Michael Howell: Hidden REPO crisis could BREAK the system

The repo blowout is an inconvenience for

the Fed. They're trying to address the

problem, but an inconvenience can turn

into a much bigger problem if it causes

a failure somewhere in the financial

system. And at the moment, what they're

doing is they're putting sticking

plaster on the cracks. Now, something's

got to force their hand. And I think

that they can't go back into the markets

in size unless there is a serious

disruption. Now, it's my contention that

if you start to see high debt liquidity

ratios, it's more difficult to refinance

your debt and hence you get a financial

crisis and every financial crisis has

been a refinancing crisis. If you start

to see problems in the repo collateral

side, it's going to pose a problem

ultimately for refinancing.

Welcome to the microscopic podcast

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Welcome to the Microscopic Podcast. Last

time, Michael joined me. We discussed

what he called the real battle of our

age, the global capital war between the

US and China, not fought through trade

tariffs, but through liquidity and

collateral. He warned that the world was

heading into a refinancing war between

2025 and 2028. that the Fed's balance

sheet tightening was madness and that

China was quietly devaluing its paper

yuan against gold to escape its debt

trap. Fast forward to today, the Fed has

just executed $30 billion worth of

overnight repos, the largest since 2019.

And Michael's last piece, the return of

not QE, suggests the central bank is

already being forced back into liquidity

support. So in this conversation, we'll

unpack what that means. Is the Fed

already back into that QE in disguise?

and what this tells us about the health

of the global financial system and how

this liquidity war between east and west

is evolving. Michael, as always, it's a

pleasure to welcome you back.

>> Well, it's very good to be here. Lot

lots to talk about and uh I hope I'm

going to do a good job because these are

these are big topics.

>> Big topics indeed. Um and we'll take

them one by one. And so my first

question would be to what I alluded

already and this one has to um refer to

the overnight repos that the Fed

executed a few days ago on Friday if I'm

not mistaken of the $30 billion in

overnight repos and as I mentioned this

was the biggest since 2019. Um you've

said in the last conversation that there

was repo market tension to be expected

as liquidity stress factors. Is this you

would say the first crack in the system

that you warned us about? Yes, I mean I

think that that's pretty

straightforward. It is. Uh what we're

seeing is uh is is liquidity conditions

are are tightening uh particularly in

the US markets. I mean that in many ways

is a deliberate policy choice. I mean

they've uh they've pushed themselves or

traveled down that road deliberately. Uh

and the reason being is that they've

allowed bank reserves which is a number

that the Federal Reserve controls

absolutely uh to shrink below $3

trillion. Now that and that has been a

policy objective for some time because

there's been a lot of um disqu or let's

say unhappiness about the size of the

Fed balance sheet uh and particularly

the amount of excess bank reserves or

supposedly excess bank reserves that are

in the system. uh not only the Fed uh

themselves are uncomfortable with that

picture but also the Treasury uh

Treasury Secretary Bessant uh and

actually new appointee to the FOMC

Steven Miran have both independently

said that carrying these high levels of

reserves in the system is basically

creating asset bubbles and that's

leading to uh you know social problems

because it's creating a big divide

between the halves and the have nots in

wealth terms across American society.

And I get all that. The problem is we

are where we are and we need liquidity

in the system because the system has

changed. It's no longer about capital

raising, new capital raising uh for

investment projects uh as the textbooks

tell us. It's all about debt

refinancing. And we've got such huge

debts that we've taken on particularly

in the wake of the GFC and in particular

as well after COVID. Uh those debts are

enormous but debt has to be refinanced.

It has to be rolled over and to roll

over debt you need balance sheet

capacity among credit providers in other

words banks or shadow banks. And that is

liquidity. So without the liquidity base

you're going to get refinancing

tensions. And how do those refinancing

refin refinancing tensions express

themselves? It's in the repo markets.

And so what you're seeing is not only uh

a jump in repo spreads, in other words,

repo rates, which are market determined

rates are trading significantly above

Fed funds rate, and I'll put a chart up

in a moment for that. But what you've

also got is stresses in the system that

are forcing uh borrowers to the Federal

Reserve's emergency financing window. Uh

which you know is not is no longer

really the discount window as uh as

we're used to in um uh in textbooks but

it's something called the standing repo

facility which is a much broader uh

conduit for liquidity uh to be injected

in the system. as you rightly say, uh,

as of the 31st of October, uh, they

drew, um, $30 billion out of that, uh,

out of that tranch. Uh, it's gone on

because they've continued to draw. Uh,

as of Monday, they they drew a lot. They

drew another, I think, uh, uh, close to

20 billion. So, I mean, the these

numbers are persisting and the tensions

keep on. At the moment, this is an

inconvenience for the Federal Reserve.

Let me stress that. It's not uh, you

know, they're not they're panicking is

the wrong word. they're trying to

address the problem. It's an

inconvenience, but an inconvenience can

can turn into uh a much bigger problem

if it causes a failure uh somewhere in

the financial system. And what you're

seeing in parallel is the number of

trade fails in among primary dealers.

That means that a transaction, a bond

transaction for example, can't take

place. Uh either buyer or seller uh

defaults on that transaction. the number

of failed trades is increasing quite

significantly. So this is what you'd

expect. And so the next shoot to drop

would be a jump in volatility in the

markets and then you start to see a more

serious unwind uh of leverage positions.

And as we know, hedge funds have got

huge leverage because what they're doing

uh you know, not just among general

assets, but more specifically with

treasuries is they're doing leverage

trades, what's called a basis trade,

where they essentially buy cash bonds

and they short futures. But this is a

huge a huge size. The Federal Reserve,

which doesn't really know exactly what

the hedge funds are doing, estimated

that last year hedge funds bought a net

uh 1 and a half trillion dollars of US

treasuries, which makes them effectively

the biggest buyers.

>> And you've also mentioned that you have

a chart chart that also illustrates the

spread. Would you maybe like to

elaborate more about that?

>> Yeah, let let me sort of go on to um to

this. If you look at the slide that I

put up, this is really um a um summary

if you like of the modern financial

system. And what it has at the heart is

in the center of that diagram liquidity

and debt boxes. Now what that's trying

to depict is that you've got this um if

you like nexus between debt and

liquidity within the financial system.

Uh this is a refinancing system at

heart. And the paradox that we've got is

that debt needs liquidity for

refinancing. Okay, we I've just

discussed that bit. So you need

liquidity to roll over your debts to

refinance debts. And you also need debt

for liquidity because today something

like 80% nearly 80% of all borrowing is

collateralized in the world economy. In

actual fact, if you look just to the

left hand side, you'll see the figure is

actually 77% which comes from the World

Bank a World Bank study.

