Michael Howell warns Fed must hike rates

Jul 31, 2026Friday, July 31, 2026Summary from 2 contributing podcasts.

Fed suppression of bond volatility hides a 200-basis-point gap between GDP growth and yields.
Michael Howell argues rate hikes are inevitable, not optional, to restore monetary credibility.
Bitcoin’s sensitivity to liquidity makes it the ultimate hedge against currency debasement.

#Fed #Macro #Regulation #Protocol #Markets #Inflation

The Fed isn’t just behind the curve - it’s actively suppressing it. Michael Howell, speaking on TFTC: A Bitcoin Podcast, laid out a stark thesis: the Federal Reserve is manipulating bond volatility to mask a structural disconnect between economic growth and interest rates. With nominal GDP running at 6-7%, the 10-year yield remains artificially low, creating a dangerous divergence.

This isn’t traditional yield curve control. It’s yield volatility control - a more insidious tactic. The Treasury buys back off-the-run bonds to suppress the Move Index, encouraging hedge funds to arbitrage the repo market and depress yields by at least 50 basis points. The result? A false sense of stability while the real economy overheats.

"The long end of the market eventually dictates the short end. This gap will close - the only question is how."
- Michael Howell, TFTC: A Bitcoin Podcast

The pressure is mounting. Money supply grew at a 10% annualized rate recently, driven by AI capex, fiscal deficits, and nominal GDP expansion. Yet the market prices in only a 30% chance of a rate hike. Howell sees this as a complacency trap. The two-year yield, a reliable Fed policy signal, correctly predicted tightening 85-90% of the time since 2000 - and it’s flashing red again.

Jack Mallers, on a prior episode of The Jack Mallers Show, framed the same crisis from a different angle: fiscal fragility. With over $8 trillion in US debt maturing within a year - 80% of gross issuance in short-term bills - any rate hike risks blowing up the Treasury’s rollover model. But Mallers calls the alternative “ponzinomics.” The system is already insolvent; hiking only reveals the truth.

"Raising rates now makes the government's own interest payments unsustainable. Not hiking makes the debt a joke."
- Jack Mallers, The Jack Mallers Show

China looms in the background. Its competitive AI advancement threatens the projected profits underpinning $500 billion data center bets - like OpenAI’s, backed by Nvidia’s $250 billion guarantee. That circular financing loop is a credit bubble on par with the fiber optic boom. When it breaks, liquidity will vanish.

Howell sees Bitcoin as the cleanest expression of this reality. With a 32% correlation to global liquidity and eight times the sensitivity of gold, it’s not speculation - it’s insurance. A 5% allocation hedges against the inevitable monetization of $40 trillion in debt. The Fed may delay, but the math won’t.

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- Deep dive into what was said in the episodes

TFTC: A Bitcoin Podcast

Marty Bent

#776: Yields Must Rise, Fed Must Hike with Michael Howell • Jul 30

Michael Howell observes deliberate manipulation of bond market volatility, which he terms "yield volatility control." This policy uses short-term issuance and Treasury buybacks to suppress yields, potentially by 50 basis points on the 10-year note.
The US economy's nominal growth, estimated between 6% and 7% (and possibly higher due to AI spending), suggests current 10-year yields are unsustainably low. Howell notes a historical gap of over 200 basis points between nominal GDP and the 10-year bond.
Michael Howell reports that the three-month annualized M2 money supply growth was recently near 10%, indicating future inflation issues. This expansion is attributed to robust nominal GDP growth, AI capital expenditure, and large fiscal deficits.
Michael Howell notes the global liquidity cycle's growth rate slowed around Q3 last year, diverting money from financial markets into the real economy. This typically leads to flattening yield curves, a normal cycle in robust economic conditions.
An AI system analysis by Michael Howell indicates that the two-year Treasury yield's signals for Fed policy are correct 85-90% of the time. The current spread suggests accelerating monetary tightening, tracking the 2021-2022 period.
Michael Howell explains that during the 2021-2022 monetary tightening, the S&P 500 fell 25% and crypto assets fell 75%. He suggests risk assets like stocks have yet to discount the current projected tightening.
Michael Howell states that the US government's current debt funding model involves 80% of gross issuance under two years duration, a practice he compares to Latin American economies. Other nations are adopting similar short-term funding strategies.

Also from this episode: (6)

Macro (2)

Michael Howell argues the world is in a "capital wars" regime, where governments actively boost national competitiveness, driving higher nominal GDP growth by 200 basis points. This shift diverts liquidity from financial assets to the real economy.
Michael Howell indicates that an R-squared value above 32% links crypto basket variation to global liquidity changes, a powerful correlation in financial markets. Global liquidity accounts for about 45% of crypto's total price variation.

