«The Global Monetary System is Bifurcating Into Two Different Zones»https://t.co/7Dn3enbCrk
— Guillermo Ruiz Zapatero (@ruiz_zapatero) December 12, 2025
— Guillermo Ruiz Zapatero (@ruiz_zapatero) December 12, 2025
we can identify a global liquidity cycle with a fairly constant frequency of about 65 months, i.e. five to six years. This has turned out to be quite a robust estimate of the cycle. The current cycle bottomed in October 2022 and has been moving up since.
— Guillermo Ruiz Zapatero (@ruiz_zapatero) December 12, 2025
The global monetary system is bifurcating into two different zones. On one side is the Chinese system, backed by gold, and on the other side is the U.S. system, backed by U.S. Treasuries in a digital wrapper.
— Guillermo Ruiz Zapatero (@ruiz_zapatero) December 12, 2025
And we Europeans? Are we just bystanders in this capital war?
— Guillermo Ruiz Zapatero (@ruiz_zapatero) December 12, 2025
Mostly, yes.
From the perspective of currencies, the Swiss franc is solid... The trouble is that it’s too small. The euro, on the other hand, is very problematic, for the simple reason that the fiscal situation in Europe is out of control
— Guillermo Ruiz Zapatero (@ruiz_zapatero) December 12, 2025
Why are they doing this now?
The reason is probably U.S. stablecoin, which is basically a digital wrapper around U.S. Treasury Notes. If you are anywhere in the world, there are some attractions in holding a dollar stablecoin, such as anonymity, ease of use, whatever. It clearly frightened some leading figures in the ECB into saying that Europe needs to start defending its monetary system against this, because we could lose control of money. Now, if Europeans see dollar stablecoin as a threat, just imagine the threat this means for China. If your currency is wobbly, if you are inflating it and if you have capital controls, U.S. stablecoin is hugely attractive for your citizens. Beijing can’t allow that.
And that’s why they are backing the renminbi with gold?
Yes. The global monetary system is bifurcating into two different zones. On one side is the Chinese system, backed by gold, and on the other side is the U.S. system, backed by U.S. Treasuries in a digital wrapper. The Chinese are saying ‹trust our gold›. America is saying ‹trust our technology›. This means that the Chinese want the gold price to rise. This is bullish for gold, silver and all precious metals. But this monetary bifurcation, ironically, also means that it’s in America’s interest to try and destabilize the gold price, in order not to benefit China. Vice versa, it’s in China’s interest to disrupt the digital U.S. economy. We are talking about a capital war here.
How will this capital war play out?
I tend to believe in American technology and I hope that America wins. Because I’m in the West and this outcome would selfishly benefit me. But history suggests that China may be in a stronger position because gold always holds its value in the long term. You can’t bet against gold. At the same time, it has never been a winning strategy to bet against the U.S. So we will have to see how it plays out. Rather than the trade war, which is a smoke screen, the real war is a capital war between the U.S. and China. This war is about the control of capital flows, of currency, and ultimately of the global economy.
And we Europeans? Are we just bystanders in this capital war?
Mostly, yes. From the perspective of currencies, the Swiss franc is solid with a great track record. It will survive and people will trust it. The trouble is that it’s too small. The euro, on the other hand, is very problematic, for the simple reason that the fiscal situation in Europe is out of control. Germany is languishing, and France has a huge debt problem. Sterling, meanwhile, is flapping around in the wind, it offers no viable option. Ultimately, European currencies will have to peg in some way, informally, to the dollar. The problem that Europe has, fundamentally, is they don’t have any control over energy supply and they have a welfare state system that is way too generous. There will have to be a reneging of the promises that have been made. Otherwise their debt will spiral out of control.
Michael Howell
Dr. Michael J. Howell is a leading financial advisor with a career spanning over three decades. He is the founder and CEO of CrossBorder Capital, established in 1996, and more recently founded GL Indexes, a London-based investment advisor and quantitative data provider. His career includes senior roles as Research Director at Salomon Brothers and Head of Research and board director at Barings. Howell has also advised the World Bank on capital flows and is the author of influential books, including Investing in Emerging Markets (World Bank, 1995) and Capital Wars (Palgrave, 2020). He writes the top-ranked Substack newsletter Capital Wars. He holds a Ph.D. in Finance and is a qualified US Supervisory Analyst. Dr. Howell lives in Oxford with his family.Lawmakers from Italy's ruling party have proposed an amendment to the 2026 budget law. Initially it said the central bank's gold belonged to the state, but they have revised that to say it belongs to the Italian people.
— Guillermo Ruiz Zapatero (@ruiz_zapatero) December 11, 2025
The ECB last week urged Italy to drop the provision.
