Financial expert Michael Howell warns that behind all the headlines about tariffs and stock market moves, there’s a more serious threat brewing: a global capital crisis. This isn’t about who exports more goods—it’s about who controls the flow of money, credit, and investments around the world. Howell believes the Federal Reserve must prioritize financial stability above everything else , including interest rates or inflation control. That means continuously providing liquidity—essentially, ensuring there's enough money flowing through the system—so markets don’t break down when debt needs to be refinanced. This issue is urgent because the global financial system is extremely fragile. One major reason is the existence of the “shadow banking system,” which includes hedge funds and non-bank financial institutions that operate with very high levels of leverage—sometimes 50 to 100 times their capital . That means a small change in market conditions can trigger huge losses and potentially a domino effect across the system. We saw this kind of collapse during the 2008 financial crisis, and Howell says the risk hasn’t gone away—it’s just shifted into more hidden corners of the market. A key point he makes is that debt levels are rising rapidly and need to be rolled over regularly , meaning governments and companies have to constantly borrow new money to pay back old debt. If there's not enough cash (liquidity) available, this creates a crisis. Howell notes that $70 trillion in global debt needs to be refinanced each year , and with higher interest rates today, this is becoming more expensive and riskier. One surprising winner during recent market stress has been Bitcoin. While not perfectly stable, it has held up better than expected, suggesting that liquidity conditions haven’t been as bad as feared. Howell explains that liquidity has actually increased lately for three reasons: A weaker U.S. dollar encourages borrowing and spending globally. China’s central bank has injected over $600 billion into its economy. The U.S. Treasury has been drawing money from its cash reserves at the Fed, unintentionally boosting short-term liquidity. But this may not last. The real concern is what happens later this year, especially as the U.S. tries to refinance about $9 trillion in Treasury debt while also covering another $2 trillion in new deficit spending. If interest rates keep rising, the cost of this debt skyrockets. Howell warns that if the Fed doesn’t step in to manage bond markets, it could lose control over the very heart of the financial system. This is where gold enters the picture. China, for example, is selling U.S. Treasuries and buying gold , possibly as a strategy to weaken the dollar’s dominance and protect its own economy. If more countries do this, gold becomes the new “safe asset,” replacing the U.S. government bond. Howell believes this is already happening, noting that gold prices are increasingly being set in Shanghai, not London—a major shift in global finance. He forecasts that if debt keeps growing at its current pace, the price of gold could double to $7,000 per ounce within the next 10 years . This is because as monetary inflation (money supply growing faster than the economy) continues, real assets like gold tend to rise to reflect that loss in currency value. Howell also discusses Bitcoin as a kind of digital gold. While it’s more volatile and affected by investor risk appetite, over the long term, it behaves similarly to gold— acting as a hedge against inflation and currency debasement . He notes that Bitcoin tends to be driven by three factors: Global liquidity (most important) The gold price Stock market risk sentiment Interestingly, Howell points out a generational divide: younger investors are more likely to trust and invest in Bitcoin, much like younger Germans in the 1920s shifted from bonds to stocks during hyperinflation. He suggests we may be witnessing a similar generational wealth shift today , as traditional safe assets like bonds become riskier in a world drowning in debt. When it comes to bonds, Howell is cautious. In the short term, bonds might perform well during a recession, but over the long term, they are likely to lose value due to rising inflation and higher interest costs . Instead, he recommends holding assets that benefit from monetary inflation, such as gold, Bitcoin, and certain stocks. He explains that the benchmark for asset returns is now about 8% per year , matching the pace of U.S. debt growth. So, investors should aim for returns above that just to keep their purchasing power intact. Equities, particularly in sectors like technology or those benefiting from inflation trends, may still offer those returns, while bonds and cash likely won’t. Looking forward, Howell believes the Federal Reserve must clearly define how it plans to use its balance sheet to support markets —not just through interest rates, but through direct liquidity support if needed. The longer it waits, the greater the risk of a market breakdown, especially if countries like China continue to challenge the U.S. by offloading Treasuries and promoting alternatives like gold. He concludes with cautious optimism: the U.S. still has time to act , and past crises show it eventually does the right thing—though often after trying everything else first. But the financial system is on thin ice, and the choices made this year could shape the next decade of global finance.
