Understanding the Petro-Dollar Agreement

The Treasury Secretary secured a US-Saudi oil deal, boosting both economies without a treaty, solidifying the dollar's global reserve status.

### Debunking the Myths Surrounding the Petrodollar and the Implications of the US-Saudi Agreement
* 🛢 The US-Saudi agreement that led to the petrodollar system was not a treaty but an executive branch program that **secured oil supply for the US** and **helped Saudi Arabia develop its economy**.
* 💵 "It is probably one of the **greatest deals in American history**."
* 📈 Contrary to the claims of the petrodollar system ending, there is **no evidence to support this**, and Saudi Arabia's currency is **pegged to the US dollar**.
* 💸 If the petrodollar system were to end, the actual implications would likely lead to a **stronger US dollar**, as there would be a **shortage of dollars** in the global economy.
* 🌐 The eurodollar market relies on the US government's ability to **create dollars**.
* 🧠 "As long as everything is working and the music is playing and money is circulating, the eurodollar market works just fine."
* 📰 When evaluating claims about the petrodollar system or the US dollar, it is crucial to think critically and consider the **motivations behind such narratives**.

this is the treasury secretary went over there and just really on more of like a gentleman's agreement said hey this is a way that we can work together. It's good for you. It's good for us. Everybody wins scenario. But it wasn't. It's not a treaty. There was no treaty between the United States and Saudi Arabia. Congress did not ratify this agreement. This was an executive branch program that was launched that worked stupendously well. It is probably, I would argue, it is one of the greatest deals in American history. There are no pacts between the Lions and Men. Hey everyone and welcome back to milkshakes markets Madness. My name is John cutme. This is Brent Johnson. The Man Behind the dollar milkshake theory. If you don't know what that is, you're in for a treat and you can learn more at the top of our at the top of the YouTube channel. There's a playlist that says start here that will fill you in on all that. Um, those who watch us regularly will note that Bren seems to be uh

excuse me Brent seems to be on a summer tour last week. He recorded from a hotel. He's recording from a fresh one. Brent, where are you this weekend? Uh, this weekend I'm in Fort Lauderdale. I just did the real estate guys' Summit. They have an investor Summit. Excuse me, where they don't just talk about real estate, they bring in people from different areas to kind of help educate all their members on things other than real estate in which they are already experts. And so they're actually getting ready to go on a week-long cruise. Wasn't able to go on the cruise, but I was able to come up for the last day and a half and spend some time with them, and it was fun. Excellent. Well, speaking of real estate, you know, we've kind of plugged the last couple episodes, at least last week, the release or the upcoming release of the project that we're doing called Macro Alchemist, the I guess inaugural or flagship research project that we're going to

release is focused on real estate. Do you want to give a little teaser on that because I think at the start of the week, we're going to share that with everybody. Sure. Well, so you know, again, for those who haven't heard before, this is kind of a project that a friend of mine who for now is remaining nameless and kind of incognito, have been talking about launching for a while. He's been a longtime, you know, investor and Market participant working for very large institutions around the world. And you know, this was, this was kind of his brainchild, but it really dovetailed nicely into what we talk about a lot, and that is that despite the problems in the US, there's even bigger problems elsewhere. And so we're starting off with a somewhat of a take on global real estate focused on China, but then also how that impacts, you know, other markets, specifically other real estate markets around the world. And I'll just leave it at that for now, but hopefully people will check it out and read it and gain

some insights on how these markets are different, but how they're also very interconnected. Yeah, so stay tuned for when we give the nod where everybody can go and dive into that and read that. It'll be at macrooutcome.com. I'm hopefully at the start of the week, so please stay tuned and feel free to check in at that.com at your convenience as the week unfolds. You know, speaking of real estate, one of the things that's very critical and one of the things that real estate is very sensitive to are interest rates. Now, this week we had inflation data come in within or very very close to estimates, slightly under estimated numbers, and the market did like that. Do you want to talk about the CPI data and where you think the FED is going to springboard off of that as far as their policies? Yes, so I think we had more data come out this week, and you know it came in at expectations or lower than expectations, so you know, but not

