The Debasement Trade: Best Strategies (2026)

There’s a growing conversation around the debasement trade and owning physical assets instead of relying solely on currency. The U.S. dollar declined throughout 2025, and its share of global reserves fell to 58.4% in the first quarter of the year, down from 71% roughly two decades ago.

As concerns about currency dilution grow, more investors are questioning whether holding most of their wealth in fiat currencies still makes sense. That’s why more people are moving towards tangible assets that cannot be printed or debased as a way to protect purchasing power.

What is the debasement trade?

The debasement trade means you’re betting against the US dollar with real assets. It’s making portfolio allocations on the belief that every dollar will lose purchasing power as government monetary and fiscal policies expand available money. You’re basically moving capital from fiat currencies into hard assets like gold, silver, real estate, and Bitcoin.

Currency debasement traces back thousands of years, from Roman emperors reducing the amount of silver content in coins to modern central banks expanding money supplies. When the United States abandoned the gold standard in 1971, the dollar became a purely fiat currency. The intrinsic value of fiat currencies is zero. US dollars are backed by nothing.

Without commodity backing, fiat money’s value depends entirely on confidence and scarcity, both of which erode when governments print more money aggressively.

Debasement theory

As governments create new money through quantitative easing and government debts keep growing, the total money circulating expands. As the Federal Reserve’s balance sheet grows, each existing dollar represents a smaller fraction of the total.

This leads to inflation and asset price increases because it takes more devalued currency units to buy them.

This is what we’re seeing right now. Central banks worldwide are actively reducing U.S. Treasury exposure and moving those dollars into physical assets like gold bullion. The de-dollarization trend accelerates as nations diversify reserves, while currency depreciation concerns drive institutional and retail investors into tangible stores of wealth.

Why the dollar is losing its value

Reasons why the dollar remains in a bull market, causing the price of everything to go up.

1) Monetary policy and money printing

Governments are printing trillions of dollars, devaluing currency, and fueling inflation.

Creating more money

In December 2025, the Federal Reserve ended quantitative tightening and moved to what it calls reserve management purchases (RMPs). The approach is how the Fed plans to expand its balance sheet again by buying $40 to $60 billion in Treasury bills each month.

This means liquidity is being added back into the system. And that added liquidity impacts your wealth.

During past rounds of quantitative easing, the Fed’s Treasury holdings grew to about $4.6 trillion, making it the largest domestic holder of U.S. government debt. When that much new money enters the economy, it increases overall purchasing power. If production does not rise at the same pace, the value of the currency weakens over time, which puts upward pressure on inflation.

Central bank actions from 2025:

• Increased balance sheet: Expansion through reserve management purchases.
• Gold buying: Global governments made gold purchases totaling 254 tonnes through October 2025, with 95% of government banks expecting to increase reserves into 2026.
• Policies: Despite ongoing inflation concerns, global central banks continue policies that keep markets supplied with money.

2) Deficit spending

By December 2025, U.S. national debt had climbed past $38.4 trillion, a level that makes it harder for monetary policy to operate on its own. When debt grows this large, keeping government financing stable becomes a priority.

In that situation, governments face limits. Instead of focusing only on controlling inflation, they also have to consider the impact of higher rates on government debt. Over time, monetary policy starts bending to fiscal needs because the system cannot easily handle the cost of servicing that much debt.

In fiscal year 2025, the federal budget deficit grew to roughly $1.8 to $1.9 trillion. This is because of:

• Tax cut extensions
• New spending programs
• Higher interest costs

The Treasury has to keep issuing more debt to cover this gap.

With total debt nearing the size of the entire GDP and still rising, the math becomes difficult to ignore. Debt is growing faster than the economy itself, making it harder for growth alone to keep pace with what the government owes.

3) Federal interest payment crisis

In 2025, interest payments on the national debt crossed $1 trillion for the first time. That’s nearly triple the $345 billion paid in fiscal year 2020. Average interest rates on government debt are around 3.4%. This is the highest level since 2008, and interest costs are taking up a growing share of the federal budget.

Projections show interest payments reaching about $1.5 trillion by 2032, with some estimates rising as high as $2.2 trillion by 2035 if rates stay elevated.

This creates a debt trap. Consider the mathematics: with $38 trillion in debt and $2 trillion in annual deficits, the debt grows perpetually. Even if the government balanced the budget tomorrow, servicing existing debt at current rates would require massive resources. Payment is impossible without either default, restructuring, or, most likely, debt monetization.

