Pennings, A.J. (2026, Apr 21) Neutralizing the Milkshake Effect in SACT-AI Bancor/ICU Monetary Coordination. apennings.com https://apennings.com/political-economy-of-media/neutralizing-the-milkshake-effect-in-sact-ai-bancor-icu-monetary-coordination/

Introduction

This blog post continues the investigation of the operations of the global spreadsheet logic, USD centrality, and, more recently, the potential to realize John Maynard Keynes’s proposal at Bretton Woods, outlining an alternate global money coordination system. Keynes proposal was brilliant but lacked the economic and technological capabilities to be viable at the time. I recently asked my students in EST 392 – Engineering and Managerial Economics to examine various global currencies and how the “milkshake theory” influences monetary flows and policy worldwide. Their results suggest that the milkshake effect is substantial, but that the dollar-denominated monetary system is also a significant supplier of global liquidity. With the writing below, I consider a less dramatic transition with a significant role for the USD.[1]

A SACT-AI (Artificial Intelligence) global monetary coordination system reconfigured to Keynes’s Bancor/International Clearing Union (ICU) framework is engineered for balance sheet symmetry. A neutral Bancor as the unit of account, automatic multilateral netting, symmetric penalties on surpluses, and tier-calibrated adjustment eliminates persistent imbalances without national-currency dominance. Yet the question of maximizing the USD’s role within this neutral architecture reveals a deliberate transitional strategy. Rather than abrupt displacement, SACT-AI Bancor can be designed with layered mechanisms that preserve, extend, and strategically leverage USD liquidity, data advantages, and institutional infrastructure during a controlled phase-in.

Brent Johnson’s “Milkshake Theory” provides the perfect diagnostic lens for understanding this transition. The United States currently acts as the world’s largest “straw,” drawing global liquidity toward itself whenever domestic conditions tighten or dollar demand spikes. Capital flows from Tier 4 and Tier 5 emerging and peripheral economies into Tier 1 and Tier 2 during stress episodes, creating sudden shortages abroad while reinforcing US advantages.[2]

In a SACT-AI Bancor/ICU coordination system, the milkshake effect is not eliminated overnight but actively detected, neutralized, and internalized through AI-orchestrated surveillance and symmetric rules. This turns an extractive force (currency from periphery countries) into a managed, balanced flow while still allowing the USD to play a maximized transitional role.

Johnson’s Milkshake Theory explains why dollar shortages are structural. When the Fed raises interest rates, or signals reduced liquidity, global investors sell local assets and repatriate capital into USD to meet funding needs or chase higher US yields. This “sucking” action drains liquidity from the rest of the world, triggering currency depreciations, capital flight, and sudden stops in Tier 4 and Tier 5 economies.

Traditional ICT4D projects (rural broadband, mobile-money platforms) and ICT4SD initiatives (solar microgrids, AI4Good early-warning systems) are disproportionately affected because they rely on dollar-denominated imports and financing. The milkshake effect thus perpetuates the tiered USD hierarchy:

Tier 1 (US) benefits from cheap capital inflows and the ability to run deficits.
Tier 2 (Advanced Financial Centers) intermediates the flows and earns spreads.
Tier 3 (Export-Led Surplus Economies) recycles surpluses but remains partially subordinated.
Tier 4 (Emerging Markets) and Tier 5 (Peripheral Economies) absorb the shocks, experiencing procyclical booms followed by devastating contractions.

Eurodollar creation and petrodollar recycling amplify the straw’s suction power, turning the global financial system into a one-way liquidity pump (According to Johnson, as widely discussed in financial commentary). SACT-AI Bancor/ICU is explicitly designed to neutralize this extraction through symmetric, rule-based coordination. Symbolic Computing agents run continuous, multi-variable simulations that monitor capital-flow velocity, cross-currency basis swaps, and reserve drawdowns in real time.

When Milkshake-like suction is detected, the system automatically triggers Keynesian recycling mechanisms, actively rechanneling financial surpluses from high-saving (surplus) countries back into deficit countries, thereby stimulating demand and maintaining global economic equilibrium. Surplus Bancor balances in Tier 3 are charged and redirected as overdrafts to deficit quotas in lower tiers; tier-calibrated adjustment macros propose immediate rebalancing before shortages materialize; edge-AI nodes on renewable-powered 5G/6G towers feed granular, high-frequency data into the central ledger, enabling predictive rather than reactive intervention (Keynes, 1943; Piffaretti, 2009).

