POSTED BY CHRIS COMBS — ARTICLE CONFIRMING THERE ARE FALSE NARRATIVES DRIVING CONFUSION AMONG INVESTORS AND MOVING MARKETS –HIGHLIGHTED IN OCTOBER 24 5-IN 5 VIDEO
By Richard Henderson
Bloomberg – October 10, 2025 at 12:50 AM PDT
Political and fiscal uncertainty in major economies including the US, France and Japan is putting pressure on their currencies and making investors nervous.
Some have been offloading holdings of US dollars, euros and yen as a result, and the prices of Bitcoin, gold and silver have surged. That’s raised the question of whether investors are making a broader shift into these alternative assets.
Wall Street has dubbed this “the debasement trade” — a nod to the historical practice of rulers such as King Henry VIII of England and the Roman emperor Nero, who diluted, or debased, gold and silver coins with cheaper metals such as copper. The term, flagged in a JPMorgan note in October, captures the idea that investors are seeking refuge from currencies they fear are being devalued.
Not everyone is convinced such a trend is real, but its adherents say it is gaining momentum, and reflects a growing problem for investors as government debt keeps rising.
What is the debasement trade?
The term describes a strategy investors use to protect themselves from the erosion in the value of money or other assets. It involves selling currencies or securities vulnerable to political or fiscal shocks and shifting into “haven” assets such as gold. But it’s not simply a flight to safety. Investors are also loading up on cryptocurrencies, which can be highly volatile but are seen as relatively insulated from monetary and fiscal policy.
According to its proponents, the debasement trade gathered momentum this year as US President Donald Trump’s tariffs started to cloud the economic outlook. The move gained further steam in early October, when the prospect of a US government shutdown heightened worries over the national deficit. An index tracking the dollar against peer currencies slumped to a three-year low in September and is on track for one of its worst annual performances in two decades.
In France, a deepening political stalemate has driven up government bond yields and put pressure on the euro. The deadlock worsened when Sebastien Lecornu — the country’s fifth prime minister in two years — resigned in October, sending the currency lower.
In Japan, the elevation of pro-stimulus lawmaker Sanae Takaichi to be the likely next prime minister in early October rekindled worries about heavy borrowing. In the days that followed, the yen slumped to a seven-month low.
Gold, meanwhile, has surged roughly 50% this year, hitting a record above $4,000 an ounce on Oct. 8, and silver has climbed to a four-decade high.
Why are investors concerned about the currency market?
Governments around the world borrowed heavily at the height of the Covid-19 pandemic to stave off recessions. As the money flowed through their economies, it increased demand for goods and services — in many cases sparking inflation. Central banks such as the US Federal Reserve responded by raising interest rates sharply to temper demand and contain price growth. It’s largely worked. But the higher-rate environment has made it more expensive to service those huge and growing piles of borrowed money.
Now, political wrangling in places like Washington, Paris and Tokyo is heightening concern that governments may struggle more than expected to pay back their debts.
Heavier debt loads also weigh on growth. With governments having to spend larger sums on interest, that leaves them with less money to stimulate their economies. Governments may need to cut spending to divert money toward debt repayments, also impacting growth.
The net effect is that these countries may need to borrow more for longer, which could weaken their currencies.
What’s the appeal of gold?
Gold is viewed as a classic “safe haven” asset — one that can hold its value during times of instability. Investors are often drawn to it because its supply and price aren’t directly controlled by governments or central banks, making it less vulnerable to policy or fiscal decisions. As a hard asset, gold retains its value through price appreciation when inflation reduces the purchasing power of a currency.
But there’s more behind the current gold rush than concerns over currency weakness. Some investors are bulking up on gold to hedge against the prospect of a slowing global economy. Others see it as protection against a potential reversal in the artificial intelligence boom that’s sent related tech stocks soaring this year.
Gold demand is also being driven by central banks, which are building up their reserves — often at the expense of the US dollar. Part of the motivation is to guard against the weaponization of currencies, especially after Washington used the dollar’s central role in the global banking system to cripple Russia’s access to international funds following its invasion of Ukraine.
What do skeptics say?
Some investors argue the logic behind the so-called debasement trade is flawed, or that there’s little evidence it’s actually happening. They note that global investors continue to hold large amounts of US government bonds, which suggests there’s no widespread abandonment of dollar-denominated assets.
Critics also point to the strength of the US stock market to downplay talk of a debasement trend, given foreign investors are required to buy dollars to purchase US stocks.