Uncovering the 21st Century Manhattan Project
Benny & The Squirel Ep. 12 with guest Brent Johnson
The Squirrel and I had a really fun conversation with Brent Johnson and hope you enjoy the episode as we dove in depth into a few key macro dynamics unfolding in the world currently.
Episode Summary
The Dollar Milkshake Theory Revisited: Why Dollar Strength and Gold Can Rise Together
Brent Johnson joined us and shared the core logic of his Dollar Milkshake Theory, clarifying why a strong dollar does not preclude higher gold prices and why relative performance matters more than absolute debasement.
Key Points
Global capital continues to be “sucked” into the U.S. due to rising rates, deeper liquidity, and the dollar’s role at the center of the global financial system .
The dollar can weaken in real terms while still strengthening versus other fiat currencies, creating stress in global funding markets.
Dollar strength tends to correlate with volatility and financial instability abroad, not domestic economic weakness.
Gold can rise alongside the dollar as a hedge against systemic stress, particularly when dollar funding tightens globally.
Liquidity, Volatility, and the Ever-Present Tail Risk of a Dollar Spike
We explored why dollar strength often coincides with crises, despite hedging efforts by corporates and policymakers. Specifically touching on the following points:
There is a strong historical correlation between dollar rallies and spikes in volatility, especially during liquidity events in the eurodollar system.
Corporate treasurers and central banks may hedge exposures, but sudden funding squeezes still overwhelm defensive measures.
We have seen prior episodes (2008 and early 2020) where reassurances were followed quickly by systemic stress.
A falling dollar generally signals abundant liquidity; crises tend to emerge only when the dollar rises sharply. This is due to the fact that the world is a dollar system so when the dollar is strong it means global deleveraging or credit tightness.
Stablecoins as Geopolitical Tools, Not Just Financial Innovation
A major portion of the discussion focused on Brent’s recent report on stablecoins, which he reframed as an extension of U.S. dollar hegemony rather than a crypto-native development.
Johnson explained that dollar-denominated stablecoins allow individuals in weak-currency countries to hold dollars directly on their phones, bypassing local banking constraints.
This dynamic undermines local governments’ ability to impose capital controls and weakens their monetary authority.
Stablecoins represent a geopolitical weapon that expands the dollar network globally, rather than simply a new buyer of U.S. Treasury debt.
Roughly 99% of existing stablecoins are already dollar-based, reflecting organic market demand rather than policy coercion.
What Stablecoins Mean for Bitcoin and the Crypto Ecosystem
The conversation turned to whether dollar stablecoins diminish Bitcoin’s role as a crisis asset.
Johnson suggested stablecoins may cap some of Bitcoin’s upside during emerging-market crises by providing a less volatile alternative.
At the same time, official adoption of stablecoins may legitimize the broader digital asset ecosystem and reduce Bitcoin’s existential downside risk.
Stablecoins could act as an on-ramp, making participation in crypto markets easier once users are already “on chain.”
The net effect may be narrower price ranges rather than outright displacement of Bitcoin.
The New Manhattan Project: The Office of Strategic Capital and State-Directed Investment
Finally, Brent outlined what he described as a 21st-century Manhattan Project centered on national security, industrial policy, and competition with China.
The Office of Strategic Capital (OSC), housed within the Department of Defense, is tasked with funding industries deemed essential to U.S. self-sufficiency.
Led by Steve Feinberg (founder of Cerberus), the OSC partners with private capital, matching investments while private investors absorb first losses.
The focus includes semiconductors, rare earths, advanced manufacturing, and defense technologies.
Johnson argued this structure blends government backing with capitalist discipline, unlike traditional bureaucratic subsidy programs.
Markets, Power Politics, and the Investment Implications Ahead
The episode closed with a broader reflection on geopolitics, markets, and where capital may be best positioned.
Markets are becoming less “free” as national security increasingly overrides pure economic efficiency.
While this trend risks long-term misallocation, it may provide short-term tailwinds to favored industries and U.S. assets.
Brent maintained that despite global enthusiasm for non-U.S. assets, he would still favor the U.S. over the rest of the world on a relative basis.
We all agreed that great-power competition is reshaping capitalism rather than ending it.