dramatically lower, but not hot, not hawkish. And so when the CPI came out on Wednesday morning, which was before the FED Market jumped quite a bit. And what, but then, you know, Powell came out. And you know, it's funny because I think the last couple of press talk conferences have not been Powell's best. And I feel like he's been a little bit more wishy-washy, maybe because they're in this wishy-washy stage. But what was interesting to me was that they indicated that they do think the markets are, or the monetary policy is too restrictive. They, they, they, which I don't necessarily agree with. But um, that's what they stated. And here's the interesting thing. Their projections for the economy for the rest of the year didn't show any change. But yet they were still predicting up to two rate cuts. And so I thought one of the best questions in the press conference at the CPI was when, you know, one of the journalists asked, well, if you don't see

the economy weakening at all, and in fact, staying strong, then why on Earth are you pricing in, or why are you expecting two cuts, and you know Powell's response was that basically saying we don't want to, uh, stay too restrictive to too long, and then have to try to save things, we would rather kind of ease into it, so he's basically saying we're trying to engineer a soft landing, um, and so I think what's probably going to happen is I think over the next two months we're going to have these very similar to what we've had in the last couple of months where we have very neutral data, and there's something in it for everybody, some things are going to be a little bit hot, some things are going to be a little bit weak, but I do think I don't think they're going to cut again in July, there's another meeting at the end of July, and then six weeks later there's a, there's another meeting in the middle of September, I don't think they'll cut in July, but I do think that will cut in

September and I think they will cut even though it's just ahead of the election. I think they'll do it just to say they did it and just to say that, you know, because you know, remember they got it so wrong a couple of years ago, that, and they don't want to lose more credibility. And so I think they don't want to not cut now because they've said and indicated so strongly that they're going to. But it's very possible that they just do one and be done. Or it's possible that they end up having to cut aggressively into weakness because the economy coming down, um, but either way, I do think the FED wants to cut. They're pretty clear that they want to cut. This is despite the fact that numbers are pretty good, the economy is in good shape. And I know that there's people are going to hear me say the economy is in good shape, say, Well, you don't, you know, the fundamentals underneath the waves, you know, underneath the Horizon, it's not quite as simple.

listen, I totally agree with you. I'm just saying, as of right now, things are fine. But based on things under the surface, it could become not fine very quick. And that's kind of what Powell, I think, was saying. Is everything's fine now, but we don't want to wait for these, you know, waves to start crashing before we start acting. Um, so I think there was a little bit of wishy-washiness in it. But you know, the market, uh, was higher. Bonds rallied like crazy because when interest rates go down, bond prices go high. So, um, that was pretty interesting. And you know, I think the end of the week markets finished kind of at their all-time highs. And the, uh, the bond prices were, you know, rallied dramatically into the week as well. One of areas where there's a big emphasis on a problem in the underlying economy, like you were pointing out. You know, we're looking at data sets and reports that a lot of people would argue aren't very accurate or at least not very honest. So when you're looking at

the real economy. One area that gets a lot of attention is the commercial real estate. And certainly, this goes in line with the macro alchemus report. But with commercial real estate primarily being a regional or small local bank situation, and you look at these small banks in terms of their balance sheet, you know they get to mark certain assets, specifically government bonds. Um, not mark to market but hold to maturity. So underneath, you can see that their balance sheets are a big issue because the bonds they bought in 2020 are now undervalued. And so if there is some sort of concern, a lot of emphasis is on the commercial real estate market. Now we could also say that this isn't any kind of Black Swamp because we know it exists. But do you think given some of the other factors, certainly the euphoria in the market as I mentioned, maybe it's because participants have been front running the booms and the busts and are expecting the FED to come in. But do you

think the FED even not of credibility would even dancing around the idea of a rate cut if these small Regional bank balance sheets uh weren't under so much pressure because of the bonds that they hold. Well I think that I I think what you're touching on here is probably the reason that Powell is saying we think that monetary policy is too restrictive and that we do want to start kind of slowing the ship before we come in for the landing right but to your so so to yeah I I agree if this issue did not exist with um the treasuries is being underwater and with the fact that commercial real estate is underwater I don't even think that they would be talking about it right now. I think if anything they would be raising rates in order to slow the economy more but the thing is is this is the problem with debt and I think a lot of people know this but that it's worth repeating that the bigger debt gets and as they grow larger L and larger and larger we've

talked about this before where there's this exponential system. The system has to grow, but the more it grows, the more brittle it becomes. And the longer this goes on, it's like a jenga tower. It's higher, it's higher, it's higher, it's higher. You know, eventually it's going to come down, but it's just a matter of when. And you know, we've got the situation where the tower is rising, the tower looks nice, but you just know from experience it can't go on forever. And I think that is why, despite all the numbers being pretty good, the economic indicators being fine, nothing really of peril out there, they know that it could turn perilous fairly quickly. And I think that's why they're trying to engineer this soft landing. I'll say their history of engineering soft landings is next to zero. I think in 1995 they did it fairly well, but other than that, I can't remember a time.

