Debasement concerns?

[Finance Dave]

I've been seeing a lot of talk on various websites and YouTube videos regarding concerns about a currency reset and debasement of the dollar. Some of them are obvious "pump and dump" attempts using AI, but others are by sources like Bloomberg news and other financial CFPs/CFAs/etc. Most of them are saying some version of "buy hard assets like Gold, silver, real estate, collectibles, and even Bitcoin".

What are your thoughts on this topic?

Given our government's penchant for overspending, I can't see how this will end well...but at the same time I don't want to be fearful of something that's not real and take risks I normally wouldn't take. I'm currently a very conservative investor...but in the minds of those writing the articles/videos, being "conservative" by owning lots of cash assets and Treasuries is actually very risky if the currency is debased. I do have small positions in gold, silver, real estate...but together it's only 3-4% of our portfolio.

I think a key milestone will be when the SS trust fund issue comes up in about 2033-2034. It's not that far away, and something will have to give.

 

[marko]

To each his own. I worry about a lot of things, but the debasement of the dollar isn't one of them. William Devane has been hawking these fears since about 2010.

I'm not an economist (not by any stretch) but "with everything that's going on" I'd expect the dollar to be more of a refuge than a risk.

IMO the US and it's economy are in a heck of a lot better shape than we're often led to believe. Just wish I had a dime for every 'end of the world as we know it' prediction that never happened.

YMMV.

 

[Spock]

Debasement is just a new word for inflation.
Grow the economy faster/"run it hot" is inflation with lipstick.
Interest rates are being cut while inflation is still above "target". A 12 pack of paper towels is $33 now.
Central banks are "diversifying their holdings" vs USTs...

There are 3 ways to deal with the debt:
1. cut spending and raise taxes/run surpluses - who didn't roll their eyes when they read that?
2. default - not happening when they can just push "print".
3. devalue/debase/inflate - cha-ching!

 

[Koolau]

Debasement of fiat currency is (and has been) standard since gummints have realized they could do it. Look back through history and most fiat currencies that "ruled the world" are now gone. The only "money" that has always been money and remains as money to this day is gold (maybe silver as well).

I don't make a big deal of it. It's the normal way such things progress. No gummint is immune. They all do it and they always will. Some currencies end in a bang and some in a whimper, but they all die eventually. All I can hope is that I'm long gone before the dollar is the next "dead" currency.

The USA has been blessed to be able to continue debasement of the dollar - but not need to do it quite as quickly as most other countries. Currencies are, and always have been "relative" to one another. They used to be officially in relation to gold or silver, but, no more.

As far as a "safety play," some people recommend holding investments denominated in other currencies - especially those that are not being debased as rapidly. I'm no expert on this subject, but I suspect the Swiss Franc is likely the only currency that is being less debased than the US dollar year in and year out.

Of course PMs (especially gold and silver) are a play but the underlying metals need to be held in your possession to insure that they aren't debased themselves (paper gold and silver are just as debased as paper "money" - because they can be debased through fraud). BUT gold in a safe or a vault produces no income. They do not w*rk the way dollars and francs or drachmas do when invested.

SO, I've always felt comfortable just holding a small amount of PMs thinking they give me a small edge "just in case" the dollar ends in a bang but also if it ends in a whimper (as seems the more likely case going forward).

Again, I claim no special insight or knowledge. I've just read up on such things and have my own opinion. I think of PMs as a type of "insurance" policy. Insurance always costs you money. You can go naked and probably come out ahead most of the time. If you sleep better knowing you have insurance (like I do) you might consider a few gold and silver coins in your lock box or buried in your back yard.

Otherwise, just enjoy the ride and watch the currencies all being debased. No gummint will cease what has w*rked (until it doesn't) for thousands of years. And remember that YMMV.

 

[Koolau]

Debasement is just a new word for inflation.
Grow the economy faster/"run it hot" is inflation with lipstick.
Interest rates are being cut while inflation is still above "target". A 12 pack of paper towels is $33 now.
Central banks are "diversifying their holdings" vs USTs...

There are 3 ways to deal with the debt:
1. cut spending and raise taxes/run surpluses - who didn't roll their eyes when they read that?
2. default - not happening when they can just push "print".
3. devalue/debase/inflate - cha-ching!

4. Rinse and repeat.

 

[Spock]

..... Just wish I had a dime for every 'end of the world as we know it' prediction that never happened.

YMMV.

The world doesn't end with high inflation. It just gets more expensive.

