Inner Loop Intelligence

Graph View

15 min read

Global Liquidity Cycle — Downturn, Transmission Shifts & Fed Response

Shifting liquidity conditions between US (QT) and Asia (China expansion) are driving a rotation from speculative assets to real assets and emerging markets.

Thesis Health

No signal data available yet.

Thesis / Overview

Shifting liquidity conditions between US (QT) and Asia (China expansion) are driving a rotation from speculative assets to real assets and emerging markets.

Key claims

🟢 Supporting    🔴 Challenging    🟡 Contested    💬 Commentary

🟢 Supporting Evidence (31)

  • Kansas City Fed approved limited-purpose master account for Kraken Financial - first digital asset firm with direct Fed payment access. Reducing interbank transaction times from 6 days materially increases velocity of money. Warsh could unleash a flood by approving applications by default. Circle, Ripple, Tether are obvious plays. [@Mark Tetreault] (2026-04-07 — fresh) → source
  • Authors expect no Fed rate cuts this year despite incoming Trump nominee Kevin Warsh — a non-consensus view. [@Stuart Hardy] (2026-04-07 — fresh) → source
  • Travis Kling: Fed and government will be forced into low interest rates, QE-style accommodation and increasing deficit spending just to keep prices flat. This will offset innovation-driven deflation. [@Will B] (2026-04-07 — fresh) → source
  • BCA Research argues Fed faces ‘double jeopardy’: will de facto shift inflation target to 2.5-3.5% and continue cutting rates even with inflation in that range. Structural driver is almost 3 million fewer older workers post-pandemic. [@Stuart Hardy] (2026-04-07 — fresh) → source
  • Gromen argues sixth grade maths shows Warsh will be ‘as dovish as Trump needs’, with unspoken implications that USD will resume orderly descent and gold will ascend. [@Stuart Hardy] (2026-04-07 — fresh) → source
  • A new transmission mechanism is needed. I’m pretty sure they’re working on it. Will it arrive in time to affect the mid-terms and debt refinancing? [@Mark Tetreault] (2026-04-07 — fresh) → source
  • Very similar to what Howell has been saying. This is currently my base case. [@Stuart Hardy] (2026-04-07 — fresh) → source
  • Many emerging markets are quietly entering a ‘triple merit’ scenario of stronger exchange rates, falling real rates and rising asset prices, with South Africa standing out as a leading example. [@Gaetan Warzee] (2026-04-07 — fresh) → source
  • MSA analysis says if T-Bonds break 114, Fed would ‘call in the cavalry’ and push monetary tools to maximum. Market implication is higher real money assets like gold/silver plus broader commodities. [@Stuart Hardy] (2026-04-07 — fresh) → source
  • Has always had problem with Raoul’s nuclear print thesis — never accepted they’d do that without a trigger. That trigger would likely need to be the mother of all selloffs. Building dry powder to buy liquidity sensitive stuff if all hell breaks loose. [@Stuart Hardy] (2026-04-07 — fresh) → source
  • Discussion at Saxo lunch highlighted that crisis-to-print angle means it has to get much worse before run it hot programme saves equities. [@Will B] (2026-04-07 — fresh) → source
  • Sold down to ~2% crypto. Given cyclicality, no reason to average in before June. [@Jesse] (2026-04-07 — fresh) → source
  • AI stocks drawing liquidity from crypto is the simple explanation for underperformance. [@Scott Leavitt] (2026-04-07 — fresh) → source
  • Portfolio has changed dramatically since October - stocks have gained more dollars and crypto unlikely to get it back short-medium term. Crypto’s performance since 10/10 has ruined its reputation. Sold down to <5% crypto. [@James S] (2026-04-07 — fresh) → source
  • Frustrated that frameworks (Raoul + astrochart) stopped working at the same time. Lost a lot of edge. [@Nicky Adam] (2026-04-07 — fresh) → source
