Debasement
Understand and Consider the Trade
Definitions
Debasement is defined as the action of reducing the quality or value of something. A decline in their intrinsic value.
Government currency and bonds are Fiat-based (1), meaning they are not backed by anything tangible. Thus, they are subject to loss of intrinsic value.
Debasement of currency and bonds occurs when governments repeatedly increase deficits and debts, ultimately increasing its money supply.
Timeline and Effect
Over time, often decades, traders of the currency start to lose faith in its ability to retain value. Concurrently, buyers of government bonds become increasingly concerned about getting their money back when the bond matures.
Debasement is a long-term, slow-moving trend developing over decades. At a point in time owners of fiat currency and fiat-denominated bonds start to look for alternative places to store their savings and wealth.
Today
In a recent interview (2), Asset Manager Adam Levinson is blunter about the current scenario. He called ‘The Great Debasement Trade’ an anti-fiat currency movement. He goes on to state a lack of trust of governments who are continuing to operate with out-of-control budgets.
The debasement is global in nature, with high government debt and deficits being commonplace everywhere, including Europe, Asia, the US and Canada. The UK and France are two current European examples where bond rates are showing signs of trouble.
Impact on Us?
First, 30-50% of Canadians investments and pensions are held in government bonds. Second, the Canadian currency is fiat. Our bonds and currency have been debased for decades. Our federal Government Debt (3) is growing ever larger.
Keith Dicker, discussing bonds in a recent podcast (4) titled The Great Debasement Trade Continues, comments that the probability of a bond market liquidity crisis is high. He notes that due to our global economy, a crisis in a European or Asian nation will impact Canadians as well. A bond market liquidity crisis will rip a hole in a lot of older people’s assets:
· The bond market will decline in value
· The stock market will decline, then later rebound
· Banks will be more reluctant to lend money
Along with the decline in bond and stock markets and increasing costs or difficulty getting or renewing a mortgage, there will be a relative increase in inflation.
So, what’s the Trade?
The Great Debasement Trade is a move by governments, investment firms and individuals towards holding less bonds and currency, replacing it with assets having intrinsic value.
In plain language, ownership of gold, silver, and Bitcoin are growing in proportion to fiat currency and bonds.
Dicker and his co-hosts suggest gold prices ripping higher this year is indicative of this ongoing trade. Reports are now out (5) stating foreign central bank reserves now hold more gold than US Treasury bonds for the first time since 1996.
Do your own research, decide for yourself if debasement is legit. If you decide it is, join the trade. Be Prepared.
1. Be Prepared blog, 25 October 2024
2. Bloomberg Insight, Adam Levinson, The Great Debasement Debate is Rippling Across World Markets, 14 October 2025
3. Be Prepared blog, 9 June 2025
4. Loonie Hour, Episode 209, October 2025
5. https://www.visualcapitalist.com/central-banks-now-hold-more-gold-than-u-s-treasuries/