MacroVoices #504 Brent Johnson: The Genius of Stablecoins
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MacroVoices Erik Townsend & Patrick Ceresna welcome, Brent Johnson. They discuss why Brent says Stablecoin is going to be a game changer, even for those who aren’t interested in crypto assets. https://bit.ly/4oMi7IB 🔻Download Big Picture Trading Chartbook 📈📉: https://bit.ly/3X396yV
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Brent Johnson argues that US dollar stable coins, enabled by the GENIUS Act, represent a profound shift in global monetary architecture that will paradoxically strengthen dollar hegemony by allowing citizens to bypass capital controls and adopt dollars digitally, while simultaneously giving the US government enhanced surveillance and control capabilities over global transactions.
- 99% of stable coins are already dollar-backed, creating dominant network effects that competitors struggle to overcome
- Digital dollar stable coins allow governments perfect visibility and control over transactions via blockchain, compared to limited control over SWIFT
- The technology bypasses capital controls and banking restrictions, making dollar adoption frictionless for individuals and institutions globally
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The GENIUS Act, passed earlier in 2025, provides official US government sanctioning and backing for stable coins, with Scott Bessant (Treasury Secretary) speaking publicly about them, and mandates that stable coins must be properly backed with transparent audits and stringent oversight.
“when they passed the Genius Act. Now I started hearing about the Genius Act a couple years ago but it was still kind of in legislative you know creation form. it wasn't really an official thing and it was still kind of on the fringe, but then they literally passed it earlier this year and Scott Bessant has spoken about uh stable coins quite a bit and so it's kind of getting official sanctioning or or backing from the US government um that it is going to be a thing”
Technology in the form of stable coins allows citizens of countries with capital controls to bypass those controls and banking restrictions by using a smartphone to download a wallet and hold dollar balances, circumventing the need for bank accounts or physical currency exchange.
“the technology is allowing citizens, individuals, and you know, again, small and medium-sized institutions to skip those capital controls or those banking laws or those regulations because anybody that has a phone, a smartphone, and a connection to the internet can download a wallet and now all of a sudden hold a US dollar balance. Previously, you had to have a bank and then that bank you had you you had to have a bank account and then that bank where you had your bank account had to allow you to own to hold US dollar balances and then not only that that bank had to allow you to withdraw US dollar balances in perhaps physical form and if that didn't work then you had to go to some local merchant or some bizaar or some money changer and you know pay a big spread in order to get out of your local currency and get into dollars.”
99% of stable coins in existence are already tied to the US dollar, not competing currencies, creating a network effect where dollar stable coins will attract adoption over other currency stable coins simply due to the existing demand for dollars and the superiority of the dollar versus other fiat currencies.
“99% of stable coins in existence are already tied to the US dollar. Now, I have no doubt at all that other countries are going to launch their own stable coins as a way to kind of compete against the US dollar, but I I would say countries around the world that are worried about the US dollar stable coin should be worried about the US dollar stable coin.”
Central banks around the world began purchasing gold after the US sanctioned Russia by canceling Treasury holdings, showing that central banks understand the risk of dollar-denominated assets being seized and are now preferring gold as a more secure reserve asset.
“central banks around the world watched what happened when the US sanctioned Russia by basically saying, 'Hey, all those Treasury bonds that you guys all own, uh, we had the serial numbers and we just canceled them. see you later. Other central banks said, 'Wait a minute. We don't want that to happen to us.' They started buying gold.”
The chart showing treasuries as a percent of reserves falling while gold as a percent rising is 'largely explained by price'—bonds have fallen 20-30% and gold has doubled, meaning the compositional shift is partly price-driven, not necessarily reflecting active central bank de-dollarization.
“Now, that's not to say that nobody has sold US treasuries, and it's not to say that nobody has bought gold, but this chart is largely explained by price. Treasury bonds have come down 20 or 30%. And gold has more than doubled. That is partly why as a percent of reserves, gold has risen and bonds have fallen.”
Technology created by the private market as a tool to escape state control (cryptocurrency) is now being co-opted by the state and implemented at scales larger than the free market would prefer, representing a reversal where the state hijacks innovation meant to constrain it.
“this new technology and this new innovations that was developed by the private market as a way to exit state control is now at least from the way I see it is being co-opted by the state and perhaps implemented on a bigger scale uh by the state than the free market would prefer to see happening.”
The strategy to profit from gold consolidation is selling puts at levels where you actually want to be a buyer, effectively getting paid to have limit orders in the market and earning premium for the willingness to take ownership at attractive prices.
“The option strategy that immediately comes to mind is selling puts for income at the levels where I actually want to be a buyer of gold. It's essentially getting paid to have limit orders in the market, earning premium today for the willingness to take ownership at attractive levels if we get another leg lower.”
The SWIFT system is not a US institution but a European institution, yet the US Treasury has infiltrated it and gained more control than any other party since 9/11 through political pressure, though they do not have perfect control or perfect visibility.
“the Swift system is actually a European institution. After 9/11, 25 years ago, the US government went to Swift, the US Treasury more specifically, went to the Swift system and by using the political pressure of the United States government was able to quote unquote infiltrate Swift and get more information from Swift. But they still don't have perfect control over it. They have more control than perhaps any other group, but they don't have perfect control.”
Money has been used as a weapon for centuries and throughout history. The US has used money as a weapon in several wars, battles, and military theaters, so the claim that stable coins could be weaponized is not a novel idea but rather a continuation of established doctrine.
“Money has been used as a weapon for centuries, perhaps all of history. And the United States has actually used this as a has used money as a weapon in several wars, battles, and different military theaters over the years. So this is not this is not some new idea that I've come up with of way they could do it. This is already doctrine in which they have used it.”
The Swift system is not a US institution but a European one; while the US Treasury infiltrated it after 9/11 to gain visibility, the US does not have perfect control over SWIFT, creating opportunity for the US government to build a parallel stable coin system where it has complete control.
