The Milk Road Show Surviving the Liquidity Crisis: Everything You Need to Navigate This Cycle w/ Michael Howell
Aug 5, 2025
In this discussion, Michael Howell, founder of CrossBorder Capital and a renowned expert on global liquidity, unpacks the pressing risks in today's financial markets. He highlights the looming $40 trillion debt rollover and the implications of fiscal dominance on bond market stability. Howell critiques traditional investment strategies for inflationary times and recommends alternatives like TIPS and cryptocurrencies. His insights on navigating liquidity challenges reveal the critical role of credit providers and the anticipated market shifts ahead.
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Fiscal Dominance Explained
- Fiscal dominance occurs when fiscal policy drives monetary policy, enslaving the latter to government debt financing needs.
- The US Treasury market's stability is paramount because government bonds serve as critical collateral in global finance.
Treasury QE Risks Inflation
- Treasury QE involves shifting government debt issuance to short-dated bills, easing immediate funding but increasing inflation risks later.
- Monetization of short-term debt by banks is inflationary and historically leads to negative outcomes.
Liquidity Challenges from Treasury Actions
- Rebuilding the Treasury General Account will suck liquidity out of markets, increasing strains in money markets.
- The Fed manages bank reserves carefully to avoid spikes in repo rates that indicate refinancing problems.
