Federal Reserve Must Prioritize Financial Stability Amid Global Capital Crisis

Financial expert Michael Howell warns of a potential global capital crisis, emphasizing the need for the Federal Reserve to prioritize financial stability over interest rates and inflation control. Key points include:

The fragility of the global financial system, exacerbated by a "shadow banking system" with high leverage.
Rapidly rising debt levels, with $70 trillion in global debt needing annual refinancing, which is becoming increasingly expensive.
Bitcoin has performed relatively well during market stress, indicating improved liquidity due to:
- A weaker U.S. dollar promoting borrowing.
- China injecting over $600 billion into its economy.
- U.S. Treasury drawing from cash reserves at the Fed.
Concerns over the U.S. refinancing approximately $9 trillion in Treasury debt amidst rising interest rates.
China's strategy of selling U.S. Treasuries and buying gold could shift gold to a new “safe asset” status.
If current debt growth continues, gold prices could reach $7,000 per ounce within the next 10 years.
Bitcoin may act as digital gold, influenced by global liquidity, gold prices, and stock market sentiment.
A generational wealth shift may be occurring, with younger investors favoring Bitcoin over traditional bonds.
Howell recommends assets like gold, Bitcoin, and certain stocks as better hedges against inflation than bonds.
The benchmark for asset returns is about 8% per year, matching U.S. debt growth, necessitating higher returns for maintaining purchasing power.
The Federal Reserve needs to clarify its balance sheet strategy to prevent a market breakdown amid challenges from countries like China.

Howell concludes that while the U.S. has time to respond effectively, the financial system remains precarious, and decisions made this year could significantly influence future global finance.