“Well, I I think it actually enhances it. And I'll tell you why is because the Swift system is not a US institution. The Swift system is actually a European institution. After 9/11, 25 years ago, the US government went to Swift, the US Treasury more specifically, went to the Swift system and by using the political pressure of the United States government was able to quote unquote infiltrate Swift and get more information from Swift. But they still don't have perfect control over it. They have more control than perhaps any other group, but they don't have perfect control.”
Sovereignty means ultimate power over a jurisdiction, and countries that become dollarized (forced to use another currency they cannot control) lose sovereignty, which is why the US weaponization of currency through stable coins erodes the sovereignty of other nations.
“sovereignty basically means ultimate power and every government wants to have ultimate power over their jurisdiction. But if you are beholden to a country to another country or if you are beholden to another currency which you cannot control then you are no longer truly sovereign.”
The US government announced a huge investment in Westinghouse and possible subsidies for more AP-1000 reactor projects, signaling a strong commitment to nuclear under Secretary Wright's Department of Energy leadership.
“The reason for the big upside surge on uranium miners and all other things nuclear related was a US government announcement that it will make a huge investment in Westinghouse and possibly subsidize more AP-1000 reactor projects in the United States. That is obviously a huge uh increase in demand that's quite a few years out. So, it's not going to affect the immediate spot price of uranium. It does affect the miners and other nuclear stocks. More importantly, in my mind at least, it signals very strong commitment from the US Department of Energy under Secretary Wright's leadership that we're going nuclear, folks, and we're going nuclear in a big way.”
For a stable coin to be credible, there must be actual backing assets held such that if you wanted to return your stable coin you could redeem it for the underlying dollar, gold, or other asset, and historically skepticism about actual backing prevented adoption.
“that's the idea and I think for a long time people were very skeptical of whether there actually was enough backing those stable coins and if there was enough assets backing it to to to where if you wanted to return your stable coin for the dollar itself or the piece of gold or whatever whatever it was tied to that the backing was not there.”
Nuclear demand from government investment in reactor projects will take several years to materialize, so it won't immediately affect uranium spot prices, but it does signal a major long-term demand inflection and validates the nuclear bull market thesis.
“it's a huge uh increase in demand that's quite a few years out. So, it's not going to affect the immediate spot price of uranium. It does affect the miners and other nuclear stocks. More importantly, in my mind at least, it signals very strong commitment from the US Department of Energy under Secretary Wright's leadership that we're going nuclear, folks, and we're going nuclear in a big way.”
Central banks worldwide began buying gold instead of US Treasuries after seeing Russia's Treasury holdings frozen as sanctions, signaling an intentional shift toward hard assets and away from sovereign debt that can be unilaterally repudiated.
“central banks around the world watched what happened when the US sanctioned Russia by basically saying, 'Hey, all those Treasury bonds that you guys all own, uh, we had the serial numbers and we just canceled them. see you later. Other central banks said, 'Wait a minute. We don't want that to happen to us.' They started buying gold.”
The US government announced it will make a huge investment in Westinghouse and subsidize AP-1000 reactor projects, signaling strong government commitment to nuclear energy expansion, which is positive for uranium and nuclear stocks even though the demand impact is years away.
“The reason for the big upside surge on uranium miners and all other things nuclear related was a US government announcement that it will make a huge investment in Westinghouse and possibly subsidize more AP-1000 reactor projects in the United States. That is obviously a huge uh increase in demand that's quite a few years out. So, it's not going to affect the immediate spot price of uranium.”
The US dollar has become more entrenched in the global financial system over the last 5 years despite widespread desire to escape it and efforts to build alternatives, and further geopolitical tension will reinforce this entrenchment as countries seek safety in dollars during crises.
“I just don't think it's that easy to do. And I think, you know, with with the ratcheting up of the trade tensions between the United States and China and the geopolitical tensions between the United States and Europe against Russia, I don't think the next four or five years are going to be smooth and calm. And I think when things get crazy, I think the dollar will still rise versus foreign currencies. And I think uh the dollar will become more entrenched than it ever has been.”
Historically, whenever a currency has failed, the government of that jurisdiction typically fails shortly thereafter due to loss of sovereignty and control, establishing the causal relationship between currency collapse and governmental collapse.
“If you look back through history, whenever there's been a currency crisis or a currency has failed, it's not very long after that that the government of that jurisdiction typically fails. And again, the reason is a loss of sovereignty. Once you lose control, once you lose power, you're out. and you know a new form takes its place”
The US has significant tricks and power/influence that allow it to maintain dollar dominance even against de-dollarization efforts, just as it did in 1972 when Saudi Arabia agreed to price oil in dollars despite no conventional reason to expect such agreement.
“And so I think the US has a lot more tricks that it can still play and more power and influence that it can use to make this happen. And especially if the market starts to adopt it on its own, it will make it even easier to do something like this.”
We are in the early stages of a secular inflation that will be good for the stock market initially (as in the late 1960s), with the bad-for-stocks feedback loop phase not arriving yet, so the market can continue higher in the intermediate term.
“we're in the early stages of a secular inflation. And that inflation is going to be good for the stock market because in secular inflations always are good for the stock market in the beginning. The thing is what everybody remembers is the horribly bad for the stock market part of the inflation like the 1970s. Well, the beginning it felt good in the late 1960s. It's when the feedback loops start to kick in that we haven't gotten to yet that inflation becomes really bad for the stock market.”
Money has been used as a weapon by the United States throughout history in several wars, battles, and military theaters, so the concept of 'US dollar stable coins as a weapon' is not a new or controversial idea but rather existing doctrine.
“I don't know if many people realize it, saying money is going to be used as a weapon. This it may sound like a controversial statement, but it should not be. Money has been used as a weapon for centuries, perhaps all of history. And the United States has actually used this as a has used money as a weapon in several wars, battles, and different military theaters over the years. So this is not this is not some new idea that I've come up with of way they could do it. This is already doctrine in which they have used it.”