So virtually 80% of all lending today

has collateral in some form whether

that's real estate collateral or whether

that's treasury security collateral. Uh

the bulk of lending is collateralized.

That is a radical change from what we

saw before the global financial crisis

where the probably the bulk of lending

uh at that time was just done on trust.

Uh there was no there was there wasn't

collateral posted to this same extent.

So that's how the world has changed. Now

that paradox between liquidity and debt,

the fact that debt needs liquidity and

liquidity needs debt is why you get an

why you get potentially instability in

the system. If one leg of that is uh is

derailed and what you have is a

refinancing leg on the right where

something like 70 to 80% of all

transactions in financial markets

primary transactions are debt

refinancing transactions. Now it's not

about raising new capital for capex.

Most of that is done where it's done is

out of cash flow or from governments. Uh

it's not done through raising new money.

Uh the the capital markets are serving a

refinancing function. uh fundamentally

now. And then on the left hand side you

see this repo collateral wing which is

basically converting uh debt into

liquidity and it's that which is really

coming unstuck right now. But you can

see because this is a circle, if you

start to see problems in the repo

collateral side, it's going to uh pose a

problem ultimately for refinancing and

you'll see things like uh bond spreads,

credit spreads, term premier, etc., etc.

will start to widen out or you know uh

present problems. So if you look at that

repro collateral problem, that's really

what we're facing on that left hand

side. Now just before we get there,

let me give the backdrop. This is the

ratio between debt and liquidity in the

world economy uh over the course of the

last uh what 45 almost 50 years. And

this is annual data but it illustrates

the point that what you have is this

equilibrium between debt and liquidity.

So this is the ratio for all advanced

economies. And if you move up higher on

that chart saying that the ratio between

debt and liquidity is deteriorating.

There's more debt relative to liquidity.

And what I've annotated on the chart are

periods of financial crisis. Now it's my

contention that if you start to see high

debt liquidity ratios, it's more

difficult to refinance your debt and

hence you get a financial crisis and

every financial crisis has been a

refinancing crisis in my book. If you go

to the other side of that dividing line

which is drawn on about two times the

dotted line you get a lot of liquidity

relative to debt and what that's saying

is in those circumstances there is

excessive liquidity and that excessive

liquidity causes bubbles asset bubbles

and we've seen a number the latest

iteration of that which really occurred

in the wake of the uh global financial

crisis is the everything bubble which

has lifted asset markets hugely that had

another big leg down after CO and you

can see relative to history on that

chart that we've been in a hugely

luxurious position as regards asset

market liquidity. Uh that's what you

know that's what's propelled uh the

everything bubble if you like. Now what

you can see on that chart is the orange

line is starting to rise and that orange

line is slated to go above the dotted

line sometime in the next two years.

The reason that's happening is really

twofold. One is that liquidity

conditions or the supply of liquidity

that's coming from the central banks is

slowing down. Okay? Uh that's number

one. Uh I'm not saying it's contracting

but the rate of growth is slowing. And

the second thing is that you've got a

lot of refinancing coming onto the

market. Now let me just show that and

you can see it in this chart which is

looking at the annual debt role that we

uh in the world economy have to face

every year. Now this is showing all

forms of new debt or all forms of debt

that is coming back to the market. This

is the increment. So this is not the

level. This is the change every year. So

what it's saying for example in year

2000 uh sorry B year 2020 you saw uh 3

and a half trillion of extra debt to

refinance but in 2021 and 22 you saw a

net decline in refinancings and that was

because policy makers enacted uh a

policy of zero interest rates or near

zero interest rates. If you have zero

interest rates, you not only incentivize

more debt take up, but you actually

encourage people to refinance their debt

uh and push it out uh into um later

years. In other words, a terming out of

debt as it's called. That turning out

pushed debt back into the latter years

of this decade in 26, 27, 28, 29. And

you can see what we've done here is to

show that incremental increase in in

financings that are coming through over

the next few years. So this big wedge of

uh of extra debt has to be refinanced

with extra balance sheet. And so the

monetary authorities, not just the Fed,

but the ECB, the Bank of Japan, etc.

have to supply more liquidity into the

system. So their financial uh markets

will leverage that up or create enough

balance sheet capacity to actually

refinance the debt. Now if you don't do

that you get a problem and the problem

is a refinancing problem and you can see

in this chart what's happening in the

US. Now this chart is probably now about

3 or 4 days old. So I didn't put the I

haven't put the Friday or the Monday

plots in but they are equally uh jumpy.

In other words, they exceed that

previous peak, the the peak you've just

seen. And what that's saying is that

there is a differential, a positive

differential between sofa rates, which

are rates for repo and Fed funds

targets. Now, what you would normally

expect to see in the markets is actually

sofa trading at a small discount to Fed

funds because sofa is a collateralized

rate whereas Fed funds is

uncolateralized. It's only based on

trust. And therefore you'd expect that

sofa is safer in that sense and it would

be at a small discount which you did

actually see uh basically in 2021-22.

What you've got now is u a backdrop

which is saying that now we've seen

elevated levels of that spread. You've

basically got um um something like at

least 20 basis points above Fed funds.

So in other words, that the quarter

point rate cut that the Fed put in the

other day has now been eliminated. The

markets are pricing in higher rates and

that's that's caused because of

shortages of liquidity within the system

and that is the problem. So um just to

resume it and since also like last time

we we talked um the overall uh level of

liquidity is then um also decelerating

in that sense um and we're entering then

a more risk off period. Are we still in

that period?

>> In terms of where we are today as we

speak, our liquidity indexes are still

expanding. Okay. So, in our view, we're

we're still in we are still invested in

the markets. Okay. But we're getting

nervous because prospectively what

you're going to start to see is a

deterioration in liquidity. And let me

just explain that in uh in two ways.

First of all, if I'm I'm going to go

back in the presentation to an earlier

slide, but if you look at this earlier

slide here, what it shows is a very

long-term view of the global liquidity

cycle.