where they've been able to do that. In fact, it's interesting to hear them being kind of proactive. We know we're trying to get ahead of this so we don't have to react to it. I kind of find that funny because for the most part, central banks are reactive agencies. Their job is to step in when needed, and they're not supposed to be necessarily proactive, you know, trying to make things happen. But I do feel like they are trying to make something happen here, and they're trying to engineer the soft landing. Um, you know, we'll see what happens. So 95, you started in this business in 98, is that correct? I started in 99. Yeah, so I was, you know, I 95 is about the time I started watching markets and just kind of reading about them. And I was in college at the time and studying them. So it's more in hindsight. I didn't see it in real time, but I just, you know, looking back through history, that's a time where they cut pretty aggressively.

and uh they were for the most part able to engineer soft landing. So looking back at that time frame and addressing the idea that the central bank is generally a reactionary mechanism, which over the last two decades at least, um evidence would support that. But makes me think back in that time frame of the 90s, the Central Bank chairman at the time was Greenspan, and he earned the uh nickname the Maestro. Is that correct? Yes. So he was more of the at least perceived at the time as somebody who was playing this Goldilocks role. Do you believe that looking back in hindsight in history, or do you think it was just sheer luck, and you think pal has the potential to move the knobs to his favor? Well, you know, Greenspan had the reputation of the Maestro. That was kind of his nickname because he was kind of the man behind the curtain pulling all the levers. And really, I think I I I give him a little bit of credit cuz he was there for a very long time.

you know presided over, you know, great economic growth, but a lot of it just had to do with lower rates, right? I mean, he, you know, Volcker is the guy that, you know, is kind of legendary as far as raising rates and like slowing an economy that was out of control from an inflation perspective. Greenspan really just facilitated, really, by lower rates, the growth that was kind of pent up and ready to go. Um, you know, it's funny, at the time when I first kind of started, I, you know, I probably drank the Kool-Aid that, you know, he was this great monetary guy, but as I, as I look back, you know, I think all these Central Bankers are basically the same. They do all the same things, they have the same moves, they all do the same trick, is to basically provide liquidity when it's needed. Now, they maybe do it in a little bit different fashion, they may speak about it differently, but they're all essentially performing the same magic trick. And so, my, my view of, uh, Greenspan

has probably dimmed a little bit as I've gotten older and become more accustomed to what they do. You know, I will, I have to tell the story really quick. What made Greenspan kind of amazing was that when he was younger, he was an acolyte of Ayn Rand, and he was very much libertarian, very much free money, very much not into government influence in markets. And then he becomes the head of the Federal Reserve, and all of a sudden he is the guy pulling all the levers. And a friend of mine, who she's one of the smartest people I know, she has said for years that she believes that Greenspan aggressively cut rates and provided Easy Money policies in order to make the debts grow exponentially on purpose, in order to crash the system. So, in other words, she thinks he did it on purpose in order to bring the whole system down, in other words, bring the system down from within, rather than trying to be like Ron Paul from outside and railing against it. And part of

the basis is the fact that he was an Ayn Rand acolyte. He wrote a very famous paper called Gold and Economic Freedom where he kind of argued for the benefits of free competition and free money, or not free money, but market-based money. And so, for him to do such a dramatic pivot, you know, again, her belief is that it was all a ruse and that he's even surprised that it's still going on, that the 2001 should have the dot boom should have brought it all down for good. But yet here we are 20 years later and it's bigger than ever. Greenspan the mole, that's a new one. I haven't heard that before. Yeah, yeah. Is there anything interesting, you know, you've now been in the room with a lot of people at the last two weekends and conferences, so fresh conversations and ideas come up at the same time whether you're talking to, you know, frequent friends and contacts.

