MacroVoices #545 Michael Howell: Warsh vs. The Markets

**Michael Howell** (0:00)
This everything bubble will never come to an end, and you're starting to see signs that the quality is rolling over. And therefore, we've got to accept the fact that after every bubble comes a bust.

**Erik Townsend** (0:11)
That was Michael Howell, I'm Erik Townsend, and this is Macro Voices, the free weekly podcast targeting professional finance and sophisticated private investors. Episode 545 was produced on August 13th, 2026
Michael and I will discuss the 65-month global liquidity cycle, where we stand in that cycle currently, and what comes next. Michael agrees with my view that gold has probably bottomed and is likely to rally from here. So we'll also discuss precious metals, inflation, and where Fed policy is headed longer term.

**Patrick Ceresna** (0:46)
And I'm Patrick Ceresna. Let's dive into this interview.

**Erik Townsend** (0:50)
You probably know Michael as the founder of Cross Border Capital and the publisher of the Capital Wars Substack. There's also another business there, which is global liquidity indices that we're going to talk quite a bit about. Michael, it's great to get you back on the show. It's been six months or so. Let's dive right into the slide deck that you prepared. Listeners, you'll find the slide deck linked in your Research Roundup email. If you don't have a Research Roundup email, just go to our homepage, macrovoices.com. Click the red button above Michael's picture that says, Looking for the Downloads.
Let's go ahead and dive right into it. Talk about the liquidity cycle and so forth. Where do you want to start?

**Michael Howell** (1:28)
First, Erik, thanks for the invitation. It's always a great pleasure to be on your podcast. I think the best thing to start with is the global liquidity picture. That's the lens that we look at markets through. Global liquidity is the key driver of asset markets. Money drives markets basically, and that's really our thesis. And so what we do is we monitor the flow of money through world financial markets. And in the slide deck, there's a chart there which shows the global liquidity cycle.
We focus in this particular slide on the advanced economies for reasons that will be probably apparent later that China is doing something very different. But essentially what that's saying is the liquidity cycle has peaked. By that we mean that the growth rate of liquidity is falling. The absolute level of liquidity in dollar terms is still elevated, but it's the growth rate which is really critical for asset pricing. That's rolling over. I think the thing to bring out of that is, or two things to bring out of that. One is that this is a regular five to six year cycle. As you can see, all those that have got the slide deck, we'll be able to see. It's a very regular cycle. The cycle bottomed in late 2022 and it peaked at the end of 2025
It's now starting to come off quite noticeably. The second point to note is that the reason that liquidity cycle is coming down is not really because central banks are tightening yet. That is a story that is unfolding and yet to come. It's much more because the real economies are strong and they are dragging liquidity out and effectively crowding out the financial sector increasingly. It really comes down to a very simple point that all money that is anywhere must be somewhere.
Effectively, if it's in the real economy, it's not in financial markets and vice versa. We've had the blaze of performance from asset markets and now it's the turn of the real economy. It's as simple as that.

**Erik Townsend** (3:24)
Now, if I'm reading this global liquidity cycle chart on page 3 correctly, it looks like not only has liquidity already peaked, but looks like we're more than halfway through the down cycle and maybe almost getting closer to the next rebound cycle, at least in terms of the y-axis, but on the x-axis, we're not there yet.
How do you reconcile that? Are we close to a bottom, or are we far from a bottom? I could interpret it either way.

**Michael Howell** (3:50)
You're right. The way that I would see it is that the liquidity cycle per se is unlikely to bottom within the next six months. It's much more likely to be a 2027 event. And if I had to venture at a time, I would say sometime around the middle to later in 2027, that would be the normal timeline. It's possible that things could concertina, and we make it an earlier rebound, but I think that's unlikely. And not least because the big monarchy authorities, I mean, Laning of the Federal Reserve is still a long way from aggressively tightening. But I think that that is upcoming. I think the Fed is going to have to do something much more explicit. And we may know that before the end of the month after the Jackson Hole speech.