Everyone Is WRONG About The Debasement Trade

Summary

The video delves into the 'debasement trade' narrative, discussing the implications of U.S. monetary policy and the increase in money supply. While gold and Bitcoin are often touted as safe investments, the speaker challenges the prevailing view, highlighting the importance of understanding the rate of money supply growth and its impact on inflation. He critiques common assumptions, offering insights into alternative strategies used by professionals, such as trading based on Treasury yield spreads, which could provide a more balanced risk-reward ratio. The video also promotes a free webinar focused on contrarian investment strategies.

Takeaways

• 😀 The 'debasement trade' is based on the idea that currency debasement (money printing) leads to inflation and depreciation of the dollar, prompting investors to buy gold and Bitcoin.
• 😀 The money supply (M2) in the U.S. has grown exponentially, especially since 2000, leading to concerns about inflation and dollar depreciation.
• 😀 Despite growing money supply, recent data suggests the rate of money supply growth is not unprecedented, with similar or higher rates observed in past decades (e.g., 1980s, 2000s).
• 😀 The current narrative around debasement (the belief that inflation will escalate) may be misleading because the rate of change in money supply growth has actually slowed in recent years.
• 😀 Governments print more money (debase currencies) to fund debt, which can reduce the debt-to-GDP ratio by creating inflation, but this harms the average person’s purchasing power.
• 😀 Commodities like gold and Bitcoin are seen as safe assets during times of uncertainty, but this is also influenced by non-debasement factors like counterparty risk and geopolitical events.
• 😀 Central banks are increasing gold holdings, not necessarily because of fears of debasement, but due to concerns over counterparty risk (e.g., actions against Russia).
• 😀 The market drives the price of commodities and cryptocurrencies more than economic fundamentals—if the market believes in dollar debasement, gold, Bitcoin, and other commodities will rise in price.
• 😀 Investors need to think beyond just holding gold or Bitcoin—advanced strategies, like bond yield curve inversion trading, offer better opportunities in today’s market.
• 😀 Bond yield curve inversions (when short-term yields are higher than long-term yields) have historically predicted recessions and provided valuable investment signals, creating opportunities even during periods of inflation or deflation.
• 😀 The video promotes a free webinar where the speaker will reveal three contrarian investment strategies to beat the S&P 500, offering a $500 coupon for Rebel Capitalist Live tickets as a bonus.

Q & A

What is the 'debasement trade' and why is it important?

The debasement trade refers to the idea that the value of a currency declines when the government prints excessive money. This concept has gained attention as a response to inflation, with assets like gold and Bitcoin typically benefiting from the devaluation of the currency.

How does the growth rate of money supply affect the economy?

The growth rate of money supply directly impacts inflation. A higher money supply can lead to higher inflation, but it's crucial to consider the rate of change, not just the absolute amount. The rate of increase in money supply can give us better insights into the potential future economic conditions.

Why are gold and Bitcoin seen as safe investments?

Gold and Bitcoin are considered safe investments because they are perceived as 'hard' assets, meaning their value isn’t easily eroded by inflation or currency debasement. Investors often turn to these assets when there's uncertainty about the value of fiat currencies.

What is the key difference between traditional inflation protection and the strategies discussed in the video?

Traditional inflation protection usually involves holding assets like gold or Bitcoin. However, the strategies discussed in the video focus on more nuanced approaches, such as using treasury yields and understanding economic cycles, which professionals often use to navigate inflation or deflation, providing higher potential returns with lower risk.

What role do treasury yields play in investment strategy?

Treasury yields, particularly the difference between short-term and long-term bonds, can signal inflationary or deflationary trends. A large spread can indicate inflation concerns, while a small spread can suggest deflationary expectations. Professionals use this information to adjust their investment strategies accordingly.

Why is the growth rate of the money supply a misleading indicator?

While it’s common to focus on the total money supply growth, the rate of change (how fast money is being printed) is often a more accurate indicator. Recent data shows that the growth rate has slowed compared to earlier periods, which can mislead people into thinking we are in an inflationary crisis when, in fact, the money supply growth has decelerated.

How does understanding money supply growth lead to better investment decisions?

Understanding the rate of change in money supply can help investors predict future economic conditions, such as inflation or deflation. By adjusting their strategies based on this information, investors can better navigate uncertain financial markets and make more informed decisions about where to place their capital.

What is the asymmetry in professional investment strategies?

The asymmetry refers to the idea that certain strategies, such as treasury yield spreads, provide opportunities to profit regardless of whether the outcome is inflationary or deflationary. This approach allows investors to reduce risk while still having a high probability of success.

What is the significance of the upcoming webinar mentioned in the video?

The webinar, scheduled for October 29th, will teach viewers about three contrarian investment strategies that professionals use to outperform the S&P 500. These strategies focus on beating the market in ways that traditional methods like buying and holding don't always achieve.

How does attending the webinar benefit viewers beyond the information shared?

In addition to learning about advanced investment strategies, attendees will receive a $500 coupon for tickets to Rebel Capitalist Live, a conference that features top financial experts like Ron Paul, Robert Kiyosaki, and Peter Schiff. This offers further opportunities for learning and networking.