- Marty Bent -- Host, TFTC podcast
- Michael Howell -- Founder of CrossBorder Capital (35+ years tracking global liquidity), author of the Capital Wars Substack, creator of the Global Liquidity Index (GLI)
Global liquidity has peaked at $188.8 trillion (all-time high) but the momentum/growth rate is now declining. The liquidity cycle oscillates with a ~5-6 year frequency; after a 3+ year upswing, a multi-year downswing is likely beginning. This has direct implications for risk assets, especially Bitcoin.
- Global liquidity is a rate-of-change (momentum) measure -- the absolute level is still near highs, but the growth rate has peaked and is rolling over.
- Markets price off marginal changes; this inflection is significant.
- Countervailing forces: PBOC injections and USD weakness are supportive, but BOJ QT, ECB/BOE tightening, and real economy cash absorption are dragging liquidity down.
- A strong real economy (estimated ~4.5% US real GDP growth over 12 months to March) absorbs liquidity that would otherwise flow into financial assets.
- Drivers: AI capex spend, the "One Big Beautiful Bill," massive short-term Treasury issuance being monetized by the banking system.
- If cash flows to Main Street, it is not available for Wall Street.
- Near-term (bearish case, ~$30K): Tightening liquidity conditions drag Bitcoin lower. Bitcoin and crypto are the most liquidity-sensitive assets on the planet -- a "canary in the coal mine."
- Long-term (bullish case, $90K+): Central banks will ultimately be forced to aggressively print money to monetize government deficits. The debt maturity wall makes this inevitable. Gold and Bitcoin are the hedges against that monetary inflation.
- Howell believes further near-term downside is more likely, but remains a long-term buyer.
- Gold's rally is not driven by broad monetary debasement -- Treasury term premia have flatlined for ~15 months, contradicting the debasement narrative.
- Gold is being driven specifically by China: the PBOC is injecting massive liquidity to address a domestic debt crisis, which encourages private-sector gold purchases. The Shanghai exchange is now the marginal price-setter for gold, not COMEX or London.
- Yuan gold price is above 35,000 RMB/oz and rising.
- China's debt-liquidity ratio is dangerously high; they need another ~$1 trillion in liquidity injections this year.
- Global debt is ~$350 trillion with an average maturity of ~5 years, requiring ~$70-80 trillion in annual refinancing.
- US federal debt has increased 12x since 2000.
- The debt maturity wall accelerates dramatically from early 2020s through late 2020s.
- Zero/negative interest rates during COVID encouraged massive debt issuance and term-out -- this is historically unprecedented (per Sidney Homer's 5,000-year history of interest rates).
- 77% of global lending is now collateral-backed; new credit relies on old debt as collateral -- creating a fragile feedback loop.
- The Fed's current policy supports a range-bound market at best, not further upside.
- Policy is shifting from Fed-driven QE (which inflates financial assets) to Treasury-driven stimulus (which targets the real economy).
- Kevin Walsh (incoming Fed chair) wants to lower rates but continue QT -- but dealer balance sheets have halved since the GFC while federal debt is up 4-5x, making meaningful balance sheet shrinkage impractical.
- Commercial bank credit creation (via SLR ratio changes) is the intended mechanism, not Fed balance sheet expansion.
- China: Backing its system with gold and commodities (no trusted international bond market); issued "Notice 42" banning all crypto/digital currencies.
- US: Building around stablecoins and digital payment architecture; the payment system is now determining the form of money (inverting the historical relationship).
- These two systems will run in parallel, with potential bridges between them.
- At the peak of the liquidity cycle: commodities outperform (gold, copper, metals).
- As the cycle rolls over: cash becomes best asset, then long-duration government bonds, then equities again at the trough.
- Bitcoin performs best in the upswing/technology-dominated phase of the cycle.
| Metric | Value |
|---|---|
| Global liquidity (peak) | $188.8 trillion |
| US federal debt increase since 2000 | ~12x |
| Global debt outstanding | ~$350 trillion |
| Annual refinancing needed | ~$70-80 trillion |
| Debt refinancing as % of primary market transactions | 70-80% |
| Global lending that is collateral-backed | 77% |
| US real GDP growth estimate (12mo to March) | ~4.5% |
| Fed liquidity contraction (late 2025) | ~$250 billion |
| Gold price in yuan | >35,000 RMB/oz |
- Bitcoin price -- barometer of global liquidity conditions
- Yield curve slope -- expected to flatten by mid-2026 (risk-off signal)
- Repo market spreads -- early warning of liquidity stress
- Liquidity cycle trough -- expected sometime in 2027
The global liquidity cycle has peaked and is turning down, which will pressure Bitcoin and risk assets in the near term. However, the unprecedented debt maturity wall approaching in the late 2020s will force central banks back into aggressive money printing, making gold and Bitcoin essential long-term portfolio holdings. The world monetary system is bifurcating into a China-led gold-backed system and a US-led stablecoin/digital system.