The dollar milkshake theory is a framework for understanding what happens in a sovereign debt crisis where the dollar would rise despite global debt problems, causing bonds to break, interest rates to rise, capital to flow into dollars and US equities, gold to rise, and the US to outperform globally.
“what it really is is it was a framework for me to understand what I thought would happen should we get into a sovereign debt crisis as a result of all this crazy debt that the world has taken out...I thought six things would happen...because of all the debt in the world, interest rates would finally start to rise after 40 years of going down. I thought that would cause bonds to break. I thought the higher interest rates would pull capital into the dollar...That pulling of capital into the dollar and into the United States, I thought would also cause US equities to rise. I thought gold would rise...And I said I thought the United States would continue to outperform the rest of the world”
Current gold correction shows consistent patterns: Dec 2023 had 7.5% correction over 78 days, Apr 2024 had 6.5% over 76 days, Oct 2024 had 9% over 68 days, Apr 2025 had 11% over 120 days. Current pullback is already 11% deep in only 13 days, suggesting deeper correction may occur given the strength of prior advance.
“In December of 2023, we saw a 7 12% correction with the consolidation taking about 78 days. In April 2024, we saw 6 12% draw down over 76 days. In October 2024, stretched to roughly 9% over 68 days. And this past April, we had 11% correction where the consolidation lasted 120 days. The current pullback is already over 11% deep, and we're only 13 days into it.”
Despite many attempted alternatives to the US dollar (EUAN proposals, digital systems, new currency standards), none have materialized into serious competitors because they face the world's biggest network—the US dollar network—which creates enormous switching costs and network effects.
“how many times have we heard about the EUAN or the new digital this or the new Libra system? You know, there's been innumerable attempts to come up with a system that is anti-dollar, that has been launched by a competitor, um, that is going to be the new standard of currency uh, issuance and usage, etc., etc., etc., and it just never ever comes to anything. And it's not to say that there's not great desire there, but again, you're fighting against the biggest network that has ever existed in the history of the world, and that's the US dollar network.”
Previous attempts by China and Russia (EUAN, digital systems, Libra) to create anti-dollar currency systems have repeatedly failed, suggesting structural advantages of the dollar network make it nearly impossible to displace.
“If if you look back over the last couple years or last several years, last 20 years, how many times have we heard about the EUAN or the new digital this or the new Libra system? You know, there's been innumerable attempts to come up with a system that is anti-dollar, that has been launched by a competitor, um, that is going to be the new standard of currency uh, issuance and usage, etc., etc., etc., and it just never ever comes to anything.”
A sharp dollar breakout could push gold from oversold to extremely oversold conditions, causing further selling despite technical signals of bounce setup, highlighting the intermarket relationship between dollar strength and gold weakness.
“The thing is, we're not sure if that's what's about to happen next. If there is a breakout to the upside in the dollar, maybe we'll go from oversold to extreme oversold and gold will keep selling off.”
The US dollar has become more entrenched in the global financial system over the last 5 years despite widespread desire to get away from it, because it is not 'that easy to do' and geopolitical tensions will reinforce dollar strength when 'things get crazy.'
“I think if anything over the last 5 years the United States dollar has become more entrenched in the world despite the great desire to get away from it. I just don't think it's that easy to do. And I think, you know, with with the ratcheting up of the trade tensions between the United States and China and the geopolitical tensions between the United States and Europe against Russia, I don't think the next four or five years are going to be smooth and calm. And I think when things get crazy, I think the dollar will still rise versus foreign currencies.”
In secular inflation periods like the one beginning now, the stock market performs well in the early stages because inflation is beneficial to equity valuations; the severe damage to stocks (like in the 1970s) only comes later when feedback loops develop.
“we're in the early stages of a secular inflation. And that inflation is going to be good for the stock market because in secular inflations always are good for the stock market in the beginning. The thing is what everybody remembers is the horribly bad for the stock market part of the inflation like the 1970s. Well, the beginning it felt good in the late 1960s. It's when the feedback loops start to kick in that we haven't gotten to yet that inflation becomes really bad for the stock market.”
Saudi Arabia's 1972 decision to price oil in US dollars was not predetermined and seemed unlikely at the time, suggesting the US government's ability to engineer similar currency regime shifts (like adoption of stable coins) should not be discounted.
“For anybody saying, "Well, no, Saudi Arabia is not going to do that. they want to sell their oil in yuan or rubles or they're gonna join the bricks. I would just say keep an open mind. A lot of people didn't think that in 1972 Saudi Arabia was going to price all their oil and dollars, but it happened.”
Systematic trading triggers that would cause negative sell feedback loops are located 200-300 S&P points lower, giving the market substantial breathing room to correct without triggering a cascade.
“Almost all of the systematic trading triggers that would cause the negative sell feedback mechanism are actually two to 300 S&P points lower. So, the market has a lot of breathing room here to take short-term corrections and not trigger something bigger.”
Gold getting back above the $4,000 level and staying there would be a telltale sign of what's likely next for the dollar—essentially gold's price action will indicate whether the dollar breakout is sustainable.
“I'll be watching gold's price action and whether it can get back above 4,000 and stay there. That for me is going to be a telltale for what's likely next to come for the dollar index.”
There's currently extreme bearishness on the dollar, raising the possibility of a squeeze and counter-trend move that would cause intermarket disruptions.
“There's so much bearishness right now about that dollar and so will we see some sort of a squeeze and counter trend that would certainly uh cause some intermarket disruptions.”
The GENIUS Act and US dollar stable coins represent a mechanism for the US to infiltrate foreign economies and use the dollar as a geopolitical and strategic currency weapon to a greater extent than already occurring, and this will not happen by US force but will be done by the market, eliminating the need for government intervention.
