Personal Finance

The Dollar Milkshake Theory: What You Need to Know

It was love at first sight.

A few months ago, I was visiting a financial literary conference in Harlem when someone introduced me to the "Dollar Milkshake Theory." This changed everything.

Dollar USD
(Photo : Canva) Dollar USD

The Dollar Milkshake Theory is the idea that the US dollar is weaking, but at the same time all other fiat currencies are weakening more. And because the dollar is the bedrock of the global economy (meaning USD is used to buy anything worldwide) it will kill all other currencies before it itself implodes. It's like a milkshake, when you mix all the other currencies together, the dollar is the only thing left standing.

I was smitten. But also skeptical. The Dollar Milkshake Theory, if true, seemed out of my hands.  Well it's not. In fact, if you're an investor there's something you can do about it. But first, iPhones.

The iPhone 15 Pluse

Yup. The iPhone is Dollar Milkshake Theory.

Right now because of the strength of the US Dollar - the USD is at its strongest point since 2002 - Europe has to pay absorbently high prices for American goods. So while the iPhone 15 might cost $1099 in America, it costs 30% more in Europe. The same goes for all of these:

  • Playstation 5 getting a 10% increase

  • Apple Watch Ultra 1000EUR (25% increase)

  • Airpods Pro 2 300EUR (20% increase)

A strong US dollar is not good for companies that rely on exports, like Apple. In fact, it's one of the main reasons why their stock has been struggling as of late.

America forced every other nation into a race with the Red Queen.
And nobody can keep up, as displayed by these charts:

So what's an investor to do?

1. The Sky is Falling Strategy

Nothing ever happens. While the Dollar Milkshake Theory might be true, there's nothing you can do about it. Instead, stay the course, continue to invest 30%+ of your income into a 3-fund portfolio and retire someday. If the world economy collapses, you couldn't have prevented it anyway.

2. Follow the VIX

You can always follow the VIX which is an index that tracks the volatility of the S&P 500. Essentially it tells you how fearful investors are.

If the VIX is high, it means the market is experiencing a lot of fear and selling. If the VIX is low, it means there's complacency and bullish sentiment in the markets. Right now the VIX is as high as a hippie at Burning Man.

3. Invest in Stablecoins

For this one, I'll give a shout-out to Lauren Como. Part of her investment strategy last year was to invest in stablecoins and receive interest payments on her USD. In other words, she was being paid to hold cash. Stablecoins are cryptocurrencies that are pegged to the US dollar, so their price doesn't ever really fluctuate. 

The best Stablecoins are USDC, Dai, and Digix Gold Token.

And here are some platforms to make money with them:

  • BlockFi (USDC and DAI): 6-7%

  • Curve sUSD (DAI-USDC-USDT-sUSD): 1.42%

  • Coinbase USDC : 2%

  • Uniswap USDC-USDT : 2.2%

Final Thought

The end times.

They aren't here... yet.

But that doesn't mean you shouldn't take precautions and have a game plan. I originally brushed off the Dollar Milkshake as a crazy conspiracy theory.

But the more I read about what's going on in the EU, China and Japan, the more it makes sense. 

We'll be alright, though. I'm 80 to 90% sure of it. 

But it's always good to have a plan B.

Related Article: Senate Adopts Stopgap Spending Measure, Preventing Immediate Government Shutdown 

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