 

[FD1000]

The 24/7 media love publishing clickbait articles — even more so since the change of power in January 2025. I completely disregard that noise.
Bad news always sells better than good news.
Over the decades, I’ve learned there’s little to no correlation between most of these articles, opinions, or “indicators” and what actually happens in the next 1, 3, or 6 months.
When it comes to economists, it’s even worse. I instantly stop reading any article that begins with something like “50 (or 87 or 202) economists worry about…” — it’s never worth the time.

 

[copyright1997reloaded]

I've been seeing a lot of talk on various websites and YouTube videos regarding concerns about a currency reset and debasement of the dollar. Some of them are obvious "pump and dump" attempts using AI, but others are by sources like Bloomberg news and other financial CFPs/CFAs/etc. Most of them are saying some version of "buy hard assets like Gold, silver, real estate, collectibles, and even Bitcoin".

What are your thoughts on this topic?

Given our government's penchant for overspending, I can't see how this will end well...but at the same time I don't want to be fearful of something that's not real and take risks I normally wouldn't take. I'm currently a very conservative investor...but in the minds of those writing the articles/videos, being "conservative" by owning lots of cash assets and Treasuries is actually very risky if the currency is debased. I do have small positions in gold, silver, real estate...but together it's only 3-4% of our portfolio.

I think a key milestone will be when the SS trust fund issue comes up in about 2033-2034. It's not that far away, and something will have to give.

The buying power of the dollar in 1913 was over 26x what it was worth in 2020. I picked 1913 as that was when the federal reserve was created with the power to regulate the money supply and with the mandate to maintain "stable" prices. Almost 33x if you measure to 2025. Another way of looking at it is that we can today buy 3% of what that same dollar would buy in 1913.

As others have pointed out, the "easiest" thing that our system (political and societal) can do about percieved or real problems is to create money, thus causing a rise in prices (aka inflation).

The question always becomes how much is baked into any move in real assets - i.e. assets with no way to create them or where their creation is somehow constrained. That includes no only things like gold, but also physical land (perhaps particularly farm land) or perhaps even things (companies) with large barriers to entry.

Each of us has to make our own path - for me, the return on fixed assets of duration (e.g. greater than 9 months or so) doesn't have enough return to take the duration risk. However, if economic conditions do deteriorate, those assets will do well (at least in nominal dollar terms). I find myself "stuck" with a large slug of short term fixed simply because I don't want to significantly increase my equity exposure AND I am already sitting with a 13% precious metals & miners exposure (now with nice for me gains).

 

[Koolau]

Just wish I had a dime for every 'end of the world as we know it' prediction that never happened.

"End of the world" is a straw man argument used to poo-poo actual "issues" that (while they won't cause the end of the word) MAY cause the end of a currency. Not nearly as bad as Armageddon, but not fun to live through. Just ask (well, too late) the folks who lived through run-away inflation in Germany in the 1920s. Didn't cause the end of the world but likely was a major issue in the rise of those who brought us WWII. So SHTF-level problem but not "end of the world" and probably best avoided if possible. And, owing to men's nature, probably will happen again. Maybe just not in my life-time, I hope.

 

[braumeister]

Some of them are obvious "pump and dump" attempts using AI, but others are by sources like Bloomberg news and other financial CFPs/CFAs/etc.

I learned a long time ago that if you ask five economists the same question, you'll get eight answers.

 

[Koolau]

The buying power of the dollar in 1913 was over 26x what it was worth in 2020. I picked 1913 as that was when the federal reserve was created with the power to regulate the money supply and with the mandate to maintain "stable" prices. Almost 33x if you measure to 2025. Another way of looking at it is that we can today buy 3% of what that same dollar would buy in 1913.

Back in 1913 the dollar was at least partially backed by gold.

An interesting "thought experiment:" A 20 dollar gold piece in 1913 was "let's say - worth" $20. Today, that 20 dollar gold piece would be worth (don't think of the numismatic value) about $4200 X 0.97 = $4,074.00 in gold value.

$4074/20 = $203.70 or worth 20 times as much as it was in 1913. Not quite 26x or 33x but close enough for gummint w*rk. That's one of the appeals of gold, but it ignores the fact that gold doesn't "w*rk."

A better example might be a "silver dollar." Neglecting the numismatic value, a silver dollar is now worth about $50 X 0.77 = $38.50. Again, close enough for gummint w*rk to 33X.

But the problem remains, holding that silver dollar since 1913 gained nothing but the increase of 38X (not the 100s or 1000s of times the dollar invested in markets might have made). Rust never sleeps and PMs never w*rk. BUT they may (or may not) have their place in a portfolio as YMMV.

