwaying from London to Dubai.

That then creates an ecosystem of refiners and other value added fabricators, mints and jewelers, obviously. They’re a variety of distribution networks. From there, most of the gold is obviously not kept in Dubai, although there are companies that are selling it, vaulting it. We know one that you have a big enough account. When you’re flying to Dubai, they’ll pick you up in Rolls Royce, drive you to the vault, do your transaction, and then they’ll either drive you back to the airport or they’ll drive you to your hotel. But on top of all this, there’s what I’ll call the more sophisticated investors, let’s take family offices as a category. It’s not just the Western world buy gold and wait for the price to go up and then sell it. I guess it’s the thesis. And then, of course, as the price goes down, they sell it because the loss has become unbearable, right? But it’s as Warren Buffett truthfully and disingenuously at the same time said, you buy the gold and you put it in your desk drawer and 20 years later, you pull it out still the same lump of metal. It’s true, a useless in that sense.

Well, in Dubai, I’ve seen, first of all, the sophisticated investors want dollar liquidity against their gold, not for consumer purposes, but to invest in other assets. In some cases, they’re trading gold against other capital assets already anyways. They’re looking for strategies that produce returns on gold. One common one that you see, and there’s a few Swiss private banks that would do this as well, sell and cover call type strategies. They call it getting a rental income on your gold. No problem with that. And the people in the Western world may not get it. I think the people in Dubai probably more so is that just in the precise crisis, that’s the whole reason why you own the damn gold. You’re not owning the gold to go from $2,000 to $2,300. That’s exciting for somebody who owns a lot of gold, but there’s a lot of ways to make 10 %, and you don’t need the gold market to make 10 %. It’s when there’s a real crisis and currencies are suddenly free-falling and what you thought was a parachute, you don’t have a parachute anymore. That’s the precise moment you want the gold. Well, selling covered calls in that strategy, all your gold is going to be called away. The precise moment when you needed it and wanted it, it’s gone. Anyways, I think they get that and they’re looking for other gold related income streams forwards, all kinds of stuff that they can do. And so they’re very receptive to the monetary metals proposition. As an aside, they’re aware that gold is coming back into the monetary system in a more serious way. And I just think there’s a whole ecosystem there of government understands that Dubai is broken into these free zones. And when you create a business there, move to business there, you move into the free zone that is applicable to your business, anybody in gold would be going to the DMCC to buy multi-commodity center. Those people get gold. You mentioned talking to a US regulator about gold. They’re going to laugh, exactly.

Brent Johnson:

I think this is a good… Not to cut you off, but I want to make a point really quick because I think this is a good place to do it. From my perspective, one of the reasons that places like Dubai, maybe Saudi Arabia, certainly India, Turkey, the reason that people in those countries always own at least 10 ounces of gold or whatever it is, or the reason they have an affinity for gold, and the reason they have historically used gold, is not because the US dollar has historically been a horrible currency. The reason they own gold is their own currencies that their own governments manage have historically been horrible currencies. I think when you hear about people in India buying gold, or people in China buying gold, or people in Turkey or wherever it is buying gold, it’s certainly a good thing to understand because that’s where I think demand is growing or has typically been higher than the West. But it’s not that those people are sitting over there looking at the US and say, Wow, Joe Biden is really out of control and the dollar is going… It’s not that they’re not saying that.

It’s not that the dollar isn’t a bad currency, but the dollar or the US domestic currency is not what has led to this historical cultural affiliation with gold. The idea that they are all buying gold because they’re worried about the dollar losing value, that may be, again, a derivative of it, but the primary reason they’re buying it is they’ve seen the government confiscate their wealth before. They’ve lived through hyperinflation. They’ve seen collapsing currencies. And so I think that’s probably why some place like Dubai and this area of the world may, once we get through this crisis that I foresee coming, may be a great place to be because they will have wealth that has been preserved through that crisis.


