From CNBC to Bloomberg, various business news outlets are enamored with the debasement trade. Investors are also losing sleep at night, worried that governments are destroying their currencies to cover their ballooning debt and deficits. As a result, traders spent their summer vacations scooping up gold, silver, bitcoin, and other hard assets.
Is Bessent Fueling the Debasement Trade?
US government bond yields have been on a tear this summer. The benchmark ten-year Treasury yield is at its highest level since January 2025. The 30-year yield has not traded this high since the Global Financial Crisis. The two-year yield, which tracks Federal Reserve policy expectations, is factoring in two interest rate hikes.
Is it anxiety over inflation? Is it intense fear over Uncle Sam’s fiscal health? Is artificial intelligence causing growing interest rates? What about thin trading volumes? Whatever the case, Treasury Secretary Scott Bessent tried to put a stop to the volatility by doubling debt buybacks from $2 billion to at least $4 billion beginning Sept. 9.
Free with the Daily Briefing
85EssaysUnravel the Constitution
Hamilton, Madison & Jay’s complete case for America, free and searchable in the Publius Reader.
Free with the Daily Briefing. Unsubscribe anytime.
US Treasury securities are not the only corner of the bond market experiencing yield acceleration. The United Kingdom, Germany, Japan, and other advanced economies are seeing their borrowing costs skyrocket. The same reasons could apply to gilts and bunds as they relate to Treasury bonds.
Whatever the justification for surging yields, the debasement trade was in the spotlight last month. Gold surged 6% to a three-month high of around $4,500 per ounce. Silver prices surged almost 9% to nearly $70 per ounce. Bitcoin rocketed by 20% out of nowhere and reclaimed $80,000 for the first time in more than a year. Conversely, the US Dollar Index headed the other direction, falling 0.2%.
Put simply, as billionaire investor John Arnold recently said on X: "Markets are saying something." But Wall Street also kicked off September, possibly unwinding the much-discussed debasement trade.
Ocean of Red Ink
As investors return from summer vacations, financial markets could be normalizing, which could also prove Secretary Bessent was right all along.
Gold slumped more than 2%, silver erased 3%, bitcoin tumbled 2%, and the US dollar rose 0.3%. However, August’s theme spilled over into the new month: Yields were up across the curve. So, what happened? For now, investors are pricing in a more hawkish Fed.
CME FedWatch data indicate traders have penciled in a roughly 60% chance of a quarter-point rate hike at the September Federal Open Market Committee (FOMC) policy meeting. It has been quite a trip for federal funds rate forecasts since the July powwow: Investors predicted a rate hike, shifted to a pause, then were split, and now they have come full circle.
What happens over the next week will prove pivotal for financial markets and the continuation of the debasement trade. The first is the August jobs report: A soft print would force the Fed to leave interest rates unchanged. The second is the August Consumer Price Index: If 12-month headline and core inflation rates hold steady or decelerate, it would buy the central bank time before following through on a rate increase.
To echo former Fed Chair Jerome Powell, the world will be data-dependent.
Being Left Behind
Global debt is north of $200 trillion. Americans have lost virtually all of their purchasing power since the Federal Reserve opened its doors more than a century ago. Interest costs have become one of the top budgetary items for governments everywhere. This is forcing investors – institutional and retail – to accumulate tangible assets: stocks, precious metals, real estate, and even digital money (bitcoin and ether, for example).
In 2026, a new mantra has been born: Own assets or risk being left behind.
