Global liquidity: the five-year cycle beneath asset prices
Interview with Michael Howell
Notes from my conversation with Michael Howell, recorded for the Foundation for the Study of Cycles interview series.
Asset prices follow liquidity, not earnings. Michael Howell has built a three-decade research career on that single claim, first at Salomon Brothers, then at CrossBorder Capital, and in his book “Capital Wars: The Rise of Global Liquidity”. For the opening episode of the FSC interview series I spoke with him about how he measures global liquidity, why it moves in a cycle, and what that cycle implies for the here and now.
A refinancing system, not a capital-raising system
Howell’s starting point is an uncomfortable piece of arithmetic. The world economy carries roughly USD 350 trillion of debt with an average maturity of about five years. As a result, financial markets must roll over approximately USD 70 trillion of debt every year just to stand still. In Howell’s words, debt is never repaid, it is only rolled over.
The financial system has therefore morphed from a capital-raising mechanism into a debt-refinancing mechanism, with refinancing transactions outweighing new capital raising by roughly seven to one. In this world the binding constraint is not the price of money (interest rates) but the availability of money: the balance-sheet capacity of banks, shadow banks and cross-border investors to absorb the rollover. That capacity is what Howell defines as global liquidity. It is not M1 or M2, and it behaves differently, because around 77 percent of global lending is collateral-based (a World Bank figure). Collateral values drive lending capacity, lending capacity drives asset values, and asset values feed back into collateral. The multiplier that matters today is a collateral multiplier, not the textbook deposit multiplier.
The 65-month cycle
Because the refinancing schedule is set by past issuance, liquidity does not drift randomly. It moves in a repeatable cycle that Howell measures at roughly 65 months (about 5.4 years) across the CrossBorder Capital indexes. From an analytical perspective this is exactly the kind of vibration a cycle analyst looks for: a dominant cycle in a driver series rather than in price itself. Price is the shadow, liquidity is the object casting it. In practice the phase of the liquidity cycle carries more information than its absolute level, and it can be projected forward the same way any dominant cycle can, with the usual caveat that length and amplitude drift over time.
What it means for asset classes
The asset implications follow directly. Rising liquidity expands balance-sheet capacity beyond what the rollover absorbs, and the surplus flows into risk assets, equities first. Falling liquidity forces the system to fund the rollover out of a shrinking pool, and financial assets get sold to do it. Gold and Bitcoin sit in a separate category: Howell treats both as hedges against monetary inflation, the debasement that a permanently growing debt pile makes unavoidable, which is why he reads them as liquidity assets rather than CPI assets. Bonds carry the burden itself; a market asked to absorb USD 70 trillion of rollover per year plus net new issuance is structurally heavy.
Where the cycle stands
Howell’s indexes put the latest liquidity upswing, the one that began in late 2022, at or just past its peak around the turn of 2025/2026. Ahead of it sits a heavy refinancing calendar: a large share of the debt issued in the Covid years falls due between 2026 and 2030. The tension he describes is between a Federal Reserve that is not accommodating the rollover and a US Treasury that partially substitutes for it through heavy short-dated bill issuance, a form of fiscal quasi-QE. However that tension resolves, the refinancing requirement itself is not negotiable, and that is precisely what makes this cycle projectable rather than merely observable.
The full conversation is on the FSC channel:
Michael Howell on Global Liquidity: How Money Flows Move Asset Prices
Michael Howell / CrossBorder Capital: https://www.crossbordercapital.com
Foundation for the Study of Cycles: https://cycles.org