“I really think this is the genius of the Genius Act is it's it it's a way for the US and the US dollar to infiltrate foreign countries, foreign economies and you know use the US dollar as a weapon to a greater extent than they already have. And not only that, they don't even have to do it themselves. The market will do 99% of the work for them. And again, it's because the US dollar is a much better currency than 99% of the other fiat currencies out there.”
Despite apparent central bank diversification into gold, Johnson still expects a sovereign debt crisis where sovereign bonds (including Treasuries) will be repudiated, driving further gold demand from foreign buyers and increasing hard assets relative to fiat.
“I do expect that probably continues in the years ahead. Again, I think we're still going to get into one of these sovereign debt crisis where sovereign bonds will be repudiated. And I think in in exchange, people will want to own hard assets, whether that's gold, whether it's Bitcoin, whether it's US companies um that have property, plant, and equipment.”
Brent says there are two primary benefits from stable coins: the secondary benefit is increased demand for Treasuries, but the primary benefit is geopolitical and strategic—using the dollar as a weapon to reshape the monetary architecture of the world.
“I think a lot of people have focused on the fact that these new stable coins will be a source of demand for the Treasury. And that that's true. It will be a source of demand, but I I I think that is a secondary benefit. I think the primary benefit is a more of a geopolitical and strategic currency as a weapon that I think will will quite honestly change monetary architecture of of the entire world.”
The US government's approach to the GENIUS Act is best described as either 'ingenious' or 'Machiavellian'—it creates the appearance of innovation and efficiency while actually deepening centralization and reinforcing the US dollar as the global reserve currency and the US government's control over the global monetary system.
“what I would say is that what what is emerging here as a result of the Genius Act and and listen I have to say and this is I say this somewhat tongue and cheek but I'm also serious is that usually when I see the name of a law come out I laugh because the name is usually the exact opposite of what's going to happen in this case I actually think it's appropriate I think this is a rather ingenious idea by the US government perhaps saying macavevelian is a better way of of describing it. But essentially what's emerging is not a decentralized alternative to the global financial order but rather a deeper centralization which may be disguised as efficiency and freedom but is actually quietly reinforces the US dollar as the global reserve currency and it reinforces the United States government's control over the global monetary system.”
The breadth of the market is awful (under 50%), meaning the majority of stocks are downtrending while the S&P is making higher highs—this concentration in a few mega-cap stocks carries the index higher, which is unsustainable.
“The breath of the market is awful. We're under 50%. which means that the majority of stocks are actually downtrending, not uptrending, which means that these meggaap stocks like Nvidia and all these other mag sevens are carrying all of the weight of the S&P's rise.”
The United States holds more gold than any other country, so if gold is repriced higher, the US benefits more than China or Russia, meaning that even in a gold-backed stable coin scenario, the US maintains an advantage.
“And the other thing is that to the extent that the rest of the world does try to do something with gold, the United States has a lot of gold. So if the dollar gets or or if gold gets repriced higher and therefore that makes China and Russia who own gold in a better uh position, well then how does that not also make the United States in a better position because they have more gold than anybody?”
Russia would not store gold in Switzerland, and the PBOC would not ship gold back to the West after spending money to buy it and ship it east, making the gold-backed stable coin scenario requiring neutral-country vault storage implausible.
“I can't imagine uh Russia storing their gold in Switzerland. I can't imagine the PBOC shipping their gold back to the West after spending so much money to buy gold and ship it east.”
Patrick observes that even in a strong dollar environment (as predicted by the dollar milkshake framework), all fiat currencies debase against real assets, so gold wins regardless of dollar strength because it's the asset that benefits when global trust erodes.
“The dollar stays strong, capital keeps flowing into the US, and the other currencies weaken. But as he pointed out, that doesn't mean hard assets lose value. In fact, it's the opposite. Even in the strong dollar world, all fiat is debasing against real assets. And that's where gold comes in. It's the asset that wins when global trust erodess, regardless of what the dollar does.”
The stable coin versus competitor debate is fundamentally a 'fiat versus fiat' battle, not a 'fiat versus hard assets' battle; stable coins compete with other imperfect fiat currencies rather than with perfection, so the US dollar's superiority as a stable currency relative to emerging market currencies is what matters.
“I think the mistake that a lot of people make is that they think that stable coins are competing with perfection. But they're not they're not competing with perfection. They're competing with other fiat. Right? This is a fiat versus fiat argument. This is nothing to do with Bitcoin. This is nothing to do with gold. It's nothing to do with diamonds or other tangible assets that increase in value over time as fiat loses value. This is a fiat versus fiat battle. And for most countries around the world and most individuals and even kind of small and medium-sized institutions, the US dollar is a much more stable currency than the local currencies in which they transact.”
US dollar stable coins represent a 'smoking gun' that could extend the dollar's hegemony over the global financial system much longer than previously thought possible, because they provide a technological mechanism to make dollar adoption frictionless and widespread.
“what is the smoking gun that might extend the dollar's hegemony over the global financial system longer than a lot of us thought possible? At least certainly longer than I thought possible...It's really, really interesting because when this first came out a couple years ago, I didn't think it was that big a deal, but I've changed my mind on that having done a bunch of research on it. And that is the rise of US dollar stable coins.”
Digital dollar stable coins allow citizens and institutions in emerging markets to bypass capital controls and banking restrictions previously imposed by their governments by simply downloading a wallet onto a smartphone and internet connection, instantly acquiring dollar-denominated assets without needing a bank account or government permission.
“the technology is allowing citizens, individuals, and you know, again, small and medium-sized institutions to skip those capital controls or those banking laws or those regulations because anybody that has a phone, a smartphone, and a connection to the internet can download a wallet and now all of a sudden hold a US dollar balance. Previously, you had to have a bank and then that bank you had you you had to have a bank account and then that bank where you had your bank account had to allow you to own to hold US dollar balances and then not only that that bank had to allow you to withdraw US dollar balances in perhaps physical form and if that didn't work then you had to go to some local merchant or some bizaar or some money changer and you know pay a big spread in order to get out of your local currency and get into dollars.”
