The Great Dollar Debate

Published on
February 4th, 2019
37 minutes

The Great Dollar Debate

The Exchange ·
Featuring Luke Gromen, Brent Johnson

Published on: February 4th, 2019 • Duration: 37 minutes

In this episode of "The Exchange," Grant Williams brings both sides of a long-running Twitter battle to the Real Vision studio. Luke Gromen, founder and president of Forest For the Trees, and Brent Johnson, CEO of Santiago Capital, meet face-to-face to make their respective cases for the future of the dollar. With uncertainty over the economy and the trade relationship with China looming, both agree that 2019 could be a big year for the world's reserve currency. The key question is, where does it lead? Filmed on January 28, 2019 in New York.


  • HC
    Hakan C.
    9 April 2020 @ 11:47
    what a relevant video during these times
  • PS
    Paul S.
    23 March 2020 @ 02:28
    Well, this has aged well in light of all the recent events. It really does take a crisis, and we do have quite the crisis on our hands. USD is skyrocketing, the question is how much further will it go? Will the swap lines alleviate some of the pressure? Personally, I don't think it will be enough.
  • WA
    Wissam A.
    14 November 2019 @ 10:50
    Can we get an update from these two gentlemen perhaps sometime first quarter in 2020?
  • SS
    Stan S.
    28 July 2019 @ 01:58
    To be filed under very late and not very helpful comments, excellent conversation. I've followed the back and forth on twitter for some time. At times, the twitter back and forth seems a little too contentious for what I hope for from two smart gentlemen. This video relieved that concern. My take: in the coming chaos, the dollar rallies so strong it weaponizes itself and the world finally demands an alternative. So Brent then Luke.
  • SB
    Stephen B.
    27 May 2019 @ 21:03
    I thought that this was an amazingly good discussion. No one can know the future but we can at least be alert to the various potential outcomes. That is the only way to calibrate the risks.
  • PM
    Paul M.
    7 February 2019 @ 10:27
    Brent talks about "older gold guys waiting for the payoff since the 70's or 80's" but the reality is that gold has been going up at a rate of 7,5% annualised since 1971. If their goal was the preservation of capital, they've done extremely well.
    • SB
      Stephen B.
      27 May 2019 @ 20:55
      And particularly well if your national currency is not the US$
  • JS
    Joseph S.
    17 April 2019 @ 22:31
    Let's have a 10-15 minute summary update every quarter or so. End of April would be next. Dovish FED effect. This will be the most important and central trade of our life time.
  • ek
    eric k.
    22 March 2019 @ 01:03
    Luke Gromen is the smartest guy on RV.
  • SG
    Salvador G.
    12 February 2019 @ 07:53
    Ok, let us assume Luke is right, the USD collapses, so demand for treasuries falls and yields rise to the roof (payback for running huge deficits). What happens then to stock prices? The other currencies rise significantly, what happens to exports of those countries? Who are they going to sell to? Marcians?? What happens to those countries stock markets???? This scenario is worse thank the great depression.... but in the end, a collapse in the USD would quickly fix the CA balance, so that means the US wins the currency war.... unless, everybody else also devalues, and we are back to a strong dollar, just at a much lower level of economic activity.
    • LC
      Lloyd C.
      14 March 2019 @ 08:31
      Everyone will devalue by printing because they will have to due to high debt levels. Therefore, hard asset prices must rise. And if you're Russia and China, the only effective credit default swap you have is Gold.
  • WM
    Will M.
    16 February 2019 @ 19:07
    Very good discussion for the allotted time. It doesn't matter who you listen to, the $ appears to be currently range bound. I am out of gold (and sliver) because I think its going to go higher. However, I remain on tenterhooks ready to buy precious metals and stocks if the dollar falls below support. If metals go up along with the dollar then perhaps the end game is upon us after all these years of false economics.
    • DR
      David R.
      1 March 2019 @ 20:16
      That last sentence is exactly what Erik Townsend, the HK-based HF mgr and host/owner of macrovoices, has long been saying.