Now, this is, as I emphasized, a

refinancing cycle. Uh it has a frequency

of, as you can see there, 65 months, and

we put a sine wave on top of that. Uh

that sine wave we estimated back in year

2000. So what you see thereafter for the

last 25 years has actually been uh just

extrapolation of that straightforward 65

month cycle. So what you see is what you

get and that shows how well or badly

it's been doing and the cycle has always

been slated to peak sometime in late

2025 early 26. Now is this current blip

down uh the turning point? I'm not 100%

sure of that. But what I do know is

we're losing momentum and the cycle is

becoming choppier. I suspect this or I

fear I should say this may be the

turning point because of what we're

seeing in parallel in the uh sofa or

repo markets. But you can see here that

the cycle neatly bottomed in October of

22 and we've had something like 35 36

months of an upswing. And if you look at

the following chart, what we show here

is that particular progress. So the red

line is the current cycle, the current

liquidity cycle. The dotted line is the

average cycle that uh we experienced

really from uh through that period of

the 1970 to 19 to 2025. So that long

period of um 55 years is averaged in the

dotted line and you can see that the

cycle is not dissimilar currently to

that average. And what we'd expect is

something like a sort of a you know

we're we're burning we're sort of

burning out now. In other words, you'd

expect some sort of inflection. It's not

guaranteed but that's what we're looking

at. So that's our fear uh going forward.

Now if we look at latest data uh we can

see some of the signs of deterioration

and we've got to build this picture uh

you know up. So first of all you've got

the sofa spread blowout that's saying

that liquidity is tightening. Secondly

you've got this chart which is looking

at the prospective growth of Fed

liquidity. Now this is assuming that the

Federal Reserve stops QT. It is not

assuming that they restart QE. Okay, so

that's the proviso and they're hinting

that they may have to and this evidence,

in other words, the sofa spread blowout

and the borrowing on on the Sandy repo

facility are suggesting they're going to

have to restart quite quickly. And this

chart is illustrating that if they keep

if they continue their current policy,

you're going to see Fed liquidity, which

is the amount of money that the Federal

Reserve itself injects into markets, uh

is going to actually fall in absolute

terms through 2026.

And technically the reason for that is

um broadly that areas of uh of stimulus

uh have evaporated. So, one of the,

again, this is slightly jargonized or

wonkish, but there was a facility that

the Fed had on its balance sheet called

reverse repos that it was, if you like,

um, a account of excess liquidity that

the markets held on the Fed balance

sheet. That has now been dissipated.

That's been thrown back into the

markets. So, they can't ease through

that mechanism. uh they could re they

could ease through doing repos, but

that's you know that's a um I think

that's a dangerous policy for a number

of reasons. Uh and so they're going to

have to start buying uh treasurers

again. Now they've hinted and in fact

actual fact there was an interview um I

spoke about but not an interview there

was a a report in the financial times uh

of supposedly an interview with Fed

officials after the last FOMC where

rather remarkably the figure of 20

billion of buying of Treasury bonds uh

was aired in the in the piece this is a

monthly purchase now that wasn't plucked

out of nowhere the journalist didn't

make that up. That must have been

planted by a Fed official to suggest

that they were on course to start

purchases of treasuries again of that

magnitude, which is about 250 uh billion

a year. So, a quarter of a trillion

dollars. So, that's the sort of

magnitude we're looking at. If they do

that, they'll probably allow the Fed

balance sheet or the Fed liquidity here

to flatline through next year. So, there

won't be a collapse, but it'll be a

flatlining. it won't be a lot of growth

and the reason it won't be a lot of

growth is that you need uh liquidity

just to satisfy the needs of the economy

through cash and circulation. So that's

if you like taking liquidity out of the

system every year uh because we need

more notes and coins in the system. So

that may be technical, but the fact is

that what we're looking at is a

flatlining of Fed liquidity and

everything that the Fed is telling us

right now, even though it sounds

optimistic is consistent with a market

that's rangebound, not a market that's

going up. And that's probably the the

bottom line.

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You've also estimated that there's um a

400 billion reserve shortfall.

um is that something that they would

then play on catchup on in that phase?

>> Yeah, I mean you can let let me

illustrate that. So if you look at this

um if you look at this chart, what it's

saying is that this is notional bank

reserves um shown in orange um in the

system projected out uh to the end of

2026 with that dotted line. The red

dotted line are my estimates of what are

called adequate reserves in the system.

Let's take that to mean minimal

reserves. In other words, what the banks

need as a minimum to work with. And if

they don't get that, they're going to

have to go back to the repo markets and

start bidding uh for more funds. And as

they bid for more funds, repo spreads go

up. So the dotted red line is the

equilibrium point where we're back in

line and there's no stresses in repo

markets. At the moment uh we are we have

a level of um bank reserves at about $3

trillion. So my estimates of adequate

reserves are about 3.3. Okay. And just

for the record, I've estimated that

looking at the history, the recent

history of the repo markets and

identifying stress points and saying

when you start to get uh a stress that's

saying that reserves are short. So when

you get no stresses, that's telling us

what the level of the adequate level of

reserves is. So that's how I've

estimated that. Now the Federal Reserve

itself has magicked up a figure of 2.7

trillion which they think are minimum

levels of reserves or adequate levels of

reserves for US banks. I don't know how

they got that figure apart from saying

well it's a it's a nice round number as

a percent of GDP and therefore that's

what they're going to run with. But I I

think that's you know I don't think

there's any particular logic in that in

that uh in that derivation. What I've

done is to look at where you actually

get stress and therefore the shortfall

between their estimates and mine is 600

billion and where we are right now and

where we're prospectively going on the

dotted line assuming an end to QT I

remark uh we're going down to about 2.8

trillion. So slightly above the Fed's

estimate of minimum but still way short

of mine. So that's the shortfall that

I'm talking about that what they're

going to have to do is to put something

like four to 500 billion back at least

back into the markets to actually get

back to their equilibrium. Now what we

know is that something like um uh 150

billion will be taken out anyway through

needs of cash in circulation. So that's

a draw on that liquidity. So in actual

fact if they put 400 back um you're only

going to get a net 250 working. So,

they're still going to be short. And the

sort of figure they're talking about

right now is about 250 billion, but they

may have to they may be able to squeeze

150 billion out of the Treasury General

account. So, you know, we're you know

what I'm saying is we're still we're

still short. Um you're not back to an

abundant liquidity situation.

>> And you also noted that there's a a bit

of a dysfunctioning uh based on a TGA as

well because of the government shutdown.

And this also has an effect on that

precisely or not.

