Michael How argues that global liquidity is shifting out of financial markets and into the real economy, which is setting up a period where equities, gold, bonds, the dollar, and commodities all move in different phases. His main tactical call is that gold and bitcoin may have already seen a near-term peak, while bond yields and the U.S. dollar are likely to grind higher as markets do the tightening for the Fed. Long term, he remains structurally bullish on gold because he sees ongoing monetary debasement, especially in China and the West, as the force that will eventually drive much higher nominal prices.
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This is an interview between Daryl Thomas of VRIC Media and Michael How of Crossborder Capital. The core thesis is that liquidity is inflecting lower in financial markets even if central banks are not yet aggressively tightening, because a strong real economy is absorbing cash and crowding out financial assets. How frames this as a cyclical process: equities tend to do best early in a liquidity upswing, commodities tend to peak around the liquidity high, and cash and fixed income become more attractive as the cycle turns down. In his view, that shift is already underway, and the market is increasingly moving into the part of the cycle where bond yields rise, the dollar strengthens, and risk assets face headwinds. A big part of his argument is built around bond-market structure. …
Tactically, he thinks gold and bitcoin may need to digest recent strength while bond yields and the dollar keep firming. The immediate risk is that the market is still pricing liquidity too optimistically.
Over the next few months, his base case is flatter curves, a stronger dollar, and pressure on commodities and high-duration risk assets. Gold’s next leg depends on whether Chinese liquidity restarts.
Structurally, he sees the world moving deeper into a debt-driven monetary debasement regime. Gold remains his preferred long-horizon hedge, with the possibility of much higher nominal prices if fiat erosion continues.
Global liquidity is shifting out of financial markets into the real economy, which is tightening financial conditions and acting as a drag on financial asset performance.
The speaker points to strong economic growth indicators and says the real economy is 'crowding out' financial markets because money must be somewhere.
Gold and Bitcoin have seen a near-term peak due to the liquidity downswing, though the long-term outlook remains bullish because governments must print money.
Speaker describes these as 'monetary inflation hedges' that are 'very liquidity sensitive' and move early in the cycle, being hurt by the current downswing.
The only realistic way for policymakers to resolve the debt problem is to print money and inflate it away, making inflation a much bigger issue than people realize.
The speaker argues that with debt-to-GDP at extremely high levels, the Fed cannot raise rates enough to service the debt, so it will resort to monetary expansion.
What are you seeing currently on global liquidity?
Michael says global liquidity is a complicated picture. The world economy looks strong, and liquidity is shifting out of financial markets into the real economy. Financial markets are tightening not because central banks are braking, but because a strong real economy is crowding out financial markets. Strong growth is paradoxically a drag on financial market performance.
Do you think the broad indices that keep hitting all-time highs are topping at this point?
Michael breaks it into four lenses: 1) Monetary inflation hedges like gold and bitcoin — they've seen a near-term peak, though long-term bullish. 2) Bond markets and yield curves — yield curves are flattening globally, term premia are coming down, signaling a peak. 3) Commodity markets — still going up but need monitoring, especially with a potentially stronger dollar. 4) Wall Street — there's a tech bubble based on AI spending with questionable profitability and free cash flow; he expects a flatlining market through this year, rangebound, with neither great upside nor great downside.
How does the Fed's desire for a rangebound market conflict with Donald Trump's administration which touts all-time highs?
Michael says Kevin Walsh is not a hand puppet of Trump; he's independent. Walsh's view is that it's no longer about Fed funds — raising rates paradoxically increases government interest payments to the private sector, acting as stimulus. Higher rates won't impact AI spending. Walsh is correct to withdraw forward guidance and keep markets guessing. Other factors like fixed income markets, forex, and monetary aggregates must be considered. Michael thinks Walsh is a much better choice than the previous incumbent.
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