PodcastNew Era FinanceMichael Howell

Michael Howell: FED Rate Hikes Will Trigger The Biggest Bull Run Ever

Howell frames debt refinancing and liquidity as central to the outlook, arguing that fiscal pressures and short-term government funding are increasing reliance on money creation. He says strong real-economy demand for liquidity can compete with financial markets, while collateral stability will matter as a COVID-era debt maturity wall approaches. He sees gold and cryptocurrencies as responsive to liquidity, but warns that rising yields could pressure bonds and equity valuations; his rate and market forecasts remain conditional.

Market LiquidityMonetary PolicyGovernment DebtInterest RatesGoldCrypto Markets

Preview · 19 more points in the app

Read the Full Summary

Key Takeaways

Howell argues that the debt overhang and recurring U.S. deficit—about 6% of GDP—are pushing governments toward money creation, with short-term Treasury bills playing a growing role: he estimates they are about a quarter of issuance and could reach roughly a third. He says bank purchases of these bills expand balance sheets and the money supply, while the short-end funding approach can leave pension funds and insurers with fewer longer-term securities.

Howell describes a system increasingly focused on refinancing rather than new private-sector investment: he estimates about 80% of primary global capital-market transactions are debt refinancings, with debt rolled over after roughly five years. He warns that the coming COVID-era maturity wall could strain liquidity, and says debt refinancing depends on sound collateral markets; a mismatch between liquidity and refinancing needs could lead to asset bubbles or financial crises.

Howell argues that nominal GDP growth, currently around 7%–8%, is a major driver of yields and expects yields to move higher over the next few years if that growth persists; he says the 10-year Treasury could test 6% in the foreseeable future. He illustrates the risk to bondholders with a 10-year-duration bond yielding 5%: a 100-basis-point rise could produce about a 10% capital loss, or an approximate 5% total-return loss after carry.

Howell says liquidity can be drawn toward buoyant real economies and away from financial markets, with weaker financial-sector liquidity putting upward pressure on bond yields and downward pressure on equity P/E multiples. He connects that dynamic to Bitcoin’s five- to six-year debt-refinancing cycle, arguing that strong real economies have weakened liquidity-cycle momentum.

TECHNOLOGY

AI Margin Pressure — Howell says competition among AI companies, including potential competition from China, could pressure margins. He compares the current boom with the Y2K-era fiber-optic buildout: the cables remained in use, but Global Crossing went bankrupt after margins collapsed.

“If you go back to the Y2K bubble or around those times I mean think of what happened with fiber optic cable and a company called Global Crossing which was…”—

ECONOMY

Debt Overhang — Howell argues that a large debt overhang is weighing on economic growth and is likely to worsen, not improve.

“Well, I think the first thing to say is the west is bust if we focus on that first…”—

Spending Pressures — Howell says the U.S. runs a fiscal deficit of about 6% of GDP year after year. Europe faces pressure to raise defense spending, and China is likely to keep pace. Squeezed tax capacity and higher bond yields make borrowing less comfortable, he argues, increasing reliance on money creation.

“So you're actually looking at a US economy for example that's running on with a fiscal deficit of 6% of GDP year after year accumulating debt and that is likely…”—

Short-Term Funding — Howell argues that governments’ growing use of short-term Treasury bills to fund debt amounts to money creation and contributes to monetary inflation. Banks tend to buy this debt, expanding their balance sheets and funding government spending through money-supply growth. He estimates short-term instruments account for about a quarter of issuance and could rise to roughly a third, potentially leaving pension funds and insurers with fewer long-term securities.

“The reason that you're getting this phenomena is that governments are increasingly funding at the short end of the market…”—

MARKETS

Bitcoin And Liquidity — Howell says Bitcoin has historically moved roughly twice as much as global liquidity in percentage terms: a 10% increase in global liquidity corresponds to about a doubling in Bitcoin’s price. He argues that a small allocation could provide protection if liquidity expands, without specifying what risk it would hedge.

“So you will find that looking at the statistics and anyone can do these calculations but if you look at the last 10 years and looking at the performance of…”—

Debt Refinancing — Howell argues that financial markets have shifted from raising new capital for private-sector investment to refinancing existing debt. Debt is rolled over after an average of about five years, he says, and roughly 80% of primary transactions in global capital markets are debt refinancings.

