MICHAEL HOWELL | Always buy the dip in monetary hedges in a monetary inflation environment!

Finance-Focused Summary

Michael Howell argues that the main investment backdrop is persistent monetary inflation, driven by the need to refinance large and growing debt loads—not necessarily hyperinflation or an imminent repeat of the 2008 financial crisis. He says portfolios should therefore hold monetary-inflation hedges, while recognizing that their prices can fall sharply along the way.

Macro and Debt Outlook

• Global borrowing: The host cites expected global government and corporate borrowing of about $29 trillion this year, up 17% from last year and roughly double the level 10 years ago. Global debt issuance is expected to exceed 23% of global GDP, versus 17.5% in 2019; the host compares this with 21.4% in 2009 and 27.5% in 2020.
• Howell separates the risk of slow economic growth from the risk of a financial-market crash. He considers a period of slower growth more likely than a 2008-style crisis, while warning that refinancing pressures remain substantial.
• In his view, debt in a credit-based monetary system is unlikely simply to be defaulted on without damaging the broader credit mechanism. The likely route is monetization—creating liquidity to support refinancing.
• He says roughly 80% of primary financial-market transactions are now debt-refinancing transactions, making the system dependent on sufficient financial-sector balance-sheet capacity and liquidity.
• AI investment is adding to corporate borrowing needs. Howell also highlights a post-COVID debt maturity wall: borrowers that refinanced at very low rates extended maturities into the latter part of this decade. That debt will need to be refinanced alongside government deficits and AI spending.
• He expects slower growth to become a greater concern in 2027–2028. The host also cites consumer pressures—including mortgage rates moving toward 8%, foreclosures up 42% in the prior quarter, low savings, and weak sentiment—while Howell says the economy may be masking household strain through government, AI, and higher-income consumer spending.

Inflation, Monetary Policy, and Liquidity

• Howell estimates monetary inflation could run at roughly 7–8% annually. He distinguishes this from “main-street” inflation, which he estimates could be around 5–6%, depending on productivity, Chinese goods, and energy costs.
• His conceptual distinction: financial repression erodes income, while monetary inflation erodes wealth. He says the latter requires a significant change in asset allocation.
• He views the Federal Reserve as focused on managing money-market liquidity, bank reserves, and repo funding—not just the headline policy rate. He cites the U.S. repo market at roughly $12–15 trillion and says policymakers are alert to refinancing risks, reducing the odds of a sudden funding accident in his view.
• Howell argues that monetary inflation can continue even when policy rates are high: interest payments from the government to private holders can add income and, if financed through monetization, liquidity.
• He says debt growth may run around 6–7% annually and argues liquidity must grow at a comparable rate to keep the debt-to-liquidity relationship stable. He views financial crises over the past 20–30 years primarily as debt-refinancing crises.
• He characterizes the Fed as operating at “half speed”: tightening may occur, but he expects its scope to be limited.

Asset Allocation and Market Views

• Gold: Howell says gold should be a core, long-term monetary-inflation hedge. He argues it has historically kept pace with growth in U.S. debt and notes U.S. debt is around $40 trillion, with $50 trillion a possible future level.
• Bitcoin and commodities: He groups gold, Bitcoin, and commodities as monetary-inflation hedges and recommends buying more when they sell off, rather than expecting them to rise in a straight line.
• Bonds: His view is timeframe-dependent:
  • Tactically, he sees scope for a bond rally as slower growth, high yields, and negative investor positioning weigh on the economy and potentially bring rate expectations down.
  • Medium term, he says he would not want to hold bonds as a core position, because he doubts they will clear the 6–7% debt-growth hurdle.
  • If bonds rally, he expects commodities could peak or pull back—but sees that as a potential buying opportunity, not a reason to sell commodities.
• U.S. Treasuries and the dollar: Howell says the dollar remains the “cleanest shirt in the laundry” among major currencies. He attributes the recent rise in Treasury yields mainly to stronger growth and higher policy-rate expectations, rather than rising term or risk premiums. A cooler economy could, in his view, bring Treasury demand back.
• Equities: He says higher bond yields have generally compressed U.S. equity P/E multiples, while stronger-than-usual earnings acceleration—largely linked to AI capital spending and possibly oil profits—has supported stocks.
• Government bill issuance: Howell describes a shift toward short-dated government debt. Banks, he says, have demand for bills because they can match the duration of growing deposit liabilities. He estimates U.S. Treasury bills could make up about 30% of U.S. debt under the approach he discusses. The trade-off is greater exposure to short-term rates.
• Treasury buybacks: He interprets buybacks as a way to improve liquidity and suppress volatility, rather than as an attempt to materially move yields. He notes that a $6 billion buyback would be small relative to a roughly $40 trillion Treasury market.
• China and gold: Howell says Chinese 10-year government-bond yields are around 1.5–2% and interprets them as consistent with real-economy growth near 1%, rather than the officially reported 4–5%. He sees China’s debt burden as another reason monetization may be necessary. He also suggests China may use gold for limited settlement or as notional backing, but explicitly says this would not mean a return to a gold standard.
• Europe and currencies: Howell says the euro system lacks a single common safe asset; in periods of stress, capital tends to move toward German Bunds, while spreads on French and peripheral bonds can widen. He expects ECB money creation to weigh on the euro. He likewise cautions against assuming the yen is a safe alternative, given Japan’s fiscal direction.
• Geopolitics and energy: Howell frames U.S.–China competition as a “capital war” and suggests U.S. policy may seek closer ties with Russia partly to focus on China and access Arctic resources. These are his interpretations, not established outcomes.

Framework and Explicit Guidance

• Separate trend from cycle: Howell’s long-term trend is monetary inflation, but cyclical moves can temporarily hurt inflation hedges and create opportunities.
• Assess refinancing risk through debt and liquidity: Financial stability, in his framework, depends on liquidity keeping pace with debt so borrowers can refinance.
• Distinguish monetary inflation from consumer-price inflation: Productivity, imported goods, and energy costs affect how money creation shows up in everyday prices.
• Match assets to the time horizon: He sees a possible near-term bond rally but is negative on bonds as a medium-term holding; he views gold as a long-term portfolio hedge.
• Buy weakness in monetary-inflation hedges: His explicit recommendation is to add to gold, Bitcoin, or commodities when they sell off, while accepting that prices will be volatile.

Disclosures and Cautions

• No explicit “not financial advice” disclaimer appears in the subtitles.
• The interview includes promotional content for Mine Vantage, a mining-stock research product described as being in beta and available to Founders-level subscribers. The host also promotes the Metals and Miners Substack.
• Howell cautions that inflation hedges do not move in a straight line and says some may become cheaper in coming months.

Presenters and Sources

Presenters: Gary Bone, host of Metals and Miners; Michael Howell, founder of GL Indexes and author of Capital Wars.

Sources and references mentioned: GL Indexes; Howell’s Capital Wars Substack; the Federal Reserve, U.S. Treasury, and European Central Bank; a Goldman Sachs consumer survey cited by the host; Scott Bessent, Donald Trump, Mario Draghi, and Ray Dalio.