>> Yeah. I mean that that a that's a very

short-term well I actually I ought to

not say that because the government

shutdown's gone on for rather longer

than

>> who knows who knows but let's say that

it's a temporary uh problem and what

it's done is it's pushed the the

Treasury general account is an account

that uh the Treasury is an operating

account the Treasury holds at the

Federal Reserve and it's used for sort

of day-to-day payments and the level

that they've typically uh or the level

they want is about $850 billion of

reserve on that account. That

historically is quite high. Uh it's been

pushed to a high level largely because

of the change in the issuance calendar.

So they're doing a lot of issuance at

the front end of the market and because

they have to be quite fleet of foot uh

when they're issuing bills, very

opportunistic, they need a bigger

cushion. So that cushion has been uh

extended. It used to be probably about

near 200 250 billion or so. So, it's

been pushed right out to uh $850. So,

they've got a they've got sort of a

working margin of error there. So,

there's a little bit of flexibility, but

at the moment, the TGA is about a is

about a trillion dollars. Um, so they

could easily push it down even to get an

$850 target of 150. So, there's some

leeway there. But at the moment, you're

absolutely right. The government

shutdown is is causing uh the TGA to be

bloated. That's for sure. It's taking

liquidity out of the system now.

>> So, if we now go back to the the 2019

style um repo crisis um well

possibility, could the Fed even stop

this in time without any political

backlash if it really reaches concerning

levels?

>> Well, as I said, at the moment, the the

issue is that it it the repo blowout is

an inconvenience for the Fed. it it's

you know it may be flashing an amber

traffic light uh it's not giving

anything more than that but they know

that they're short on liquidity and they

got to find ways of putting it in. Now

the the question really is and it's much

more a philosophical one is that do they

go the whole hog and say well okay let's

tear up the script of saying that the

minimum level of reserves is 2.7

trillion uh let's completely rethink

this or can we sort of just stick we can

just put sticking plaster on the cracks

and at the moment what they're doing is

they're putting sticking plaster on the

cracks now something's got to force

their hand and I think that they can't

go back into the markets in size unless

there is a serious disruption. uh that

would be my view because I think it's

politically difficult to do that and

therefore you may have to see some

disruption uh whether it's a major

failure or another you know another uh

you know more serious credit default uh

the ones we've had in the last few weeks

that that may be the trigger and that

may allow them then to say without loss

of face uh we're going to start buying

treasuries because markets need that

extra liquidity. So I think you're going

to see disruption before you see uh good

news. Uh I mean ultimately what we're

looking at here is a situation which

ultimately says bad news is good news

because we're in a we're in a world

where debt has to be refinanced and you

simply cannot default debt on the scale

that is is implied here because debt

backs the financial system. Uh as I said

to you that liquidity uh in the system

is collateral backed and a lot of that

collateral is debt. So you simply can't

have uh mass defaults. You've got to

allow you you've got to have the

liquidity there to uh prevent that and

that will be a bailout. So the Federal

Reserve is there and poised to inject

liquidity as it's done many times before

and that's the world unfortunately we're

in. That's the fact. So you could argue

that bad news is good. So if you do see

a financial crisis and a major sell-off,

then you've got to buy buy back by buy

the dip because that's what's always

worked because we know the Federal

authorities are going to come back and

others and the Federal Reserve leads for

the world. So what you see the Fed doing

the ECB is going to have to copy.

There's no question about that. Uh and

that's that's what we're doing. The only

question is uh I think is how much

liquidity they put in. They put enough

in. Do they put enough in to stabilize

markets or do they put more in? Do they

put more in which actually creates uh a

further bullish uplink? Now my view is I

think policy has changed and I think

policy is trying desperately to get to

this level where they don't they they're

sort of betw twix in between. So they're

keeping the market stable but they're

not really pushing Wall Street up

dramatically higher. And one way to look

at that is and maybe I can just show you

this chart on route. This is just

showing the impact and why this why this

is so important because this is

illustrating uh Fed liquidity. Fed

liquidity is the other side of bank

reserves. So if Fed liquidity increases,

bank reserves increase. Uh if Fed

liquidity contracts, bank reserves

contract. And this is the mechanism by

which the Fed controls, bank reserves.

Now, if you look at Fed liquidity in

red, you can see there what I've done is

traced out over time going right back to

the early 2000s the history of uh Fed

liquidity. And what I've also put on the

chart uh is a projection into the end of

26. So that's what is slated to happen

on the assumption that QT ends, but

there is no restart to QE yet. So I

haven't put the optimistic case in. And

the orange line is the S&P 500. But I've

lagged it by effectively 6 months, 25

weeks to show as best I can when you see

big draw downs in Fed liquidity what it

tends to do to the market. So it tends

to create market volatility or sell-offs

uh within about 6 months and that's what

you basically get. And in response to

the question which is inevitable, what

happened before 2008? Well, we were in a

different financial system after all

before 2008. And it was the shadow banks

in particular that were really driving a

lot of the liquidity creation, not the

Federal Reserve. And that was a shadow

banking boom and bust. Uh, and what

we're now in is a world where we're

talking about QEQT booms and busts. And

that's all about the Fed balance sheet.

So, that's the danger that we that we're

looking at in terms of this chart. So,

you need liquidity. Now, when I said

that we're in a situation where you may

not get a lot of liquidity, you'll get

just enough. So, the Fed is searching

out for a Goldilocks scenario here,

neither too hot nor too cold. In other

words, what this chart is basically

demonstrating is how the system is

evolving in my view. And that leads on

to this whole question about China, what

China's doing and maybe this capital war

uh episode uh in the sort of longer

term.

What we're looking at here is all forms

of stimulus that the world the sorry the

US economy enjoys from the Federal

Reserve uh and from the US Treasury. Now

the first thing to say is that the

Federal Reserve can stimulate through

traditional means in other words through

pumping liquidity into markets via

buying treasury securities. Okay, or

what's called open market operations. Or

it can create liquidity in another way

if you like Sula Tabler in a hidden way

which is doing things like uh the

reverse repo uh account letting that run

down through uh spending more money on

the Treasury General account through its

operating losses uh which is feeding

money back into the system which is

currently uh a source of liquidity or uh

as well it can basically do it through

things like this special programs like

the bank term funding program or

understand the standing repo facility.

So these are other mechanisms they can

use. The red is traditional QE in other

words balance sheet expansion through

buying treasuries. The orange is the not

QEQE these other forms standing repo

facility uh bank term funding program

etc. Uh the black is what I've called

treasury QE. Now, Treasury QE is

slightly wonkish, but it basically says,

look, one of the ways that you can

increase liquidity in the system is to

inject money via treasury bills. The

reason that's a liquidity injection or

equivalent to one is that it changes the

duration or the average maturity of debt

or assets held by the private sector.

