The New Rescue System...

The fire department showed up before the building did.

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Dear Fellow Traveler:

So, we conclude the week of chatter around central banks… and we do it with the very uncomfortable question that we had to wrap up our conversation yesterday.

Dollars can now arrive at the speed of light… or cell phones. That means, they can also leave the phone at the same speed. So, that suggests the next bank run won’t start with a line out on a sidewalk near the local credit union.

It has the prospect to start on 100 million phones at two in the morning in New York, but stretch across every time zone… and happen on a Sunday… while every bank is closed coast to coast.

Based on the sheer amount of editorial that has emerged on stablecoins in the last six months from central banks, I assume that our Masters of the Universe have considered the possibility of a bank run of this scale. If they aren’t, they didn’t see how the actual Silicon Valley Bank run really reached scale…

It was directly tied to social media.

I assume they think about it… because they’ve already started to build the very bailout system that would be required on that Sunday. It has the feel of buying fire trucks before building a town… long before a single building permit arrives.

Let’s Start in jUNE

So, we’ve discussed this subject, but in June the Federal Reserve issued a report on what it deemed… “the fragility” of digital money.

No… that’s not it. Here’s the real term: The Fragility of Perfectly Safe Digital Money

Yes, they started a research report with fragility… and used the word “perfectly” to describe the safety of the stablecoins. If you’re at a computer reading a title like this, you should check under the chair to make sure there isn’t an ejector button…

We know that every stablecoin can have Treasury bills backing it… but the system itself can still crack into 1,000 pieces and still require a central bank to line up and flood the system with capital to prevent a collateral crisis.

I stress this… because a bank run on scale with stablecoins could in theory be absolutely insane. If every single person who is linked to a phone demands their money back at the same time… the stablecoin operators have to sell their government bonds… all at the same time.

And the question is simple. Can the market actually absorb a flood like this?

Panic selling (or even forced selling) creates and evolves into an emergency.

Sure, the bills behind the coins are very safe… it’s the fact that everyone is trying to escape through the same window at the same time, much like we saw the breaking of the buck back during the Great Financial Crisis. Central banks - like everyone else - don’t actually study the pathway of these possible stampedes unless they first have everyone in a seat at the stadium. By that point… you’re playing with a loaded weapon.

Source: Federal Reserve research on stablecoin fragility, June 2026.\

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It’s Everyone’s Problem… All At Once…

In July, I explained that it’s everyone’s problem when too many people are locked into the same position in a crowded market. What’s happening is that the government might borrow so much money (so quickly) that traditional bond purchases can’t keep up with the frantic pace of issuance.

Maybe hedge funds then provide support and start buying. To do so, they use a massive amount of borrowed capital to purchase bonds but then try to exploit very tiny differences in the spread between the physical asset (the bill) and the Treasury futures. This is basically just the Basis Trade.

Hedge funds became the important, marginal buyer of U.S. debt. The borrowing is stretched because there aren’t really any haircuts on these loans… meaning they are borrowing $100 against $100 of collateral. The structure has created a situation where there is no cushion on these trades, and it’s tolerated because we need the demand to persist for this debt.

So… if stablecoin companies start to sell their bonds on the same day that hedge funds must also sell… what happens? It’s the same Treasury market experiencing a deleveraging event and a forced sale at the same time…

Everyone tries to squeeze out the same window on the same day… and who is left to cushion that blow? The answer, technically, is only the buyer of last resort, which is the Federal Reserve… and having to step in at scale would be a glaring admission that this system is very… “Fragile.”

The new rescue system is well under construction, and it has a few deadlines that we’ve discussed in previous issues. As Glenn Handley explained, U.S. regulators now want a central middleman to track every single bond position so no one can try to hide a massive position that might turn into a systemic landmine.

Markets will start to shift in 2027…

But last month, Wall Street started running live, digital trades on ordinary securities… and the rest of the market will roll out in October. The Bank of England, meanwhile, has taken the “Break the Glass” strategy to new levels. With continued concerns about its GILT market (bonds), they have just admitted that hedge funds and other non-bank financial institutions (NBFIS) are the dominant force in modern debt management. The Bank of England has built an emergency lending window for pension funds and insurance companies. These NBFIs can now borrow cash directly from their lender of last resort when the system cracks. Naturally… this creates a lot of morale hazard… but that’s just a small consequence to keep this party going…

The funny thing about this is that it was never part of a plan. It was all yanked together with duck tape and bungee cords after the most recent crisis, which saw its latest facility created and used from the previous crisis… and that chain goes on and on.

Bureaucracy has a funny way of doing this… and it’s always interesting how the public catches whatever drops from the sky… and we just move on trying to pretend that nothing happened. (Source: They’re Rewiring the Financial System Again While Nobody Is Looking, Me and the Money Printer, July 10, 2026.)

