Raoul Pal\u2019s latest \u201cJourney Man\u201d episode brings back Michael Howell, CEO of CrossBorder Capital, for a sweeping tour of the liquidity landscape that has propelled risk assets like crypto for nearly three years. Both agree the global liquidity cycle is \u201clate,\u201d still advancing but increasingly mature, with its eventual peak most likely pushed into 2026 by policy engineering, bill-heavy issuance, and rising use of private-sector conduits.<\/p>\n
The investment implication running through the conversation is unambiguous: long-duration assets\u2014crypto and technology equities\u2014remain the primary beneficiaries of ongoing currency debasement, yet the endgame is now visible on the horizon as a wall of debt refinancing and inflation risk approaches.<\/p>\n
Howell\u2019s high-level assessment<\/a> is stark. \u201cWe\u2019re late. It\u2019s not inflecting downwards yet\u2014we\u2019re still in an upswing\u2014but\u2026 the liquidity cycle is about 34 months old. That\u2019s pretty mature.\u201d In his framework, cycles typically run five to six years. Pal\u2019s Everything Code\u2014a synthesis of demographics, debt, and the policy liquidity needed to roll that debt\u2014arrives at a similar destination, albeit with a slightly shorter cadence and a crucial timing nuance.<\/p>\n \u201cMy view is it\u2019s been extended,\u201d Pal says, adding that the peak \u201cnormally would have finished sometime this end of this year, but it feels like it\u2019s going to push out.\u201d Howell places the likely turn \u201caround about early 2026,\u201d with his model\u2019s latest estimate at March 2026, while Pal is \u201cin the camp of Q2\u201d 2026. The difference is tactical; the thrust is the same: the late-cycle rally can run further, but investors are now operating inside the final act.<\/p>\n At the center of that act is what Howell calls a structural transition \u201cfrom Fed QE to Treasury QE<\/a>.\u201d The US Treasury\u2019s heavy tilt to short-dated bills over coupons lowers the average duration of paper held by the private sector. \u201cVery crudely, we tend to think that liquidity is equal to an asset divided by its duration,\u201d Howell explains.<\/p>\n Reducing duration mechanically boosts system liquidity. That issuance profile also corrals volatility and creates powerful bid auras: banks gladly absorb bills to match deposit growth, and, increasingly, so do stablecoin issuers managing cash to T-bill ladders. \u201cIf any credit provider buys government debt\u2014particularly short-dated stuff\u2014it\u2019s monetization,\u201d Howell notes. The result, in Pal\u2019s summary, is that policymakers have shifted from balance-sheet expansion to a more complex \u201ctotal liquidity\u201d regime, where banks, money funds, and even crypto-native entities become the delivery rails of debasement.<\/p>\n The debate over near-term Fed liquidity hinges on reserves and the Treasury General Account. The quarterly refunding blueprint has telegraphed a rebuild of the TGA<\/a> toward the high-hundreds of billions. Howell is unconvinced it happens quickly or fully, because draining that much cash would risk a repo spread spike, something the Fed and Treasury appear determined to avoid.<\/p>\n \u201cEverything I hear\u2026 is they want to manage that liquidity. They don\u2019t want to pull the rips on the markets,\u201d he argues, adding that the Fed has effectively been targeting a minimum level of bank reserves since last summer\u2019s stress-test changes. \u201cThe Federal Reserve controls bank reserves in aggregate completely,\u201d Howell says. Even if the TGA edges higher, \u201cyou can find other ways of injecting liquidity\u2026 through Treasury QE or getting the banks to buy debt.\u201d<\/p>\n The global overlay is every bit as important. Europe and Japan, as Howell frames it, are net-adding liquidity; China has moved decisively to ease via the PBoC\u2019s toolkit\u2014repos, outright OMOs, and medium-term lending\u2014after a stop-start attempt in 2023.<\/p>\n Chinese 10-year yields and term premia have started to firm from depressed levels, which, paradoxically for asset allocators, \u201ccan be good\u201d if it signals escape from debt-deflation toward reflation and a commodity up-cycle. \u201cIf you get this big Chinese stimulus continuing\u2026 that should mean stronger commodity markets,\u201d Howell argues, with Pal adding that a revived China would restore the missing engine of the global business cycle even as liquidity remains the dominant market driver.<\/p>\n Japan is the outlier with a fascinating twist. Disaggregating term premia shows the selling is concentrated in the ultra-long end, not the belly or front of the curve. Howell\u2019s inference is a duration rotation rather than a full-curve sovereign dump\u2014\u201ca switch from bonds into equities\u201d\u2014consistent with mild-inflation regimes that favor stocks. Why tolerate it?<\/p>\nGlobal Liquidity Remains Strong<\/h2>\n