So, in other words, if the US Treasury

normally issues 30-year debt and instead

it says, "We're not going to issue any

more 30-year debt. We're going to issue

three month Treasury bills." The change

in the average maturity of their debt

issuance is going to provide a lot more

liquidity to the system. Because if

you're a bank or a financial

institution, uh, by definition, a

30-year treasury will take up a lot more

balance sheet space because it's a more

volatile instrument than a very

short-term 3-month treasury bill. What's

more, banks tend to buy treasury bills

with elacrity. And if a bank buys a

treasury bill, that's pure monetization.

So that's the other route towards

liquidity. Bit more wonkish, but that's

a a very valid conduit. Now what you see

here in the chart is the history over

the last few years and the black area is

becoming more dominant. In other words,

it's Scott Bessant, not J. Pal, who is

the source of liquidity in the future.

And the reason that's an important point

is that what you can see here are two

things evolving. One is that there's a

cycle in these liquidity uh impulses.

And if you look at where we are in 2025,

we've just come out of the low point in

that liquidity stimulus. So actually I

think no surprise the US economy is

cooling a bit but it could well

accelerate into 2026 contrary to what

most economists are saying and that's

because you're getting this extra

stimulus. How is second point is how is

Scott Besson doing this because what

he's doing is spending a lot of money uh

for the government in the real economy

doing things like more defense

procurement more strategic alignments uh

more strategic mineral purchases etc is

paying for it uh with government money

and that government money is coming

through the bill market through this

funding and therefore what you're

getting is this treasury QE which is

effectively driving the economy the

important point here and the point that

Bessant makes uh I think with a lot of

validity is that if you're spending

money via the Treasury, it's very

directed spending and it is going into

the real economy. We can debate whether

that creates inflation in the long term

or not uh you know long into the night,

but effectively that's what they're

doing. If you leave it to the Fed, the

Fed has a very broad hose and the Fed

sort of splashes money everywhere and

everybody gets soaked. uh but asset

prices tend to go up. So it's very sort

of illirected Fed liquidity. Treasury

liquidity is very directed and that's

the difference. If we move from Fed QE

to Treasury QE, it probably hurts Wall

Street, but it benefits Main Street. And

that's what I think the difference is.

And that transition which we're seeing

now is very difficult to fine-tune,

which is why we're seeing problems in

the repo markets. That's the that's the

bottom line. Now you may have some

questions with that but the corollery

now is

the treasury QE how it's financed and

the role of stable coin which could be

big big big

>> that was actually my next question um

and I want to see because a lot of um

experts online some really diss it as

one of the let's say milkshake dollar

theory type of narratives where you can

back up treasuries especially the short

dated ones with um the whole ecosystem

of stable coins, the genius act got

passed also to enable that and to put

some legislative frameworks around that.

How much importance do you really think

it might actually make a dent? The the

tether for example has been one of the

biggest purchases of treasuries

recently. Um do you think that this will

really make a big difference in that

sense? I think it could do and I think

you know I think the jury is out but I

think the I think the the prospect is

there and you know the what this really

comes down to is the effect not really

on not stable coin on the domestic US

economy but much more on the

international economy and the funding

that this could u unlock for the US

government. Now already the ECB has said

well this looks unfair to us. um you

know, US stable coin could be a threat

to the European monetary system because

we would lose control uh over uh

monetary policy in the Euro zone. And I

think that's a realistic threat. Now, it

may well be that, you know, we're, you

know, we're we're debating the degree,

maybe it's a gray area, maybe the ECB

loses control of 10, 15%, maybe more

percentage of deposits, but it still

could be a meaningful amount. uh because

European residents could think well okay

uh if we put money into stable US dollar

stable coin uh potentially it's

anonymous or you know it gives us one

one one one line of defense here it may

not it may be that we can hide it from

the tax authority more easily. I'm just

supposing the arguments that people

would would present or at least it's

outside of jurisdiction, European

jurisdiction, and we feel more

comfortable uh holding US dollar assets

in this form rather than a bank. And and

again, I'm just proposing arguments that

could be made here. That could be the

incentive. And it isn't necessarily the

case that these stable coin do not pay

interest or do do not pay an income

because they could basically as is being

muted already give a fee rebate uh

so-called fee rebate which gets around

the legislation of paying interest

although as I understand it uh the

inability to pay interest is only for US

residents not for foreign residents but

and that's a detail but the bigger

thread is not for Europe it's for the

rest of the world uh because the because

Europe has the euro which is at least a

you know a decent and viable currency

with some integrity. Once you start

thinking about African currencies or

Latin American currencies or other uh

other international currencies then you

start thinking well actually the

residents in these countries already

hold dollars. Uh they're constrained by

the lack of paper supply. uh if they've

now got access to stable coin, they're

going to move with elacrity in size uh

into the stable coin market and that

would mean that effectively the world

dollarizes very quickly. Now, I wouldn't

rule that out as a possibility because I

think it's it's very realistic and I

think it's particularly a threat to

China

because what we know is that if for

example, hypothetically, you took

capital controls off of China, what

would be the direction of capital? It

would leave in big size in my

estimation. Okay. Now, if you start to

think about think this through and

you've got a situation whereby uh

Chinese exporters are already got a lot

of dollar deposits, they're feeling

slightly uncomfortable uh given the

precedent about the sequestration of

Russian assets uh after the invasion uh

of Ukraine. Um holding it in Western

banks, whether it be European or US

banks, they feel uncomfortable about

that. they could hold it in stable coin

and it's a lot easier to open a stable

coin account that is now to open a bank

account. So that could be done and there

is some degree of anonymity um in

holding those stable coin. I'm not going

to say exact uh but there is at least

some degree of anonymity that could

cause them to shelter that u and I think

from a Chinese exporters point of view

uh if you've got a lot potentially of

dollar revenues and even despite the you

know the tariffs uh that have been

imposed China's trade surplus uh in

dollars has gone up not down so think

that one through so they've got to have

somewhere to put that those those

dollars and stable coin could be the

answer and we could be talking about you

know a huge a huge size of inflow. The

Chinese authorities are worried. Uh

they're worried simply because they will

lose control of the Chinese monetary

system. Um there is a discouragement uh

you know from the point of view of a

Chinese exporter or there there's maybe

there's a you know it's a choice between

what they call the devil and the deep

blue sea. Do you put it back into the

Chinese banking system, put your money

back, convert it back into yuan and hold

it in the Chinese banking system?

probably not because then you could get

that sequestrated if you uh you know if

you behave like Jack Maher and uh you

know become persona non grata so uh that

is ruled out so stable coin are the

obvious answer and I think that's what

China is panicking about and what you've

seen in China this year is a very

significant change which I'm about to

show you

sorry that's this chart and this is

showing people's bank of China's

liquidity injections into the system Now

I think this has spurred China uh

anecdotally but unofficial anecdote

would suggest that policy makers are

running scared and what they're doing

now is they're trying to shore up the

Chinese financial system and to get out

of the debt burden which is really uh

impairing it. Uh China has a huge debt

problem uh as we know uh that is

creating deflation in the system. The

only way you can or there are two ways

you can get out of debt I should say.

