You are a free subscriber to Me and the Money Printer. To upgrade to paid and receive the daily Capital Wave Report - which features our Red-Green market signals, subscribe here. The Surprising Asset That Has Never Caused a Financial CrisisYou wouldn't believe it... but it's true when we get to what really fuels a crash...
Dear Fellow Traveler: With markets at all-time highs just three months after a crash, all one’s brain can think is… "What's next?" Here's something that might surprise you. I’ve spent a lot of time studying, avoiding, and profiting from financial disasters. I’ve studied many of them, from tulip bulbs to subprime mortgages. But there’s one asset that has managed to stay off the "crisis catalyst" list. Gold has never caused a systemic financial crisis… because no financial system has ever been built on leveraged speculation in gold itself. And no, I'm not about to pitch you some gold-bug fever dream about buying coins from a guy in a van. I'm speaking about something really important. About leverage, trust, and how financial systems actually blow up. Remember: It's never the risky stuff that destroys the world. It's always the "safe" stuff. And it’s always the leverage around those assets that creates disaster. When "Rock Solid" Becomes QuicksandLet's take a trip through financial hell, shall we? I’ll start with the Panic of 1893 because many people believe that the gold standard was responsible. It wasn’t… Panic of 1893What Was The "Safe" Asset? The U.S. currency. What Happened: America's Treasury was running out of gold fast. Concerns that the U.S. might abandon the gold standard led to a rush into gold, depleting reserves. When news broke in April that the government was dangerously low on the shiny stuff, panic set in hard. Like Black Friday fighting over flatscreens at 6 am, hard… The result? Bank failures, railroad bankruptcies, and unemployment hit 43% in Michigan. But this wasn't a gold crisis. It was an everything-else crisis magnified by America's rigid dependence on gold and political battles over silver… and then a complete collapse in the speculation in other sectors - all largely a house of cards. Gold wasn't the villain. Loss of confidence in the currency system itself caused the crisis. The Great Depression (1929)The "Safe" Asset? Blue-chip stocks and utilities What Happened: "Forever" companies were bought with borrowed money. When prices dipped, margin calls created a death spiral. The market lost 89% of its value. Unemployment hit 25%. Leverage struck again. Savings & Loan Crisis (1980s)The "Safe" Asset: Government-insured deposits and real estate What Happened: Deregulated S&Ls made reckless bets with depositor money. That money was supposed to be "safer than a Swiss bank vault." Over 1,000 institutions collapsed. The crash cost taxpayers more than $100 billion. Asian Financial Crisis (1997)The "Safe" Asset: Fixed currency pegs to the U.S. dollar What Happened: Governments promised fixed exchange rates. When capital fled, they could no longer defend the peg. Regional collapse followed. Dot-Com Bubble (2000)The "Safe" Idea: The unstoppable power of the internet What Happened: Investors assumed profits didn't matter because: It's the internet! The NASDAQ fell 78%. $5 trillion vanished. I couldn’t find a job out of college. Global Financial Crisis (2008)The "Safe" Asset: AAA-rated mortgage-backed securities What Happened: Over half of the CDOs rated AAA between 2005 and 2007 were impaired by 2009. Those "safe" securities turned toxic. Households lost $16 trillion. The stock market was halved. Unemployment hit 10%. No one went to jail. The Fed bailed out the rich. We started the QE hell train. Bank Failures (2023)The "Safe" Asset: U.S. Treasury bonds What Happened: Silicon Valley Bank and others gorged on long-dated Treasuries. That didn’t work out. When interest rates spiked, those "safe" bonds went toxic. We had our first social media-driven bank run. It was the second-largest bank collapse in U.S. history. The Fed bailed out Silicon Valley itself. The community banking space is still overregulated. The Trade Collapse (2025)The "Safe" Asset? U.S. Treasury bonds... again What Happened? Hedge funds had been running the "basis trade." The what? They were borrowing money to exploit tiny price differences between Treasury bonds and Treasury futures. They reportedly were leveraged up to 100-to-1. When Trump's tariffs spooked markets, margin calls started. The benchmark 10-year Treasury yield spiked 19 basis points to 4.18%. It was the largest one-day jump since September 2022 (as the GILT Crisis unfolded). Meanwhile, the 30-year yield climbed 21 basis points, marking its sharpest move since March 2020. The yield on the 10-year Treasury rose from 3.9% and briefly hit 4.51%. Both stocks AND bonds were falling together. There was literally nowhere "safe" to hide. Hedge funds have been liquidating US Treasury basis trades at a furious pace... The scale of the selling is destroying liquidity, not just in