  • LB
    Louis B.
    11 February 2019 @ 03:09
    I expected more, a lot more. Very disapointed. No mention of the Fed, the PPT or the ESF. I think Brent lives in Lalaland, but he's far from alone in that respect unfortunately. He's in the company of the vast majorirty of people and especially so those managing other people's money. They know the future may be vastly different one day and the US's exceptionalism may not be as permanent as they wish, but dismiss all that casually simply because they can't see it happening soon. How pathetic. As for the conclusion of this 'debate', they both semed to agree - that the dollar will weaken... eventually. The real question, as always, is timing. Cause and effect is a a natural law and it is not governed by the time it might take from one to the other. People like Brent like the system as it is, it serves them well. Full stop.
    • WM
      Will M.
      16 February 2019 @ 19:02
      Clearly Louis you are out of touch with the overwhelming majority of viewers. They only had 35 mins, not an hour and 35 mins. Room for more debate though of the issues you raise, don't disagree they are important.
  • AK
    Anthony K.
    15 February 2019 @ 20:37
    If you you are listening Real Vision.. We need more of this and throw all the newer ideas in the can
  • NB
    Nikola B.
    10 February 2019 @ 21:12
    Just half through the interview and I have to give tons of credit to Grant for handling one particular situation really well. It’s when Luke started talking about how the US weaponised the USD via Switzerland and thereby hyperinflated the Iranian economy. It’s a classic Luke moment, where he uses a phrase that hides a relatively complex mechanism and I assume I’m not only one who finds this kind of discourse difficult to follow. Grand interrupted him and asked him to explain what he meant by that. I think only the best interviewers don’t allow details like that slip through the net. Well done Grant!
  • YW
    Yowshi W.
    4 February 2019 @ 15:52
    They dont talk about bitcoin but seems the alternate system is bitcoin
    • IO
      Indi O.
      5 February 2019 @ 18:44
      I think there are multiple possible alternates. To me the most likely is SDRs based on a basket that might include several major national currencies, plus gold and maybe even Bitcoin. There certainly is a lot of institutional and government movement in the crypto space, though you won't hear about it on mainstream news. At least one government would have to strongly campaign for its inclusion though, and the US would need to not mount a strong opposition. Considering that all bitcoin ETFs/ETNs so far have been approved in Europe, and not approved in the US, that makes it less likely to be included. And considering the strong proponents gold's inclusion might have from China, India and/or Russia, and the opposition the US would normally mount to that, it might come down to only gold or bitcoin being able to make it in. In that case, I'd bet on gold, but stranger things have happened.
    • LC
      Lloyd C.
      10 February 2019 @ 03:59
      Ethereum will scale better and compete with SWIFT
  • RS
    Ronan S.
    9 February 2019 @ 13:35
    great vid, to Luke's point on offshore Chinese Debt. The recent book new Silk roads book outlines huge increase of offshore debt to developing nations in Africa and Asia where a demographic boom made it possible. Any further thoughts on this would be great?
  • AP
    Adam P.
    9 February 2019 @ 09:42
    What kind of whiskey are you gentlemen drinking??
  • TA
    Truitt A.
    9 February 2019 @ 04:09
    Great exchange and very glad it was finally put on video! Always learn something from these sharp minds as they debate this topic. Thanks for the insight, gents!
  • HX
    Hu X.
    8 February 2019 @ 02:34
    V informative and insightful, thx
  • MM
    Mak M.
    7 February 2019 @ 20:12
    Excellent interview and very informative. Thanks for that
  • JS
    Jürgen S.
    7 February 2019 @ 18:24
    Great interview. I‘m really curious on how this will play out. I‘m more aligned with Brent.
  • GO
    Gary O.
    7 February 2019 @ 05:30
    Good conversation, good times. Thanks guys!
  • SU
    Shakeel U.
    7 February 2019 @ 00:14
    Epic, 10/10
  • SS
    Steve S.
    6 February 2019 @ 22:04
    That was a good conversation. One of the better videos on the site
  • JG
    Joseph G.
