MacroVoices #391 Brent Johnson: The Dollar Is Not Done
Brent Johnson argues the U.S. dollar bull market isn't over, expecting new highs above 114 despite a year-long pullback. He views geopolitical tensions, Japan's currency crisis, and the massive eurodollar debt market as key drivers that will strengthen the dollar against foreign currencies, even as he expects both dollars and gold to rise together against other fiat currencies.
Summary
Brent Johnson returns to MacroVoices to discuss why he believes the U.S. dollar's strength is far from over, despite a significant pullback from 114 to 99 over the past year. Johnson argues that the dollar hit a blow-off top in September 2022 when multiple foreign central banks intervened simultaneously, but maintains his long-term bullish view. He emphasizes the critical role of the eurodollar market, pointing out that over $30 trillion in U.S. dollar debt exists outside America, making dedollarization equivalent to deleveraging - a process that typically strengthens the underlying currency. Regarding BRICS challenges to dollar hegemony, Johnson acknowledges the bloc's significance but questions their ability to implement alternatives and expects U.S. pushback through diplomatic pressure and sanctions. On geopolitics, he sees escalating tensions between the U.S., Russia, and China as dollar-positive until the U.S. clearly loses military hegemony. Johnson identifies Japan as crucial, arguing the Bank of Japan faces an impossible choice between saving their currency or bond market, likely choosing bonds and sacrificing the yen. This weakness pressures China and could trigger yuan devaluation. He expects the euro to fail at resistance around current levels due to European economic weakness and banking vulnerabilities from holding negative-yielding bonds. Johnson sees potential for both dollars and gold to rise together as all fiat currencies face debasement, and expresses bullishness on agricultural commodities like wheat and corn due to geopolitical supply risks and weather concerns.
About this episode
MacroVoices Erik Townsend and Patrick Ceresna welcome Santiago Capital founder Brent Johnson to the show. They discuss the reasons Brent thinks the U.S. Dollar bull market isn’t over yet, and why Brent thinks new highs for the dollar index are still to come. https://bit.ly/3EjuaYB Download Brent’s charts: https://bit.ly/44xYY2r Download Big Picture Trading chartbook 📈📉 https://bit.ly/3sEGm3s ✅Sign up for a FREE 14-day trial at Big Picture Trading: https://bit.ly/2JjZR7J Please visit our website https://www.macrovoices.com to register your free account to gain access to supporting materials
Key Insights
- Johnson argues the dollar index will reach new highs above 114, driven by geopolitical tensions and structural factors in the eurodollar market
- The eurodollar market contains over $30 trillion in U.S. dollar debt owed by entities outside America to themselves, making dedollarization equivalent to deleveraging
- Johnson believes BRICS countries lack the ability to successfully implement dollar alternatives and expects U.S. retaliation through diplomatic and economic pressure
- Geopolitical escalation involving Ukraine-Russia or China-Taiwan conflicts would be dollar-positive until the U.S. clearly loses military hegemony
- The Bank of Japan faces an impossible choice between saving their currency or bond market, with Johnson expecting they'll sacrifice the yen to prevent banking system collapse
- Japanese yen weakness puts pressure on China as cheaper Japanese goods compete with Chinese exports during China's deflationary real estate crisis
- Johnson expects the euro to fail at current resistance levels due to European economic weakness and banks holding negative-yielding sovereign bonds
- Both dollars and gold can rise simultaneously as the dollar strengthens against foreign fiat while all fiat currencies weaken against real assets
- Johnson is bullish on agricultural commodities, particularly wheat and corn, due to beaten-down sentiment, geopolitical supply risks, and El Niño weather patterns
- Rising dollar strength historically coincides with global crises, as shown by correlations over the past 25 years
- The mild winter and Putin's grain export allowances in 2022 created favorable crop conditions that may not repeat this year
- Johnson argues that while politicians want to dedollarize, foreign business leaders generally prefer conducting business in U.S. dollars over their home currencies
Topics
Transcript
Thank you. Eric Townsend and Patrick Ceresna. Macro Voices Episode 391 was produced on August 31st, 2023. I'm Eric Townsend. Brent Johnson returns as this week's feature interview guest. We'll discuss the reasons Brent thinks the U.S. dollar bull market is not over yet and why Brent thinks new highs for the dollar index are still to come. And I'm Patrick Ceresna with the Macro Scoreboard week over week as of the close of Wednesday, August 30th, 2021. 2023, the S&P 500 S&P futures were up 235 basis points to 4524. We'll take a closer look at that chart and the key technical levels to watch in our postgame segment. The U.S. dollar index down 26 basis points, closing at…
Full transcript available for MurmurCast members
Sign Up to AccessMore from Macro Voices
MacroVoices #554 Dr. Anas Alhajji + Louis-Vincent Gave: Developing Crises in Middle-East and France
Dr. Anas Alhajji discusses the 'three seas crisis' (Gulf, Red Sea, Black Sea) and its permanent impact on global energy markets, including refinery capacity shortages and the need for infrastructure redundancy. Louis-Vincent Gave warns that France faces an emerging market-style debt crisis with fiscal, energy, political, and social dimensions that could threaten the euro's stability.
MacroVoices #554 Yasir Arafat: Mass Manufacturing Nuclear Power Plants
Yasser Arafat, CTO of Allo Atomics, discusses the company's plans to mass-produce advanced nuclear reactors at scale, arguing that cost-competitive nuclear energy (cheaper than coal and gas) could be achieved within years, not decades, by leveraging manufacturing principles similar to Tesla's approach. He addresses fuel supply chain constraints, nuclear waste recycling potential, and competitive threats from China while outlining a pathway to transition global energy systems away from fossil fuels.
MacroVoices #553 Brent Johnson: Disparate Housewives
Brent Johnson discusses the dollar's breakout above 102, analyzing why the greenback continues strengthening despite expectations for decline, while also exploring the deepening coordination between the Federal Reserve and Treasury Department in what he calls the "Disparate Housewives" framework. He argues the US remains positioned to weather higher rates better than other economies, and frames the current geopolitical environment as analogous to the early Cold War era with China rather than a replay of the 1970s.
MacroVoices #552 David Rosenberg: Navigating The Noise
David Rosenberg argues that inflation concerns are overblown despite recent energy price spikes, contending that without wage pressures entering the labor market, price shocks will remain transitory. He identifies the November 3rd midterm elections and November 4th Treasury refunding announcement as pivotal catalysts that could trigger significant bond market rallies and economic slowdown as fiscal stimulus ends and gridlock returns.
MacroVoices #551 Michael Every: Decoding The Global Geopolitical Puzzle (Part 2)
Michael Every from Rabobank discusses the interconnected geopolitical tensions between the U.S. and China, analyzing how conflicts in Ukraine, the Middle East, and potential Taiwan invasion scenarios serve as strategic moves in a broader great power competition. He examines emerging policy shifts including potential diesel export bans, AI arms races, and nuclear escalation risks while arguing that national security concerns are overriding traditional free market economics.