Money Never Disappears, It Just Moves — Notes on MacroVoices #545 with Michael Howell

When the sun stands at noon it begins to decline; when the moon is full it begins to wane. Heaven and earth fill and empty, waxing and waning with the seasons.

—— The Book of Changes, Great Commentary II (pre-Qin China; translated by the author)

What This Episode Is About

On the August 13, 2026 episode of MacroVoices, host Eric Townsend welcomed Michael Howell of Crossborder Capital. Howell’s day job is measuring global liquidity — in plain terms, tracking how much money is flowing through the world’s financial system and whether that flow is speeding up or slowing down. That measurement is his primary lens on asset prices.

The episode is titled “Warsh vs. The Markets,” and it does cover the new Fed chair’s tug-of-war with the bond market. But the real skeleton of the conversation isn’t personnel — it’s something colder: a roughly five-to-six-year liquidity cycle that has turned down. From that starting point Howell works outward to bond yields, gold, oil, the yen, and whether equity risk should be dialled back.

What stayed with me wasn’t any of his numbers. It was a piece of plain language he repeated: all money that is anywhere must be somewhere. It sounds like a tautology. It’s actually the engine of the entire argument.

The Main Points

1. Liquidity has peaked — but not for the reason you’d guess.

Most people assume money leaves markets because the central bank starts tightening. Howell says that’s not what’s happening yet; central bank tightening is the chapter still to come. What’s actually draining the pool is a strong real economy. Companies are buying materials, building, restocking, paying higher wages — that money gets pulled out of financial markets and into the physical world. His phrasing: asset markets had their blaze of performance, and now it’s the real economy’s turn.

The direction of causation matters. If money is scarce because a central bank hit the brakes, your homework is policy. If it’s scarce because the economy is booming, your homework is activity data. Those are completely different reading lists.

2. “Past the peak” and “at the bottom” are far apart.

He watches the growth rate of liquidity, not the level. The absolute dollar level is still elevated; the rate of change is rolling over, and pricing follows the rate of change. He reckons we’re about 60% of the way through the downswing, with a trough most likely mid-to-late 2027 — a bottom inside the next six months is unlikely.

A small moment I liked: Townsend caught one slide labelling the cycle 65 months and another drawing it as 60, and asked which. Howell’s answer was that this belongs in the category of approximately right rather than precisely wrong — it’s a five-to-six-year order of magnitude, don’t load too much confidence onto it. People willing to say “I’m not that precise here” tend to be more trustworthy elsewhere.

3. The title fight: the chair wants one curve, the market wants the opposite one.

Howell’s position is that central banks don’t set interest rates — markets do, and it’s the long end driving the short end, not the textbook version. Bond yields are rising globally (China excepted) because nominal GDP growth is strong; he puts it in a 6–8% band. The Fed can’t easily resist that, and most of the clever technical tricks have already been spent.

Meanwhile the mix Warsh signalled at the FOMC presser was: let the market do the tightening for him (long yields rise on their own) while keeping ample reserves at the front end. That combination steepens the curve. But in a liquidity downswing, the natural tendency is bear flattening. One side wants steep, the other wants flat — that’s the actual substance of “Warsh vs. The Markets.” Not a personality clash; two mechanisms pulling on the same curve.

4. Why bubbles grow themselves: collateral as the amplifier.

This was the most worth-keeping mechanism in the episode. Roughly 80% of all lending in the world economy is now collateral-based. So the sequence runs: an initial push (possibly from a central bank) → asset prices rise → collateral values rise → the same borrowers can borrow more → more money flows in and pushes assets higher.

The crucial part is that once this loop starts, it’s beyond the central bank’s control — it’s endogenous to the financial system. That explains two things: why every historical bubble traces back to a big liquidity expansion, and why busts arrive faster than anyone models — the same amplifier works just as well in reverse. His conclusion leaves no wiggle room: after every bubble comes a bust.

