ETF Ideas for the Debasement Trade

The debasement trade visualized

To be honest, calling it a “trade” undersells what’s really a long-term structural story that investors are only now recognizing.

The following chart tells that story better than any headline could. It shows three data lines: the purchasing power of the U.S. dollar (purple), the size of the M2 money supply (orange), and total U.S. public debt outstanding (blue).

Over the past decade, those lines have moved in exactly the directions you’d expect if you believe in “debasement”—the dollar’s purchasing power down, money supply and debt up.

The inflection point came after 2008, when near-zero interest rates and multiple rounds of quantitative easing made it normal for the Federal Reserve to expand its balance sheet whenever growth wobbled.

Then came the pandemic. Between 2020 and 2021, the M2 money supply jumped by more than 40% as stimulus checks, loan programs, and asset purchases flooded the system. That same period saw federal debt cross $30 trillion for the first time in history.

Once inflation took hold in 2022, the damage to purchasing power became permanent. Even though nominal GDP recovered, real wages lagged, and the consumer dollar today buys roughly 30% of what it did in 1980. Meanwhile, debt keeps compounding faster than output, forcing policymakers to choose between higher taxes, higher inflation, or both.

So, while the “debasement trade” has become a trendy label, the underlying forces—monetary expansion, fiscal excess, and structural inflation—have been compounding for decades. It’s a wake-up call showing what happens when debt and money creation outpace productivity for too long.

ETFs for the debasement trade

There are three main ways I look at capitalizing on debasement through ETFs. And to be clear, despite the name, this isn’t a short-term “trade.” It’s a long-term, structural positioning around the erosion of purchasing power that’s been underway for decades.

The first is owning ETFs tied to assets that can’t be debased. Historically, “debasement” meant something literal—kings thinning out the silver content in their coins, replacing it with cheaper metals like zinc to stretch resources further. Today, the same thing happens through monetary policy rather than mints. The value of money declines as more of it is created.

Gold and bitcoin stand out because neither can be produced out of thin air. Gold must be mined, and supply grows only marginally each year. Bitcoin has a hard cap of 21 million coins, with its issuance rate halving roughly every four years. That scarcity is why both have recently hit new all-time highs, and why spot ETFs in each have seen surging inflows.

The second way is through assets that can generate cash flows rising faster than inflation. Real estate and infrastructure fit that description well. Both tend to benefit from pricing power—landlords can raise rents, and operators of pipelines, toll roads, or utilities often have inflation-linked contracts.

ETFs targeting REITs and infrastructure companies give you diversified exposure to these underlying cash-generating assets, without the complexity of owning them directly. You also get the benefit of quarterly or monthly distributions and eligibility to hold in tax-sheltered accounts.

The third approach is to short what’s most exposed to debasement: long-term government bonds. Buying those is essentially lending to a borrower with a worsening fiscal position. After the U.S. credit downgrade, that risk is no longer theoretical.

Rising debt levels and persistent deficits make the real return outlook for Treasurys unattractive. Investors can position for this through put options on Treasury ETFs or through inverse ETFs that use swaps to deliver opposite exposure to long-duration bonds.

Taken together, these ETF strategies reflect different sides of the same structural theme—protecting capital and purchasing power in a world where money itself is slowly being diluted.

Please note that this article reflects the author’s personal views and does not represent the opinions of the publication or its affiliates. It is for informational purposes only and does not constitute investment advice. It is essential to seek guidance from a registered financial professional before making any investment decisions.