What is the default? But as I've tried

to argue, you can't default in the

modern financial system because

effectively liquidity or credit is debt.

So everything is sort of rests on

everything else. So you simply can't

default if unless you want to end your

financial system and your economic

control. So they can't default. Second

option is to print money and devalue it.

And that's what they're doing here. So

they're trying to dig themselves out of

this debt grave by printing lots of

money. And let's just see this chart

here which is looking at the debt

liquidity ratios between Japan and

China. Now Japan has managed to get

itself out of its debt problem uh to an

extent. The black line is looking at the

debt liquidity ratio of Japan. I look

here at debt liquidity not debt GDP. Uh

a lot of economists look at debt GDP.

I'm not sure why. I don't know what it

really tells you uh about the fact the

number is going up but debt liquidity is

a meaningful statistic because it mean

reverts and it shows the ability to

refinance debt and what you can see in

the period from about 2000 through 2010

um China's debt sorry begun Japan's um

debt liquidity ratio was skyhigh that

was impairing the economy the economic

performance is a big drag uh on Japan's

economy and what they've done through

abonomics and through the purchases of

JGBs

um by the Bank of Japan. Um what's

happened is that that debt burden has

come down. They've basically inflated

their debt away and you can see the debt

liquidity ratio dropping back. Liquidity

has been created in size and the yen has

devalued dramatically. Okay, that's the

story. Look at China, the orange line.

China is about um 10 15 years behind

Japan. And what it's trying to do now is

exactly the same thing.

So what you're seeing is the Chinese

yuan devaluing. But as I've said before,

don't necessarily look at the yuan US

dollar cross as your marker here, your

benchmark. Think about the yuan gold

price. And I've tried to show this in

this chart, which is always out of date

because the the line moves uh up and

down so dramatically. But this is really

trying to show what the Chinese have

been doing. And it's no mistake that the

Chinese are actually buying gold as well

because it's shoring up it's

simultaneously shoring up their

financial system and giving them some

cushion against this devaluation. But

what they're doing is they're trying to

get rid uh they're trying to reduce

rather the nominal value or nominal

impact of Chinese debt particularly real

estate debt. So what you've got to do is

to devalue your paper assets i.e. the

yuan against real assets uh i.e. real

estate or gold. And that's what they're

successfully doing. And that is

basically the the background to the

Chinese monetary system. And what you've

got basically going on in the world

economy big picture is you've got a

bification of the mon world monetary

system into two if you like subsystems.

One is a US uh US system that is backed

by treasuries but those treasuries are

wrapped in stable coin. Okay. So

effectively it's a digital collateral if

you like. Uh and then what you've got in

China is a paper yuan system that is

increasingly backed by gold and

therefore you've got a goldbacked or

quasi goldbacked system in China. So

you've got two ultimate collaterals you

might say digital assets for America re

bitcoin and gold in China. And therefore

you we got to start thinking seriously

about diversifying uh into those two

assets not as alternatives but as uh as

compliments. You want gold and you want

Bitcoin. You don't want one or the

other. And that's really the story.

>> So that actually already answered my

follow-up question about um the role of

the yuan and and and gold. And um then I

was also wondering since the west and

would just like resume it very simply

with the G7 who hold about yeah I think

more than 50% of gold reserve for what

officially um wouldn't they also be keen

or interested to follow suit and devalue

paper against the gold that they like

ways of offsetting the depth as well.

Well, I I I wouldn't necessarily rule

that out. And I think that what you know

what I'm suggesting here is a sort of

polarization of the system into these

two assets. And I think you I think you

could legitimately argue there may be

there'll be shades of gray. But then I

could say that if this is a competitive

situation, a capital war, and we've

stressed the idea that, you know, the

trade war, I'm not going to dismiss it

as being unimportant, but it really is

the veneer on top. And what you've got

to think about is what we're really

fighting is a capital war. It's for it's

a battle for the control of capital in

the world economy. Uh not about trade

patents. It's about ultimately capital.

And you know, China wants its capital to

be in control. America wants its capital

to be control in control. And that is

really uh if you like the vent is is

currency or you can think of it in

currency terms I should say. So if you

want to undermine um the US dollar with

its uh digital collateral, what China's

got to do is to try and undermine the

integrity of a digital coin and that may

be attacking uh a blockchain system or

it may be you know may be trying to do

uh cyber threats uh whatever because the

more disruptive you are in digital

technology the less comfortable people

may be holding these digital assets. So

you know the advent of quantum computing

and the advances China is making in that

in that sphere are probably uh

ultimately a threat to the dollar based

monetary system looking into the future.

Equally America will then think well

okay it's in our interest if China is

backing things with gold or it's got a

lot of gold we don't want the gold price

to go up because it's giving China more

power. So what they really want to do is

to if you like stabilize or uh reduce

the gold price. So, what I'm saying is I

don't know who's going to win this

battle. Uh, but you're likely to get a

lot of volatility on both those two

asset classes. Uh, they may trend higher

in the long term. They should do because

we're in a fiat world and those are

basically collateral hedges. But, you're

going to get volatility between these

two areas as sometimes the US is in

control and sometime China's in control.

But, you know, the one thing that you

won't get uh I absolutely guarantee is a

return to a gold standard. And some

people are arguing that this move by

China to accumulate gold is a return to

a gold standard. It definitely is not.

It may be giving uh the sort of a

connection to gold, but they can't go

back to a gold standard because it would

tie the hands of the monetary

authorities in terms of financing the

government. A great power u such as

China or America simply cannot afford to

go back to a to a rigid monetary uh or

digital standard. You simply can't do

it. You couldn't fix the dollar to

Bitcoin in the same way as you couldn't

fix the yuan to gold. It would be

impossible because you you'd let if you

like the ability to change fiscal policy

and that's what they need to do

particularly if we're in a ever get to

the stage of being in a kinetic war.