Keith, I want to ask you a question, which has been on my mind. So a lot of people have said, Brent, Keith, you guys are total boomer morons. You and your shiny pet rocks, it’s all about crypto. Blockchain is going to take over the world. We’re going to use Bitcoin in El Salvador. And trust me, the dollar, its days are numbered. We’re all going to be using cryptography and our smartphones. You guys want coins jingling in a purse sack or something. You guys are gold bugs in the root sense. So, Keith, I want to ask you a question here, which has been on my mind, which is how do we overcome Gresham’s law? And maybe the answer is monetary and you can answer it that way. But how do we overcome Gresham’s law? I’m thinking specifically for Bitcoin people. It feels like, well, if Bitcoin is this incredible asset that just has to go up to a million dollars and all the other currencies are going to fall, when you want to be spending and using your dollars or your local currency and hoarding your Bitcoin, never using it, never spending it? And how are we going to plan on financing productive business with Bitcoin if you never want to use it?

Keith Weiner:

So I have to correct two things. First of all, I’m not a boomer. I’m a proud member of Generation X man. Anybody calling me a boomer is just simply wrong on a matter of fact. Secondly, gold is not a rock. It’s a metal and it’s separated from the rock. That’s the whole point of gold mining and refining. So if you want to call it a shiny patent metal, go do that, but it’s not a rock. Okay, so substantially, how do you get around Grezem’s Law? So Grezem’s law says that two things legally have a value that is fixed to be equal, but the market value is different than people will give up the one that has the legal value that’s higher than its market value and hoard the one whose real value is higher than the legal value. The corollary to Grezem’s law is that if I have a gold coin worth roughly $2,000 or I have $2,000, $2,200 bills and I have to settle a $2,000 obligation, I would choose to spend the paper rather than keep the gold. Obviously, and there is no way of working around that. And that’s the problem. So people, right?

And I’ve had many conversations with companies that try to create these spend your gold type programs, where buy gold with a store and we’ll attach it to a debit card so you can spend your gold. A lot of people would be happy to be paid in gold, but I don’t think very many people want to pay out gold. And so there is no working around that. I mean, that’s just one of those universal laws, deal with the world as it is and you can’t get to utopia by assuming that law away. So how do you get these things into productive use? Well, my argument is finance. You have to pay interest on something. It’s the only way to pull it that has a high value or a non-diminishing market and utility. I’ll get back to Bitcoin on that point in a minute. The only way to get people to bring it out to market is to pay interest. Interest is the only force that brings it out to market. Even when the government sends guys with machine guns door to door, they don’t get a lot of it because people just bury it deeper. It was buried one meter below the ground, and when they realize the government is coming with machine guns, they’ll bury it two or three meters down and put in a whole new garden.

So interest is the only force that draws it out and the only way to pay interest. And I think I stand vindicated before all these platforms that pay interest on your crypto started, I said there’s no way to pay interest on Bitcoin. Then this platform started and I said, I don’t think it’s sound. I think I stand vindicated on that point, which I made in 2017 or 2018 when that started to happen. And the only way to pay interest on something sustainably is to finance a productive enterprise. Somebody’s producing something real in the real world. They need to borrow capital. And if they borrow gold or they borrow Bitcoin, then they’ll pay interest in gold or Bitcoin. The problem with borrowing Bitcoin is it’s unstable. And if Bitcoin goes up a billion X from where it is now, then anybody who borrowed it is going to be ruined long before then. Think about your home mortgage. Let’s say you pay $2,000 a month, $3,000 a month at mortgage. Imagine if that went up to $20,000 a month, 10X, you’re ruined. There’s no way. So you need something that’s stable and an argument that’s gold. Now, and this gets back to the point Brent was making earlier about people use the dollar because they perceive it to be a dollar world, which is certainly true.

