How America Drinks Your Milkshake

Rate hikes are a popular tool for fighting bank runs among central bankers. Higher rates pull money back into the banking system from people with extra cash.

For example, in February 2022, Russia responded to a looming bank run by raising interest rates to 20%. The vacuum was activated, the money outflow was halted. Investors had chosen to take the bank up on this enticing offer.

So what happens when the global reserve currency raises their rates? In something often dubbed “The Dollar Milkshake Theory”, global capital rushes into the US, leaving the rest of the world financially starved.

In September 2022, the UN cried uncle. They begged the US to stop drinking their milkshake. The Bank of England was on the verge of a bank run, and mysterious red flags were rising at the Swiss Bank.

But the days of the US playing the role of global leader are long over. The President and the Fed openly state that they have no concern for how the rest of the world will handle life with out milkshakes.

So the debt games begin, and in the words of the 1970’s Secretary of Treasury upon closing the gold window, “The rest of the world can’t do a cock-eyed thing”.

Sure, everyone has to take ownership for this disaster. However, the lack of appreciation the US has shown the world after they placed their trust in the US Dollar, it’s unsettling.

The average American’s inability to handle mild discomfort; to fix inflation by acts of self discipline rather than hiking rates, may mean disaster for everyone else.

So when the Fed calls for another interest rate hike, the world banks better be ready to run. America is coming for your milkshake.