  • Raoul’s framework slowly evolving but lagging reality rather than leading it. A framework that evolves after the fact isn’t great, certainly not $10k great. [@Antonio Furtado] (2026-04-07 — fresh) → source
  • Keeps reading about ‘wall of liquidity’ that will hit markets but it isn’t doing anything for crypto. Thinks all that liquidity is being placed elsewhere, maybe gold. [@Antonio Furtado] (2026-04-07 — fresh) → source
  • Raoul’s charts are fundamentally broken, from an era when global liquidity was fine to model because flows were fungible. Now need more granularity. AI capex is a real liquidity sink for the first time since dot-com. [@thibault] (2026-04-07 — fresh) → source
  • 42 Macro says global liquidity down -4% on 3mo SAAR basis. Only US (2%) and China (4%) expanding. Eurozone -17%, Japan -8%, Switzerland -9%, UK -13%. Longer the US-Israel-Iran war persists, greater the reduction in liquidity and decline in asset markets. [@Mark Griffin] (2026-04-07 — fresh) → source
  • Global liquidity contracting for fourth straight week at $187.9T. Annual growth slipping to 6.4%. SMB 3-month annualized growth turned negative at -4.0%. Rising bond volatility pushing haircuts higher and depressing collateral multiplier. [@Nicky Adam] (2026-04-07 — fresh) → source
  • Global liquidity at ATH means nothing without proper transmission mechanism. ‘That liquidity might as well be on the moon.’ [@Mark Tetreault] (2026-04-07 — fresh) → source
  • Notes shift away from US-based consumer/retail demand for crypto. Other countries’ retail demand might step in. Crypto market cap is still very small with more urgent use case ex-US. [@Mark Tetreault] (2026-04-07 — fresh) → source
  • If Mark’s thesis is right, Macro Summer expectations will be ‘Real-World Summer’ rather than ‘Crypto Summer’. Following Howell’s Defensive/Commodity rotation or Raoul’s Infrastructure/Capex theme would benefit, while those waiting for speculative crypto snapback would be disappointed by new bottom-heavy transmission mechanism. Basically it’s Main St over Wall St play. [@Stuart Hardy] (2026-04-07 — fresh) → source
  • Chris Tipper nailed it on why alligator jaws didn’t close — explaining the disconnect between liquidity and Bitcoin. [@Mark Griffin] (2026-04-07 — fresh) → source
  • Howell himself questions his own thesis. Reports Howell noting structural necessity for large Fed balance sheet and shift from Fed QE to Treasury QE, which changes the transmission dynamics. [@Nicky Adam] (2026-04-07 — fresh) → source
  • Global liquidity hit all-time high of $188.8T, with 3-month annualized growth at 3.6% and annual growth at strong 8.7%. Shadow Monetary Base reached $112.1T with 3-month annualized growth jumping to 9.1%. [@Nicky Adam] (2026-04-07 — fresh) → source
  • Howell is ‘all fucked up’ because he’s not incorporating transmission mechanism dynamics. The liquidity readings might as well be on the moon if they don’t reach risk assets. [@Mark Tetreault] (2026-04-07 — fresh) → source
  • Basically it’s the Main St over Wall St play. [@Stuart Hardy] (2026-04-07 — fresh) → source
  • The liquidity might as well be on the moon without proper transmission mechanism dynamics. Missing piece in Howell’s ATH liquidity readings is incorporation of transmission mechanism. [@Mark Tetreault] (2026-04-07 — fresh) → source
  • Agrees with restructuring thesis. Does not expect money printing this year as done in the past. [@Gary Winters] (2026-04-07 — fresh) → source
  • Agrees with the restructuring thesis and notes it would mess up Howell’s whole framework. The next step is to philosophize about how this ‘trickle up’ approach will flip financial asset values. Theoretically it could cause a huge re-rating without a recession. [@Jesse] (2026-04-07 — fresh) → source