But also if you owe a million dollars to what you used to finance your farm, your factory, or your fleet of trucks, or your ship, or whatever, and you don’t pay it, they take your asset away. You’re wiped out. So it’s not just entirely perception. The value of the dollar is supported by all the debtors. And since there are dollar debtors globally, everybody globally is supporting the value of the dollar by being in dollar debt, which they can’t get out of at this point. It’s a trap that doesn’t have an exit, not an aggregate. I mean, any one debtor can get out, but not an aggregate. I don’t know if I answered your question.

Brent Johnson:

I’m just going to jump in real quick because I think it’s really important to understand that. Two points is I think a lot of times people will always ask me, Well, which I own, dollars or gold? And I’m like, You don’t have to choose between the two. You can have exposure to both. This is a false competition that says you have to pick one over the other. You can own both. They’ll both go up against other currencies or they can both be used in different circumstances. But it’s not like it has to be an all or nothing thing. The other thing that I wanted to say was that with regard to the system, it’s a closed system. Now you can exit the system by buying gold. But as we explained earlier, most people, or at least the big global asset allocators, they operate within the framework that has been designed for them. And so even if you want to exit, it’s important to understand that most of the world is not going to exit the system.

Keith Weiner:

The guy who sold the gold is entering.

Brent Johnson:

Yeah, exactly. Exactly. And so when you understand that it’s a closed system and you understand things that have to happen within that system, it is really rigged. And I use that just because it’s the easiest way to explain it. It’s rigged in favor of the dollar. And so the idea that the dollar is going to crash and that the Yen and the euro are all of a sudden going to be flourishing or the euro is going to flourish, and that’s it. The system is not designed for that. And if a new system were put in place and the rest of the world were to say, We’re going to this new system, then they have to deal with all that dollar debt. And a lot of people think that they owe that dollar debt to the United States, but they don’t. They owe it to each other. That dollar credit, that euro dollar credit has been extended to each other amongst themselves. So even if they were to default that debt, you said if they default, their asset gets stolen. Well, even if they were to do that, they’re not defaulting on the United States, they’re defaulting on each other.

So if that debt disappears, somebody else’s asset disappears outside the United States. So you would have to get almost the rest of the world, all at the same time to agree what new system we’re going to go to, who’s going to implement the system, who’s going to monitor the system, and who’s going to enforce the system. I’m not going to say that that is impossible, but if you’ve ever been in a meeting with more than three people, you will know that it’s of course, you will know that it’s extremely challenging.

Keith Weiner:

Just to give you a perspective, imagine you’re a creditor in Austria, your debtor is in Hungary, and they’ve had long obviously commerce between those two places. And the debtor in Hungary owes you a million dollars. And now some bureaucrat in Brussels, who’s part of some World Economic Forum, Davos scheme involving Africa and Argentina and who knows what else, says, we want to re-denominate. We want you to sign as the creditor to redenominate this debt that the Hungarian owes you and some new world bank credit.

Brent Johnson:


Keith Weiner:

You don’t take that? If you don’t sign, he continues to owe you dollars. If you do sign, you’re now going to get redenominated or something. The only thing you know about it is that the people that are pushing it are these world governance types and you know nothing else about it. Are you going to take that deal? You and all the other creditors in the world are going to say no, thank you.

Brent Johnson:

That’s the perfect example. That’s the perfect example.


And Brent, I know sometimes Keith and I joke, sometimes on Twitter, we’ll put up a poll every once in a while, which is like, all right, gold bugs, dollar people, you need to send your dollars or your gold in whatever way you identify, you need to send your capital to one of the BRX nations. You can choose Brazil, you can choose Lula, you can choose Russia. You can choose Putin. You can choose India, and you can choose Modi, or you can choose choose China, Chi, or of course, South Africa. Okay, which of the BRX would you like to send your money to? And of course, people in the comments, Well, I would… The answer is you don’t want to send your money to any of these people. No one is saying that Uncle Sam is really a great creditor. But have you seen the other people in line? And so, of course, this goes back to that relative currency thing. Monetary Metals, Keith, myself, Jeff Dyess, will all be in the New Orleans Investment Conference. Brent, you will be there as well. I don’t want to give away your topic, but I do want to ask you, what’s a question I should be asking all future guests of the Gold Exchange Podcast?