whether it's someone like cuppy or Todd or Mike Green, is there any any um thing that is worth sharing? Is there a fresh idea? Is there something that someone is looking at that you thought was intriguing and worth sharing that you know hasn't really been talked about a lot yet? Well, here was the interesting thing, and Todd and I were talking yesterday, and we both said equities are at a level that you have to be concerned. It doesn't mean you have to sell them all. It doesn't mean you have to predict a crash, but it's just, you know, we've come a long way. So yesterday, there's a number of one of these signals that a number of people watch, is called Demar. There was a number of DeMark 13 counts on several indices and stocks yesterday. Uh, the relative strength again was through the roof. Uh, you know, sentiment is as high as it's ever been in the last 5 years. So there's a number of signals that are saying, you know, you got to at least be careful on.

equities here. And the fact, you know, you know, we were talking about how you can for for one year you can buy. If you have a, if your portfolio is 100% stocks for 3%. In other words, you can buy a put for 3% that protects your portfolio for an entire year. So the worst case scenario over the next 12 months is you would be down 3%, but then you would have have all the upside of the S&P 500 over that time period. That's pretty cheap to be able to 100% protect your portfolio for 3%. So we kind of talked about that. So for all those reasons, you know, we're at a level in equities where you have to be concerned. That being said, it's hard to find somewhere else to go that that looks attractive or that looks more attractive. Again, I know there's people out there saying no you gotta buy Bitcoin, you buy. You gotta buy Gold, yeah, yes, as far as a diversified Port.

portfolio you have to but again there's no one other thing out there that's really like lighting up wow we should go buy copper wow we should go buy you know real estate wow we should go do this because this everything is kind of at its highs everything has kind of reasons that you would not buy it and so what Todd and I were talking about is with a lot of people that we talk up to they they feel the same way right and so when everybody feels the same way then it's probably wrong right but but the funny thing is it's kind of like the snake eating itself because even though we agree that everybody's looking at it the same way and that can't be right you can't find any place else to really go to that's really exciting and so you know it's almost like we're we're in neutral and you know I I've said this before I've been doing this for 25 years now this is the hardest time to manage money I can remember um because because there's so many different factors that

play, and there's so many different ways that this can go, and so I'm, I'm doing my best to be prepared for everything, rather than just trying to figure out one thing that's right. I'm trying to be prepared for all scenarios. And um, but the point I would make to your question is, I've talked to so many people who are kind of in the same boat, and they kind of feel the same thing, you know. Energy traders haven't had a great year. Precious metals investors didn't have a good first couple months, then they had a great six weeks, and now for the last four weeks, hasn't been so great. Real estate guys are just kind of holding on for dear life right with the commercial real estate. Um, you know, copper made a huge run and then had a huge pullback. Uh, the grains had a big run and now they've pulled back. And so there, there's, there's no one area that's just like really booming right now, other than Ai and

equities, but those are the level that makes it unattractive to enter. So, it's it's really a weird time, well at least with all those things you just sh, at least the insurance is cheap. I mean there's some comfort in that, that's right, that's right, and the fact and that we talked about that too. The fact that you can just sit in Te bills with a portion of your portfolio and get four or five perc. I mean that's a that's a great optionality to have, awesome. Well, let's get into the um biggest topic of the week, or at least at the end of the week, the Petro dollar, the end of the Petro dollar, the end of the so-called 50-year agreement, 80-year agreement, you know it has to be true when articles can't even get the histrionic number of years that it existed correct. So, let's just jump right into it. BR, give us, you know, your take not only on on the Petra dollar overall, but you know shine some truth

some light on what this whole thing was about. Okay, so this is a very huge topic, and I'm going to do my best to kind of summarize it as best I can. But this was one of the more maddening weeks, you know, again, when we started this channel, it was going to be, you know, not just about the market, but also madness, and we were going to point out the things that were just people were losing their minds over. Well, you know, this fits well into that category, and I don't know why it still surprises me, but it still surprises me when people are so willing to believe something just because they want it to be true, right? And so as we go back to this, let's talk about what they're talking about to begin with. So in the early '70s, the US cut link from gold on the dollar. And so from like '71 to '73, we really had just free-floating currencies that were not backed by anything, and it kind of had somewhat of a mini-currency.

