Central banks worldwide are realizing that liquidity has been too tight and will embark on major easing programs, Michael Howell, founder and managing director of CrossBorder Capital, told Real Vision's The Expert View.
"We know there's a big build-up of debt, but debt needs to be refinanced," he explained. "The world financial system is [now] effectively a refinancing mechanism. So, the focus on interest rate cuts is broadly meaningless. What you need to understand is the volume of liquidity markets. In other words, balance sheet size."
China has been among the first to take action, starting to inject liquidity back into its money markets in mid-May.
Other central banks will follow, and the US will not allow other currencies to devalue against the dollar, Howell said, adding: "So effectively, we're in a currency war."
"Financial assets should generally do pretty well [in that environment]," Howell told Real Vision. "The gold price comes out of this magnificently. And cryptocurrencies, which are a pure liquidity play, should do extremely well."
"Equity markets generally should do pretty well in this environment," he continued. "[And] there's a good chance that bond yields could go down - we could be in an environment where the yield curve does steepen, but across all maturities, the entire term structure drops."
Howell reiterated the importance of what happens with liquidity. "The punchline, unquestionably, is to watch liquidity," he said. "Liquidity is the most important thing in the global economy and global financial markets right now."
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