Why Tangible Assets May Be the Final Safe Haven

---

• The easy-money era is ending, and the forces that powered it, like cheap credit, carry trades, and endless liquidity, are starting to unwind.
• Inflation and debt are returning in familiar patterns, echoing the 1970s and forcing investors to rethink what real value means.
• As the system turns, tangible assets like gold and oil may reclaim their place at the center of wealth.

Nearly every long cycle begins with an illusion: that the rules of the last decade will govern the next one. For fifteen years, investors lived inside a system built on confidence, cheap money, and fairly low volatility. The carry trade, which is borrowing in one place to invest in another, became the heartbeat of global finance. It worked because everyone believed tomorrow would look like yesterday.

Yet cycles end not in panic, but in disbelief. When momentum stops working, when easy leverage turns fragile, when the safest trade begins to feel dangerous, the world is shifting beneath us. The last era rewarded scale and liquidity. The next might reward scarcity and resilience.

The Paradox of Inflation

Adam Rozencwajg, managing partner at Goehring & Rozencwajg (G&R) - a premier global natural resource investment firm based in New York - describes inflation as mechanical and psychological. In the short run, it is formulaic: higher energy prices, more money in circulation, lower real rates. You can model it with spreadsheets and lagging indicators. But in the long run, it becomes a matter of belief. Once people expect higher prices, they act in ways that make it true, pulling purchases forward, demanding wage increases, hoarding assets. The expectation becomes the cause.

That is the paradox of inflation. It is predictable on paper and uncontrollable in practice. Once psychology takes over, the data stops helping. In the 1970s, it took a generation to learn that lesson. Today, the early signs of that same psychology, including the acceptance that prices only move one way, are returning.

History Doesn't Repeat, But Debt Does

The stories of monetary history are rarely about new mistakes. They are about old mistakes rediscovered in modern language. In the 1960s, President Lyndon Johnson literally pinned his Fed chair against a wall, demanding easier money to fund the Vietnam War. Nixon replaced a cautious central banker with a loyal one. The result was stagflation: the toxic mix of rising prices and slowing growth that reshaped the Fed's mandate.

Today, the stage could be set up very similarly. We have high debt, political pressure, negative real rates, and a Federal Reserve caught between the fear of inflation and the fear of breaking something larger. As Rozencwajg put it, the path to a Volcker moment always runs through an Arthur Burns. Policy errors are not random. They are the system's way of buying time until the pain becomes unbearable.

The Treasury’s math shows the same trap. Once debt exceeds 100 percent of GDP, higher interest rates consume the economy’s nominal growth. To avoid a spiral, the system must keep borrowing short-term and cheap. But short-term funding is fragile. It relies on hedge funds, futures, and repo markets that can disappear overnight. The problem is that the system is working exactly as designed, just at a scale no longer sustainable.

The End of the Carry Era

The carry era is defined by trust. Trust that volatility will stay low. Trust that capital will always be available. Trust that liquidity will solve every problem. But like all long booms, it ends when trust becomes habit.

Carry trades are reflexive: the more they work, the more they reinforce the conditions that make them work. Cheap money inflates asset prices, asset prices justify more leverage, and stability becomes self-fulfilling, until it isn’t. When the cost of money rises or volatility returns, the positive feedback loop turns negative, and the world that once rewarded size and confidence begins to reward humility and flexibility.

Markets are not just mathematical systems. They are emotional ones. They oscillate between the greed of leverage and the fear of loss, and when the leverage unwinds, the world re-discovers value not in speed, but in endurance.

Gold, Oil, and the Return of Tangibility

One could make a strong case that every carry boom has an opposite: a resource boom. When leverage collapses, scarcity replaces abundance as the source of value. After years of dismissing gold as a relic and oil as obsolete, investors are rediscovering their purpose. Gold protects against monetary change, while energy fuels the physical world that no algorithm can replace.

In the 1970s, the end of Bretton Woods launched gold 25-fold. Oil prices quadrupled. The largest companies on earth were drillers and refiners, not data firms. Today, gold is again rising against every currency, and energy producers are trading for the price of their scrap steel. Offshore rigs built for billions can be bought for cents on the dollar. It’s the same story: what was forgotten becomes valuable when the world needs it most.

The irony is that the market still resists believing it. Investors cheer the idea of "Drill Baby Drill" policies without asking what geology allows. Shale fields in the United States have peaked, and Venezuela’s vast heavy oil reserves are rusted and gutted. Even if governments wish it otherwise, nature moves on its own schedule. The politics of energy may change faster than the physics that govern it.

The Unsustainable Math of Everything

Consider the scale. There are hundreds of trillions of dollars in global financial assets: stocks, bonds, private equity, credit, real estate. All of it depends on the same basic assumptions: growth, liquidity, and the ability to roll debt forward. Against that, the entire float of gold trading hands in the world is two trillion. The rest is buried in vaults.

That is the imbalance we need to keep in mind: a small door leading out of an enormous room. If even a fraction of that financial capital seeks refuge in scarce assets, the price of scarcity must rise. That’s arithmetic, not a prediction. 

Every era invents its own form of unsustainability. In the dot-com boom, it was profits deferred forever, while in the housing boom, it was debt without consequence. In this one, it might be liquidity without limit, or the belief that central banks can manage the cost of money indefinitely. When that belief cracks, the search for something tangible begins again.

When Value Changes Shape

The shape of value changes with each generation. A century ago, wealth meant land. Then it meant factories, then intellectual property. In the last two decades, it meant liquidity, the ability to move fast, scale infinitely, and never run out of buyers. But liquidity is not the same as solvency because when the music stops, the assets with a heartbeat are the ones that matter.

That means energy companies that produce real fuel, miners that extract real metal, and farmland that yields real crops. They are messy, cyclical, and politically unpopular. They are also the foundation of every abstract dollar in the system. Some refer to them as hated assets. History calls them indispensable.

Investors tend to forget that resilience compounds faster than perfection. In the years ahead, the winners may not be those who predict the next rate move, but those who understand the rhythm of cycles: the expansion of belief and the contraction of reality.

The Lesson of Every Cycle

For years, the shared assumption has been that inflation is solved, debt is manageable, and volatility can be engineered away. Let’s not forget that none of these are laws of nature. They are conditions: temporary, human, and reversible.

Tomorrow will not look like yesterday, but that’s not a reason for fear. It’s a reason for humility. The end of one system is the beginning of another, and somewhere in that transition, in the revaluation of what matters, lies the opportunity that every long cycle eventually delivers.

---

This is based on an episode of Top Traders Unplugged, a bi-weekly podcast with the most interesting and experienced investors, economists, traders and thought leaders in the world. Sign up for our Newsletter or subscribe on your preferred podcast platform so that you don't miss out on future episodes.