Brent Johnson, creator of the Dollar Milkshake Theory, posted what he considers one of his most important reports yet — Empire by Code: The Rise of USD Stablecoins. He also explains the issues around stablecoins in two recent interviews with Adam Taggart and Viva/Barnes. He says that USD stablecoins are not just another fintech innovation but instead they represent a fundamental shift in how America projects monetary power globally.
Understanding the Dollar Milkshake Theory
First, some context. Johnson’s Dollar Milkshake Theory says that despite the concerns about US deficits and debt, capital will flow into the United States during times of financial crisis. The world has borrowed enormous amounts of dollars through what’s called the Eurodollar system. When serious geopolitical or monetary conflicts emerge globally, everyone needs dollars to service their debts, which creates a massive sucking sound as liquidity flows to America. “The United States would suck up all the money that gets printed as a result of responding to the crisis,” Johnson says.
The “milkshake” metaphor is interesting. Think of global dollar liquidity as a milkshake sitting in a glass. The world is full of dollars created through lending, which represents all that debt denominated in US dollars sitting outside America. The United States has the straw. So, when a crisis strikes and everyone desperately needs dollars to settle their debts, the US essentially sucks up all that liquidity, like drinking a milkshake through a straw. Thus, capital flows into the United States, which makes the dollar stronger while other currencies weaken.
Johnson traces how he arrived at this theory: “The thesis was based on the fact that I think the world has borrowed an incredible amount of money. The debt has gotten to a level where I think we’re going to start having the consequences of borrowing all that money.” Despite believing the US has created many problems through its monetary policies, Johnson concluded that “the capital of the world would flow into the United States and the United States would suck up all the money that gets printed as a result of responding to the crisis.”
A Transformative Event in Monetary History
In his report “Empire by Code: The Rise of USD Stablecoins,” Johnson frames the emergence of USD stablecoins as potentially “a transformative event in monetary history, one as consequential as the day the United States severed its link to gold and as powerful in shaping the world’s financial order as the moment it abandoned Bretton Woods.” These are serious moves taking place.
The report opens with a warning from Carl von Clausewitz’s “On War”: “I shall proceed from the simple to the complex. But in war more than in any other subject we must begin by looking at the nature of the whole; for here more than elsewhere the part and the whole must always be thought of together.”
Johnson applies this principle to money. As he writes in the executive summary: “Money, like strategy, is an ecosystem of power. Every instrument, market, and institution serves a purpose within a larger design, and none can be truly understood in isolation. This is why money and power are inseparable. Each reinforces the other, and together they shape the hierarchy of nations.”
The report examines several interconnected components: the Eurodollar market, SWIFT, the GENIUS Act (recent US legislation governing stablecoins), and the rise of stablecoins. But Johnson emphasizes they must be understood as “expressions of a single whole” through which the United States projects, maintains, or adapts its influence.
His conclusion is stark: “What is emerging is not just a new currency system, but a new form of control.”
The Eurodollar System: Dollars Outside America
To understand why stablecoins matter, we need to understand the Eurodollar market first, which very few people know even exists. This is not about euros or Europe specifically. Instead, it’s the market for US dollars that exist outside the United States. And it’s massive!
Johnson traces its origins: “Post World War II we had the Bretton Woods agreement where the dollar was the global reserve currency.” The Soviet Union was receiving dollars from trade but “didn’t want to put them in a US bank because they could be confiscated.” So they placed these dollars in European banks, which then used them as collateral to make new US dollar loans. That process enabled the creation of new US dollars — but outside the American regulatory authorities.
This created what Johnson calls a critical dynamic: “Most of the money printing that everybody likes to say ‘money printer go burr,’ it’s actually done by the commercial banks and the global commercial banks and even non-financial entities and non-bank institutions. It’s not so much the governments themselves printing the money.”
The system exploded after Nixon ended the gold standard and the United States convinced Saudi Arabia to price oil in dollars. “That turbocharged the need for dollars and that made this Eurodollar market grow even more,” Johnson says. Today, “the size of the Eurodollar market, which is the market for dollars outside the domestic United States, is orders of magnitude larger than the market for dollars inside the United States.”
Johnson emphasizes a truly unimaginable scale: “It’s at least a hundred trillion and probably 700 trillion if you started adding up derivatives and off-balance sheet items and non-bank entities and non-bank financial institutions. It’s just this monster out there that has grown on its own.”
Stop. Go back and read the last paragraph again. Unreal.
The catch? The US doesn’t fully control this system. Transactions run through SWIFT, essentially “the central nervous system for the global financial system,” but it’s a European system. “The US has more control than any other country. But they don’t have full control. They don’t have full visibility,” Johnson says.