crisis. At the same time, OPEC countries in the Middle East started boycotting certain countries who they felt were unfairly helping Israel against Arab countries in a military conflict. And so, they started an embargo of oil to Western countries. And as a result, you know, oil prices skyrocketed, oil supplies fell, we had gas lines, and you know, everybody's economy runs on energy. You have to have energy to run an economy. So, this was causing problems not just in the US and not just for Richard Nixon, but all over the world. It was causing problems in Japan, it was causing problems in Europe. And so, in 1973, the head of the Nixon sent the head of the US Treasury, his name was Simon. I don't remember his first name. Anyway, it doesn't matter. The head of the Treasury went to the Middle East and he met with a number of different countries. But he specifically went to Saudi Arabia and he met with the head of the family, The Sod family. And they

convinced. And here's where many people get this wrong. They think that the whole agreement was just about pricing oil in dollars. That's not exactly correct because oil was already priced in dollars. What they convinced them to do was to stop the embargo and start sending more oil to the US. So what really happened was that the US secured oil supply for the future because they didn't want the US economy to be subject to the whims of a country in the Middle East. But as a result of selling all that oil to the United States, now Saudi Arabia was going to receive tons, billions and billions of dollars of revenue. What were they going to do with that revenue? At the time, their economy was extremely small. There is no if they would have put all of that money directly in the Saudi Arabian economy, the prices would have exploded. It would have been they couldn't have done it. It would be like trying to put a swimming pool full of water into a pitch. It just it.

wouldn't fit. Saudi Arabia was trying to figure out what do we do. What if if we if we go back to selling all this oil and we get all these dollars. What are we going to do with it. So part of this meeting was not just securing a supply of oil. It was how how could the US help Saudi Arabia use this new Revenue most efficiently. And so the treasury secretary convinced them to put that money into treasury bonds. And as a result, they promised them they're not going to get confiscated. You know, we're not going to delink you. Um, in fact, what we will do is we will help maintain your position of power in Saudi Arabia. We will provide you military assistance. So if you're a king of a middle eastern Kingdom, your number one concern is you want to remain the king of that Middle Eastern Kingdom. That is your number one goal. So having the world's superpower at the time on your side, keeping you in power and protecting you, it's not a horrible

deal right. And then, Exchange. In addition, the US agreed that we are going to help transform your economy from a desert Kingdom into a modern, highly sophisticated, technologically advanced country. And that is exactly what has happened. And so, as a result, and because that was kind of the arrangement for Saudi Arabia to buy treasury bonds, they had to receive dollars to do it. And so, this was a huge win. But the other thing is, this is the treasury secretary went over there and just really on more of like a gentleman's agreement, said, Hey, this is a way that we can work together. It's good for you, it's good for us, everybody wins scenario. But it wasn't. It's not a treaty. There was no treaty between the United States and Saudi Arabia. Congress did not ratify this agreement. This was an executive branch program that was launched that worked stupendously well. It is probably, I would argue, it is one of the greatest deals in American history. And not only did it help Saudi Arabia

by the way, over the last 50 years, Saudi Arabia, the standard of living has is amongst the highest in the world. They have some of the most technologically advanced Society in the world. They have huge beautiful highways, High you know high-rise buildings, uh, you know the amazing tourism. So they have gone again from this desert Kingdom to a world place player. So from their perspective, it worked out. Not only that the house of s is still in power, it worked out great, and it worked out fantastic for the US. Because after the US delink from gold, there was some concern about the Dollar's role continued rooll as the global Reserve currency. But now the fact that you, the Saudi Arabia, was only going to sell their oil and dollars meant that everybody needed dollars because everybody needs energy. And so it went from there was somewhat waning demand for the to now more demand than there had ever been. And then because everybody needed energy and everybody needed dollars to do it, it really solidified the dollar as the global Reserve

currency. And then that led to the exponential growth of the euro-dollar market that we have talked about on several occasions. Now, the other thing that I didn't really say here is that people often think that this was a great deal for the US and not a great deal for Saudi Arabia. Now, I already explained why it was a fantastic deal for Saudi Arabia, but the additional thing that I didn't talk about is the US didn't go there on hand and knee begging for this deal. In fact, the US, again at the time, was the strongest country in the world, and while Saudi Arabia had a lot of oil, they didn't have a huge military, they didn't have a huge global presence. If they had said no to the US, the US would have probably gone to one of these other families and said, Hey, do you want to be king? And what are they going to say? No, I don't want to be king. Of course, they want to be king, right? So then all of a sudden, the House of Saud

