#240 Michael Howell: 'We're in a Liquidity Air Pocket' as Hidden Stimulus Fades

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Mar 6, 2025

Michael Howell, CEO of CrossBorder Capital and author of "Capital Wars: The Rise Of Global Liquidity," dissects the current liquidity landscape. He warns of an impending 'air pocket' as hidden stimulus fades, emphasizing the risks from the U.S. Treasury's bill-heavy financing strategy. Howell also discusses the potential for Trump to revalue U.S. gold reserves for a massive fiscal boost, while advocating for caution among investors as 2025 approaches. He suggests a pivot to real assets like gold amid these economic uncertainties.

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INSIGHT

Liquidity Air Pocket

Global liquidity is rising since late 2022, but an "air pocket" emerged in late 2024.
This air pocket is due to China tightening monetary policy and fading US stimulus.

INSIGHT

Treasury Bill Financing Risk

The US Treasury's reliance on bill financing makes government funding costs sensitive to short-term rates.
This bill-heavy strategy also exposes the US government to interest rate risk.

INSIGHT

China's Impact and Easing

Chinese monetary policy heavily influences the global economy, causing growth fluctuations.
Recent data suggests China is easing policy again, potentially boosting commodity markets.

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Michael Howell, CEO of CrossBorder Capital, an investment advisory firm, and author of the book, “Capital Wars: The Rise Of Global Liquidity,” returns to The Julia La Roche Show where he analyzes global liquidity trends and warns of market risks ahead.

Howell explains we're entering an "air pocket" in global liquidity despite the overall upward trend that began in October 2022. He examines the "hidden stimulus" from Yellen and Powell that's now fading, details why the US Treasury's bill-heavy financing strategy exposes government funding to interest rate risk, and discusses a theory about Trump potentially revaluing US gold reserves to generate a $1.25 trillion windfall. For investors facing 2025's "much more uncertain year," Howell advises caution and suggests that real assets—particularly gold—may outperfor

Sponsor: This episode is brought to you by Monetary Metals. https://monetary-metals.com/julia

Links:

Website: http://www.crossbordercapital.com/

Twitter/X https://x.com/crossbordercap

Substack: https://capitalwars.substack.com/

Book: https://www.amazon.com/Capital-Wars-Rise-Global-Liquidity/dp/3030392902

00:00 Intro and welcome Michael Howell

01:25 - Current state of the global liquidity cycle and the emerging "air pocket"

03:50 - The hidden stimulus from Fed and Treasury that's now fading

06:16 - How bill-focused Treasury financing is effectively "monetizing the deficit"

11:04 - China's central bank actions and their global economic impact

15:54 - Signs of a potential Chinese policy shift toward economic growth

18:35 - Parallels between Trump and Nixon's economic approaches

21:37 - Asset allocation recommendations based on market regimes

26:58 - Analysis of where we are in the liquidity cycle and future projections

31:49 - Why China needs to devalue against gold and implications for US policy

37:49 - The growing global debt burden and limited options for resolution

43:43 - Why the Fed must expand its balance sheet by mid-2025

48:48 - Tariffs as a negotiating tool rather than an end goal

50:39 - Final advice: investors should consider adding resources/gold to portfolios as protection during uncertain times