What Are Stablecoins?
Johnson defines a stablecoin as a digital token issued by either a financial firm or a company that remains stable against a certain asset. Unlike Bitcoin, which has been highly volatile, stablecoins maintain price stability by being backed with US Treasuries.
The key feature is that stablecoins represent “a way to have a digital dollar that you can send, spend, and transact with that settles instantly anywhere in the world.” And crucially, “you don’t even need a bank to do it.”
Johnson admits he initially missed the significance: “Stablecoins have been around for six or seven years, right? And I was very skeptical of them initially.” Part of his skepticism came from questionable practices by early issuers like Tether, which “didn’t want to be audited” and had “some very shady practices to say the least.”
But as the system developed, Johnson came to realize “not only did I miss it, but everybody else who I think is continuing to miss it. And even those who are big advocates for them, I think are missing the real play.”
Beyond Treasury Demand
The narrative around stablecoins focuses on a straightforward benefit, which is that they create new demand for US Treasury debt. Here’s how it works. To maintain their dollar peg, stablecoin issuers must hold US Treasury bills as backing. As stablecoin adoption grows, so does the need to purchase Treasuries. With the US facing high debt service costs and massive refinancing needs, this new marginal buyer seems like a convenient solution.
While the Trump administration has promoted stablecoins primarily for this Treasury demand feature, Johnson says that this misses a bigger picture. “I think that’s really a secondary benefit,” he says. “I actually am of the belief that the US would not have that much trouble selling Treasury bills if stablecoins didn’t exist.”
Johnson says that the real strategic advantage is control and redollarization. The Treasury demand story, while true, is almost a distraction from what stablecoins actually enable. They don’t just help finance US debt. They fundamentally restructure how dollars flow around the world and who controls those flows, especially in geographies where hundreds of millions of people aren’t even banked. Again, the scale of those potentially new markets for the US dollar is unimaginable.
Even geopolitical rivals recognize this threat. Johnson says that “you’ve seen Putin make comments about the US dollar stablecoin” and other countries making comments “in some kind of a negative sense because they’re scared of it and they should be.”
But the real story could be much bigger. It’s about actually replacing the Eurodollar system with something the US can fully control, and dollarizing populations that were previously out of reach. If the US is successful implementing this strategy, it will represent a remarkable achievement and a reassertion of American monetary policy globally, which in recent decades has been eroded by the massive growth of the Eurodollar post World War II.
Money as a Tool of Control
To understand the strategic implications, Johnson emphasizes a fundamental truth about money: “Money is used as a tool or as a means of control that governments use against its own citizens or to marshal its citizens in a certain way. Really powerful countries can use money to get other countries to do what they want to do.”
This isn’t theoretical. As Johnson says, “Money as a weapon, this isn’t some idea that I just came up with. This is military doctrine. The United States Army, Marines, they know how to use money as a weapon. It’s taught at their colleges. It’s implemented in their actions when they’ve been in foreign theaters.”
The power of the dollar stems from its role as global reserve currency. “By the fact that the global reserve currency is the US dollar, the US has more control over the global monetary system than any other one government.” But that control has been incomplete because of the Eurodollar system’s opacity outside the United States.
The Empire Strikes Back
Johnson uses a Star Wars analogy to explain the coming financial war. “At the end of the first movie they blow up the Death Star, right? That’s a huge victory and we created Bitcoin and it’s achieved escape velocity or whatever. But the next eight movies aren’t about peace and love in the galaxy. The battle continues.”
Johnson says the idea that the US would simply accept displacement is naive. “A lot of people tell me the US is the great evil in the world or it’s the global bully or it’s designed the system that enslaves the world through taxation and theft via inflation. And then they also tell me that [the US] can’t possibly win the next round. I’m like, they just enslaved the whole world by your own admission, but they’re just going to roll over and the next round’s going to go to the next guy?”
Cryptocurrency was designed to escape government control. Now that same technology is being co-opted to extend control. “The dollar is already the ring of power, in my opinion, and this is a way to just entrench it even more,” Johnson says. “And the craziest thing, in the same way that the Eurodollar market built the Eurodollar prison that the world is now in, stablecoins is a way to turbocharge that and not only turbocharge it but give the US more control over it.”
Johnson is not clear who does actually control the Eurodollar system. But some analysts have speculated that it’s primarily European banks, which may help explain the current stress between Trump and Europe as the US make clear moves to reassert control over its own monetary policy — see LIBOR vs SOFR here and here.
In “Empire by Code,” Johnson describes how “quiet code and public ledgers are no longer just symbols of rebellion against the state. They are becoming extensions of it.” The tools once imagined to escape central authority are being absorbed by what he calls “the most powerful monetary authority the world has ever known.”