4) Debt monetization

Debt monetization is when the central bank purchases government debt. This means it’s financing deficits with newly created money. While the Fed maintains independence and denies direct monetization, the effect of QE and RMPs is similar:

1. The government issues debt.
2. The Fed buys substantial portions (directly or indirectly by supporting demand).
3. The amount of money in circulation expands.
4. The Fed issues treasury auctions to absorb over $3 trillion annually in new issuance, which requires higher treasury yields unless the Fed intervenes to maintain demand.

The inevitable outcome? As deficits persist and debt compounds, the political path of least resistance is continued money printing. This debases the currency and rewards debtors (the government) at the expense of savers and citizens holding cash.

We talked about the national debt and de-dollarization in one of our recent podcasts:

Inflation and currency devaluation

You’ve seen the rise in gold prices, but what’s behind the growth from around $380 an ounce in 1995 to its current level above $4,300? The answer isn’t that gold became more valuable. If you held one ounce of gold in 1995, then 30 years later in 2025, you still have exactly one ounce of gold. The metal hasn’t changed. What changed is how many devalued dollars it takes to buy that ounce.

This is asset price inflation. As the purchasing power of the currency falls, the price of gold rises. It takes more dollars, each worth less than before, to buy the same physical asset.

Investor expectations and tangible asset classes

Expectations have an impact as well. When people believe money printing will continue, markets adjust right away instead of waiting for prices to rise later. Investors don’t want to hold cash that may buy less in the future, so they look for better returns now, which increases asset prices today.

That creates a feedback loop:

• Government spending and central bank policies signal that easy money is likely to continue
• Inflation expectations rise
• Investors move into assets that protect against inflation
• Prices climb even more

Fiscal and monetary policy work together to keep inflation pressure in place. Large government deficits add demand to the economy, while central bank policies keep money flowing. Together, they steadily chip away at the dollar’s real value.

Why cash and bonds aren’t helping you

Even interest rates aren’t offering much protection. Real yields, which account for inflation, remain low. In 2025, real yields on 10-year Treasuries averaged around 1.8 percent. That barely keeps up with inflation and falls well short of matching the pace of rising asset prices.

The point isn’t to bet that gold or silver suddenly become more valuable on their own. The goal is to protect yourself from the reality that when monetary stock keeps growing, each dollar buys less over time.

Protecting your wealth

Investing approaches you can take to protect your wealth and reduce fear of currency depreciation include:

Gold as your primary safe haven

Gold is the ultimate store of value. It benefits directly from de-dollarization trends. You can see this as national banks worldwide reduce dependence on the U.S. dollar and instead buy more gold reserves.

There’s been a gold rally ever since 2020. But in the past year, gold prices rose nearly 65%, hitting $4,300/oz as of this writing. Government banks worldwide added 254 tonnes of gold purchases through October alone, which is their fourth-strongest accumulation year this century.

The scarcity principle reinforces gold’s value proposition. As an expert said, “Our government can print money, but they cannot print gold, silver, or Bitcoin.” Fiat currencies inflate toward worthlessness, but gold maintains its intrinsic value as a monetary metal with 3,000+ years of history.

Looking forward, expert forecasts remain bullish. J.P. Morgan projects gold will average $5,055/oz by Q4 2026, driven by strong central bank demand. Morgan Stanley predicts $4,500/oz by mid-2026, while many individual investors believe it will hit $5,000/oz in 2026.

Advantages of adding gold:

• Low correlation: Gold often moves differently from the stock market I, which can help balance a portfolio when Wall Street becomes unstable.
• Central bank demand: Ongoing purchases by government banks keep impacting prices and aren’t tied to short-term economic cycles.
• Long history: Gold has held value for thousands of years across different societies and financial systems.
• Global liquidity: Gold is widely recognized, so you can sell it or exchange it almost anywhere in the world.
• No counterparty risk: When you hold physical gold, you’re not relying on a bank, institution, or third party to make it valuable.

Gold is one of the lowest-risk parts of tangible asset allocation. It can give you steady returns with strong downside protection. Plus, prices usually rise gradually rather than suddenly, which helps keep volatility low. That combination makes gold a solid core holding for protecting against long-term currency erosion.

Silver: the volatile precious metal

Silver is very different from gold. It’s a precious metal for investment, but it’s also widely used in modern technology and manufacturing. That dual use creates more opportunity, but it also adds more complexity compared to gold.

Supply deficits

Silver has a supply deficit. According to the Silver Institute, 2025 ended with a shortfall of roughly 115 to 120 million ounces, marking the fifth year in a row where consumption exceeded production. Over the past four years, the world used about 700 to 820 million ounces more silver than it produced, which is equal to an entire year of global mine output.