5. China is running the opposite way, and gold is the thermometer.

His read on China: too much debt, deflationary pressure, government bond yields down at 1.7% (the only major bond market falling). That state can’t persist. The way out is to devalue the debt — let domestic prices and wages rise relative to the nominal debt stack. And China has capital controls, large reserves, and compliant state banks, so it can attempt something contradictory-looking: hold the yuan steady against the dollar externally while devaluing internally.

He thinks that, not geopolitics, is what’s actually been driving gold’s swings. He goes further and suggests watching the yuan gold price rather than the dollar price, on the grounds that Shanghai is now the marginal pricer. The virtue of this framework is that it’s falsifiable — if the PBoC’s liquidity injections fade, his thesis should be marked down. He’s also upfront that the chart overlaying the PBoC’s daily balance sheet against gold is “proof by association,” not inside knowledge.

6. The gold-oil ratio: an exercise honestly labelled as one.

He discusses the gold-oil ratio as a mean-reverting real exchange rate reflecting relative extraction costs of two minerals — historically stable, long-run average around 20x. So he runs the arithmetic: gold underpinned at $4,000, divided by 20, gives $200 oil. Loosen the ratio to 30x and you still get $135.

What I want to flag is the sentence he attached himself: “This isn’t a projection. I’m triangulating, playing with numbers, asking what if.” That’s the responsible version. Strip that line out and keep only the “$200 oil” headline, and you’ve got a categorically different object. That distinction is worth carrying into everything financial you read.

7. Where we are on the allocation clock: “speculation.”

He splits the cycle into four regimes: calm, speculation, turbulence, rebound. Calm is when liquidity is above average and expanding — you just hold beta and everything works. That was the last two years, and he thinks it’s over. We’re now in speculation: you can still make returns, but volatility is high, so the quality of those returns is poor.

His supporting observation is vivid: plenty of asset managers are down this year even though the big indices are up. The index makes highs while the people trading it struggle — that’s what this regime looks like from the inside.

Going Further

1. “The index keeps hitting highs. Why don’t I feel it?”

This is probably the point in the episode closest to most people’s daily life. The headline says record high; your own statement says flat or worse; and you start wondering whether you picked wrong, whether you’re just bad at this, whether you should give up and buy the index.

Howell’s remark that many professionals are down this year offers a different explanation: this may not be about you. It may be a feature of this phase.

Unpack it. Index gains come in two shapes. In one, most constituents rise together — almost any selection works, and that’s his “calm.” In the other, a handful of names carry the index while everything else stalls or falls, and a large gap opens between “the index’s return” and “an ordinary person’s return.” The market desk segment of this same episode gave a concrete sample: speculative positioning in the S&P sat at the 96th percentile of its one-year range, the Dow at the 99th, while the Nasdaq was near zero and in fact net short. Same “bull market,” temperature differences wide enough to look like two markets.

So next time that doubt shows up, the more useful question isn’t “did I pick wrong?” but “who exactly is going up?” Look at breadth. Look at whether sectors are moving together. If the answer is “only a few names,” then your lag versus the index is structural, not a skill problem. And note the trap on the other side: the obvious move for someone trying to “catch up to the index” is to concentrate into those few names — which is the step that genuinely enlarges risk.

The portable takeaway: an index is a weighted average, not your experience. When the two diverge badly, check breadth before you interrogate yourself.

2. “He says gold is going up and oil could double — should I follow?”

The episode contains some cinematic numbers: $200 oil, a 10-year yield testing 6%, gold trending higher even if not to new highs by year end. The instinct on hearing these is binary — believe all of it, or dismiss the man as talking his book.

There’s a third and better use: take someone’s conclusion apart into the checklist they themselves handed you.

Howell was unusually generous with his indicators. He said gold follows the PBoC’s injection pace, and if that fades, gold gets challenged. He said silver is the high-beta play, and silver outperforming gold would signal sentiment returning to precious metals. He said the turn from turbulence to rebound would show up as an inflection in liquidity data, a bull steepening in yield curves, and real damage in commodity prices — and he added that we are a long, long way from that point.

Those are worth far more than “$200 oil.” The number is his conclusion; the indicators are his criteria. Criteria you can test yourself. A number you can only believe or not.

