We're Preparing For A 30-Year Debasement Cycle

Debasement cycle since 2020 has failed to lower debt/GDP - six years in the ratio is higher, risking a stalled cycle that could stretch 22-35 years or produce $9,000 gold within six years

Fiscal trajectory - CBO projects 2026 deficit 5.8% of GDP, primary deficit 2.6%, net interest 3.3% of GDP; interest payments $1.0T in FY2026 vs defense $885B

Market mechanics - Fed hiked 25bp to 3.75%-4% on Sept 16, Aug CPI 3.4% YoY, real policy rate near zero; Treasury enlarged long-end buybacks from $2bn to at least $4bn per operation

Treasury curve defense is a liquidity patch - TGA ~ $950bn funds buybacks, swapping long-term for short-term debt, increasing duration and rollover risk if stress persists

Written by Leo Nelissen & Albert Marko

Introduction

What happens when a government tries to inflate away its debt, and the debt keeps growing anyway?

That's a question we've been hearing more and more. As many of you know, Albert works closely with hedge fund partners, which gives us a front-row seat to what Wall Street is thinking when the cameras are off. And the tone of those conversations is a lot less relaxed than what you see on financial television.

In this article, we explain why we believe the debasement cycle that started in 2020 is failing at the one job it was designed to do, and why that could mean $9,000 gold and a much longer road than most investors expect. We'll also translate the numbers behind this thesis into plain English and lay out a concrete game plan: what we would own, how we would size it, and what we would avoid.

Fair warning: parts of this article are provocative. That's by design.

So, let's dive in!

We're Preparing For A 30-Year Debasement Cycle

Introduction

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