    6 February 2019 @ 21:35
    Excellent discussion but it is clear that the dollar can go up or down depending a great deal on the decision making both fiscal and monetary as well as geopolitical. It seems as though Powell has made a turn back toward monetizing the debt rather than allowing the market to fall back toward more reasonable valuations. These twists and turns by those in power make predictions that much more difficult.
  • LT
    Lucas T.
    6 February 2019 @ 18:35
    I tend to side with Brent as I always understand him much better than Luke, maybe Luke is right, but he is not as good at putting across his ideas...he is talking about jet fighters and a bunch of rando things. His thinking is either not clear or this is not the format that gets him across the best. Also Grant was surprisingly cordial to Brent...was he kicking him in the shins secretly under the table?
  • WS
    William S.
    6 February 2019 @ 15:21
    MMT, debt jubilees, capital controls, currency wars, crypto.....all good topics for Steve Hanke to weigh in on via long format.
  • KE
    Kathryn E.
    6 February 2019 @ 02:37
    Great interview, loved it!
  • FB
    Floyd B.
    6 February 2019 @ 00:12
    Outstanding,will be adding them to Twitter ASAP! Also would like to know the impact of issues that will likely continue to develop in the EU and the potential for volatility in the EURO and how that might affect their dollar thesis and timing.
  • VS
    Victor S. | Contributor
    4 February 2019 @ 21:49
    Gents i know you all -Brent less so -as we never talked via is what is strange to weird in the whole conversation you never mentioned the Fed flipping on 1/4/19? If rates dont go up how does the $, and you also didn’t mention Italy in recession and Germany+France +China in trouble and the UK in limbo Brexit . The world is going into or in recession so How does the dollar rise??? Unless you assume Brent ,the Fed still raises rates? Kudlow wants a strong $ trump does ...not final point.
    • HS
      Hendrik S.
      5 February 2019 @ 09:40
      Isn’t it about interest rate differentials
    • HS
      Hendrik S.
      5 February 2019 @ 09:43
      I’m from Europe and I am happy putting some money in us treasuries at these rates
    • SS
      S S.
      5 February 2019 @ 10:19
      @Victor. I think it's all about timeframes. No doubt $ falls in the long run but on the path there and in the near term, $ rises. Troubles in Italy, Germany, France, China and UK is Bullish for the $ in 2019. There is no other currency on planet Earth that I would go Long against the US Dollar at this time.
    • VP
      Vincent P.
      5 February 2019 @ 20:41
      Agreed that FED flip topic etc should have been discussed. USD's best chance to really breakout IMHO, is when markets go full retard "risk-off". Victor, there's the falling rates and stronger USD scenario :) I think the 12/18 rate hike coupled with the 180 FED reversal will in the end turn out to be the temporary backstop to "buy time" for a trade deal to happen and also to save the market from persistent stressed financial conditions of their own doing. Investors will recognize the accelerating global slowdown soon, perhaps even with a China deal because, how many times has it been priced in so far??? There's been lots of reporting of front loaded demand last year because of tariffs. Now, there's slowing commodity freight, slowing demand and slowing economies in key countries. Does, the world really have enough faith in a trade deal to pull back and wait for soothing tariff cuts or will it be too little too late no matter what? Don't think so.
  • GC
    Gary C.
    5 February 2019 @ 20:28
    Luke, have read your book twice now, have been uncertain of your reference to the explosion in derivatives. Do you think sovereigns and other buyers of treasury dept were sold (purchased) interest rate derivative protection? Purchasing quadrillions of protection for trillions of debt? If this is not what you meant , could you explain what you and Mr. X were discussing. Thanks
  • RA
    Robert A.
    5 February 2019 @ 19:36
    Please see my reply to MB below.
  • MB
    Matthias B.
    5 February 2019 @ 18:20
    and before I forget - excellent format. could have been a notch longer to delve more into certain arguments. but pls continue the format into other topics, eg volatility with Chris Cole, or debt jubilee etc.
    • RA
      Robert A.