The process of transitioning from LIBOR (London Interbank Offered Rate, set by London bankers with limited US control) to SOFR (a US-based rate with complete US control) took 5-7 years, providing a historical template for how the US might transition from traditional euro-dollar rails to new blockchain-based US dollar stable coin rails.
“And the example I've used of how this could possibly go is the Liebore. You brought up the Euro dollar system...there's an entire system of dollar-based transactions that exists outside the United States. And that system is called the Euro dollar system...the interest rate which was kind of the standard interest rate that was used for the euro dollar market was called libore...it was basically set by a committee of bankers in London...they didn't have perfect control and they didn't like that. And over time, they got Liebore shut down and they got it transferred over to what's now called sofur, which is now a US-based rate and one that they have control over. Now, that process took five, six, seven years, but they eventually got it done.”
Sovereignty is defined as ultimate power over one's jurisdiction; as stable coin adoption increases, countries become increasingly dollarized and lose monetary sovereignty because they depend on a currency they cannot control, historically leading to government failure after currency failure.
“And what this ultimately gets to what it ultimately gets to is the sovereignty of a country. And this is where you know understanding the definition of terms I think is pretty important here because sovereignty basically means ultimate power and every government wants to have ultimate power over their jurisdiction. But if you are beholden to a country to another country or if you are beholden to another currency which you cannot control then you are no longer truly sovereign. And as I think these other countries start to become more quote unquote dollarized, it starts to eat away at the sovereignty of those local jurisdictions. And it's not an accident. If you look back through history, whenever there's been a currency crisis or a currency has failed, it's not very long after that that the government of that jurisdiction typically fails. And again, the reason is a loss of sovereignty. Once you lose control, once you lose power, you're out.”
The 30-page paper 'Empire by Code' argues that stable coins represent a shift in global monetary architecture as profound as when the US severed the dollar from gold and left Bretton Woods, and the paper emphasizes that overall structure matters more than individual details.
“from a very big perspective, we think that this is a very big deal and perhaps as big a deal as when the United States severed the dollar from gold and left the Bretonwood system. The point I would make with the paper is we tried to break it up into easily understandable different sections and the details matter but the overall structure matters more”
The geopolitical risk premium in oil appears to be over, with the market stabilizing around $60 WTI, but President Trump's preference for lower oil prices conflicts with geopolitical risks that could escalate.
“The geopolitical risk premium spike seems to be over and we're stabilizing around $60 WTI. I still say though anything is possible from here. President Trump wants lower oil prices, but at the same time there are geopolitical risks that could easily escalate to much higher oil prices.”
After the FOMC meeting, Powell cooled off market expectations about rate cuts, shifting December rate cut odds from 'almost a certainty' to about 2/3, causing sofur futures to give up about 10 basis points.
“We basically had the FOMC meeting. Powell cooled the market off a little bit with their uh dovish expectations and we saw the sofur futures all react with taking about 10 basis points out of the markets. A lot of the probabilities of a rate cut in December have gone from almost a certainty to now about a 2/3 odds that there will still be a rate cut in December.”
The dollar milkshake theory predicts that if a sovereign debt crisis occurs, the dollar will rise rather than fall because the dollar underlies the entire global economy and capital will flee to dollar assets, but this was developed as a framework to understand outcomes—not a prediction that we'd necessarily get the debt crisis itself.
“what it really is is it was a framework for me to understand what I thought would happen should we get into a sovereign debt crisis as a result of all this crazy debt that the world has taken out...the dollar underlies the entire global economy. You can't really understand what's going on in the world if you don't understand what's going on with the dollar.”
Despite massive bailouts, money printing, Fed balance sheet expansion, and other stimulus measures since COVID, the dollar is essentially flat from 2020 levels—suggesting the frameworks holding despite extraordinary policy interventions that would normally weaken currencies.
“The dollar it's up about 10% but from COVID which is when things really kind of got interesting. It's basically flat but I would point out it's flat despite all the bailouts despite all the money printing despite the money printer go burr despite the expansion of the Fed balance sheet.”
If the US can convince a partner like Saudi Arabia to say 'we are still pricing oil in dollars, but rather than using a Fed wire over SWIFT, we want to use this new efficient, quicker, cheaper stable coin system,' it would give the stable coin system immediate legitimacy and cascading adoption.
“Imagine if the United States were to be able to get a partner like Saudi Arabia to say, 'We are still pricing our oil in dollars, but now rather than sending us a Fed wire over the Swift system, we would like you to use this new, more efficient, quicker, cheaper system that the US Treasury has blessed.' And then all of a sudden that gives it legitimacy. And for anybody saying, 'Well, no, Saudi Arabia is not going to do that. they want to sell their oil in yuan or rubles or they're gonna join the bricks. I would just say keep an open mind. A lot of people didn't think that in 1972 Saudi Arabia was going to price all their oil and dollars, but it happened.”
Eric says he made a prediction in his 2018 book that the US government would outlaw crypto once they realized it threatened dollar hegemony, but he was wrong—the government instead learned to weaponize stable coins to strengthen dollar dominance, making stable coins a 'gamechanging' mechanism.
“I said look at some point the US government is going to figure out how much of a threat the whole crypto digital asset infrastructure that's being built how much it poses a threat to dollar hegemony and once they figure that out they're going to do everything they can to stop it. What I didn't see coming is no actually they're going to figure out how to use it to their advantage and stable coins are the mechanism to do that and I agree with you it's a gamecher.”
The paper 'Empire by Code' argues that money must be understood holistically—considering all its parts together rather than individually—and that stable coins and the GENIUS Act represent as significant a shift as when the US left the Bretton Woods system and severed the dollar from gold.
“we titled it that because again we we I was actually surprised myself when I started doing the research on this...we started the paper off with a quote by um Von Clauswitz who was a military general and he said something to the effect that in war you know you have to think of all parts of a whole. You can't just think of the individual parts alone. And the point we made that's the same thing with money...And so from a very big perspective, we think that this is a very big deal and perhaps as big a deal as when the United States severed the dollar from gold and left the Bretonwood system.”