Treasuries but across high-grade credit and agency MBS. The so-called safest asset in the world nearly broke the financial system due to excessive leverage. And yet, Janet Yellen still blamed supply chains, and no one bothered to ask her WHY the leveraged hedge funds had too many treasuries… and why the Federal Reserve doesn’t seem to be worried about that exposure.. You see the pattern here? Why Gold Has Never Worn the Crisis CrownGold's absence from this financial rogues' gallery isn't a matter of luck. It's structural. Gold is mostly held outright, not on margin. It's not widely used as collateral for other trades. So when it drops, it doesn't trigger a cascade of forced selling like a house of cards in an earthquake. Unlike housing or stocks, gold isn't propped up by debt, and in a crisis, that's everything. Meanwhile, there's no gold-backed CDO market. No synthetic CLOs. No structured tranches of volatility swaps backed by the yellow metal. ETFs like GLD are liquid and regulated, but they're not built to blow up spectacularly. Also, there’s no dividend yield. No rental income. No bond coupons. That's key. Crises often begin when a "safe" yield disappears, exposing the leverage lurking behind it like a bad spray tan under fluorescent lights. Most importantly, in panic, gold becomes a buyer of liquidity, not a forced seller. After Lehman Brothers collapsed in 2008, gold briefly fell just below $700.00. But that was just a pause to catch its breath. From there, it climbed to nearly $1,900/oz in under three years. Gold isn't perfect. It's not always stable. But it's never the fire… It's the exit door. Could Gold Ever Cause a Crisis?The past says no. But the future? Now that I've written this, I'm sure someone at Citadel or another fund is developing a gold-backed stablecoin that will implode spectacularly. Here's what could go wrong:
And I know what you're thinking… What the hell is all that? Exactly. Instead of building factories or curing diseases, we've trained our brightest engineers to build financial Rube Goldberg machines that make money disappear. The Truth About Financial CrisesIt's not risky assets that crash the system. It's the stuff people think is safe. Markets don't collapse when people are gambling. They collapse when they forget that they are. Housing was "rock solid" in 2008. Government bonds were considered untouchable in 2022. But gold? Gold has never worn a mask of safety. It's too old. Too strange. Too self-aware. It doesn't promise yield. It doesn't disguise risk. It just… is. That brutal honesty might be the very thing that's kept it from ever blowing up the financial system. Every major financial crisis follows the same script… It's always the "safe" assets, and it's always THE LEVERAGE that creates the disaster. We pile debt on top of things we trust. We create complex financial instruments around them. We convince ourselves the risk has been engineered away. The scary part? Look around today. We have more leverage in the system than ever before. More complex instruments. More "safe" assets that aren't really safe. The money printer keeps running. The leverage keeps building. And somewhere out there, the next "safe" asset is getting ready to become the next crisis catalyst. Just probably won't be gold. But then again… Citadel… Stay positive, Garrett Baldwin About Me and the Money Printer Me and the Money Printer is a daily publication covering the financial markets through three critical equations. We track liquidity (money in the financial system), momentum (where money is moving in the system), and insider buying (where Smart Money at companies is moving their money). Combining these elements with a deep understanding of central banking and how the global system works has allowed us to navigate financial cycles and boost our probability of success as investors and traders. This insight is based on roughly 17 years of intensive academic work at four universities, extensive collaboration with market experts, and the joy of trial and error in research. You can take a free look at our worldview and thesis right here. Disclaimer Nothing in this email should be considered personalized financial advice. While we may answer your general customer questions, we are not licensed under securities laws to guide your investment situation. Do not consider any communication between you and Florida Republic employees as financial advice. The communication in this letter is for information and educational purposes unless otherwise strictly worded as a recommendation. Model portfolios are tracked to showcase a variety of academic, fundamental, and technical tools, and insight is provided to help readers gain knowledge and experience. Readers should not trade if they cannot handle a loss and should not trade more than they can afford to lose. There are large amounts of risk in the equity markets. Consider consulting with a professional before making decisions with your money.
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