Johnson sees this as the US co-opting private market innovation: “The US is co-opting the innovation that was designed to escape the prison. And so I think initially that is why these stablecoins and digital assets and crypto, however you want to describe this whole ecosystem was developed.”
Unlocking Global Dollar Demand
The scale of opportunity is staggering. Johnson estimates that “easily 50 and probably 70” percent of people globally would prefer to earn and transact in dollars over their local currencies if given the choice. Currently, international capital controls and banking restrictions create enormous friction to transfer money. Stablecoins remove those barriers entirely.
“If you live in, let’s just say Turkey, and you want to hold a US dollar balance, you have to open a bank account and then it has to be with a bank that allows you to hold dollars,” Johnson says. The Turkish government can then limit how much you can hold and restrict when you can withdraw it, especially during a currency crisis.
With stablecoins, “anybody who doesn’t even have a bank” can hold dollar balances on their phone. “As long as there’s an internet connection they can connect to the internet, open, download a wallet and they can transact or they can hold these US dollar stablecoins.”
This creates an existential threat to national sovereignty for some countries. “The ability for citizens to exit the local currency” becomes dramatically easier. “If the Turkish government loses control of the monetary system within Turkey and citizens now start to hold dollar balances rather than lira balances, the Turkish government starts to lose control. They don’t like that.”
Johnson emphasizes the pattern: “If you look back through history, any country that has had a currency crisis or whose currency has failed, the government typically fails shortly thereafter. And again, it goes back to control. It’s because money is a means of control. And if you can’t control the money, then you can’t control the society.”
Why People Choose Dollars
Johnson pushes back against the idea that dollar demand is artificial or coerced. On a fiat versus fiat basis, the choice is clear. “Most global trade for the most part takes place in dollars, especially commodity based. They’re invoiced in dollars. They’re transacted in dollars.” As an aside, it seems ironic that this is what happened in recent decades with the Eurodollar surpassing the value and control of the domestic American dollar. Could that be why the US is making these moves under Trump now?
Importantly, “that was not the United States going around and telling a manufacturer in Turkey that they had to do business in dollars with a trade partner in India. Those two entities chose to do that because it was the most liquid and it was the safest and it was the most convenient out of all the fiat options.”
Even when Bitcoin advocates argue that unbanked populations could use Bitcoin, Johnson notes that “if given the choice to do it in dollars, a huge chunk of them, maybe the vast majority, would pick dollars for the reasons we mentioned.” This is the network effect on display. The dollar has the network. Bitcoin doesn’t.
“The dollar is kind of like Twitter. Everybody loves to hate Twitter. Everybody says they’re going to leave. Everybody says they’re going to go use a different one, but everybody ends up coming back to Twitter because that’s where everybody is. And the dollar is kind of the same way.”
A CBDC By Another Name?
This raises some uncomfortable questions. Are stablecoins just Central Bank Digital Currencies in disguise? The EU has been openly developing a digital euro, which Christine Lagarde continues to promote as Europe tries to maintain monetary control over disparate EU nations and perhaps even assert more control globally.
Johnson acknowledges the concern directly. When asked if all the fears people had about CBDCs are now back on the table, he responds: “I think they’re back on the table.” The government would know exactly what citizens are spending money on, there would be no cash for anonymous transactions, and authorities could shut down accounts at will.
The political workaround is elegant. “Trump said we’re never going to have a central bank digital currency. And there was always push back against that because the United States was founded on individual freedom and individual rights. A central bank digital currency is in many ways un-American.”
But Johnson sees through the semantics. “The way they’ll get around that is they’ll just make it a treasury coin rather than a central bank coin. But at the end of the day, it is a digital, it is a CBDC. It’s just called something differently.”
The distinction matters politically but perhaps not practically for regular Americans. Whether issued by the Treasury or the Federal Reserve, the result is the same. Stablecoins are programmable money that can be monitored and controlled.
Johnson even suggests this could reshape the relationship between Treasury and the Fed. “I think this is also one of the ways in which Treasury gets control over the Fed.” The ability to issue digital currency directly could circumvent the traditional banking system entirely. “If the treasury issues a stablecoin, it is a way to circumvent the banks because everybody could just open an account directly with the treasury.”
Domestic Implications: Do We Still Need Banks?
The implications extend far beyond international markets. “If you have a US dollar stablecoin that’s issued by the Treasury, you don’t really need the banks, right?”
The current banking system exists partly because of infrastructure requirements. But stablecoins change that calculus. “You certainly don’t need 14,000 banks. Maybe you need 10 or 20.”