>> But there's also like a clear trend

right of um with the Shankai gold

exchange for example the push towards um

there also um being able to build an

infrastructure of vault nodes. Um the

latest example was for example of Saudi

Arabia where they traded gold with gold

uh oil with gold. Um do you think that

this is also then um one push further

then to gain access and control over the

pricing of gold itself and getting away

from the LBMA for example.

>> Yes. Uh I think absolutely no question

about that. I think China's trying to

control the gold price uh and they want

to accumulate gold and uh you know the

est the unofficial estimates are that

they've already accumulated uh

officially this is about 5,000 tons of

gold u now um if you add in um the

friends of China um so the Shanghai

Corporation Organization and the other

bricks you're looking at a pool of gold

which is far in excess of what America

has in Fort Knox. though already they're

they're way ahead um and therefore you

know it's in their interest to allow the

gold price to go up. So I think they

they want to control it uh for sure but

as I say I mean I think that that that

would give China a lot more power and

the idea that they're they're using gold

to exchange against commodities is

pretty much telling us that's that's

their intention. Now, even though um

they might allow Saudi Arabia to do a

gold oil exchange, okay, this these are

going to be very very selective trades.

Okay, but if you go back to the old gold

exchange standard that was run by

America up to 1971, uh we as individuals

were never allowed to to exchange our

gold for of for, you know, for $35 or

whatever it was or to buy gold at $35.

We couldn't do that. Okay? uh only

governments were allowed to do that.

Okay. So, there was there was a two-tier

gold market uh in the same way as

there's a two-tier gold there may well

be a two-tier gold market here in terms

of access to uh to that. It may be only

the Saudis or Brazil or whoever are

allowed to make those trades. Uh they

won't allow individuals to do that. Uh

certainly take to take gold out of out

of the economy. Uh there's a free gold

market in China, but you simply can't

export gold.

>> True. Um so now if like to to wrap it up

um if we look no more like on the asset

side and asset distribution and take

into consideration everything you've

just mentioned earlier on um that would

obviously have an impact on equities and

that would also obviously have an impact

on Bitcoin and gold more particularly um

how would you paint this picture now?

Okay. Well, if you come back to to this

uh cycle that I showed earlier. So, this

is the global equality cycle. If you

frame that schematically in this

diagram, you can see there are four

regimes on the left that we describe as

liquidity regimes, investment regimes.

Calm speculation turbulence rebound

the names are uh you know pretty

self-evident. And then you've got on the

right hand side the equivalent asset

allocation cycle. So what that really

says is that if you're in the upswing of

the cycle, really between the rebound or

through the rebound and calm phases,

equities do well. Commodities tend to do

well around the peak of the cycle, so

between calm and speculation. Cash is

very good on the way down uh when you're

risk off, so speculation to turbulence.

And then when you get into the sort of

the deep turbulence area, you want

government bonds, uh long duration

government bonds. And that's really how

the cycle evolves. Now um this traffic

light system is telling us you know how

to invest same information but just in a

different way and what that's saying is

that if you look at the left hand side

that's asset allocation and then right

hand side is industry groups you've got

four different regimes rebound calm

speculation turbulence on each and

you've got different asset groupings uh

as you go down the axis or industry

group uh industry groups on the right.

And what it says is that in rebound and

calm, you want equities. In rebound, you

want credits. You want to start taking

down your credits in calm, top slicing.

And then by speculation, you want to be

getting out of credits. And I think

we're in that speculation zone pretty

much now. Uh we're getting into that

that sort of area. So my view is you

want to be top slicing equities. You

want to be starting to get out of

credits. You still want poss you still

want to be in commodities. Uh and I

still yeah I still like gold uh for

example precious metals but I think

other commodities like copper are still

going to have still got legs uh in them

particularly if the US economy gets

traction as we suggest next year. Bond

duration uh is a bit too early but you

could be putting a toe in the water

beginning to get back into bonds. Um and

then if you look at industry groups uh

you know cyclicals

look great on the way up not so good on

the way on the liquidity cycle down.

technology has clearly been a leader.

It's very good in rebound and calm. Uh

financials come in through midcycle and

you know I think you I mean investors in

Europe would have enjoyed a huge run in

bank stocks uh in the last 12 months and

that's just quite normal for this stage

of the cycle. Uh and then you start to

see you know areas like uh energy

commodities really picking up late in

the cycle and that's where I think we

are now. I mean you've had tremendous

gains in mining stocks for example. So

you know what I'm saying is that despite

the fact that economists well not only

don't have any data to work with at the

moment for the US economy but I mean

they the economies have flatlined pretty

much ever since co there's been no

discernable economic cycle. What we've

had is an absolutely plain vanilla

investment cycle here uh moving through

uh this asset allocation schema almost

exactly uh both in assets and in terms

of industry groups. I mean nothing could

be more straightforward. Uh it's all

driven by the liquidity cycle not by

some notional economic cycle. And that's

what I think it always is anyway but you

know we can debate that one. I think

we're in a a late later cycle

speculative phase. So I think

>> I think we I mean if you look at this

chart here which is looking at global

liquidity uh and world wealth this is

annual changes uh the orange line is

global liquidity growth. Now what I've

done is project that over the next few

months but if you look more into 2026

that dotted line is going to come down.

uh it's got a little bit of momentum

near term, but you kind of get the idea

that the that the black line will follow

that. So, I'm not saying, you know,

completely bail out of markets right

now, but I think you've got to start

thinking about 2026 being a less

attractive year for sure. And if you

start to look at more specific things

like Bitcoin,

this is looking at the correlation

between um Bitcoin and global liquidity

weekly. Now, uh, I showed earlier on a

chart showing Fed liquidity and the S&P,

which was about a six-month lead time.

This one is shorter between global

liquidity and Bitcoin of about 13 weeks.

Uh, but what it's saying is that um, you

know, the black line is looking at

liquidity. This is a very short-term

indicator, but we would suspect that

that black line is going to start to

flatline more and more uh, over the

course of 2026.

uh it's possible it may even fall and

therefore you the prospective gains in

Bitcoin are not going to be there.