has the US as an enemy, rather than a partner. So, you know, it's kind of the even if you don't love the other guy or the other woman or the other uh team, it's kind of the devil you know, right? And so we chose the devil we know, and they chose the devil they knew, and it worked out for everybody. And so the idea now that 50 years later, this agreement which there was never again, there's never a legal document that said this is going to expire in 50 years. Now people will say, but I saw this piece of paper or I saw this communic. Okay, if I went to a meeting, a business meeting, or you know, one of these conference presentations I'm at, and I took notes and I sent them back to, you know, my home and them away, and then 40 years from now, somebody pulls out my notes and reads about it, that doesn't mean that I was part of an official deal, just means I was there and watched this presentation, saw how it went down, and I documented it. So, yeah.

there are memos out there that explain what happened and explain kind of how it goes, but these are not official uh treaties that have been ratified by two different governments. It's just kind of how they decided to work together, okay, so let's bring that back back to the day because people want to believe that the US dollar is on death's door. Someone somewhere on some podcast or some you know Tik Tok video or some you know Twitter post says, holy cow, 50 years later this is over, hasn't been re renewed, and so you know they're ditching the dollar. Well, they're not ditching the dollar, first of all, they were selling dollars before and dollars before the agreement. They continued to sell dollars during the agreement, and they're continuing to sell dollars now, so this idea that all of a sudden Saudi Arabia is is no longer going to use dollars, it's just it's it's it's silly, and people you know took this this Tik Tock meme or what I don't even

know how it started, but however, however, it started. And then it started going around, and other people started talking about it. And then journalists who didn't do their research, you know, said, well, I can't miss out on this. This is such a great headline. They started writing about it. It just kind of created a life of its own. But there's no evidence. There's nothing that says this actually ended. The other thing is that the dollar went higher this week, not lower. Um, and by the way, I don't know if people know this or not, but Saudi Arabia's currency that's pegged, you know what it's pegged to. It's not pegged to Gold. It's not pegged to Rubles. It's not pegged to Yuan. It's pegged to the US dollar. So if they're going to stop selling in US Dollars, then they must not believe very much in their currency, right? If they're getting out of the dollar because it's a shitty currency, then what does that say about their currency that it has to be pegged to the dollar to

give it some stability. On the one hand, it's amusing; on the other hand, it's maddening. But on the other hand, it's just very frustrating just to when you see these things and people perpetuate it even though there's literally no truth to it. But then let's pretend for a second that it is true. Let's pretend that there was a document. Let's pretend that there was a treaty. Let's pretend that Saudi Arabia literally said, We're not renewing it 'cause we no longer the dollar. What would that mean for markets? Well, a lot of the people that have been reposting this to say it means it's horrible for the US. The dollar is going to lose Global Reserve status. It's going to fall. It's going to go away. It's not going to be worth anything. You're going to lose all your money. And you got to get into gold or you got to get into Bitcoin or whatever it is. Well, let's think through what would actually happened if this was the case. We've

documented many times on this show, and I've talked about it many times on the presentations, is all the dollar debt in the world. Not just from the US issuers, but from people and entities outside the US, and they owe just as much as the US owes in dollars to each other. So, if Saudi Arabia stops selling oil in dollars and starts selling any Wan or gold or rupes, or whatever it is, rubles, then that means there's going to be less dollars circulating in the world. And if there's less dollars circulating in the world, that means there's less supply of dollars available. And if there's less supply of dollars available, how are the countries and entities that owe all this US dollar debt going to service and pay off that debt? It'll be harder to get dollars rather than easier to get dollars if it's no longer sold in dollars. And so, all of a sudden, those debts that are no longer getting serviced and are no longer getting paid off start to go into default. What does

that cause it causes a further supply crunch. With there's even fewer dollars available, but all the debt still exists, and so you get the situation where if this actually happened, the price of the dollar would rise on the global stage versus its peers, rather than fall. So then you get into the question, well, if the dollar is rising versus the other currencies, then why on Earth would you sell your most prized commodity in a weaker currency than the dollar? Even if these headlines are true, which they're not, but if they were true, it wouldn't have the effect that many of the proponents of this theory are saying it would have. So you know, I encourage people when they see these headlines, I'm not saying to ignore them. You know, it is news. If somebody says this is happening, it is worth seeing, well, is it really happening? But you know, don't just accept the first conclusion that you read. You know, part of the reason we do this show is we want to try to help educate people of how the system actually works. And way

