The Real Crypto Cycle: What Happens When Global Liquidity Peaks | Michael Howell
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What you can see right now is that we're transitioning, unfortunately, out of a period that I've labeled the everything bubble. And that everything bubble is basically illustrating the fact that liquidity has been abundant relative to debt. Now, what has gone on? Well, the first thing that's happened is that every crisis that we've seen pretty much since the GFC has been addressed by policymakers throwing liquidity back into markets. The celebrated QE trade okay, that has been going on, and maybe we're about to restart that.
Michael Howell, welcome to Banklist. It's an honor to have you, sir.
Well, it's great to be here. A lot of things going on in markets right now. I think we we need to keep abreast of them.
We do. And I think that I want to keep, abreast of global liquidity and looking at that through this lens. So your life's work has really been mapping money to flows, global liquidity flows. You help investors track global liquidity. I feel like I'm an investor, and many bankless listeners might be in a similar position as myself that kind of understands global liquidity, but doesn't fully understand it. And I see a lot of noise out there. People talking about, well, you know, Fed said this, and therefore this, or they'll look at charts of m two and say, this is bullish or this is bearish. And
Well, mean, maybe I wouldn't go that far, but I'd go fairly close to that. I think the interesting point to ponder is, know, why, why did we get, why did we get to this position? Why is looking at global liquidity so important? Why is, why are money flows and watching where the money is really, a key factor in understanding asset prices today? And I think the, you know, the beginning of my insight, was that I used to work for the American investment bank, Salomon Brothers. And Salomon Brothers was a big trading firm. It pretty much was for many, many years, the bond markets internationally. An
I think you are, Michael. Maybe we can go into the GLI, Right? So this global liquidity index. So this is a chart of weekly global liquidity, and it's a chart that goes all the way back to, 2010. And this is the the GLI index I think you're referring to. And Correct. 2010 for people who can't see this. If you if you can't see this, then then make sure you're looking at the video on either YouTube or or Spotify right now. It was about it was under a $100,000,000,000,000, the weekly global liquidity throughout the world. Now it is just under $200,000,000,000,000, so we're looking at, like, a dou
Okay. So this is the flow of money through global financial markets. It's not a measure of M3 or M2 or any of these traditional money supply aggregates that economists look at. And in many ways, the definition of liquidity that we use, pretty much begins where conventional M2 definitions end. This is money in financial markets. Money in the real economy, in other words, money that is sitting in retail bank deposit accounts, is really what goes into M2. This is, if you like, the fringes of the financial system, but it's really money that is in the financial markets. So it looks at the repo mark
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