However, and this is the the however

which is always very difficult to time

um you know on setbacks I'd be a buyer

and you know I think the trend in both

gold and bitcoin is really well

established. I think you've got strong

strong compelling trends there because

we're in a world of monetary inflation

and therefore what you've got to do is

to buy these things on dips. And a sort

of a final comment is if you really want

to look at the long-term prospects,

start to look uh I'm going to show you

an earlier chart. This this chart is

looking at the structural deficit in the

US economy. Now the structural deficit

the orange line is shown as a percent of

GDP and that is basically careering

towards levels of 10 to 12% of GDP each

year by 2050. These are not our figures.

They come from the Congressional Budget

Office uh which is a bipartisan body in

the US. The only change we've made to

those figures is we've put a slightly

elevated uh number for defense spending

at 5% of GDP because that's the NATO

target. But otherwise, we take their

numbers. And what you can see is the

structural deficit which is four items,

social security spending, Medicare, the

interest bill and defense, no

discretionary spending at all. That's

what you get on the fiscal deficit. The

dotted line is debt held by the public

which you can see on that right scale uh

balloons up to 250% of GDP by 2050. Now

the Congressional Budget Office has a

similar projection of a very similar

figure. So our numbers are not out of

line. What does that mean? Well, this

chart is saying, look, let's just make

an assumption here and let's make an

assumption that the gold value of US

government debt does not change uh from

now uh until 2050. What would the gold

price have to be to match that increase

in debt? And what you see there is the

implied gold price. Now that means that

gold hits $10,000 by the mid 2030s and

prospectively could get to $25,000 an

ounce by 2050. Okay, there are two

things to bear in mind when you look at

this. Number one, the long-term ratio

between Bitcoin and gold seems to be

about 28 times. Okay, and that's, you

know, that may be a trading rule, but

it's not a bad long-term rule, okay, to

think about. Okay. So, uh you could be,

you know, easily thinking of uh of

hugely uh huge inflation in Bitcoin

prices over the long term. The second

thing to say is that if people think

this is fanciful, think what happened in

the last 25 years, the stock of US debt

went up 10 times, right? From year 2000

to year 2025, a tfold increase in

federal government debt. That's eye

watering. The S&P over that same time

frame went up barely five times. Okay.

Gold prices have gone up 13 times. So

gold has more than match the increase in

federal debt. And we're just saying

let's assume it matches the increase in

federal debt. So that is where the

long-term future is. You've got to have

monetary inflation hedges because we're

in a fiat world. And we're in a fiat

world until we're not. But at the moment

we're in a fiat world. And to get out of

a fiat world, you'd have to have really

uh huge austerity from governments and

no prospect of heightened military

tensions uh either.

>> So bottom line is in this kind of setup,

gold and bitcoin are the things to hold

on fundamental long-term perspective

>> for the long term for for younger

generations. This is what you got to

invest in in my view. Okay? uh if you're

older like me, you can fine-tune it, but

um I I think generally you just got to

buy buy these things on weakness year

after year. This is pretty clear. But

for example, Francis Hunt who made an

argument that now gold is only catching

up to uh the whole um money supply

that's been pumped also before the 2000s

that only now is entering a certain

convexity and parabolic acceleration

phase. But in your chart is kind of

superposed. So you do not take into

consideration what um um yeah preceded

that period or is that

>> I mean because I think that you know

what we have is what we you what we've

got and I'm starting from this point and

you know you've also got to take into

account the fact that policy makers are

mischievous and it's not in not in their

interests uh to allow the gold price to

go up to this extent. uh in the same way

you know as I've tried to say there's

sort of competition here. So uh there

have been many attempts before to try

and uh you know try and undermine the

gold market whether it's shortselling by

bullion banks or whatever it may be. Uh

there are a lot of constraints on on the

free movement or free pricing of gold.

Uh so let's not rule that out but I

think generally uh you know I'd be

comfortable where we are now of seeing

uh you know this sort of this sort of

escalation in the gold price. I mean, if

it's more than that, great. I'll come

along quietly, but I think we're going

to get decent gains anyway. I mean, it's

an asset which is likely to outperform

stock markets considerably.

>> So, in that sense, it would also leave

equities more like moving side at least

sideways for the time being, if not uh

totally.

>> Well, I think let's let's get the

perspective. I think over the next 12

months, I think I would at at best see a

rangebound equity market. And we know

that you know equity markets tend not to

stand still. So there's clearly downside

risks particularly if policy makers make

mistakes. So that I think is clear in

the longer term because equities are a

liquidity sensitive asset too and I'm

suggesting we need lots of liquidity

because we've got lots of debt whether

we like it or not and that debt is

growing exponentially. Uh we're going to

be in a world where there's a lot more

liquidity and therefore equity prices

will go up. uh bonds will be uh you know

will lose their value. I'm not a I'm not

keen on bond markets apart from a very

short-term defensive move, but I think

bonds in the long term are not. And you

know, maybe this is the wrong analogy,

but it's an analogy that is extremely

apt is look at what happened in Germany

uh after World War I with

hyperinflation. Uh you had a situation

there where if you were a bond holder,

uh you lost almost all your wealth and

that tended to be the middle classes and

particularly uh the older generations.

they lost most of their wealth and who

gained from that period because it was

clearly an income redistribution. It

tended to be uh the younger generations

who despite the fact their peers and

their parents said or rather their

parents and grandparents said don't

invest in equities these are crazy

investments okay go for the safety of

German government bonds because they've

always paid out that was such a bad

investment recommendation but it draws a

parallel with what's happening now and

people are saying don't invest in

Bitcoin uh or cryptocurrencies because

these are crazy investments nonetheless

they've done extremely well and that

they seem to be inflation proof and

that's the parallel I would draw. Uh now

I' I'd stop there because there are a

lot of unfortunate analogies if you

start to extrapolate that German

experience but the fact is uh that you

see these huge differentials in in asset

performance during high inflation

periods and that's what we're likely to

see. Equities will do pretty well in a

high inflation period. I'm not

suggesting we're getting in

hyperinflation, but you know, we're

clearly treading down the road of more

inflation. Equities do well. Large cap

equities will do well, but other assets

will do a lot better. And I think

Bitcoin and gold are the things you want

to own.

>> Beautiful conclusion, Michael. Thanks a

lot for this precious knowledge and

unpacking all this those complex topics.

Um, as a lot of people know, but those

who don't know, you also have a Substack

uh to which you provide more and more

analysis also for people who want to dig

deeper into your articles and and your

work. You also have a website and um an

X account that will will link everything

down in the description below. Again,

Michael, thanks a lot.

>> Great pleasure. Thanks so much.

Hey.