Weaponizing The Dollar (w/ Luke Gromen and Brent Johnson)

Do the U.S. government and the Federal Reserve have the stomach to break the global financial system with the dollar? Luke Gromen of Forest for the Trees and Brent Johnson of Santiago Capital join Real Vision co-founder Grant Williams to examine the knock-on effects of an escalating currency war. This video is excerpted from a piece published on Real Vision on February 4, 2019 entitled “The Great Dollar Debate.”
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Weaponizing The Dollar (w/Luke Gromen and Brent Johnson)
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Transcript:
For the full transcript: rvtv.io/2Yx7Io0
When you talk about weaponizing the dollar, are you just talking about them allowing it to strengthen? They're going to make it a more attractive currency through interest rates? They're just not allow it to strengthen without stepping in?
In this case, yes. The biggest threat to my expected pathway is the weaponization of the dollar with extreme prejudice. In other words, the US government and/or Fed decide that it is a good thing to break the world with the dollar, which they can do, to Brent's point. It's absolutely doable. And that they are willing to take the collateral damage that would go along with that, which is to say you'd break the US bond market, you'd break the US equity market, you would break consumption in the US. You would drive a severe recession, if not depression. All of those. If the United States government at the Fed are willing to do those things for a period of time with their eye towards a goal, you know, ala Paul Volcker, with an eye with their eye towards a goal of setting the United States up in a better bargaining position vis a vis China, vis a vis Russia, other emerging markets. And to try to stem the tide of dedollarization of commodity markets that's been going on, then Brent is going to be 100% right. And the dollar is going to go to 120, or 160, or some really big number, and there's not going to be enough dollars.
When you talk about weaponizing the dollar, are you just talking about them and allowing it to strengthen? They're going to make it a more attractive currency through interest rates? They're just not allow it to strengthen without stepping in?
In this case, yes. I mean, I think we've weaponization of the dollar, you've probably heard us talk about it being used in sanctions, regimes, et cetera. In this case, the weaponization, I use that term purely as a we're going to strengthen it, and we're just going to use it to let everybody else break themselves on it.
So why is he an idiot? Because I've got to say, I listened to this, and I go backwards and forwards. Because the one thing is we will have to have an opinion on the dollar. And you have to build a trade process around that. And I've gone backwards and forwards. Right now, I lean towards Luke's camp. I've been in your camp, before but why are Luke and I idiots?
Well, if you guys were idiots, I wouldn't be here. I should say that, too. Honestly, the only reason I even keep going back and forth with Luke is I actually respect his opinion. And I know how much work he's put into it, and how much time and thought he's put into it. I don't think he's out there selling something he doesn't believe in. I think he believes what he's saying. And if he didn't, I would delete the tweet, I'd block him, and whatever, right? But you know, the reason I engage with him is number one, I disagree with him. But every now and then, he says something that makes me, god, now I've got to go look that up, right?