things you know kind of go on both behind the scenes and in the real world. And so you got when you see these headlines, you really have to think a little bit and make sure you understand, uh, what the implications are because often times when things are getting sent around like this, there there's a, there's a certain motivation that these people have in order to do this. And you got to think about what their motivations are. And for those people who say that well, Brent you have a motivation too you're trying to push a narrative, yeah, that is true but I'm also trying to give you both sides of the story. And I don't really care whether you believe with believe me or not. I'm trying to get you to understand how the system works and you can ultimately decide for yourself, um, but what we really want, uh, and what we hope people get out of this show is kind of a more balanced take what's going on, what does it actually mean. And I think this week perfectly was representative of the type of stuff that

we try to debunk and try to help people think through. It's the Italian statement qu Bono you know fits that's right. And you know when something like this comes on comes along. You know those who benefit from trying to sell you whether it's a Bitcoin investment strategy or precious metals investment strategy. And all those things are an important. You know part of the portfolio depending on what your investment time Horizon is and what your risk profile is. So not to say any of those Investments don't have a time and a place but there are people who are are definitely trying to benefit by selling you a narrative instead of really looking underneath the hood and getting the the actual details on it. I'll also highlight one of the um one of your mic drop moments. You did a debate on Zero Hedge with Jim Rickards and you had talked U you was a two-hour long thing but there really is just like this two-minute sound bite that's priceless because you're talking about the euro dollar market and for those who are somewhat unfamiliar or need a little

bit more detail on that please again. We talk about it every time at the start of the podcast. Go to the start here playlist. We introduce you to those things in a couple of 50-minute clips. So we won't do it here, but the euro dollar market is basically these countries in the periphery outside of the main US that have lent to each other dollars. They owe those debts to each other. So if there was ever a mass default, or you know, as people often push on you Brent, well, what if everyone just decides they no longer want the dollar? They're basically defaulting on each other first. Eventually, that will come home to roost. But the mic drop moment you had with Jim was saying, you know, okay, what will happen to the dollar when these debts start to go into default amongst each other before it even reaches the shores of the US? The euro dollar market outside the US, these entities, they don't have the ability to create dollars out of thin air. So they actually have to go source them.

somewhere, the only people that can create dollars out of thin air is the US government. And so, you know, if you think about the Cantillon effect, you know, the people closest to the money benefit the most, and the further you are from the money, the less you benefit from it. That's kind of the euro dollar market. As long as everything is working and, you know, the music is playing and money is circulating, the euro dollar market works just fine. But the minute the music stops and you start to get this credit contraction, they have nobody that can bail them out unless the US decides to bail the rest of the world out. And so far, for the most part, the US has decided to do it, but they have not decided to bail the rest of the world out to the detriment of the US. And so, in that situation, the US will get bailed out first, and then the rest of the world will get bailed out. But the other thing I would say is a lot of the times when

people talk about the impending, or the imminent, or the eventual death of the dollar. It all has to do with the fact that we have too much debt, and there are consequences to having too much debt. What I find hilarious is that then the same people who say the US has too much debt and there are consequences to having US debt, well then as part of their argument for dollarization, say the rest of the world's just going to default on their US dollar debt. So they say defaulting on your US dollar debt will work for the rest of the world, but it won't work for the US. Now why will it work for the rest of the world, but it won't work for the US? You got to be kind of consistent in your thinking. And I always kind of get a chuckle out of that one when people say, Oh, they'll just stop using it and won't pay them. Well, fine if that's what you, if you, if you, if you believe that debt doesn't have any consequences.

what's the problem with the US having all this debt? Well, look Brett, we'll leave it there. I don't think this Petro-dollar thing is over. Hopefully, this gave some, you know, insights into what actually is the truth of the story versus the hyperbolic narratives that keep getting tossed around any time anyone can grab onto a headline that's streaming about the end of the dollar. Um, look, you can join Brent on Twitter and continue this conversation and share your opinion on it using his handle Santiago Au fund. You can find me using the handle John kmea. You can find this show both on Twitter and on YouTube using the handle milkshakes pod. That'll do it for this weekend. Take care, everybody. We'll see you next [Music] week. This show is provided for entertainment and informational purposes only. It should not be relied upon as legal, business, investment, or tax advice. Neither the hosts, guests, nor any funds they may manage intends to make an offer or solicitation for the sale or purchase.

of any specific securities, investments, or investment strategies.

