Currency debasement is a simple idea with enormous consequences: when more money chases the same amount of goods and services, each unit buys less over time. Think of a pizza cut into more slices – there are more “pieces,” but not more pizza; that’s what happens when policy expands money and credit faster than the real economy grows. In ancient times, rulers shaved coins or mixed in cheaper metals; in the modern fiat era, it shows up through persistent fiscal deficits, rate‑cut cycles, and central bank balance‑sheet expansion that boost nominal demand faster than real supply. The mechanism changes, the outcome rhymes: purchasing power erodes, and assets that can’t be printed tend to outperform.
Debasement isn’t a partisan project – it’s a bipartisan habit born of incentives. One side prefers more spending; the other prefers lower taxes. Neither reliably embraces the hard choices that balance budgets over the cycle. The path of least resistance is to let nominal GDP run above funding costs and let time and inflation smooth the debt. Layer on a Federal Reserve that, in practice, prioritizes maximum employment when trade‑offs bite, and the policy mix leans toward easy financial conditions when growth wobbles. Over long arcs, that stance supports activity – but it also taxes savers through negative real returns.
History provides the footnotes. Rome’s denarius saw its silver content slide as emperors financed wars and welfare; inflation rose, confidence fell, and commerce suffered. Henry VIII’s “Great Debasement” diluted coinage to fund the crown, lifting prices and sinking credibility until reforms restored trust. Paper money compounded the lesson: the Continental dollar and Weimar marks printed to bridge fiscal gaps left savers scarred. When the dollar severed its gold link in 1971, policy gained flexibility – and the 1970s inflation shock and later QE eras showed how cushioning growth often erodes purchasing power for holders of cash and long‑duration nominal claims.
Today’s debasement is quieter but broader: structurally higher deficits, aging demographics, re‑shoring, and the political appeal of easy money coincide with periodic slowdowns that invite rate cuts and liquidity backstops. Even without double‑digit CPI, chronic primary deficits financed below nominal growth transfer resources from savers to borrowers. The tell isn’t just inflation prints; it’s the steady migration toward scarce, cash‑flowing, or policy‑insulated assets, and the premium investors place on claims that don’t rely on anyone’s promise to pay.
That points to a practical allocation anchored in hard currency and equity discipline. We start with a gold‑centric sleeve: under today’s conditions, total hard‑currency exposure as high as 30% can be warranted for investors prioritizing real purchasing power, with gold as the core. Silver adds torque to monetary cycles; platinum and palladium diversify where supply constraints and industrial demand tighten the balance. We add Bitcoin to the mix with its engineered scarcity with open rails – but it’s more equity‑sensitive and liquidity‑linked, so we treat it as a speculative satellite rather than a substitute for gold’s insurance role.
Marry metal and equity. We pair bullion exposure with high‑quality precious‑metal miners to harness operational leverage to rising prices. Favor low‑cost producers with tier‑one assets, strong balance sheets, disciplined capital allocation, and visible reserve replacement; avoid marginal operators where cost inflation outruns realized prices and equity dilution becomes the hidden tax. Beyond miners, we make equity selection an inflation discipline, not a slogan: emphasize businesses with genuine pricing power that can raise prices faster than input costs and sustain margins through cycles, while minimizing reliance on asset‑light consumers who are most burdened by persistently higher living costs and thus less able to absorb price hikes. Real returns should come from durable free cash flow and moat‑driven price realization, not from financial engineering or hope that the discount rate keeps falling.
Funding and duration should reflect the regime. We keep long‑duration nominal bonds tactical rather than strategic and emphasize short‑duration credit and floating‑rate where appropriate. We add to scarce assets on volatility and quality miners when forced selling creates price air pockets. We try to size positions with humility: let gold act as insurance, size Bitcoin like a call option, build miners in tranches around cost‑curve inflections, permitting milestones, and balance‑sheet de‑risking. We fund additions from cash and long‑duration nominal exposure rather than sacrificing compounders that can outrun debasement.
This isn’t about ideology; it’s about arithmetic and incentives. If fiscal policy keeps running primary deficits, if politics continues to prefer stimulus over austerity, and if the Fed continues to lean toward full employment when tradeoffs sharpen, the destination doesn’t change – debasement is where the road leads. Until the path varies – through sustained budget discipline, structurally positive real rates, and a credible commitment to price stability – we assume erosion of purchasing power is the base case. That’s not a reason to hide; it’s a blueprint to allocate: own the scarce money, own the operators who pull it from the ground, and own the businesses whose pricing power can outpace their costs. In a debasement regime, that’s what bullish looks like.