SACT-AI transforms the milkshake effect from an extractive force into a managed, symmetric flow. USD shortages are neutralized because liquidity is generated within the Bancor ledger rather than being pulled from peripheral markets. The result is smoother global financial and trade transactions, with traditional ICT4D assets protected from sudden stops and ICT4SD scaling becoming counter-cyclical rather than procyclical. Even in this neutral architecture, the USD can be strategically positioned to retain influence during transition without recreating the full milkshake asymmetry.

Transitional design choices include:

High initial basket weighting with algorithmically declining USD component, allowing the dollar (or a Treasury-backed stablecoin) to serve as the dominant collateral and settlement rail in early phases. Also, AI-driven reweighting macros reduce this weighting linearly or conditionally, tied to verifiable de-dollarization milestones. Another strategy is giving preferred collateral status for USD assets, giving Tier 1 a privileged but time-bound advantage in meeting quota requirements or buffering stress. AI agents apply preferential haircuts (charges to cover potential liquidity problems) and lower penalty thresholds for USD collateral.

Surveillance and data dominance in symbolic computing, incorporating US-centric sources (FOMC-style qualitative intelligence, Treasury market data) as high-trust inputs. This maximizes USD influence in early-warning models while AI enforces overall symmetry. Hybrid digital-USD interoperability, where a Treasury-backed stablecoin acts as the high-frequency execution layer for Bancor credits, preserving instant settlement and compliance while the neutral ledger handles multilateral netting.

These mechanisms maximize USD utility (deep liquidity, network effects, regulatory familiarity) while AI governance ensures the milkshake effect is capped. Any excessive suction is automatically offset by surplus recycling and quota expansion for lower tiers. The system thus achieves a controlled “soft landing” for the dollar — extending its role without permitting it to dominate the final architecture.

Tiered outcomes in the global USD system illustrate the strategic balance:

Tier 1 (United States) Retains transitional leverage through collateral preference and data dominance, mitigating the loss of pure USD hegemony.
Tier 2 (Eurodollar/Financial hubs) Continues to intermediate hybrid USD-Bancor instruments, earning spreads while gaining symmetry benefits.
Tier 3 (Export-led surplus economies) Faces gradual pressure to recycle surpluses productively rather than into dollar assets.
Tier 4 (Emerging markets) and Tier 5 (Frontier and peripheral economies) experience the greatest relief as the milkshake suction is replaced by predictable Bancor overdrafts, enabling stable scaling of traditional ICT4D into AI4Good and renewable infrastructure without procyclical disruption.

Link to Petrodollar and Tiered Impacts

Petrodollar recycling intensifies the milkshake effect because oil exporters, holding large dollar balances, often increase their purchases of US assets during periods of dollar strength, further draining liquidity from Tier 4 and Tier 5 markets. The tiered consequences are stark:

Tier 1 (United States) Receives cheap capital inflows, finances persistent deficits, and enjoys lower Treasury yields.
Tier 2 (Eurodollar hubs) Earns intermediation profits from recycling flows but remains exposed to Fed policy shocks.
Tier 3 (Export-led surplus economies, including major oil exporters) Accumulates reserves but becomes trapped in the recycling loop, supporting their export model at the cost of domestic rebalancing.
Tier 4 (Emerging markets) Experience episodic booms when oil prices are high and recycling is abundant, followed by sudden stops when the milkshake effect intensifies.
Tier 5 (Frontier and peripheral economies) Face the harshest impact — chronic exclusion from stable capital, reliance on volatile aid or commodity revenues, and “stability without scale” for ICT4D and ICT4SD projects.

In SACT-AI Bancor/ICU equilibrium, the milkshake effect is not eliminated but internalized and symmetrized: the USD becomes one high-quality input among many, and global liquidity flows according to real-economy needs rather than unilateral core demand.

Conclusion

Brent Johnson’s Milkshake Theory illuminates why the current USD-focused system extracts global liquidity. SACT-AI Bancor/ICU neutralizes this extraction through automatic recycling, predictive surveillance, and tier-calibrated adjustments. By strategically embedding transitional USD privileges (basket weighting, collateral preference, surveillance integration, and digital-stablecoin interoperability), the system can maximize the dollar’s role during reconfiguration while ensuring the milkshake reduces destabilization in USD lower tiers.