And last time you were on, you wanted me to ask:

If you’re analyzing the Fed and you’re talking about the Fed in the podcast, why don’t you ask about other central banks? So I’m going to ask you your own question quickly and then say, what should I be asking future guests?

Brent Johnson:

Well, so largely I don’t think they’re going to get out of their conundrum. I think that they are going to eventually be forced to try to choose between their currency markets and their bond markets. I think they will ultimately choose their bond markets because if they don’t choose to save their bond markets, they will have a banking system crisis. You have to understand that the bond market is how these governments raise money. If they no longer want to raise money and literally just physically print it, then they can let the bond market go. But I think they will choose the bond market over the currency. And when they do that, I think their currencies will fall precipitously versus the US dollar. So the short answer is I don’t think they’re going to get out of it. I think they’re going to try, but I think they’re going to fail. And then this quickly leads into one other thing is this whole idea that the bricks were going to launch this currency and they were going to back it with gold, and that is going to be the catalyst to send gold higher. I think it fundamentally misses the premise.

I think gold is going to go to $5,000, but I think it’s going to go to $5,000 because governments do stupid things and fail and not because they do smart things and succeed. So all of these schemes that involve other countries going to a gold-backed currency, in my mind, they’re just completely crazy. The other thing, but—and to do the second part of your question, what should people be asking now? If and when you have other guests on who are running either gold mining businesses or they’re managing gold miner a fund, or they have some gold related business and in some form or another they’re selling gold, you should ask them what they receive when they sell the gold and which currency other than the dollar that they are planning to move to. If they say we’re not planning to move to any currency other than the dollar, you have your answer.

Keith Weiner:

That sounds like a cross examination in court. Isn’t it true, sir, that when you sell your gold, you receive US dollars and only US dollars?

Brent Johnson:


Keith Weiner:

Well, it is true. In your financial report given your 10Q three days ago, you did not disclose any intentions to own any foreign currencies other than the US dollar. Right. And you already know the answer to the question before you ask it.


Where can people find more of your incredible work if they want to check out Santiago Capital? And of course, where can we read more about the dollar milkshake theory?

Brent Johnson:

So there’s a couple of different ways. My actual business is a money management business, and I manage capital for high net worth individuals. I have a website that’s really just a landing page of satiagocapital. Com. It has a few regulatory documents and my contact information. So if anybody’s looking for those types of services and are interested in talking to me further, you can go to satiagocapital. Com. I’m pretty active on Twitter. My handle is satiagoaufund, or you can just search for Santiago Capital. And then we also have our own podcast called the Milkshakes Pod, so at or you can go to @milkshakespod on Twitter and find us there as well.


Brent, I want to thank you so much for coming on to The Gold Exchange Podcast and we’ll see you in New Orleans.

Brent Johnson:

Thanks for having me, guys.


Thanks so much, Brent.

Keith Weiner:

Thank you!

Additional Resources for Earning Interest in Gold

If you’d like to learn more about how to earn interest on gold with Monetary Metals, check out the following resources:

The New Way to Hold Gold

The New Way to Hold Gold

In this paper, we look at how conventional gold holdings stack up to Monetary Metals Investments, which offer a Yield on Gold, Paid in Gold®. We compare retail coins, vault storage, the popular ETF – GLD, and mining stocks against Monetary Metals’ True Gold Leases.






Case for Gold Yield in Investment Portfolios

The Case for Gold Yield in Investment Portfolios

Adding gold to a diversified portfolio of assets reduces volatility and increases returns. But how much and what about the ongoing costs? What changes when gold pays a yield? This paper answers those questions using data going back to 1972.




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