PodcastMacro VoicesBrent Johnson

MacroVoices #553 Brent Johnson: Disparate Housewives

Johnson discusses U.S. credibility, the prolonged U.S.-China competition, and possible shifts in Treasury and Fed coordination, alongside mechanisms involving gold and stablecoins. He also weighs AI's potential to lift productivity against job displacement, and outlines market risks tied to Treasury demand, rising yields, dollar strength, and energy supply. His forecasts include possible dollar and gold moves, as well as oil and natural-gas squeezes under specific conditions.

Geopolitical RiskChinaMonetary PolicyGovernment DebtGoldStablecoins

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Key Takeaways

Johnson sees the U.S.-China contest as a prolonged competition in which energy capacity and AI matter; the host’s examples include China’s nuclear buildout and open-source AI models that may be only three to six months behind frontier labs. The host says those models could solve many corporate problems and, when run locally, help companies keep decision-making data out of external clouds.

Johnson argues that an independent Fed is part of the separation of powers that supports U.S. credibility, while the host says Scott Bessent is extending Treasury into traditionally monetary-policy areas. Johnson reads Bessent’s remarks about working with a new Fed chair, alongside Treasury buybacks and swap lines, as a signal of closer Fed-Treasury coordination.

Johnson describes a possible gold-certificate revaluation from $42 per ounce to about $4,100 as requiring Treasury action and Fed acceptance; spending the roughly $1 trillion that could be credited to Treasury would increase the money supply and dilute each dollar’s value. He says gold could be used to restore confidence if needed but is not currently necessary, while the host’s separate idea of a gold-backed stablecoin using roughly 8,000 tons of U.S. gold remains speculative and one he calls risky.

Johnson argues that stablecoins could distribute bonds, raise cash, and make payments without banks, potentially reducing the Fed’s leverage as the technology develops. Separately, he expects AI to raise productivity over the long term but anticipates short-term job displacement; he says governments will probably respond with some form of universal basic income or an expanded welfare state, not as a recommendation.

GEO-POLITICS

Fed Independence — Johnson argues that separation of powers supports U.S. credibility and structural certainty, and that an independent central bank is part of that system.

“First I wanted people to understand that in many ways the power of the United States has been built on the separation of powers you know and the fact that…”—

U.S.-China Rivalry — Johnson sees a prolonged U.S.-China power competition, with globalization potentially reversing over the coming decades. He considers the late 1940s and 1950s a better historical analogy than the 1970s. China is a formidable competitor, he says, and energy capacity and the AI race matter to the contest's outcome.

“And I kind of feel like that's what we're embarking on now. We're embarking on this great cold war with China…”—

Treasury Expansion — The host argues that Scott Bessent is expanding Treasury's role beyond its traditional scope and participating in what the host characterizes as wartime policy decisions.

“Scott Bessant is not only expanding the scope of Treasury beyond its traditional meaning, but to my thinking, he's really starting to participate in what I think are wartime policy…”—

TECHNOLOGY

Stablecoin Leverage — Johnson argues that stablecoins can distribute bonds, raise cash, and enable payments without a banking system. As the technology develops, he says, it could reduce the Fed's leverage.

“stable coins do not need a banking system to distribute either the bonds or to raise cash or to make payments…”—

Open-Source AI — Citing Matt Barry, the host says Chinese open-source AI models are three to six months behind frontier-lab models and may be capable of solving most corporate problems. Running them on local hardware could keep corporate decision-making data out of external providers' clouds.

“the Chinese open-source AI models that you can get for free if you are willing to run them on your own hardware, they're only 3 to 6 months behind the…”—

ECONOMY

Gold Revaluation — Johnson describes a possible revaluation of government gold certificates from their $42-per-ounce book value to a market price of about $4,100. The Fed could credit roughly $1 trillion to the Treasury's account, but the mechanism requires Treasury action and Fed acceptance. Spending the funds would increase the money supply and reduce the value of each dollar, he says. He also says the New York Fed holds about 6,000 tons of gold that does not belong to the United States.

“But going to your question is the way that they could have this windfall show up in the treasuries's account is they could tell them that the gold certificates that…”—

AI And Rates — Johnson says AI-related growth expectations may be one reason rates are higher. Investors may believe the technology could support growth, help the United States manage its debt, or delay a downturn, and therefore demand more compensation to hold government debt. He describes this as a possible explanation, not his base case.

“The other part of it that I think is a little bit less appreciated and this is not necessarily my base case but I can't rule it out is that…”—

Fed-Treasury Coordination — Johnson contrasts 2022, when Powell raised rates while Yellen's Treasury actions sent liquidity back into the market, with Bessent's more recent involvement in traditionally monetary-policy areas such as Treasury buybacks and swap lines. He reads Bessent's statement that Treasury and a new Fed chair would work together as a signal of closer coordination.