In a new system based on AI/SACT spreadsheet logic, this approach delivers the symmetric coordination Keynes envisioned. A computable ledger channels liquidity toward sustainable ICT4D rather than permitting unilateral extraction. SACT-AI Bancor/ICU (SABI) suggests the transition to multipolar money may be both politically viable and technically robust for the global economy.

References

Blockworks Macro. The Dollar Milkshake Theory Explained. YouTube. 2026. https://youtu.be/xxzy3sLs4Bs (Accessed March 29, 2026).
Keynes, J. M. (1943). Proposals for an international clearing union (Cmd. 6437). His Majesty’s Stationery Office. (Reproduced in IMF eLibrary, 2010). https://www.elibrary.imf.org/display/book/9781451972511/ch001.xml
Lenzu, S. (2026). Artificial intelligence and monetary policy: A framework and perspective on cyclical transmission, structural transition, and financial stability. Federal Reserve Bank of New York & NYU
Pennings, A.J. (2026, Apr 12) USD Liquidity: A Tiered Hierarchy Model and Implications for AI4Good and ICT4D. apennings.com https://apennings.com/characteristics-of-digital-media/usd-liquidity-a-tiered-liquidity-hierarchy-model-and-implications-for-ai4good-and-ict4d/
Pennings, Anthony J. Weak Domestic Dollar, Strong Global Dollar. apennings.com. August 3,
2022. https://apennings.com/dystopian-economies/weak-dollar-strong-dollar/
O’Malley, S. (2026, January 7). Dollar Milkshake Theory Illustration [Image]. The Investor’s
Podcast Network. https://www.theinvestorspodcast.com/dollar-milkshake-theory/
(Accessed March 30, 2026).
Real Vision. The Dollar Milkshake Theory Explained. Why the U.S. Dollar Strengthens During
Crises. YouTube. 2025. https://youtu.be/_SaG9HVXMQg (Accessed March 29, 2026).
Stern. https://pages.stern.nyu.edu/~slenzu/Papers/Lenzu_AI_and_MP.pdf
Piffaretti, N. F. (2009). Reshaping the international monetary architecture: Lessons from Keynes’ plan (Policy Research Working Paper No. 5034). World Bank.

Recommended Videos
Blockworks Macro. The Dollar Milkshake Theory Explained. YouTube. 2026. https://youtu.be/xxzy3sLs4Bs (Accessed March 29, 2026).
O’Malley, S. (2026, January 7). Dollar Milkshake Theory Illustration [Image]. The Investor’s Podcast Network. https://www.theinvestorspodcast.com/dollar-milkshake-theory/
(Accessed March 30, 2026).
Real Vision. The Dollar Milkshake Theory Explained. Why the U.S. Dollar Strengthens During Crises. YouTube. 2025. https://youtu.be/_SaG9HVXMQg (Accessed March 29, 2026).

Notes

[1] I wrote my Masters thesis on the end of Bretton Woods and the transition to a networked digital technologies in financial industries. I subsequently developed an interest in spreadsheet logic, which break down into the Substitution-Abstraction-Symbolic Computing-Telecom Synchronization (SACT) “Stack” of the global political economy.
[2] As I run a undergraduate program with a specialization in ICT4D, I have been examing the role of USD dynamics in various types of countries based on their interactions with the US dollar and Eurodollar lending markets.

© ALL RIGHTS RESERVED

Not to be considered financial advice.

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Anthony J. Pennings, PhD is a Professor at the Department of Technology and Society, State University of New York, Korea and a Research Professor for Stony Brook University. He teaches AI and broadband policy. From 2002-2012 he taught digital economics and information systems management at New York University. He also taught in the Digital Media MBA at St. Edwards University in Austin, Texas, where he lives when not in Korea.

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Category: artificial intelligence, blockchain, data analytics and meaning, democratic political economies, financial news, financial technology, mobile technologies, political economy of media, public administration, smart new deal, spreadsheet logic, sustainable development, telecom policy and net neutrality, telegraphic political economy, the cold war, the smith effect
Tags: milkshake effect > Milkshake Theory > Network effects > SACT-AI Bancor/ICU > Substitution-Abstraction-Symbolic Computing-Telecom Synchronization (SACT)

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