The rumor spread like an oil fire, but is this truly the end of the PETRODOLLAR and U.S. Hegemony?

The Dollar Milkshake Theory, an idea created by Brent Johnson of Santiago Capital to explain the role of the U.S. Dollar in the global monetary system, is a reference to the infamous milkshake scene in the movie “There Will Be Blood”.

On their finance show, MILKSHAKES MARKETS MADNESS, Brent and his friend Jon Kutsmeda share weekly videos that discuss business, investing, and a variety of topics related to money and global capital markets.

Their goal is to help simplify complex economic ideas, like the Dollar Milkshake Theory, and to bring some much needed perspective to the madness of financial markets, without the hype or drama.

Learn more at http://MilkshakesPod.com

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SHOW SCHEDULE
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Sunday 11am EST -- Full Length (30 - 40 min)

Additional UNSCHEDULED segments:
- Monday "Peek at the Week"
- Flash Market Update
- Midweek Update
- Madness Edition
- WWJD
- Clips from full-length episodes
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Brent Johnson Milkshakes Pod | Investing • Finance

The Unratified Agreement Between the US and Saudi Arabia

The Treasury secretary made a non-treaty agreement with Saudi Arabia, which was never ratified by Congress.

The executive branch program is considered a great deal in American history by the secretary.

The agreement was successful, despite lacking official approval from Congress.

The Likelihood of a Federal Reserve Rate Cut

The Federal Reserve is likely to cut interest rates, possibly just once, to maintain credibility and address underlying economic issues.

There is a strong emphasis on the pressure faced by small regional banks due to undervalued government bonds and underwater commercial real estate, which is driving the Fed's consideration of a rate cut.

The Fed is aiming for a soft landing to address the growing debt and brittle economic system, despite current positive economic indicators.

The Unconventional Actions of Alan Greenspan

Alan Greenspan, the former Federal Reserve chair, was known as the "Maestro" for his role in the economy, but his reputation has since been questioned.

Greenspan's shift from a libertarian to implementing easy money policies has led to theories that he intentionally grew debt to crash the economic system.

His unconventional actions and the lasting impact on the economy continue to be a topic of debate and speculation.

Concerns Over Equities and the Current Investment Landscape

Equities are at a concerning level, with multiple signals indicating a need for caution in the stock market.

Despite these concerns, there is a lack of attractive alternative investment options, making it a challenging time to manage money.

The insurance cost for portfolios is relatively cheap, providing some comfort in the current unpredictable situation.

In the 1970s, the US convinced Saudi Arabia to end the oil embargo and invest their oil revenue in US treasury bonds.

This deal ensured a stable oil supply for the US and helped Saudi Arabia avoid economic instability.

The agreement also included US support for Saudi Arabia's power and modernization, making it a significant and successful arrangement.

The Impact of the US-Saudi Arabia Agreement on the Global Economy

Saudi Arabia's transition to a technologically advanced society and a major player in the world has significantly impacted the global economy.

The 50-year agreement between the US and Saudi Arabia, based on oil and dollar sales, continues to be in effect, despite rumors of its expiration.

The agreement has not only solidified the US dollar as the global reserve currency but also influenced Saudi Arabia's currency, which is pegged to the US dollar, indicating the country's reliance on it.

The Potential Impact of Saudi Arabia's Alleged Decision to Stop Using the Dollar

Saudi Arabia's rumored decision to stop using the US dollar for oil trade could lead to a shortage of dollars in the global market, making it difficult for entities to service their dollar-denominated debts.

Contrary to popular belief, this situation could actually cause the value of the dollar to rise against other currencies, rather than fall.

It's important for people to critically evaluate sensational headlines and consider the potential motivations behind the spread of such news.

The Euro dollar market consists of countries outside the US that have lent dollars to each other, leading to potential mass defaults.

These entities rely on the US to bail them out in case of a credit contraction, as they cannot create dollars themselves.

Despite concerns about the US's high levels of debt, there is inconsistency in the argument that the rest of the world can default on their US dollar debt while it wouldn't work for the US.