 

[VanWinkle]

Gold is hot, so the gold salesmen are out in force to
scare you into investing with them. I think this
is just another "sky is falling" moment that will
be proven to be a timing mistake for most investors
that take the bait.

 

[Ballhawker]

After a parabolic rise, Gold hit $875 in January 1980. The price then collapsed over the next 2 1/2 years, then basically oscillated up and down. It didn't hit $875 again until January 2008 - 28 years! We could be in the early part, middle or near the end of a cycle similar to 1980 again. Parabolic rises almost never correct "gently". I'm not a gold basher at all, but be safe out there friends!

 

[HarveyS]

The only concerns I have regarding debasement is a damp floor when derain falls outside.

 

[Sunset]

Wouldn't stocks (ownership) of companies be another "hard" asset.

I view inflation as basically a debasement of the dollar and it's been continually happening for many decades, so I expect it to continue.

As it is, the USA dollar is quite strong and high these days and has been for years.

I'm selling some silver as it's at a record high, that's how secure I feel

 

[mrfeh]

The 24/7 media love publishing clickbait articles — even more so since the change of power in January 2025. I completely disregard that noise.

+1

Just ignore such garbage.

 

[GrayHare]

Debasement has been going on a long time, moreso when taxation has not paid for unpopular wars or other unpopular spending. It's the easiest way to fill the gov't income gap. Plus it creates more and more millionaires, a count that makes the economy look good. Parabolic gold will eventually overshoot its "proper" price then comes back down.

 

[copyright1997reloaded]

Wouldn't stocks (ownership) of companies be another "hard" asset.

I view inflation as basically a debasement of the dollar and it's been continually happening for many decades, so I expect it to continue.

As it is, the USA dollar is quite strong and high these days and has been for years.

I'm selling some silver as it's at a record high, that's how secure I feel

Yes. This is what I said in my post (equities vs. bonds in an inflationary environment).

The thing about things at record highs - we only know the real high in retrospect. A couple/few years ago lots of people were saying gold would be stuck under $2K and silver under $25.

 

[Koolau]

Gold is hot, so the gold salesmen are out in force to
scare you into investing with them. I think this
is just another "sky is falling" moment that will
be proven to be a timing mistake for most investors
that take the bait.

After a parabolic rise, Gold hit $875 in January 1980. The price then collapsed over the next 2 1/2 years, then basically oscillated up and down. It didn't hit $875 again until January 2008 - 28 years! We could be in the early part, middle or near the end of a cycle similar to 1980 again. Parabolic rises almost never correct "gently". I'm not a gold basher at all, but be safe out there friends!

Hear, hear!

 

[Koolau]

Wouldn't stocks (ownership) of companies be another "hard" asset.

I view inflation as basically a debasement of the dollar and it's been continually happening for many decades, so I expect it to continue.

As it is, the USA dollar is quite strong and high these days and has been for years.

I'm selling some silver as it's at a record high, that's how secure I feel

When prices go higher, that's when I feel less secure - not that I'm really worried. Nor do I plan to sell at a profit. Kinda fun to multiply my XX ozt. of gold and YYY ozt of silver by their current, respective prices. I don't expect them to be that high this time next year (kinda hope not). But in the meantime, they do make the ATH thread more fun.

 

[GrayHare]

Gold down 5% at the moment. Its parabolic rise would seem to have ended, at least for awhile.

 

[Lorenzo]

All the internet chatter about currency debasement and gold/hard assets may be one of those self-reinforcing loops the internet is known for sustaining and amplifying. People read about debasement and buy gold, but they also read about the gold buying and think "debasement."

 

[copyright1997reloaded]

Gold down 5% at the moment. Its parabolic rise would seem to have ended, at least for awhile.

As of my typing this,
GLD +56.5% YTD
SLV +67.0% YTD
GDX +113.9% YTD
GDXJ +121.4% YTD
SIL +112.3% YTD
I will take it (long each of them from before this year).

They all need to rest from the parabolic rise. If we look at history as a guide, we may be far from done. In the 72 rise, it was parabolic, followed by a drawdown, followed by an even bigger rise (the 1978+ line).

 

[CRLLS]

I really don't pay much attention to it. I had to look up the word. Devalued money seems, in its basic form, to affect only those who have stuffed their money under the mattress. Investing in gold, real estate, stocks other "things" are all ways to buffer against hording cash. Maybe I have it wrong. I am willing to learn.

 

[Koolau]

Yeah, I'm so concerned about it that I didn't even notice the drop in gold. I have other things to do. Seemed to me gold had run ahead of itself and I assumed there would be a drop.

Just because gold made me think of it, I checked silver and it's down almost 10% from its recent high. Nnneyyyyyhhh.