Most people in the world do not want to hold gold; if they did, they already would. Gold is not competing with fiat currencies for daily use—gold is for long-term store of value while fiat (including dollar stable coins) serves liquidity and operational needs.
“because I think we get back to the dollar versus perfection or the dollar stable coin versus perfection rather than dollar versus other fiat. Now I think there's a place for goldbacked stable coins and perhaps some of these other countries will try to do something with gold but again you have to remember most people in the world do not want to hold gold. If they did they would already hold gold. There's nothing to keep them from already doing it.”
The key insight of 'Empire by Code' is that 'quiet code and public ledgers are no longer just symbols of rebellion against the state' but are 'becoming extensions of it,' and 'the very tools once imagined to escape central authority are now being absorbed by the most powerful monetary authority the world has ever known.'
“we say make no mistake something profound is shifting in the geometry of global money. Quiet code and public ledgers are no longer just symbols of rebellion against the state. They are becoming extensions of it. And the very tools once imagined to escape central authority are now being absorbed by the most powerful monetary authority the world has overnown. Through digital tokens that settle in real time and travel across borders without friction, the United States may be transforming the architecture of control itself.”
Even if other countries launch gold-backed stable coins, they will not succeed better than dollar stable coins because most people do not want to hold gold for daily liquidity needs—they want it as a long-term store of value—and this is categorically different from the need for day-to-day transaction currency.
“there's a place for goldbacked stable coins and perhaps some of these other countries will try to do something with gold but again you have to remember most people in the world do not want to hold gold. If they did they would already hold gold. There's nothing to keep them from already doing it. And the other thing is if they do want to hold gold as an asset, that's different than holding gold for liquidity for business reasons or for you know your daily operational needs.”
Market breadth is currently poor (under 50%), meaning the majority of stocks are downtrending while only the mega-cap stocks like Nvidia and other Mag 7 stocks are rising, creating risk that the S&P 500 rally is not sustainable if mega-cap earnings disappoint.
“Now, here at the time of recording, we're right in the middle of the MAG 7 earnings...the breath of the market is awful. We're under 50%. which means that the majority of stocks are actually downtrending, not uptrending, which means that these meggaap stocks like Nvidia and all these other mag sevens are carrying all of the weight of the S&P's rise. And that we got to really see whether or not they can keep that going.”
While blockchain-based stable coins offer the advantage of programmable money and perfect visibility, the exact architecture (whether US Treasury issues directly, licenses multiple banks, or uses other models) remains uncertain, but governments will not give up control—whatever implementation emerges will maximize government monetary control.
“I am not an expert on all this technology to say exactly how this would work. And the other thing I would say is even if I was an expert on the technology, I still wouldn't know exactly how this is all going to get rolled out. But I do know that there is ways that on these different crypto assets or these cryptocurrencies or these different blockchains to to basically make it programmable money...I don't have a perfect answer to that. I don't know. But I what I do know is that part of the reason for doing this is to have more control. Right? Governments are not in the business of giving up control. Whatever you think of the Genius Act, I promise you that is not so that they are losing control of the money. It is it is an attempt to get more control of the money.”
The uranium and nuclear bull market is in its infancy and just barely getting started, similar to how the internet boom was 'barely getting started' despite having the .com bust in 2000.
“I think this uranium and nuclear bull market is in its infancy. It's just barely getting started. Now, at the same time, you know, the the uh internet boom was just barely getting started when we had the.com bust in 2000.”
The US will gradually cannibalize the traditional eurodollar rails (offshore dollar-based transactions) and replace them with new US dollar stable coin blockchain rails, mirroring how they previously moved from LIBOR (set in London) to SOFR (a US-based rate), giving them complete control over global dollar transactions over 5-7 years.
“the example I've used of how this could possibly go is the Liebore...it was basically set by a committee of bankers in London. And again the United States had a little bit of control over that because it was a essentially a dollar based loaning system but they didn't have perfect control and they didn't like that. And over time, they got Liebore shut down and they got it transferred over to what's now called sofur, which is now a US-based rate and one that they have control over. Now, that process took five, six, seven years, but they eventually got it done. And so, now Libbor no longer exists and now it's sofur and, you know, the US has more control over it. I could see the same thing happening with these Euro dollar rails and these new, you know, US dollar stable coin rails. Uh I don't think it's just going to happen by a flip of a switch, but I think it will happen over time.”
The GENIUS Act's passage earlier in 2025 represents official US government sanctioning and backing of stable coins, signaling that the government will mandate stable coin backing and impose stringent transparency requirements and audits, transforming a previously fringe asset into a regulated financial instrument.
“I think what really kind of changed this for me was when they passed the Genius Act. Now I started hearing about the Genius Act a couple years ago but it was still kind of in legislative you know creation form. it wasn't really an official thing and it was still kind of on the fringe, but then they literally passed it earlier this year and Scott Bessant has spoken about uh stable coins quite a bit and so it's kind of getting official sanctioning or or backing from the US government um that it is going to be a thing and and that's what really got me thinking about it in a in a bigger way and and as I started thinking about it in a bigger way I think the government is going to mandate in some way or another that these stable coins are backed and I think transparency is going to need to be more forthcoming than it has been and I think audits are going to be more stringent than they have been.”
Gold implied volatility is currently elevated and in the top quartile of the past year's range, creating juicy income opportunities when selling puts compared to historical volatility premiums.
“What makes this even more interesting is that as I show on page three of the slide deck, implied volatility on gold remains elevated. We've pulled back from the extreme highs, but we're still sitting in the top quartile of the past year. That means that puts are paying juicy income compared to what gold has historically offered.”
The US gold reserves haven't been audited in 70 years, which critics cite as evidence they might not exist, but China and Russia also lack public gold audits, and requesting verification of China's claims gets no response, so the 'US gold audit' criticism is asymmetrically applied.