      5 February 2019 @ 19:35
      Thanks MB for your Debt Jubilee prompt. It has been touched on by a few RV presenters, but has never truly been explored in depth. Somehow I think everyone is just waiting to see when Japan turns to this and, of course, sizing up the aftermath when they pull the trigger. I agree with you...why not get some great presenters analyzing this and try to get out ahead of it—if that’s even possible. If we (or Europe or Japan) can’t pay the debt back and can’t inflate it away, isn’t the only thing left to default by way of a Debt Jubilee? I think we all could use some help on our Portfolio positioning alternatives by the RV experts—I know the discussion is going to be speculation since the historical and Biblical history of DJ occurred in MUCH different times, but I for one would really like to see RV tackle this issue head on and soon. What say you Milton?
  • MB
    Matthias B.
    5 February 2019 @ 17:03
    general question to the audience: while many aspects influence a currency, what is more important, trade differentials or purchasing power parity? or have TDs rather a short term impact whereas PPP are the long term parameter? tks for feedback.
  • GH
    Gary H.
    5 February 2019 @ 16:10
    Enjoyed the conversation. As always that pesky timing gets in the way
  • JH
    Joel H.
    5 February 2019 @ 11:29
    This format really works with these guys, only wish it was a bit longer. Really wanted to hear a sit down with them and this hit the spot. Funny how many disagreements come down to timeline. I am curious to see what happens if we get a disruption of the euro, then see how that effects the dollar? Anyway, thanks all, hopefully we can hear from them both soon!
  • CR
    Carmen R.
    5 February 2019 @ 10:24
    Excellent. I really feel Luke brought more neat to the table.,,
  • TB
    Troy B.
    4 February 2019 @ 09:21
    Make these an hour long, two hour long, really great conversation.
    • MZ
      Martin Z.
      5 February 2019 @ 07:57
      Absolutely. They were just warming up. It's easy to imagine that if the debate had gone on much longer than a mere 37 minutes, they might have relaxed and felt less need to be so cordial, and hence found much more to disagree about than just the timing.
    • SF
      Simon F.
      5 February 2019 @ 09:53
      I certainly think getting a whole lot deeper into the key factors that underpin each position and the 2nd and 3rd order effects is important. An exchange that took that time would be great. It might also be great to do some side filming of key experts of each of those factors and get their input responded to during the debate.
  • CD
    Colin D.
    4 February 2019 @ 13:06
    Unless I am misinterpreting this, the only key difference between the two of them seems to relate to timing really. Luke thinks we are further down the line on de-dollarisation of the world whilst Brent thinks there is still a painful transition to pass through first, which is likely to support the dollar. Whilst I enjoyed the debate I am still stuck on the fence!
    • SS
      S S.
      4 February 2019 @ 13:37
      Both agree that dollar is most likely going to go higher in 2019.
    • MZ
      Martin Z.
      5 February 2019 @ 07:52
      And both agree that the other one could be right. So it's important to be flexible, watch events closely, and CYA for either eventuality....Got cash?...Got gold?...Got RV?
  • SS
    S S.
    4 February 2019 @ 13:48
    My favourite quote was from Brent when he said 'Everyone is a long term investor, until they are down 10-15%' So true.
    • MZ
      Martin Z.
      5 February 2019 @ 07:49
      Reminiscent of Mike Tyson's comment: 'Everyone has a plan until they get punched in the face.'
  • RI
    R I.
    5 February 2019 @ 05:17
    Entertaining conversation but no discussion about how economic (not political) fundamentals like growth and inflation across countries (namely US vs Europe/EM) affects the dollar. It’s all about politics and its potential effect on the dollar. Politics is merely an amplifier (whether it be up or down) of fundamental economic trends. Still, as mentioned, politics is entertaining, makes front page news and therefore easy for narrative construction.
  • AW
    Austin W.
    5 February 2019 @ 04:49
    This is what new media is! Loved following this on twitter and all I wanted was to hear them debate in person. Wish it was longer. Thank you ReaVision, Luke, and Brent.