One layer deeper: the same mechanism supports both bullish and bearish conclusions, depending on which asset you’re looking at. His chain runs liquidity down → real economy strong → commodities good, financial assets defensive. So “oil up” and “cut equity beta” aren’t in tension in his framework; they’re two faces of one claim. If you extract the first half to buy something and skip the defensive half, you’re not using his framework — you’re picking the parts of his sentences you wanted to hear.

The portable takeaway: when you hear a conclusion, ask whether the speaker also handed over “here’s what would prove me wrong.” If they did, copy that list. If they didn’t, the conclusion is a story, not a tool.

3. “Isn’t the Fed the one who decides rates?”

A lot of people run this mental model: the Fed sets rates, rates set stocks and bonds, so all you need is to guess the Fed. This episode inverts it. Howell says the market sets rates, the long end pulls the short end, and the central bank is closer to ratifying a fact that has already occurred.

If that’s right, your homework list changes entirely. Rather than handicapping the next meeting, watch the trend in nominal GDP — he credits fiscal spending, the AI investment boom, and deglobalisation-driven capex and inventory rebuild for pushing it to 6–8% — because that’s the gravity under yields. He even offers a ready-made proxy: the 2-year Treasury has long been a good leading indicator of policy rates. He mentions he asked an AI model how accurate it is and got back 85%. A charming aside, but also a reminder: that 85% came from a model, not from his own work, so discount it accordingly.

Japan is the live experiment for this whole chain. Authorities have held the short end down while the long end chases above-4% nominal GDP, and the result is sustained pressure on the yen — until they decide to tighten. Howell frames it as a warning for the US: if you don’t address the underlying problem and keep funding at the short end, that is monetisation, and the pressure eventually surfaces in the currency. What you suppress doesn’t vanish. It comes out somewhere else.

The portable takeaway: when you notice you’re spending all day guessing one official’s next move, stop and ask — is this variable independent, or is it somebody else’s dependent variable?

Where to Look Next

• The episode itself (MacroVoices #545, August 13, 2026) and the slide deck the show provides — the chart numbers referenced in the interview all line up.
• Michael Howell’s book Capital Wars and the Substack of the same name hold the full version of this liquidity framework; the episode is one slice of it.
• If you want to test it yourself, the lowest-barrier public data set is: the US ISM and equivalent business surveys elsewhere (is the real economy actually draining the pool?), the US 2-year and 10-year Treasury yields (how is the market pricing policy?), and the gold price in yuan (does the China leg hold up?). None of these are behind a paywall.
• The market desk segment’s positioning data comes from the weekly US Commitments of Traders report, published every Friday. Anyone can check where positioning sits within its historical range.

The One Thing to Take Away

One idea, the plain sentence he said three times:

Money never vanishes. It just goes and sits somewhere else.

The power of that line is that it converts an unanswerable question — is there more or less? — into a checkable one: where is it now? Money leaving markets didn’t evaporate; it went into factories and payrolls. Gold rising isn’t necessarily fear; it may be a tap opening somewhere specific. Once you build the habit of asking “where did it go,” a lot of apparently contradictory phenomena turn out to be entries in the same ledger.

And this habit has nothing to do with investing.

Something you can do today: pick one thing in your life that feels like it has gotten worse lately — you and a family member have run out of things to say, your stamina isn’t what it was, a project you keep talking about hasn’t moved an inch. Don’t ask “am I not trying hard enough?” That question has no answer and no exit. Ask instead:

“Where did the time and energy that used to be here actually go?”

Then write down three specific recipients. Not “work” — that’s too big to act on. Write it at the resolution of “10pm to midnight, every night, on my phone,” “both weekend days absorbed by other people’s emergencies,” “one unresolved thing running in the background draining power all day.”

Most of the time the answer isn’t that you got lazy. It’s that your money is all still there — it’s just sitting in a different account. Seeing which account is the only way to have a real conversation about moving it.

Raw Markdown

This article is an educational discussion of investment method. It is not advice to buy or sell any individual security, offers no target prices, and does not analyze any current holding. Investing carries risk; make your own decisions or consult a qualified professional.