By Maria Irene
The US dollar has long been considered the world’s reserve currency, but in recent years, there has been growing concern that its dominance may be threatened. However, a new theory known as the Dollar Milkshake theory suggests that the US dollar may actually strengthen in the coming years, causing a “sucking” effect on other currencies.
The theory was put forward by Brent Johnson, a managing director at Santiago Capital. According to Johnson, the US dollar will strengthen in the coming years due to the relative strength of the US economy compared to other major economies, leading to an increase in demand for US dollars. He argues that this increase in demand for US dollars will have a “sucking” effect on other currencies, causing them to weaken relative to the US dollar.
The theory is based on the idea that the US dollar is the world’s reserve currency, and that many countries and investors hold US dollars as a safe-haven asset. In times of uncertainty or economic turmoil, investors tend to flock to safe-haven assets, which can lead to a surge in demand for US dollars. According to Johnson, this demand for US dollars will only increase in the coming years, as the US economy continues to outperform other major economies.
However, some experts are skeptical of the Dollar Milkshake theory. They point out that the US dollar has already been strong for several years, and that there are limits to how much stronger it can get. They also note that there are other factors that can influence the value of a currency, such as interest rates, inflation, and geopolitical events.
In addition, some experts argue that the Dollar Milkshake theory is based on a flawed understanding of how currencies work. They note that currencies are not like milkshakes, which can be sucked up through a straw. Instead, the value of a currency is determined by a complex set of factors, including economic fundamentals, central bank policies, and market sentiment.
Despite these criticisms, the Dollar Milkshake theory has gained a following among some investors and analysts. They point to the US dollar’s recent strength as evidence that the theory may have some merit. They also note that the US dollar’s dominance as a reserve currency is unlikely to be challenged anytime soon, given the size and stability of the US economy.
Ultimately, the future of the US dollar and its dominance as a reserve currency remains uncertain. While the Dollar Milkshake theory may offer one possible explanation for why the US dollar could continue to strengthen in the coming years, there are many other factors that could influence its value. Investors should carefully consider these factors when making investment decisions, and should be prepared for a range of possible outcomes.