These shortages are difficult to resolve quickly. Mining companies face declining ore quality and recurring disruptions in major producing countries such as Mexico, Peru, and Russia. Only about 28% of the global silver supply comes from primary silver mines, with most production occurring as a byproduct of mining other metals. As a result, higher prices do not rapidly lead to increased silver output.

Silver markets structure

The silver market is also smaller and less liquid than gold, making it more susceptible to price swings. The phenomenon of “silver slams” which are sudden, sharp price declines because of short selling of silver coins or bars, has historically frustrated investors. Lately, these dips haven’t lasted long. Prices tend to bounce back quickly due to real physical demand that absorbs the selling.

Relationship to gold

Silver amplifies gold’s moves. In strong metals markets, silver typically outperforms gold on a percentage basis. The gold-to-silver ratio, which is how many ounces of silver equal one ounce of gold, went from 100:1 earlier in 2025 to around 61:1. This leverage effect makes silver an option for investors looking for higher potential returns and willing to accept increased volatility.

From a portfolio standpoint, investors often use silver when they want more upside than gold can offer and are comfortable with larger price changes along the way.

Bitcoin and alternative assets

People also look at Bitcoin as part of the debasement trade. The appeal is straightforward. There’s a fixed supply that’s capped at 21 million coins, and no central bank can create more of it. That limitation is what puts Bitcoin in the same category as gold for some investors.

Bitcoin’s price fluctuations are far more extreme than gold or silver. Price drops of 20–40% over a short period are common. Because of that, Bitcoin is usually a smaller position in portfolios than traditional safe-haven assets.

Bitcoin’s 24/7 global trading creates additional complexity. Unlike gold and silver, which trade during set market hours, Bitcoin markets never close. That constant trading makes it easy to buy and sell, but it also means prices can fall quickly when markets get stressed.

Beyond Bitcoin, other alternative investments you might consider to diversify are:

• Commodities: Assets like copper, oil, and agricultural products often rise with inflation and don’t always move in the same direction as equity markets.
• Foreign currencies: Currencies from countries with lower debt levels can hold up better than the dollar. One example is the Swiss franc.
• Real assets: Property, farmland, and timberland have a tangible value and can also generate income.

The reason to own a few different hard assets is simple. They don’t all move the same way, and each one brings something different to your portfolio.

Finding asymmetric trades in 2026

An asymmetric trade is one where your potential upside greatly outweighs your potential downside. It’s the classic low-risk, high-reward scenario that investors are always looking for. These opportunities can come about during currency dilution because of market inefficiencies.

As a trend begins, certain market segments react more slowly than others. Prices can take longer to adjust in smaller, less liquid markets. This creates a temporary window of opportunity. For example, physical silver was an asymmetric bet about a year ago. Early investors recognized its potential before the broader market caught on.

Then, as an asset class matures and investors jump on the trend, asymmetry collapses. The risk-to-reward ratio normalizes, making huge gains less likely.

Debasement trade strategy

Is it too late for you to get into the currency depreciation trade? Before answering, consider the circulated money chart over the past 65-plus years. The trend is clear. Prices keep moving higher, and they tend to rise faster during periods of stress or crisis. Do you really think governments are going to stop printing money?

The only way to halt currency dilution is to stop the printing, but implementing that policy would blow up the debt bubble, trigger an economic crash, and create an economic depression.

If you accept this premise, that they will continue printing money, then no, it is not too late. The currency depreciation trade isn’t short-term speculation. Instead, it’s a long-term position to protect your wealth against fiscal and monetary policies that aren’t sustainable.

For most people, currency depreciation trade usually makes up somewhere between 5% and 20% of total investable assets, depending on comfort level, age, and overall financial situation.

Monitoring and rebalancing your portfolio

Dealing with currency debasement isn’t a one-and-done decision. You’ll want to watch the markets and make adjustments as things change. Areas to monitor:

Monetary policy

• Fed balance sheet direction, including QE or RMP activity
• Real interest rates relative to inflation
• Fed policy language and forward guidance
• Ongoing central bank gold purchases

Fiscal policy

• Size and direction of federal deficits
• Debt growth relative to GDP
• Demand at Treasury auctions and yield behavior
• New spending or tax policy changes

Market signals

• Yield curve shape and long-term rates
• Inflation expectations and breakevens
• U.S. dollar strength or weakness
• Physical and ETF demand for gold

A high-level glance at areas to watch includes:

