Forward Guidance
Liquidity Is Breaking And The Economy Is Next | Michael Howell
Apr 2, 2025
Michael Howell, an expert in finance and the founder of Cross-Border Capital, shares his insights on liquidity in global markets. He warns of hidden stimulus tapering off by the Fed and Treasury, impacting the economy's ability to refinance debts. Howell discusses the disconnect between 10-year yields and mortgage rates while urging that central banks must shift focus towards balance sheet management. Additionally, he explores China's debt deflation strategies and how global liquidity patterns correlate with Bitcoin's price. A must-listen for finance enthusiasts!
01:09:01
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Quick takeaways
- The podcast highlights the critical need for liquidity growth in the financial system to facilitate debt refinancing and prevent crises.
- Michael Howell discusses the implications of diminishing hidden stimulus from the Fed and Treasury on the economy, foreshadowing potential slowdowns.
Deep dives
Understanding Bank Reserves and Liquidity
The current banking reserve situation is characterized by a shift from an ample to a potentially scarce regime. In recent years, particularly post-COVID, there has been a substantial increase in reserves, but as quantitative tightening (QT) continues, these reserves are dwindling. Experts believe that the Federal Reserve's liquidity may reach dangerously low levels as soon as September, leading to stresses in the repo market, evidenced by widening spreads. Understanding the balance of bank reserves in relation to liquidity is crucial, especially amidst concerns of a slowing US economy, which could further impact credit markets.
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