MacroVoices · Thursday, August 13, 2026
Michael Howe explains that the financial system now creates liquidity endogenously through rising asset prices and collateral values, which are a backstop for credit. This cycle of liquidity booms and busts has been a root cause of past market bubbles, and he believes the current 'everything bubble' will also end in a bust.
“the problem is that the financial system creates liquidity endogenously. Because after an initial liquidity shot, which may come from the central bank, asset prices rise, collateral levels increase.”
“We live in a financing system now where collateral is the mainstay, the backstop for all credit and all loans. Something like 80% of all lending now in the world economy is collateral based.”
“This everything bubble will end, and everything comes to an end. And you're starting to see signs. that quality is rolling over. and therefore we've got to accept the fact that after every bubble comes a bust.”