“Now, I know some people will come back and say, 'The US gold hasn't been audited in 70 years.' To which I would say, 'Well, when's the last time you saw China's gold audit? And when's the last time you saw Russia's gold audit? And did you actually get confirmation of it or did they just tell you they had it?'”
The US dollar index has firmed toward the high end of its recent consolidation range but hasn't yet achieved an upside breakout, with many pundits calling for one.
“the Dixie has firmed up toward the high end of its recent consolidation range, but we haven't seen an upside breakout yet. Lots of pundits are calling for one.”
Crude oil has found support along its previous year lows, bounced back to the 50-day moving average and 50% retracement, but has not yet reversed the primary downtrend.
“we found some support along its previous year lows. We've bounced, but we've only bounced back to the 50-day moving average and 50% retracement. We have not seen the primary downtrend yet be reversed”
The yield on the 10-year and 30-year Treasury both popped after the FOMC meeting, but the key question is whether this is just a quick gyration/correction or whether something more pivotal changed, requiring more data to determine.
“caused the 10-year yield. uh uh and the 30-year yield to both pop a little bit here. The big question is that just a quick little gyration correction or did uh something more pivotal change? I think uh we need a little bit more data. Obviously, there was a reversal on the FOMC which is an important event moment and so let's see whether or not this ends up following through or fades uh that one day move.”
Russia and China are well-positioned to fight back against US dollar stable coin dominance, and while some countries lack the ability, power, or technology to develop alternatives, Russia and China likely will attempt to launch ruble and yuan stable coins.
“countries around the world that have the ability to fight back will no doubt fight back. And I think the countries that you mentioned, China and Russia, are probably best positioned to fight back. So there's a number of countries out there who won't have that ability and don't have the power or perhaps even the technology or the knowhow to do it. And so I think what happens is even countries like Russia and China, you know, will still probably use the dollar stable coin to a certain extent, but I fully expect there to be uh a rubble stable coin, probably a yuan stable coin.”
Physical uranium held through ETFs like SRUUF (SPY Physical Uranium Trust) is interesting because uranium futures themselves are just getting underway while uranium mining stocks have already had a strong impulse, suggesting potential for the physical commodity to catch up.
“on page 10, I have that chart of uranium futures. And what I want to highlight is that while uranium stocks have had a very strong impulse, uh uranium is just getting things underway. I actually think that owning physical uranium through things like the uh spat physical uranium trust is very interesting here and there's lots of room for actually uh the the physical uranium to actually make some traction.”
Eric expects the gold bull market to eventually end in a very ugly blowoff top and harsh sharp downside reversal, but he does not think we're seeing that yet—this is just an overdue pullback.
“I still think this gold bull market is eventually going to end in a very ugly blowoff top and a very harsh, sharp downside reversal. But I don't think we're seeing it yet. I think this is just a pullback. It's an overdue pullback.”
If other countries attempt to create gold-backed stable coins, the US still benefits because it holds more gold than any other nation, so any gold repricing would enhance US assets as much as or more than competitors' assets.
“The other thing I would say is that to the extent that the rest of the world does try to do something with gold, the United States has a lot of gold. So if the dollar gets or or if gold gets repriced higher and therefore that makes China and Russia who own gold in a better uh position, well then how does that not also make the United States in a better position because they have more gold than anybody?”
Bitcoin and hard assets like gold serve as exit strategies from the state control that stable coins and programmable money would enable, and this is why ownership of those assets remains important.
“That's one reason to own gold. That's one reason to own Bitcoin. It's uh perhaps a reason to own some of these other, you know, crypto assets that that gains uh that that provides an exit from the system.”
Despite the uranium/nuclear bull market being in its infancy, uranium stocks are extremely overbought and vulnerable to a sharp correction if negative news emerges, similar to how internet stocks crashed during the dot-com bust even though the internet industry was just beginning.
“Now, at the same time, you know, the the uh internet boom was just barely getting started when we had the.com bust in 2000. We could easily see considering how overbought all these uranium stocks are, some negative news flow could really, you know, send us uh down for a while, but it's temporary. I hope it happens because it'll be a viable dip.”
Gold has fallen from its recent highs and is correcting, with prior correction patterns showing 50-day moving average serving as support and prior corrections lasting 2-4 months; the current correction should be expected after a $1,000 rally and is not a sign the gold bull market is ending.
“Like I was talking about earlier in the trade of the week, I want to highlight that a lot of the prior corrections found support near that 50-day moving average, which is hovering just below the 3900 level. Now, while there is always the potential for a deeper correction, overall, it is a primary bull market and and whether or not that swings a couple hundred more or less. The big question of course is where will the key buying opportunities be and where are the accumulation points in this overall prior corrections have lasted two to four months. So it's very likely here that we may spend a good chunk of the fourth quarter just grinding it out uh after such a good bull impulse.”
Eric Townsend previously predicted in his 2018 book that the US government would eventually recognize crypto as a threat to dollar hegemony and move to suppress it, but he did not foresee that the US would instead figure out how to co-opt stable coins to their advantage and perpetuate dollar dominance.
“My prediction going back to my book in 2018 is I said look at some point the US government is going to figure out how much of a threat the whole crypto digital asset infrastructure that's being built how much it poses a threat to dollar hegemony and once they figure that out they're going to do everything they can to stop it. What I didn't see coming is no actually they're going to figure out how to use it to their advantage and stable coins are the mechanism to do that and I agree with you it's a gamecher.”
Patrick is bullish crude oil going into next year, but first needs to see where the downtrend ends and where the transition moment to something bullish happens.
“I'm actually quite bullish crude oil going into next year, but we have to really see where this downtrend ends. We have to really see where that transition moment to something bullish can happen because it certainly isn't here yet.”
US gold holdings have not been audited in 70 years, but similarly Russia and China's gold holdings have never been independently verified, so skepticism of US gold claims applies equally to competitor claims.
