Great interview! I started watching you back in the day, prior to me subscribing on SubStack. You seem to be the only one tracking and applying your global liquidity theory to asset values. Your insight is amazing and one of a kind
I saw your interview, it was very good. You talked about the era we are in "monetary inflation" you also mentioned that another era is "financial repression". Do you know of a book, or a website link that explains these "Era:s" so i can learn more about them.
used AI to summarize the podcast and break down into small parts.
**Summary of the Podcast Discussion on Global Liquidity and Monetary Policy**
The podcast features Michael Howell, founder of Crossborder Capital, discussing global liquidity trends and their implications for financial markets. Key points include:
1. **Liquidity Creation Shift**: The responsibility for liquidity creation has shifted from central banks to the banking system, particularly through banks purchasing short-dated U.S. Treasury securities. This expands bank balance sheets, effectively increasing money supply and liquidity, reminiscent of the 1970s when similar expansions led to monetary inflation.
2. **U.S. Treasury and Federal Reserve Dynamics**: The U.S. Treasury has been running down its General Account at the Federal Reserve to fund government spending due to debt ceiling constraints, injecting significant liquidity into markets. However, the Fed plans to shrink its balance sheet and reduce bank reserves in 2025, which could tighten liquidity and potentially disrupt the current bull market.
3. **China’s Liquidity Injection**: China is actively increasing liquidity to devalue the yuan against real assets like gold, aiming to address its debt issues. This policy shift, evident since late 2024, is driving a global reflation trend, with the yuan gold price doubling since 2022, targeting around 26,000 yuan per ounce.
4. **Global Bond Yields Rising**: Bond yields are increasing globally, particularly in Japan, Germany, and the UK, driven by fiscal challenges and rising term premiums, not just U.S. yields. The U.S. is a "price taker" in this context, with global yields pushing U.S. yields higher. This reflects increased bond issuance and fiscal pressures, especially in Japan due to demographic challenges.
5. **Monetary Inflation and Investment Strategy**: The discussion highlights a global trend of monetary inflation, where paper currencies are devalued against real assets. Investors are advised to focus on monetary inflation hedges like gold and Bitcoin rather than bonds, which are vulnerable in this environment. Financial repression is dismissed as a less relevant narrative compared to protecting wealth against monetary inflation.
6. **Risks and Outlook**: Near-term liquidity conditions are positive for risk assets, but rising bond yields (potentially exceeding 5% in the U.S.) could dampen economic sentiment and affect stock markets. The Treasury’s reliance on short-dated debt issuance acts as a "backdoor" liquidity injection, but future Fed tightening could pose risks. Wealth taxes and reduced welfare commitments are potential government responses to fiscal challenges.
7. **Key Takeaway**: Liquidity is the critical driver of financial markets, and investors should monitor global liquidity trends closely, using assets like gold and Bitcoin to hedge against monetary inflation. Howell emphasizes Crossborder Capital’s expertise in tracking these trends, available through their research and Substack.
The discussion underscores the complexity of global liquidity dynamics, with a focus on the interplay between central banks, treasuries, and banking systems, and the importance of protecting wealth in an era of rising monetary inflation.
Great interview! I started watching you back in the day, prior to me subscribing on SubStack. You seem to be the only one tracking and applying your global liquidity theory to asset values. Your insight is amazing and one of a kind
I saw your interview, it was very good. You talked about the era we are in "monetary inflation" you also mentioned that another era is "financial repression". Do you know of a book, or a website link that explains these "Era:s" so i can learn more about them.
Thanks!
Not explicitly since it is 'new'. I wrote about concept in book Capital Wars (2020) but that it getting a tad dated
I always want more info like that… something I can read
used AI to summarize the podcast and break down into small parts.
**Summary of the Podcast Discussion on Global Liquidity and Monetary Policy**
The podcast features Michael Howell, founder of Crossborder Capital, discussing global liquidity trends and their implications for financial markets. Key points include:
1. **Liquidity Creation Shift**: The responsibility for liquidity creation has shifted from central banks to the banking system, particularly through banks purchasing short-dated U.S. Treasury securities. This expands bank balance sheets, effectively increasing money supply and liquidity, reminiscent of the 1970s when similar expansions led to monetary inflation.
2. **U.S. Treasury and Federal Reserve Dynamics**: The U.S. Treasury has been running down its General Account at the Federal Reserve to fund government spending due to debt ceiling constraints, injecting significant liquidity into markets. However, the Fed plans to shrink its balance sheet and reduce bank reserves in 2025, which could tighten liquidity and potentially disrupt the current bull market.
3. **China’s Liquidity Injection**: China is actively increasing liquidity to devalue the yuan against real assets like gold, aiming to address its debt issues. This policy shift, evident since late 2024, is driving a global reflation trend, with the yuan gold price doubling since 2022, targeting around 26,000 yuan per ounce.
4. **Global Bond Yields Rising**: Bond yields are increasing globally, particularly in Japan, Germany, and the UK, driven by fiscal challenges and rising term premiums, not just U.S. yields. The U.S. is a "price taker" in this context, with global yields pushing U.S. yields higher. This reflects increased bond issuance and fiscal pressures, especially in Japan due to demographic challenges.
5. **Monetary Inflation and Investment Strategy**: The discussion highlights a global trend of monetary inflation, where paper currencies are devalued against real assets. Investors are advised to focus on monetary inflation hedges like gold and Bitcoin rather than bonds, which are vulnerable in this environment. Financial repression is dismissed as a less relevant narrative compared to protecting wealth against monetary inflation.
6. **Risks and Outlook**: Near-term liquidity conditions are positive for risk assets, but rising bond yields (potentially exceeding 5% in the U.S.) could dampen economic sentiment and affect stock markets. The Treasury’s reliance on short-dated debt issuance acts as a "backdoor" liquidity injection, but future Fed tightening could pose risks. Wealth taxes and reduced welfare commitments are potential government responses to fiscal challenges.
7. **Key Takeaway**: Liquidity is the critical driver of financial markets, and investors should monitor global liquidity trends closely, using assets like gold and Bitcoin to hedge against monetary inflation. Howell emphasizes Crossborder Capital’s expertise in tracking these trends, available through their research and Substack.
The discussion underscores the complexity of global liquidity dynamics, with a focus on the interplay between central banks, treasuries, and banking systems, and the importance of protecting wealth in an era of rising monetary inflation.