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October 16, 2025

The Great Debasement Theory

Wall Street is finally waking up to a macroeconomic reality that has guided our investment thinking ever since 76research began in early 2024…

The foundations of the global fiat money system are eroding. From private individuals to central banks, investors are gravitating toward assets that will protect them in an era of monetary fragility.

Earlier this month, Nikolaos Panigirtzoglou, a widely followed market strategist at JPMorgan, highlighted in a note to clients what he called “the debasement trade.”

Debasement, or monetary debasement, refers to the decline of the real value, or purchasing power, of a currency as a result of the actions of the central bank.

The concept originates in ancient times, when metallic coins would be melted down and remixed so that they had less gold and silver content—in other words, physically debased (made less pure) with lower value metals like copper or lead.

A debased Roman coin, circa 270 AD

(Less than 5% precious metal)

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The JPMorgan report describes a structural shift, encompassing both institutional and retail investors, away from fiat assets that are backed solely by government issuance and toward commodity-based and digital stores of value—most notably, gold and Bitcoin.

There are hundreds of different Wall Street strategists emailing reports every day, but this note in particular has sparked a great deal of discussion. We suspect it is because the mainstream investment community, along with the financial media, is trying hard to make sense of the extraordinary recent performance of gold.

After a strong start to the year, gold leveled off around $3,400 per ounce, where it then lived for most of the spring and summer. But gold has since skyrocketed through $4,200 per ounce.

Gold price - Year to Date

Gold has benefited from a momentum shift which we anticipated in our September 2, 2025 note to subscribers (Pressure on Fed Reignites Demand for Gold).

The main catalyst, as we explained at the time, was Fed Chair Jerome Powell’s pivot toward easier monetary policy to combat a weakening labor market outlook—the key message of his late August speech at Jackson Hole.

Low interest rates and easier monetary policy also mean more liquidity in the financial system, i.e. more money that can find its way into hard assets like gold. The prospect of interest rate cuts, as Jerome Powell outlined at Jackson Hole, is music to a gold owner’s ears. - 76report (9/2/2025)

Wall Street’s fiat bias

Wall Street is essentially the fiat money establishment. It manufactures and sells fiat-based financial instruments—equity, credit, and derivatives—which are all ultimately tied to a single, government-sponsored production line at the center of the system: the Federal Reserve.

It is not surprising then that, within Wall Street, there is an institutional bias against monetary alternatives to the U.S. dollar, as well as a lack of understanding of them.

JPMorgan is the largest and most valuable bank in the United States. The firm’s CEO Jamie Dimon, who has in the past compared Bitcoin to a “pet rock,” is now begrudgingly conceding that it is now “one of the few times in my life [when] it’s semi-rational to have some [gold] in your portfolio.”

This is a remarkable and somewhat perplexing statement, coming from someone who could be described as the most powerful figure in the traditional financial world.

Gold has advanced around 60% this year, which is about four times better than the performance of the S&P 500 Index. Over the past 20 years, gold has returned nearly 750%, versus (a still impressive) total return around 450% for the S&P 500.

Gold vs. S&P 500

(Total Return - Last 20 Years)

Looking back over the past 20 years, it seems that it would have been a lot more than “semi-rational” to have had gold exposure.

Gold has not only outperformed stocks, but it has also in many years demonstrated low or negative correlation with stocks. Gold behaving differently from stocks was especially valuable in the post-Global Financial Crisis time frame, when stocks performed quite poorly.

Over the past two decades, gold has provided great long-term returns and has performed well as a hedge when the stock market was weak. From a portfolio perspective, what more could a semi (or even fully) rational investor want?

All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident. - Philosopher Arthur Schopenhauer

Better late than never

What we find most interesting about the JPMorgan report on the debasement trade is not so much its observations but that the mainstream financial community found them so noteworthy. From the standpoint of investors in gold and Bitcoin, these insights are quite familiar and obvious.

The JP Morgan note connects the debasement trade to a “combination of factors,” ranging from “elevated geopolitical and policy uncertainty, to uncertainty about the longer-term inflation backdrop, to concerns about ‘debt debasement’ due to persistently high government deficits across major economies, to concerns about Fed independence, to waning confidence in fiat currencies in certain emerging markets in particular, and to a broader diversification away from the US dollar.”

In other words, investors are now responding to all of the core macroeconomic themes we have been explaining to subscribers over the past two years, from our April 2024 note on gold (Gold Advances, Justifiably) to our September 2024 note on Bitcoin (Dollar-Proofing Your Portfolio).

How far will the debasement trade go?

Wall Street conventional wisdom is perhaps finally catching up. For those who may already be positioned to benefit from the monetary debasement theme, the key question is how much further can it go and what are the best ways to play it.

These are complicated questions, given that the debasement trade has multiple drivers. Below, we will provide our updated thinking on the key asset classes connected to the debasement trade: gold, crypto and stocks…

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