The Great Devaluation Trade Is Hot Again

More on the Treasury's plans... Buying and selling at the same time... The bullish case for gold – again... Bitcoin's behaving similarly... Fed Chair Kevin Warsh's first big test...

The adults are playing with paper again...

Ah, late summer in the mid-Atlantic... The landscape is flush from recent rainstorms... Baby birds are chirping away, deer hopping along... The air is clear, smoky skies gone... This morning, all looked and sounded so peaceful under a sunny sky.

Then I (Corey McLaughlin) thought about what the humans atop the financial system are doing again... manipulating paper. And the good vibes and our sanguine attitude were dashed – again.

As we covered last week, Scott Bessent's Treasury Department is promising to "make a market" for long-term Treasurys due to a lack of buyers. If that sounds concerning to you, it is.

While the U.S. federal debt has crossed $40 trillion with no end in sight, ever-present inflation is running warm once more. And foreign buyers of America's bonds are looking for alternatives amid the latest round of geopolitical uncertainty.

Uncle Sam's bills just keep getting more expensive, but nobody wants to – or can afford to – finance them. So Bessent says the Treasury will step in and buy... and maybe sell at the same time.

The latest on 'Treasury Twist'...

Last week's announcement hadn't discussed how the Treasury would buy these bonds. At the time, Bessent said publicly that it would involve a "Treasury Twist." He didn't offer details... But observers took that as a suggestion that the Treasury would manipulate the yield curve and buy long-term bonds with the proceeds from selling short-term debt.

This morning, citing two unnamed senior Treasury officials, a CNBC report went further. It revealed that the Treasury could use its nearly $1 trillion general account to help buy government bonds starting next month through the midterm elections.

Raising cash on its own means that the Federal Reserve might not help the Treasury in this operation. But it's a convoluted operation.  

The Treasury maintains a cash balance, a sort of rainy-day fund, at the department's discretion. The size has changed under various White House administrations, most recently from under $600 billon under the Biden administration to around $950 billion under Donald Trump.

It's put to use, for example, to help fund the government when Congress can't agree on the "debt ceiling." That next debate won't come until later this year at the earliest, so the Treasury could reduce the size of its cash fund to fund bond purchases for some time.

Still, if any of the Treasury's general account funds are sold, the department would have to sell more bonds if it wanted to build the stash back up... while simultaneously saying it's going to buy long-term debt (to artificially keep yields lower).

And to what end? It's all a mere Band-Aid considering the size and trend of U.S. debt and annual deficits.

As veteran market observer Dan Denning mentioned today in Bill Bonner's daily e-letter...

Using that operating cash to suppress a price signal will not prevent investors from realizing the US government is behaving like a third-world nation in a financial crisis.

It's a continued charade of government-driven, kick-the-can-down-the-road fiat currency policies that inevitably drive more inflation... "We, the People" just have to live with it.

No wonder, the 'Great Devaluation' trade is sizzling again...

It's a concept rooted in government policy that longtime readers are familiar with. Just about a year ago, in our August 7, 2025 edition, our Dr. David "Doc" Eifrig spelled it out in a Digest essay...

In the piece, titled "History's Most Expensive Mistake Is Happening Again," Doc shared a few past examples of inflation running rampant in societies... explained why monetary policy was at the heart of it... and revealed that the same thing is happening again today.

He wrote...

We're living through a great national devaluation.

Your money is worth less than ever before. Your labor is worth less.

You know what this devaluation feels like – in big and small ways across American life.

It's the little surcharges on restaurant bills... the packages on store shelves that get gradually smaller for the same price... and higher premiums for the same health insurance.

It hasn't stopped.

A bullish case for gold – again...

Folks who are paying attention have begun bidding up the price of gold once more... and bitcoin, too, if that's your flavor of hard asset...

Gold, the centuries-old store of value, is up 15% in August alone.

And as Stansberry Research senior analyst Brett Eversole pointed out in his "Review of Market Extremes" last week for True Wealth Systems subscribers, gold recently rallied more than 7% in a week.

