Debasement Trade Returns as Dollar Fears Grow
Investors are increasingly seeking refuge from the US dollar due to fears of its devaluation, sparking what's being called 'the debasement trade' on Wall Street.
The term refers to a strategy where investors sell currencies or securities vulnerable to political or fiscal shocks and shift into 'haven' assets like gold and cryptocurrencies.
US Treasury Secretary Scott Bessent's recent interventions in the financial markets have contributed to this trend, as he first supported the Japanese yen and then announced plans to buy back certain government bonds to restrain long-term borrowing costs.
The move sent the US dollar skidding, with some investors loading up on Bitcoin and gold, which are seen as relatively insulated from monetary and fiscal policy.
Billionaire investor Ray Dalio has urged investors to cut bond exposure and hold gold and some Bitcoin as protection against a potential US debt crisis.