Category	Signals to monitor
Monetary policy	Fed balance sheet direction, including QE or RMP activity; real interest rates versus inflation; Fed policy language and guidance; central bank gold purchases
Fiscal policy	Federal deficit trends; debt growth relative to GDP; Treasury auction demand and yield behavior; new spending or tax policy changes
Market signals	Yield curve shape and long-term rates; inflation expectations; U.S. dollar strength or weakness; physical and ETF gold demand

Risks of debasement trade

There are risks to consider and keep in mind as you add assets to counteract the dollar’s role in your portfolio. These include:

• Policy reversal: A political regime could prioritize fiscal discipline, or a government treasury could initiate aggressive, Volcker-style monetary tightening to combat inflation, as we saw in the late 1970’s and 1980’s.
• Deflationary shock: A severe credit contraction could trigger a deflationary shock, causing a scramble for dollars that strengthens the currency despite high debt levels.
• Technology disruption: Breakthrough productivity gains from artificial intelligence, robotics, or energy technology could generate economic growth sufficient to outpace debt accumulation.
• Too many believers: Risk that a trade becomes the norm. If every portfolio manager, hedge fund, and retail investor holds gold, who remains to buy? The sudden selloffs in silver and Bitcoin’s frequent 10–30% drops show how quickly prices can fall, even when the debasement case still holds.
• Opportunity cost: During periods where growth assets (technology stocks, venture capital, emerging markets) outperform defensive assets, holding gold and silver feels punishing. It’s also hard to stick with these positions when stocks are doing well. Watching equities run while your assets lag can cause people to exit at the wrong time.

Learning from history

The record highs of gold and silver in 2025 are not an anomaly. It’s a recurring pattern we’ve seen for decades whenever fiscal and monetary discipline eroded. Consider:

Period	Debasement driver	Hard asset performance	Outcome
1970s	Oil shocks, deficit spending, Fed accommodation, and abandonment of the gold standard	Gold: $35 to $850/oz (peak 1980); Silver: high gains to $50/oz	Ended with Volcker’s aggressive rate hikes stabilizing the U.S. dollar, triggering a 20-year bear market in commodities
2000-2011	Post-tech bubble QE, war spending (Iraq/Afghanistan), housing crisis, global financial crisis response	Gold: $280 to $1,900/oz (peak 2011); Silver: $4 to $48/oz (peak 2011)	Ended with the Fed tapering QE
2020-2022	COVID lockdowns, multi-trillion stimulus, zero rates, QE infinity	Gold: $1,500 to $2,070/oz (peak Aug 2020); Silver: $12 to $29/oz (peak Feb 2021)	Ended with Fed rate hikes/tightening in 2022, sparking dollar rally and metals correction into 2023

Final thoughts on dollar debasement protection

The takeaway is simple. Relying entirely on fiat currency carries more risk than it used to, and that risk is structural rather than temporary. That alone makes it worth taking a closer look at alternatives.

If you want to learn more about gold and silver and how they can protect your wealth, connect with the Swiss America team today.

Debasement trade: FAQs

What is an example of debasement of currency?

An example is when President Franklin D. Roosevelt devalued the dollar by raising the official gold price from $20.67 to $35 per ounce after requiring citizens to turn in their gold. This reduced the dollar’s gold backing by 41%. Key aspects of this scenario:

• Debasement vs inflation: Debasement doesn’t always look like inflation at first. It can happen through policy changes that alter what a currency is backed by.
• Laws and policies: Governments can change the rules around money or gold ownership when under financial pressure.
• Currency value: Repricing gold higher was a way to devalue the dollar without officially admitting the currency was weaker.

What does debasement mean in economics?

Debasement means deliberate reduction in a currency’s intrinsic value or purchasing power. It’s often a result of governments or central banks increasing the supply of currency without corresponding economic growth. Here’s how it works:

• Money supply growth: More currency enters circulation without a matching increase in goods and services.
• Asset repricing: Hard assets like gold and silver rise in price as each unit of currency buys less over time.
• Erosion of savings: Cash and fixed income lose value even when inflation seems controlled.

What is the difference between inflation and debasement?

Debasement is a deliberate act to reduce a currency’s intrinsic value. Inflation is the symptom that represents an increase in the cost of goods and services.

• Timing: Debasement occurs first, while inflation appears later.
• Cause vs effect: Debasement is the policy action, inflation is the outcome.
• Visibility: Inflation is noticeable to consumers, while debasement often happens quietly.

The information in this post is for informational purposes only and should not be considered tax or legal advice. Please consult with your own tax professionals before making any decisions or taking action based on this information.