It's the precious metal's biggest move higher since it began falling from all-time highs around the start of the year.

If this were any other asset, we'd be skeptical of continued gains after a run like this in the short term. But historically, odds suggest more gains to come for gold, as Brett explained...

The recent one-week rally could be the start of a major reversal.

You see, gold not only managed a strong rally in one week – but it also did so while still in a downtrend.

That's a rare setup. We've only seen nine other extremes like it since 1975, and they led to consistent outperformance. Take a look...

Gold has a tendency to swing up and down. Even so, it has been a strong performer over the long term. A simple buy-and-hold strategy would have led to 6.4% annual gains over the past 50 years.

You can do much better if you buy after rebounds like these, though. These extremes led to gains of 11.4% in six months and 16.6% over a year... Plus, the metal was higher a year later 78% of the time.

Best of all, this recent jump also pushed gold back into an uptrend. It has climbed above its long-term moving average... another signal that has historically led to outperformance.

That's right, gold is now above its 200-day moving average (200-DMA) – a simple technical measure of a long-term trend. Gold's price was up about 1% today to above $4,600.

My colleague Nick Koziol covered this in these pages two weeks ago. Citing the work of DailyWealth Trader editor Chris Igou, he noted that if gold broke above this moving average, it would be a key bullish signal. It's on now.

Bitcoin's behaving similarly...

Like gold, bitcoin has surged recently, too – by more than 20% in only five days. That's its biggest gain since starting a decline from all-time highs last fall.

Recent signaling that the White House will back clearer cryptocurrency regulation has fueled positive sentiment. And more government plans to manipulate the dollar's value certainly don't hurt bitcoin's cause, either.

As I suggested last week, this recent behavior could be the start of a new four-year cycle for the world's most popular cryptocurrency. According to Chris, the jury is still out. But bullish evidence is mounting.

Like gold, bitcoin has jumped above its 200-DMA during this rally...

"If it can hold above that level for long, we could see a new bull market take shape," Chris says. He's not ready to declare one yet, though...

In fact, [bitcoin] still hasn't broken above its most recent high in May. So there is no sign of "higher highs and higher lows" taking shape. This is a news-driven spike.

Events like this usually lead to a pullback after the jump higher.

The other reason I'm not ready to go long bitcoin is that the 200-DMA is still falling.

At the end of the day, the moving average is the trend line. That means bitcoin is still in a downtrend. And until it can make a series of higher highs or its 200-DMA starts to turn higher, it's too risky to buy.

But it's getting close, trading near $79,000 as we write.

The week ahead...

This story is going to continue one way or another by the end of the week. That's when the head of the U.S. government's other financial institution gets his turn in the limelight. 

New Federal Reserve Chair Kevin Warsh is set to address the central bankers' confab in Jackson Hole, Wyoming on Friday for the first time as the Fed's leader.

Clearly, given all the recent activity in the Treasury market, investors will be hanging on his words. As past Stansberry Research Conference presenter and Investor Hour guest Chris Irons, aka "Quoth the Raven," wrote today...

The Treasury market spent much of last week making it abundantly clear that Kevin Warsh's honeymoon as Federal Reserve chairman is over.

Chris' entire morning note is worth a read, and not just because I happen to agree with the premise.

After Warsh's second press conference as chair last month, I wrote that he was being downright confusing. Recall that the Fed kept interest rates steady without clear reasoning or justification, since longer-term yields were rising suggesting more concern for inflation.

In our experience, when markets get more questions than answers from the U.S. central bank, they never react well.

Warsh prefers to ditch or ignore forward guidance from the central bank. So we forecast more volatility as a result.

For better or worse, investors had more of an idea what to expect under Jerome Powell. The previous chair would telegraph Fed decisions on rates and the balance sheet weeks or months in advance of the actual decision. The market has been conditioned for this.

Friday will be Warsh's first big test...

