Do you remember what happened to money in the 1970s? Or after 2008? Or during COVID?
Most people remember the headlines from those periods. Fewer remember what was happening underneath. These weren’t just isolated crises tied to oil shocks, housing markets, or a global shutdown. They were different versions of the same underlying pattern playing out.
Those were debasement cycles. And we’re starting one now.
What’s interesting is how different each of those periods looked on the surface. The 1970s were tied to the end of the gold standard and a surge in inflation. 2008 was a financial system collapse. COVID was a sudden stop in the global economy that forced governments to step in aggressively. Different causes, but the response followed a familiar script.
When the system gets stressed, debt rises and growth slows, leaving policymakers with limited options. They lower interest rates, inject liquidity, and expand balance sheets to stabilize things. It works in the short term, but over time it increases the supply of money faster than real economic output. That’s where the erosion begins. Not with a bang, but more like a slow leak that quietly reduces purchasing power.
That is essentially what a debasement cycle is. It’s not dramatic enough to feel like a crisis every day, which is exactly why it tends to go unnoticed until much later.
Why this cycle is being talked about again
The idea is starting to get more attention again. Ohsung Kwon at Wells Fargo has described the current environment as the fourth debasement cycle, likely beginning around 2022.
One of the more important points in that framework is duration. These cycles are not quick resets. Historically, they’ve stretched close to a decade, which suggests we may still be in the earlier stages, even if markets already feel extended.
The logic behind this view is fairly simple. When debt levels are high and the system becomes more fragile, the range of policy responses narrows. Most paths lead back to some form of easing, whether that’s through lower rates, liquidity injections, or balance sheet expansion. Over time, those responses tend to lean in the same direction for currency. Not intentionally, but almost by necessity.
The part most investors misunderstand
A lot of people still think of inflation as something temporary, a spike that comes and goes. Debasement cycles tend to show up differently, and often in ways that are easier to ignore.
Instead of a clean rise in inflation, you typically see asset prices climbing faster than incomes, persistent pressure on purchasing power, and a widening gap between nominal returns and real returns. Portfolios can look like they’re doing well, but the more important question is what those returns actually buy.
This is why looking at markets purely in fiat terms can be misleading. When the unit of measurement itself is changing, record highs don’t always mean what they used to. In some cases, they simply reflect the currency doing less work.
Where capital tends to move
Capital doesn’t ignore this. It adjusts, usually before the narrative fully catches up. During these periods, money tends to move toward assets that are harder to dilute. Real assets, commodities, and especially Gold tend to attract more attention.
The reasoning is straightforward. Gold doesn’t rely on a counterparty, it can’t be printed, and it tends to respond when real interest rates move lower. That combination becomes more relevant when investors start focusing on long-term purchasing power rather than short-term price moves.
One of the more notable dynamics today is that central banks themselves are participating in this shift. The same institutions responsible for issuing currency are also accumulating gold reserves. They may not describe it as a hedge, but the behavior is consistent with that idea.
Why this matters now
This isn’t really about trying to time inflation or make a short-term market call. Debasement cycles tend to unfold slowly and unevenly, with plenty of noise along the way.
The more important point is that the underlying structure hasn’t changed. Debt levels remain elevated, deficits are persistent, and any meaningful slowdown increases the likelihood of further intervention. That response is necessary in the moment, but it tends to push the system further in the same direction over time.
That’s why this conversation keeps coming back. Not because something dramatic is about to happen overnight, but because the underlying pressures are still there and not easily reversed.
How to think about protecting yourself
If the value of currency is gradually being diluted, then holding only currency becomes a risk in itself.
Protection in this type of environment usually comes from owning assets that can hold value in real terms, whether through scarcity, pricing power, or simply existing outside the traditional financial system.
This is where gold continues to play a role. Not as a trade to be perfectly timed, but as a form of balance within a portfolio that is otherwise fully exposed to the same forces driving the debasement.
Final thought
What’s interesting is that this perspective isn’t limited to retail investors. Institutions and central banks are already behaving in ways that suggest they see the same underlying trend.
And historically, by the time a debasement cycle becomes obvious to everyone, a meaningful part of the adjustment has already taken place.