“The most recent example I can think of is in 2022 when Powell was raising rates to slow inflation and at the same time Janet Yellen was drawing down the…”—

MARKETS

Dollar Demand — Johnson argues that global reliance on dollar-denominated trade and borrowing creates demand for dollars. Companies and countries earn and borrow dollars, then hold them to match dollar liabilities with revenues without taking on currency-trading risk.

“And so, in some ways, the world still needs dollars to operate. The world still sells things to the United States in dollars. Therefore, they earn dollars…”—

Treasury Selling Risk — Johnson says uncertainty about U.S. policy may make investors less eager to buy Treasuries, while cautioning that weaker demand is not wholesale rejection. He also warns that passive bond portfolios can amplify a sell-off: rising yields lower bond prices, prompting automated strategies to sell and potentially causing severe dislocations.

“I think number one, I think, you know, there is some uncertainty with Trump's policies and what's going on in the world…”—

FORECASTS

Dollar Outlook — Johnson sees potential for much higher dollar levels over the longer term. In a sovereign-debt-crisis endgame, he thinks a dollar spike is more likely than a decline. He also allows for a short-term dollar pullback and a possible euro and gold bounce; these are scenarios, not certainties.

“Gold's kind of at a pretty interesting place here. The momentum on gold has gone away. The narrative on gold has gone away…”—

Gold Downside — Johnson says that if the dollar index reaches 110, gold could fall to around $3,700; a break of support could bring another 10% decline. A further rise in crude oil could also contribute to a short-term corrective break below $4,000. He views such a correction as a potential long-term buying opportunity, not a certainty.

“If we go to 110 on the dollar index, I think gold probably goes lower maybe to the I don't know $3,700 range. It's already, I think, around 4,100…”—

Equity Repricing — The market commentator says the bond sell-off and rising yields are raising the hurdle rate for financial-asset valuations. Equities appear to price in enough earnings growth to absorb higher borrowing costs, but continued bond-market pressure could eventually force equity prices lower.

“This story on yields continues to be the core thesis…”—

Dollar Breakout

Johnson attributes dollar strength to higher rates, global demand for dollars, and relative weakness elsewhere, while allowing for a short-term pullback before potentially higher levels.

Dollar And Gold Outlook

Johnson sees a possible near-term dollar retracement and gold bounce, but says a dollar surge could damage markets; he views gold near support as a potential buying opportunity.

Fed Treasury Coordination

Johnson argues that intensifying great-power competition may push the Fed and Treasury toward closer coordination, changing the traditional balance between monetary autonomy and sovereign priorities.

Gold Revaluation Mechanism

Johnson describes how revalued gold certificates could credit Treasury funds through the Fed, while emphasizing that the arrangement would require institutional cooperation and is not an imminent plan.

Goldbacked Stablecoin Risks

The speakers consider a government gold-backed stablecoin and more extreme uses of custodial gold, while Johnson frames these possibilities as contingency tools rather than expected near-term policy.

Gold As Dollar Insurance

Johnson characterizes gold revaluation as an accounting mechanism that could increase money supply and dilute dollars, but says current dollar demand makes such a measure unnecessary for now.

Treasury Yield Pressures

Johnson links rising yields to weaker Treasury demand, AI-driven growth expectations, and passive bond selling, warning that higher rates can amplify market stress at home and abroad.

U.S. Rates And Carry

Johnson says higher global rates may burden smaller economies more than the United States, supporting relative dollar demand and potentially attractive dollar-versus-Canadian-dollar carry trades.

China Cold War Analogy

Johnson sees the postwar period as a better analogue than the 1970s, arguing that U.S.-China rivalry and domestic strains could lead to more centralized American power rather than national decline.

Great-Power Competition

Johnson expects a prolonged contest centered on China that will force countries to choose sides, with AI leadership and energy capacity increasingly shaping geopolitical power.

China's AI Challenge

Johnson regards China as a formidable AI competitor, noting its energy advantage and the potential for capable, inexpensive open-source models to challenge U.S. firms and infrastructure.

AI Jobs And Productivity

Johnson expects AI to boost long-term productivity but recognizes near-term job displacement and social disruption, which governments may try to address through expanded assistance.

Canadian Dollar Put Trade

Patrick presents a defined-risk Canadian-dollar put as a way to express the view that dollar strength may resume, while outlining the premium, payoff, and downside risks.

Treasury Yields And Stocks

Patrick says rising yields are pressuring financial assets even as major indexes hold up, with weak market breadth raising the risk of a broader equity repricing.

Dollar Strength And Oil

Patrick sees the dollar as the near-term path of least resistance as the euro weakens, while warning that Hormuz disruption and thin inventories could drive oil higher and intensify market stress.

Precious Metals And Gas

Patrick says rising real rates and dollar funding stress remain headwinds for gold, while record natural-gas short positioning could fuel a sharp squeeze if colder weather forecasts persist.

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Important Disclaimers

Not Investment Advice: For education only — not financial, tax or legal advice.

AI-Generated: Made by AI from source transcripts and may contain errors.

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