  • PG
    Philippe G.
    5 February 2019 @ 01:14
    Great stuff! Liked how they kept it professional and friendly at the same time! Got a good chuckle at the Harry Potter and Sci-Fi references MMT? Sounds like we need an expert view segment on that please!
  • DS
    David S.
    5 February 2019 @ 00:32
    Gold is already part of the FX market. It works well as individual fiat currencies collapse like Argentina and Turkey did in the last year. Any portfolio should be hedged with some form of gold or related asset in case the whole fiat currency system falls apart at the same time. The daily FX market does not, however, follow any economic model Austrian or otherwise. It is the resultant of human assessments of the relative value of all included currencies at one time. We are already down the rabbit hole of FX markets after the gold standard was eliminated. As Russell Clark discussed, we need to make a currency forecast as part of major trades. Currency forecasts are often wrong in direction and timing. Hedging FX forecasts cost money, but it is the only long-term approach that may work. Glad I do not need to be fully invested. DLS
  • TJ
    Tay J.
    4 February 2019 @ 22:59
    Superb format. What could be more thought-provoking than hearing both sides of an important argument? The trick is to keep the debaters engaged head to head--rather than simply arguing past each other, e.g. each addressing a different time-frame. ('Happens all the time in the Munk Debates.). So the moderator needs to actively steer the conversation. (That's YOU Grant! :) Please run more of these.
  • TP
    Tom P.
    4 February 2019 @ 22:50
    A few too many analogies. Other than that, an absorbing conversation. Great to see two sides of what i think is the most important debate in the financial marketa right now. Thanks
  • JB
    Jason B.
    4 February 2019 @ 19:13
    I think Luke is a very smart guy but that he is way too bullish on China and he does not understand how things have changed drastically in China in the last 10 years, especially in the last 3-4 years. Xi's Western media coverage is very different from the reality of what is actually happening in China. There are a lot of free YouTube videos where many successful European and Americans who have lived in China, tried hard to learn good Mandarin, tried hard to assimilate into their culture and even married Chinese wives there are now being kicked out of China. The Wall Street Journal even ran an article in the last 6 months how successful foreign businessman are leaving China en masse. Many have felt that the rules and taxes were changed on them and they are being forced out. On top of this drain in talent in China, China now has an enormous debt problem. Their debt and credit are growing at far faster levels than their gold holdings. And many Chinese families there are in debt up to their eyeballs according to my sources. So on a relative basis, the US appears safer (but is being given more rope to hang itself with long term) than the EU, emerging markets and China.
    • AM
      Andrew M.
      4 February 2019 @ 21:14
      Couldn't agree more. Luke is right about US pensions and liabilities, but that's in the future. The real macro story in the next 18 months will be China and maybe Europe (they are interdependent). Credible China watchers (Enodo, China Beige Book etc.) believe that their growth is 2% annualized, if that - Enodo thinks they're in technical recession. People need to be watching this now. Some of this is the trade war (heaven forbid Trump loses his patience and puts and embraces more sanctions), but China is in serious trouble, even if there is a deal. Their currency is the ultimate release valve, while it makes no sense to be pegged to the USD. I think eventually a deval makes sense, and a second global business cycle - following China's yield curve perhaps? - would be interesting, since Europe and Japan bonds are shot. But under what circumstances remains to be seen. Ultimately, while the US might converge with ROW in H1 (the decoupling of last year was unprecedented), a crisis in Europe or China (and one would ensure the other) is more likely and very $ positive imo.
  • CB
    Chris B.
    4 February 2019 @ 20:43
    Excellent content from three very smart guys and excellent facilitation by Grant. Caused me to change my mind about the direction of the dollar in 2019. Also a shout out to whomever was filming this as it was natural and made me feel like I was in the room.
  • fc
    flavio c.
    4 February 2019 @ 20:19
    Both very good guys! Follow both on Twitter too. Another great value Talk here in realVision! Thanks Only thing is that Next they have to drink the whole bottle!!
  • JD
    Jeremy D.