Inflation, which one could argue is "cooling," is also well above the Fed's supposed 2% goal. And good luck telling the American people that prices aren't rising.

Meanwhile, Warsh says the Fed is committed to price stability and while employment is steady, folks looking for jobs – especially on the younger end – are struggling. And the housing market is frozen like a Minnesota pond in winter...

Where does that leave the Fed, which is supposedly responsible for balancing "stable prices" and "maximum employment"? We shall see – or not. But the market wants clarity.

Warsh could double down on his existing approach – which has been to say a lot of words that don't mean all that much concretely. This would let everyone believe the federal-funds rate will stay where it is for the foreseeable future.

Or he could share signals about his thinking more clearly that shift expectations and even suggest a rate cut could come next, rather than a hike. As Quoth the Raven shared this morning in a scenario worth considering...

Warsh has already argued that higher market yields may perform some of the Fed's work for it [on inflation]. That position has created an obvious communications problem because Warsh previously cited falling yields as evidence that markets considered the Fed credible, only to characterize rising yields later as helpful tightening that might reduce the need for Fed action. He cannot indefinitely claim that every possible movement in yields validates his policy.

Jackson Hole gives him a chance to resolve that contradiction by acknowledging that the rise in long term borrowing costs has materially tightened financial conditions and therefore reduces the urgency of another rate increase.

And the political reality remains impossible to ignore... Donald Trump wants lower interest rates, the Treasury Department is visibly uncomfortable with long term yields above 5% and Bessent has already shown his hand by expanding long dated bond buybacks.

Our take: Heading into Warsh's speech, the market is clearly bullish on more inflation winning the day. We wouldn't bet against it.

New 52-week highs (as of 8/21/26): BHP Group (BHP), Alpha Architect 1-3 Month Box Fund (BOXX), Pacer U.S. Cash Cows 100 Fund (COWZ), Quest Diagnostics (DGX), Dorchester Minerals (DMLP), Dexcom (DXCM), EOG Resources (EOG), Ero Copper (ERO), iShares MSCI Spain Fund (EWP), Freeport-McMoRan (FCX), Cambria Foreign Shareholder Yield Fund (FYLD), Global X MSCI Greece Fund (GREK), Illumina (ILMN), IQVIA (IQV), Korn Ferry (KFY), Coca-Cola (KO), LandBridge (LB), Lonza (LZAGY), VanEck Morningstar Wide Moat Fund (MOAT), USCF SummerHaven Dynamic Commodity Strategy No K-1 Fund (SDCI), SSR Mining (SSRM), Twist Bioscience (TWST), Ternium (TX), Union Pacific (UNP), Visa (V), and Vanguard FTSE Europe Fund (VGK).

In today's mailbag, feedback on comments made last week by Treasury Secretary Scott Bessent that we reported about... and more thoughts on U.S. debt and AI spending... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.

"It's interesting at Bessent talking about 'Our message to our allies, our trading partners...' From the massive tariffs on everyone, to wanting to invade Greenland... our allies are probably pulling away some and looking for stable partners." – Subscriber Ryan S.

"Hi, As a European retail investor I am now very selective in transferring Euros to buy US company shares due to the planned weakening of the US currency. I'm a tiny investor but I guess the big guys think twice now.

"The AI investment bubble reminds me of the Irish property bubble which burst in 2008. Borrow to invest in factories, houses, shopping malls, etc. because demand always exceeds supply until it doesn't, with the immediate bankruptcy of speculators, bank lenders, building companies; slow collapse of the administration and property value and dispersal of workers worldwide.

"Enjoy your life and be careful." – Stansberry Alliance member David G.

"The actions of the markets are ripe for failure. The billions spent on data is not going to pay off for five to ten years. Not my idea of investing. So much could happen in the meantime..." – Subscriber Chris C.

Corey McLaughlin comment: I like you guys. We're preaching to the choir here, it seems.

All the best,

Corey McLaughlin
Baltimore, Maryland
August 24, 2026