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The Fed’s Next Act

The Federal Reserve is happy to provide capital to the system, and took an anything goes approach with the repo market in December. While everyone is all hung up on interest rates - and still trying to understand how we’re at all time highs - I remind you that the Fed said in its statement last week that it has instructed the Federal Reserve Bank of New York to use its repo operations to keep providing support to the banking reserves … which is a very roundabout way of saying… “BRRRRRRRR”

They are STILL printing money and adding to their balance sheet, but don’t you dare call it Quantitative Easing. It’s Reserve Management, and it’s just you know… maintenance… not adding to the balance sheet (Which they are doing…)

The Fed keeps that lending window open too… but largely just to banks and large Wall Street dealers, which can access it anytime they need to. Must be nice.

Hedge funds can’t borrow from this thing, and everyone will remind you of this under oath. But the hedge fund doesn’t need an appointment with the Fed. It can borrow money from the dealer… and that dealer can just walk up to the window right now.

Emergency money will create some slack across balance sheets, and won’t send people out on a search party for whatever they lent to someone last night.

I will remind you that the Fed has held emergency powers to lend to institutions outside the banks since 1932… and the government has taken action to provide lending support to strategically important companies… like Lockheed Martin in 1971…

You don’t ask permission… you never did. You just do it, and then you wait for a Congressional hearing and tell the economic illiterates who can’t even run a lemonade stand that the strategic interest of the United States was tied to that lending window.

And after they’ve lectured you about “bailouts,” you take that Congressman into a room, and you show them a simulation of what happens if the 10-year bond goes to 8%… and they walk out of that room in silence, looking like they’ve seen a ghost.

There’s precedent for that too… It happened when our Treasury and Fed officials took Congress behind closed doors and explained the truth about AIG’s implosion…

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They’re Doing It and There Wasn’t a Vote

I know that saying that they’re rewiring the system… and maybe that sounds like newsletter hyperbole. But after years of digging through this plumbing, I simply invite you to launch your complaints to the Federal Reserve… instead of me.

After all, they’re the ones who wrote and named the paper. Their staff… and I’m serious about this… released a paper last year that is called “Rewiring Repo.”

That paper studied how the markets short circuited in September 2019… and they had to shore up a new emergency lending window if it happened again… (and it did… especially last fall and winter).

The Bank for International Settlements’ top economist has already told us about the complete rewiring of the system after the 2008 financial crisis. The people running the monetary grid have called it rewiring… their terms.

I’m just the messenger who tells funny jokes and tries to dumb this down so that people anywhere can understand what’s happening. (Source: Chang, Klee and Yankov, Rewiring Repo, Federal Reserve FEDS 2025-013.)

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It’s Coming

So, I wrap this conversation with the ongoing evidence of what comes next and why the Jackson Hole meeting in three weeks is so important. They are accelerating the payment systems and velocity of money, moving toward instant settlement, tokenizing collateral, and bolstering the clearing houses.

They’re working on changes to the repo markets and the Treasury market’s primary liquidity channels. I’m not saying that this is some secret bailout plan for the future…

But it does show you that they understand how speed and leverage can create panic and lead to broader Treasury issues that ultimately spillover into the equity markets.

If you need further evidence of how far and how fast it can happen, look to 2020, the GILT Crisis in 2022… the SVB Crisis in 2023… the Nikkei Crash in 2024… the Trade Crash in 2025… the Japan jitters in late November 2025… and the market wind down in late March 2026….

I remind you that people write firecodes before anyone occupies a building… The Fed has explained how this all ends. The last two times that “innovation” came for the banking sector, it started in the 1970s.

At the time, money markets emerged… then recently, fintech names like Venmo and PayPal emerged as alternatives to the banking sector.

In both cases, the banks adapted, the new technology or system ran alongside it, and everything remains in place. Yes, the system bends, and the big players find a way to survive (if not thrive because they engage later in regulatory capture).

The end game isn’t about the banks… It’s really about the Treasury market, and I’ll tell you that the officials will do whatever is necessary to keep the flames away from the government borrowing. That’s the market holding everything else up, as I’ll explain in my podcast tomorrow… Source: Federal Reserve, Banks in the Age of Stablecoins, FEDS Notes, May 1, 2026.

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In Conclusion

In the last few days, I’ve shown you what the agenda looks like for Wyoming in a few weeks. Your checking account is now a battleground, and stablecoins are the fresh new marginal buyer of government demand.

The dollar has escaped the banking system, and we have a brave new future on the horizon. Beneath all of this… we know that the firemen are standing by ready to douse any market down with fresh capital and collateral…

When the speeches from Wyoming hit the news, ignore the podium.

Speeches are marketing…

We want to see the footnotes, which are the real confessions of central bankers.

This year, the central banks released their papers on the future of money…

All we did was read them…

Thank you for spending the week with me.

This weekend, I’ll send a report on one stock that I think is poised for a huge move when all of this is said and done… Money Printer Pro readers will get access to it, and we’ll do a quick run through on it this coming Monday during our 8:30 am show.

If you’re not a member… Now is the time to start.

Stay positive,

Garrett Baldwin