Johnson admits uncertainty about the exact implementation: “I don’t know if they’re going to issue an official US dollar stablecoin, if they’re going to grant licenses to 20 different entities and then they create their own stablecoins, or maybe they’ll just let anybody issue their own stablecoin so long as they follow the rules that are outlined in the GENIUS Act.”
Regardless of the specific path, “new battle lines are drawn and people are going to compete for that territory.”
A New Form of Control
This creates what Johnson calls “financial battlefields” everywhere. Money is fundamentally about control, and when governments lose control of their currency, they lose sovereignty itself. “If you are subservient to a form of money that you cannot control, you are no longer sovereign,” he says.
The programmable nature of stablecoins gives the US unprecedented visibility and control compared to the opaque Eurodollar system. Unlike SWIFT, the stablecoin rail infrastructure is “very elegant and very controllable and highly transparent for whoever is programming.”
Johnson elaborates on the difference: “These stablecoins via code, these channels are not only visible, but they’re programmable. And so it gives the US complete visibility or potentially gives the US complete visibility and control. They can shut it down. They can open it up. They can turn somebody’s money off. They can turn it back on.”
As Johnson writes in his report: “What happens when the private innovation that once sought to liberate markets instead becomes the instrument through which a superpower consolidates them? What if the next great disruption does not weaken the empire, but strengthens it?”
Johnson’s conclusion is sobering: “This is about as an elegant way to invade another country without even people realizing it that I’ve ever seen.”
Can Countries Resist?
Johnson expects resistance but doubts its effectiveness. “Without question, there’s going to be a battle. And I don’t know exactly how this is going to play out. And the other countries will without question fight back because they have to. If they don’t fight back, they will cease to exist.”
The challenge is that resistance requires heavy-handed tactics: “The reason governments exist is because they have a monopoly on violence. And I hate to bring that up, but that’s the truth. And so if they throw people in prison or if they take their businesses or confiscate their assets, that will deter people from breaking the law, quote unquote, in that country, but it won’t stop everybody.”
Stronger countries like China have better defenses. China can “probably introduce their own CBDC or whatever it is. And internally that probably is better at defending against the dollar stablecoin than perhaps Turkey or Egypt or Afghanistan or Venezuela would be.” But even there, “I don’t think it will be perfect and I think it will still seep in, right? It’s like water. It just seeps in. It’s hard to keep it completely out.”
Europe faces particular challenges. “Europe is just in so much trouble. I just don’t know how else to say it.” Christine Lagarde talking about the digital euro shows “they’re trying as hard as they can to maintain control,” but their position is weak and growing more so over time.
A broader question looms. “What does this do over time to everybody who chose team America?” in the recent reshuffling of global trade. Johnson’s answer? “I think they’re going to get dollarized.”
Understanding Reality, Not Celebrating It
It’s important to note that Johnson takes a deliberately analytical stance on stablecoins rather than advocating for a specific outcome. When Taggart points this out in the interview, saying “You’re not a dollar lover,” Johnson responds, “This scares me to be honest.”
Taggart clarifies: “You are just trying to help people understand the world as it is and as it is likely to be.” Johnson isn’t cheerleading for dollar dominance through stablecoins. He’s describing what he sees as inevitable given the incentive structures of nation-states and the dynamics of power.
Throughout both interviews, Johnson emphasizes uncertainty. “I don’t have this completely figured out,” he says. “I don’t know exactly how this is going to play out. Again, I’m sure there will be some unintended consequences.”
He wrestles with the implications openly. “I think of a country like a farm or a ranch, it makes a lot more sense. Some ranches are free range and they let you roam around and eat whatever you want, but at the end of the day, you’re still staying within those confines. Other ranchers have you locked up in a really tight pin and you get outside for one hour a day and they give you not very good food to eat. But at the end of the day, it’s livestock. It’s management of livestock.”
Despite predicting that stablecoins will strengthen dollar dominance, Johnson’s investment advice reflects genuine concern about the outcome. He recommends owning gold and hard assets as “a put on the whole system” because “I don’t know that this is going to go well. I don’t know that it’s going to go perfectly. It may very well cause chaos. And gold probably does well in a world where there is chaos.”
His reasoning is that “there’s nothing more bullish for gold than a strong dollar because a strong dollar kind of wrecks the system and causes chaos. And gold does pretty well in chaos.”
For people who say the US cannot possibly win the next round of global monetary competition, Johnson offers a realistically stark reminder: “If that is your belief, you are betting against immeasurable power.” He’s not celebrating that power, though. He’s warning people to understand it so they can attempt to position themselves accordingly.
As he writes in “Empire by Code”: “This paper does not offer reassurance of the status quo. It confronts a reality that few seem to have yet recognized and even fewer truly understand.”