“And then the other point about the world changing which is partly to do with this but it's the fact that if you think about financial markets as a result…”—

Inflation Hedges — Howell distinguishes monetary inflation, which can erode wealth when assets fail to keep pace, from consumer-price inflation, which reduces real incomes. He identifies gold, silver, Bitcoin, Ethereum, and Solana as relatively sensitive to global liquidity. Fixed-income assets, including 10-year U.S. Treasuries, can lose value after a positive liquidity shock.

“Monetary inflation destroys your wealth. High street or main street inflation destroys your real incomes. Okay?…”—

FORECASTS

QE And Hedges — Howell argues that additional liquidity or QE tends to lift gold, silver, Bitcoin, and Ethereum. Cryptocurrencies have been the most sensitive of these assets in recent history.

“I mean the whole economy would collapse as we saw sort of briefly at the time of COVID or in the 2008 crisis. So central banks come back with elacrity…”—

Rate-Hike Rally — Howell suggests that a 25-basis-point Fed funds increase could satisfy bond markets, potentially lowering yields and volatility. He says a policy-rate hike could be followed by a rally in the long end, but presents this as an assumption and says repo-collateral markets matter.

“So, a little you know, a little push up inching you know, Fed funds up by 25 bips may well satisfy the bond markets and therefore bond markets bond market…”—

Higher Bond Yields — Howell expects bond yields to rise over the next few years toward 7%–8% if nominal GDP growth remains at that pace. He says the U.S. 10-year yield could test 6% in the foreseeable future and possibly go higher, citing government spending, a 6%-of-GDP deficit, and inflationary demand as upward pressures.

“Now what we where we are now is we're looking at bond yields which are you know nearer 5% than 8%…”—

Western Debt Overhang

Howell links Western debt burdens to aging demographics, geopolitical competition, persistent fiscal deficits, and a shift in financial markets toward refinancing rather than new capital formation.

Rising Yields, Monetary Inflation

Howell argues that stronger nominal growth helps explain higher yields, while governments can extend borrowing by funding more at the short end, gradually increasing monetary inflation.

Debt, Liquidity, And Collateral

Howell says refinancing depends on balance-sheet capacity and collateral quality, with repo-market stress and a rising debt-to-liquidity ratio signaling potential crises and asset selloffs.

Treasury Liquidity Operations

Howell interprets Treasury buybacks and ample bank reserves as efforts to stabilize volatility, repo markets, and collateral rather than simply steer interest rates.

Fiscal Pressures And Money Creation

Howell expects fiscal and geopolitical constraints to sustain short-term government funding and monetary growth, while saying this policy approach buys time rather than resolves debt pressures.

China’s Debt And Gold Demand

Howell attributes much of gold’s recent rise to Chinese liquidity creation and debt pressures, and says Chinese policy can also influence cryptocurrency markets indirectly.

Financial Crisis And Crypto Cycles

Howell warns that interconnected balance sheets could amplify failures, but views liquidity-driven pullbacks in gold and Bitcoin as potential buying opportunities rather than a simple four-year crypto cycle.

Portfolio Risk And Equities

Howell recommends limiting volatile crypto exposure, explains how real-economy liquidity can compete with financial markets, and cautions that higher yields may pressure equity multiples despite earnings growth.

AI, Liquidity, And Bonds

Howell compares AI enthusiasm with past technology booms, stresses liquidity and COVID-era refinancing needs, and says higher starting yields can make bonds more attractive despite duration risk.

Debt Cycle And Market Signals

Howell maintains that debt refinancing will keep prompting money creation, then recommends tracking repo spreads, bond volatility, and yield-curve slope to assess market stability.

Capital Wars Research

Howell directs listeners to Capital Wars, his book, and GLI’s institutional research and data services, while the host closes by thanking him.

Related Episodes

Important Disclaimers

Not Investment Advice: For education only — not financial, tax or legal advice.

AI-Generated: Made by AI from source transcripts and may contain errors.

No Guarantees: Past performance does not predict future results; investing carries risk.

Our Commentary · Request Removal