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Gold, silver, and bitcoin have all dropped to their lowest levels of the year, as a strengthening dollar and mounting fears of interest-rate hikes strip the logic from one of the most popular macro bets of the past several years.
Investors who loaded up on the so-called debasement trade — the idea that hard assets protect wealth when governments print money and erode purchasing power — are now on the wrong side of a shift in rate expectations, and they are pointing at Kevin Warsh as the catalyst.
What the Debasement Trade Is, and Why It Is Breaking Down The debasement trade is a straightforward thesis: if central banks keep rates low and money supply grows, assets outside the traditional financial system — gold, silver, and $BTC chief among them — should hold or gain value.
The trade attracted significant capital precisely because it did not depend on earnings growth or corporate cash flows. It depended on policy staying loose. That assumption is now being challenged.
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