    4 February 2019 @ 18:55
    Wonderful. Now I have no idea which way the dollar is going!
  • RA
    Robert A.
    4 February 2019 @ 18:49
    Vintage RV here with a civilized discussion, diametric viewpoints and perfect moderation by Grant on what is, indeed, THE most important lynchpin of all financial positioning going forward. Raoul and Julian of Macro Insiders will be the first to agree that it is all just one trade based upon the US dollar—just get that right and position accordingly. This is what I enjoy most about RV—fresh, timely, well thought out arguments based upon historical and temporal data/factors that can allow us to make up our own minds....or perhaps, more importantly, if not entirely persuaded by either argument position for both outcomes with a heavier weighting as to which side of the argument we come down on. We must hear from these Gentleman again in six months time!
  • TR
    Travis R.
    4 February 2019 @ 18:20
    Do not apply Austrian Economics free market thinking to a Fiat Market system. Well said.
  • SH
    Steve H.
    4 February 2019 @ 18:15
    This sort of stuff is the heart of RV. Thank you.
  • RM
    R M.
    4 February 2019 @ 18:05
    1. The feds recent capitulation to the stock market increases the probability that if the dollar made a new high, it would be squished back down in a heartbeat, as US multinationals would be screaming and stocks will be dumping, and neither the Fed or Trump want that. So if Brent is right it will not be for long. 2. I cannot believe nobody gave levels for the dollar! Come guys, Grant, Luke, Brent, what will the DXY be on Dec 31 2019? Lets see who is closest! Otherwise your all wimps:)
  • NG
    Nick G.
    4 February 2019 @ 16:42
    It is just too late in the political cycle to weaponize the USD. Trump needs to carry the same swing States as in 2016. How he does that with a strong USD is beyond me. Those guys can hardly compete with a weak USD. Or am I missing something of Brent's argument?
  • HO
    H2 O.
    4 February 2019 @ 15:20
    Pretty light on real macro here.
  • PJ
    Peter J.
    4 February 2019 @ 15:16
    Great discussion, can we have a revisit / update once a quarter until the shit eventually hits the fan?
  • TK
    Ted K.
    4 February 2019 @ 14:50
    Love how Grant isn't sitting in the middle. If he was, Luke and Brent would be opposite each other and the discussion would seem confrontational. Nice touch.
  • LJ
    Lucas J.
    4 February 2019 @ 14:46
    I am glad you guys did this conversation so their points are out there and we don't have to hear about this from them for awhile. It is like hearing a red sox and yankee fan arguing...
  • AM
    Andrew M.
    4 February 2019 @ 14:39
    Odds of a substantive trade deal (vs truce) seem close to zero, and not sure why Trump would weaken the $ to appease China, who are only now facing a reckoning for their decades-long credit binge. Without being thrown a an implausible lifeline, China is going to have to deal with its banking / credit crisis well before US has to worry about its liabilities. That's very, very $ positive.
    • AM
      Andrew M.
      4 February 2019 @ 14:46
      Some other notes: Debt ceiling / $ headwinds in H1.!/article/47454/week-ahead-earnings-recession-time On the structural $ shortage: - very similar to what Jeff Snider has been saying; using BIS data he tries to quantify the sheer scale of it. IMO, the Treasury and Fed can help boost $ liquidity in the short-term (draining treasury balance, ending QT etc), but the structural shortage (that is bigger than US liabilities and need to be rolled sooner) has been planted. Any crisis and run on $s could see another Eurodollar meltdown very soon imo. And as Brett said, I'm not sure the Fed is going to make those $ swaps available to the ROW (they didn't help China out a few years ago).
  • JH
    James H.
    4 February 2019 @ 14:16
    Great to get these two together and digging deep into their positions. Thank you.
  • SS
    S S.
    4 February 2019 @ 12:41
    Best Exchange yet. Amazing. Love watching them on Twitter.
  • CM
    Carlos M.
    4 February 2019 @ 12:16
    great talk!!! I always learn something with these guys! very clear and eloquently put as well.