Inflation (1)

Michael Howell asserts that governments will resort to printing money due to an inability to cut spending, reform welfare, or increase taxes without an exodus of talent (e.g., UK lost 600,000 millionaires since 2021).

BTC Markets (1)

Michael Howell's analysis shows cryptocurrencies (Bitcoin, Ethereum, Solana basket) have an 8x sensitivity to global liquidity, significantly higher than gold/silver's 2x sensitivity. A small crypto allocation, perhaps 5% of a portfolio, offers strong monetary inflation protection.

China (2)

Michael Howell argues gold prices are primarily driven by People's Bank of China liquidity injections, not Western money printing. China uses this to devalue the yuan internally and to externally rival the US dollar, with capital controls preventing money from flowing into illegal crypto markets.
The People's Bank of China's balance sheet data suggests a deliberate three-month economic cooling period, similar to the 2008 Beijing Olympics, likely to reduce oil import bills. This period resulted in weak Chinese financial markets, but the PBOC is now re-injecting liquidity.

#Fed #Macro #Markets #AI Infrastructure #BTC Markets

The Jack Mallers Show

Jack Mallers

Stepping Down From Twenty One, The Fed Coin Flip & The AI Credit Bubble • Jul 28

Jack Mallers stepped down as CEO of 21, the company he co-founded, due to a fundamental divergence between his vision for a Bitcoin-focused business and the strategic path determined by the board. He acknowledges his failure to align the board with his public vision.
Under Mallers' leadership, 21 raised over $1 billion and acquired approximately $1.4 billion worth of Bitcoin, establishing the second-largest treasury and going public. However, Mallers states they "utterly and completely failed" to build cash-generating Bitcoin products for customers.
Jack Mallers confirms Strike remains an independent, founder-controlled company focused on Bitcoin, which he now dedicates his full energy to. Strike, a five-year-old startup with roughly 100 employees, holds over $100 million in Bitcoin and operates profitably, growing year-over-year.
Mallers expresses concern over the Fed's potential interest rate hike, which he believes would exacerbate the US government's financial woes due to over $8 trillion in short-duration debt maturing within one year. He highlights the Wall Street Journal's report on deficits threatening the bond market.
Nvidia has committed to guaranteeing $250 billion in financing for OpenAI's 10-gigawatt data center project, which could cost over $500 billion. This guarantee, representing 135% of Nvidia's retained earnings, significantly increased Nvidia's credit risk and negatively impacted its stock, according to Jim Chanos.
Mallers advises aspiring entrepreneurs to solve their own problems first, as he did with Strike, to ensure quality and address real needs. He aligns with Austrian theory, viewing profitability as a "literal expression of something being more valuable to the world than it is consuming."

Also from this episode: (6)

BTC Markets (2)

Jack Mallers noted the Bitcoin price at $64,700, with a market cap of $1.3 trillion, standing 48.7% off its all-time high of $126,160 reached on October 6, 2025.
Jack Mallers notes Michael Saylor has ceased recent Bitcoin purchases because MicroStrategy's MNAV (market value of net assets) is not rich enough, especially after a new metric was introduced and concerns arose over STRC liabilities. Mallers found Saylor's claim that Bitcoin would be worth $5K without MicroStrategy "offensive."

War (1)

Jack Mallers states the conflict involving Iran has persisted for five months, contributing to inflationary pressure on a global system already struggling with money printing. He notes the Strait of Hormuz remains "relatively closed," despite reports of friendly talks involving Donald J. Trump.

Protocol (1)

Mallers disputes the common claim of 1-3% global Bitcoin adoption, arguing that true understanding of Bitcoin is far lower, possibly closer to 0.01% of the 8 billion global population. He vows to intensify his "orange pilling" efforts through educational content.

AI & Tech (1)

Mallers identifies an "AI credit bubble" fueled by borrowing from tech giants like Oracle and Microsoft, rather than profits, with increasing credit risk across these lenders. He contends the US government, which views AI as a national security priority, will likely print money to prevent failures and ensure the US wins the AI race.

Mining (1)

Mallers explains Bitcoin mining is a competitive, low-margin industry constantly seeking cheap energy sources, facing a halving every four years. He emphasizes Satoshi's "ingenious insight" of the difficulty adjustment, which ensures a consistent 10-minute block time regardless of external factors or miner participation.

#Macro #Markets #Fed #AI Infrastructure

Michael Howell warns Fed must hike rates

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