The debasement trade is raging. Precious metals prices are at the highs, driven by fear that out-of-control fiscal policy will end in debt monetization. But there’s a puzzle. If markets are so worried that debt will be inflated away, why is break-even inflation not higher? This is probably the main pushback on the debasement trade, but I think it’s misguided. Inflation break-evens are always backward-looking and myopic. The fact that they don’t price more inflation is par for the course and in no way invalidates the debasement trade. Markets won’t price higher inflation until it stares them in the face. The two ... (full story)