🔴 Challenging Evidence (14)

  • On long-term horizon everything is bullish. GMI has longest time horizon of all but not great at trading smaller moves. [@thibault] (2026-04-07 — fresh) → source
  • Has anything in RV or GMI actually been negative other than on very short-term time horizon? [@James S] (2026-04-07 — fresh) → source
  • Believe Raoul’s liquidity analysis doesn’t really work anymore and needs to be more granular. Too much cognitive dissonance in proclaiming ‘fastest age of technological revolution ever’ and expecting everything to be ok/not change. [@thibault] (2026-04-07 — fresh) → source
  • Raoul & Julien don’t think the Fed would raise rates into a supply shock. [@James S] (2026-04-07 — fresh) → source
  • Dario Perkins argues even if AI drives productivity boom, it doesn’t justify lower rates—opposite may be true if AI raises r* through increased capex and reduced saving, as happened by 1999. [@Stuart Hardy] (2026-04-07 — fresh) → source
  • Claude 4.6 Opus analysis shows GMI is spewing nonsense on TGA drawdowns and eSLR reform effects. The $200bn TGA drawdown claim doesn’t square with Treasury’s own published targets. [@Will B] (2026-04-07 — fresh) → source
  • GMI’s credibility has never been lower after Q4’s ‘The Waiting Room’ and liquidity tsunami posts. They admit they missed the US liquidity impact and wouldn’t have traded it anyway due to its temporary nature. [@Will B] (2026-04-07 — fresh) → source
  • Crypto allocation remains the same. Just another downturn to live through. [@Mark Tetreault] (2026-04-07 — fresh) → source
  • Questions bearish framing: ‘liquidity is at ATH. Thats it. Bullish. What am I missing?’ [@James S] (2026-04-07 — fresh) → source
  • One difference is the US will push the crypto call despite Main Street focus. [@Gary Winters] (2026-04-07 — fresh) → source
  • Doesn’t think it’s super complicated — Bitcoin is just on a 4 year cycle. The halving of supply flow every 4 years has something to do with it. [@Jesse] (2026-04-07 — fresh) → source
  • S&P and NASDAQ continued to rise or went flat, stocks outside Mag7 did great. BTC just disconnected for some other reason. Doesn’t agree liquidity was the problem. [@James S] (2026-04-07 — fresh) → source
  • Howell calls for peak in liquidity cycle. Predicts Bitcoin more likely to drop to $30k than rise to $90k. Global liquidity has peaked and entered multi-year downturn expected to bottom in 2027. Real economy strengthening diverts liquidity to working capital and capex on Main Street. [@Nicky Adam] (2026-04-07 — fresh) → source
  • Taking into account the 3 month lag, April should be a good month. Provided no black swans, we should be chopping along, no flushes, before going higher. Since July’s low we are only up $5T but liquidity should still have a word to say going forward. [@Nicky Adam] (2026-04-07 — fresh) → source

🟡 Contested / Debated (2)

  • Subscribed to Howell’s research for 1 month and canceled. His interviews add value but not his subscription. He mentioned he discontinued his money management business to focus on research. [@Jesse] (2026-04-07 — fresh) → source
  • Pays $75/month for Howell’s liquidity tracker to watch for a serious nosedive + 12 week lag like end of 2024. But most of his articles don’t gel—he’s been ‘dancing near the door’ since Christmas 2024. The next few months will decide. [@James S] (2026-04-07 — fresh) → source

💬 Commentary & Context (11)

  • Notes synthetic longs aren’t worth much due to margin requirements being similar to buying shares on margin. Prefers long dated OTM naked calls. [@Jesse] (2026-04-07 — fresh) → source
  • A very negative Michael Howell today—bearish, selling US stocks, raising cash. [@James S] (2026-04-07 — fresh) → source
  • Howell agrees we’re headed for much higher rates in near-medium term. But his conclusion of long mid-duration bonds and gold is funny while bonds are tanking and gold is falling off a cliff. [@Jesse] (2026-04-07 — fresh) → source
  • Still keeps an eye on Howell’s global liquidity chart. If it falls, will de-risk with a 12 week lag. [@James S] (2026-04-07 — fresh) → source
  • GMI isn’t asking us to stop using our brains. They are suggesting we stop letting the current bearish noise (‘narratives’) talk us out of a long-term structural trade. [@Tom van Buren] (2026-04-07 — fresh) → source
  • Raoul Pal posted ‘keep calm and carry on’ on RV platform amid noise. Still bullish on SUI, could be generational buying opportunity. [@Mark Griffin] (2026-04-07 — fresh) → source
  • Key question: what would make it revert? If hyperscaler capex peaks or debt issuance normalizes, does competing bid evaporate and liquidity flow back to crypto? [@Stuart Hardy] (2026-04-07 — fresh) → source
  • Liquidity levels: Aug 2025 range-bound >$185T, Dec 2025 $187.4T, Jan 2026 $189.3T, Feb 2026 $189.3T. Only up $5T since July’s low. Assuming 3-month lag, April should be good month, bullish price action returning end of March. [@Nicky Adam] (2026-04-07 — fresh) → source
  • Base case for 2026 was few short 10-20% dips at index level but it’s been happening under the hood. If you believe in a big dip then portfolio makes sense — rotate into BTC and some of the AI buildout trade which has been too hot but will be more secular than people assume. [@thibault] (2026-04-07 — fresh) → source
  • Howell’s thesis that Chinese liquidity favours gold and silver is seducing but yet to be proven beyond doubt. Second order effects could allow liquidity to spill over. Once geopolitical uncertainty fades, rotations can happen and capital should flow into deeply out of favour crypto. [@Nicky Adam] (2026-04-07 — fresh) → source
  • Questions whether we should account for the source of liquidity — if it’s all from China, it may get to Bitcoin via Hong Kong differently. Perhaps gold reacts to current liquidity and acts as conduit to other risk assets on a lag. [@Stuart Hardy] (2026-04-07 — fresh) → source