“Now, I know some people will come back and say, "The US gold hasn't been audited in 70 years." To which I would say, "Well, when's the last time you saw China's gold audit? And when's the last time you saw Russia's gold audit? And did you actually get confirmation of it or did they just tell you they had it?"”
A stable coin is a digital token whose value is tied to a tangible asset or existing form of value (such as US dollars or gold) rather than deriving value from speculation or perceived utility like meme coins.
“what a stable coin is essentially a digital token that is then tied to something else that's tangible so as an example or or or something that exists in in another form. So rather than a new meme coin, you know, like Doge or something coming out that that really gets its value from either some perceived um use or or speculation, it the the stable coins derive their value from the underlying assets that it's tied to.”
A stable coin is a digital token tied in price manner to an underlying tangible asset or fiat currency (such as the US dollar) rather than deriving value from speculation or perceived utility like meme coins, ensuring its value is backed by reserves.
“what a stable coin is essentially a digital token that is then tied to something else that's tangible so as an example or or or something that exists in in another form. So rather than a new meme coin, you know, like Doge or something coming out that that really gets its value from either some perceived um use or or speculation, it the the stable coins derive their value from the underlying assets that it's tied to. So you could, you know, you could have a US dollar stable coin in which case it's tied in a price uh manner to the dollar.”
Systematic trading triggers that would cause negative sell feedback mechanisms are located 200-300 S&P points below current levels, providing the market with substantial cushion to absorb corrections without triggering larger cascading selloffs.
“Now, even if we do have a little bit of a correction, there's a pretty big cushion. Almost all of the systematic trading triggers that would cause the negative sell feedback mechanism are actually two to 300 S&P points lower. So, the market has a lot of breathing room here to take short-term corrections and not trigger something bigger.”
Whether the FOMC-induced reversal in Treasury yields represents a quick gyration or a more pivotal shift requires more data to confirm, as the reversal coincided with an important event moment that may or may not have follow-through.
“The big question is that just a quick little gyration correction or did uh something more pivotal change? I think uh we need a little bit more data. Obviously, there was a reversal on the FOMC which is an important event moment and so let's see whether or not this ends up following through or fades uh that one day move.”
Geopolitical risk premium in crude oil has spiked and then eased, with oil consolidating around $60 WTI; longer-term the oil market is bullish but near-term could decline further before sustaining rally, with Trump administration pressure for lower oil prices offsetting geopolitical upside.
“The geopolitical risk premium spike seems to be over and we're stabilizing around $60 WTI. I still say though anything is possible from here. President Trump wants lower oil prices, but at the same time there are geopolitical risks that could easily escalate to much higher oil prices. I think there is a potential of lower because the president is pushing for it at the point of that next geopolitical escalation. Obviously, it's likely to be up. I still think uh longer term the the picture is up for oil, but you know, a few dollars down, maybe even as much as $10 down from here before we get into that sustained rally is entirely possible.”
This analysis of US dollar stable coins sits at the intersection of three major domains: capital markets, global geopolitics, and the psychology of crowds, making it relevant to sophisticated investors across all these domains.
“this US dollar stable coin is or as an idea, it kind of sits at the center of both capital markets, global geopolitics, and the madness of crowds. And if that isn't interesting to you, I don't know why you're listening to macro voices.”
The GENIUS Act stable coin system represents a different type of blockchain than a decentralized cryptocurrency blockchain where the US government would have control over transactions through programmable money, implying it would be a permissioned or controlled ledger rather than an ownerless public ledger.
“I'm the first to admit that I am not an expert on all this technology to say exactly how this would work. And the other thing I would say is even if I was an expert on the technology, I still wouldn't know exactly how this is all going to get rolled out. But I do know that there is ways that on these different crypto assets or these cryptocurrencies or these different blockchains to to basically make it programmable money. And one of the things I've been debating myself with and talking to a bunch of other smart people is is this going to be a system where the US Treasury rolls out their own stable coin or on their own system or will it be something where they just let everybody you know do it or will it be something where they perhaps they grant a license and they perhaps they grant 20 licenses to a handful of different multinational banks and financial entities who then issue them.”
The S&P 500 market is currently overbought on a technical basis and could experience a correction, but the correction would be healthy and not invalidate the broader uptrend in equities driven by inflation.
“we're really pretty darn overbought here on a technical basis. So, some kind of correction or pullback would certainly be in order...I think it's higher first and then lower on stocks because of inflation, but not until the inflation is really entrenched and we're just at the beginning of this major secular trend.”
The US dollar index has consolidated above its 50-day moving average and is edging toward the top of its trading range, suggesting potential for a breakout, though this has not yet occurred and remains uncertain.
“the US dollar has been consolidating above the 50-day moving average and edging to the top end of its range. What's really interesting here is just after the Bank of Japan's monetary policy statement, we just had the US dollar breakout against the yen.”
Fed rate cut probability for December shifted from near-certainty to about 2-to-1 odds following the FOMC meeting where Powell indicated less dovish expectations than the market had priced in.
“A lot of the probabilities of a rate cut in December have gone from almost a certainty to now about a 2/3 odds that there will still be a rate cut in December.”
The S&P 500 index is up 285 basis points as of October 29, 2025, trading to 6890, having surged higher with the key question being whether momentum will continue in the post-MAG 7 earnings window.
“The S&P 500 index up 285 basis points trading to 68.90 surged higher but will the momentum continue in the post mag 7 earnings window.”
The paper 'Empire by Code' is available to both the $3.99/year and $23.99/year subscription tiers at Santiago Capital research service (research.santiago.com), and Brent calls it 'a very very big deal' that represents an incredibly interesting moment in analyzing global markets.
“we've got two levels of service. We've got a premium service, which costs $3.99 a year, and we've got a prolevel service that costs $23.99 a year. We thought that this report was important enough that we're making it available to both levels of subscribers.”