Counter-arguments & data gaps

What would change this view

Events reckoned with

  • Global liquidity contracts for fourth straight week to $187.9T — reckoned 2026-03-31
  • Global liquidity contracting for fourth straight week to $187.9T — reckoned 2026-03-31
  • Global liquidity contracts to $187.9T, fourth consecutive weekly decline — reckoned 2026-03-31
  • Global liquidity contracts to US$187.9 trillion, fourth straight weekly decline — reckoned 2026-03-31
  • Global liquidity contracts to $187.9T, fourth consecutive weekly decline — reckoned 2026-03-31
  • T-bond futures close below 114, approaching crisis trigger threshold — reckoned 2026-03-21
  • MOVE index spikes to 115, now at 108 — reckoned 2026-03-21
  • 42 Macro reports global liquidity down -4% on 3mo SAAR basis — reckoned 2026-03-15
  • Chris Tipper analysis on why alligator jaws didn’t close shared by Mark Griffin — reckoned 2026-03-04
  • Kansas City Fed approves limited-purpose master account for Kraken Financial — reckoned 2026-03-04
  • Howell calls for peak in liquidity cycle — reckoned 2026-02-22
  • Howell report on Warsh nomination and hawkish policy implications — reckoned 2026-02-22
  • Global liquidity reaches all-time high of $188.8T — reckoned 2026-02-18
  • Global liquidity hits record $188.8T but momentum indicators weakening — reckoned 2026-02-18
  • Strong PBoC pre-Lunar New Year injections reported as key driver of global liquidity — reckoned 2026-02-18
  • Global liquidity hits ATH of $188.8T while Bitcoin remains weak — reckoned 2026-02-18
  • Global liquidity hits ATH of US$188.8 trillion — reckoned 2026-02-18
  • Global liquidity hits ATH at $188.8T with 8.7% annual growth — reckoned 2026-02-18
  • PBoC pre-Lunar New Year liquidity injections drive global liquidity higher — reckoned 2026-02-18
  • Mark Tetreault articulates thesis that Treasury/Fed restructuring liquidity transmission mechanism — reckoned 2026-02-06
  • Mark Tetreault proposes liquidity transmission restructuring thesis — reckoned 2026-02-06
  • Stuart Hardy identifies Main St over Wall St dynamic in new liquidity regime — reckoned 2026-02-06
  • Mark Tetreault identifies Treasury/Fed plumbing restructuring as key macro theme — reckoned 2026-02-06
  • Kevin Warsh Fed Chair nomination discussed as factor in policy shift — reckoned 2026-02-06
  • Mark Tetreault outlines thesis on liquidity transmission mechanism restructuring — reckoned 2026-02-06
  • Fed held rates at 3.50-3.75% — reckoned 2026-01-28
  • Fed held rates at 3.50-3.75%, describing inflation as ‘somewhat elevated’ — reckoned 2026-01-28
  • Kevin Warsh nominated as Fed Chair — reckoned 2026-01-01
  • Fed restarted QE with approximately $40bn in Treasury bill purchases — reckoned 2025-12-10