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ETFs to Hedge Against Currency Debasement

NEW YORK ( TheStreet) --As the crisis in Europe continues to take its toll on the markets and bank borrowing costs rise, a nation's debt and currency debasement should be of much concern.

Most recently, a study indicated that the U.S. national debt has ballooned nearly 12 fold over the last 30 years. Additionally, over this same time span the ratio of debt to GDP has gone from nearly one-third to 85%.

During this time of balloning debt, GDP has only expanded 5.3 times, indicating that debt is growing twice as fast as the U.S. economy. Similar trends have been seen in Europe, in particularly Greece, Spain and Portugal.

Some concerns of this exponential growth in debt include hyperinflation, as a result of printing more currency, a decline in the value of a nation's currency, better known as currency debasement, and increased costs of borrowing, which make it difficult to chip away at deficits.

Some experts suggest that this trend is likely to continue as nations, in particular the U.S., have become accustomed to borrowing extraordinary amounts of money and printing extra currency to stay afloat. If this is the case, then inflation will be inevitable and currency values will diminish.

Here are some to protect against currency debasement include the following:


Traditionally, gold trades inversely to the U.S. dollar and has long been a traditional hedge against inflation and currency weakness. Gold can be played through the SPDR Gold Trust (GLD).


In general, as the U.S. dollar loses ground, commodities reap the benefits. Additionally, the world is growing and demand for commodities is likely to follow. Some broad based commodity plays include the iShares S&P GSCI Commodity-Indexed Trust (GSG) and the PowerShares DB Commodity Indexed Tracking Report (DBC), which includes exposure to gasoline, crude oil, sugar, copper and other sought after commodities.

Emerging Markets

Brazil and India are expected to see financial strength, which translates to a stronger currency. Brazil continues to be flush with resources that are in high global demand and India is seeing increases in business investment, strong capital markets and boosts in consumer confidence.

Brazil can be accessed through the WisdomTree Dreyfus Brazilian Real (BZF) and India can be played through the WisdomTree India Earnings (EPI).

For exposure to both these nations, one could take a look at the iShares MSCI BRIC Index (BKF), which allocates nearly 49% of its assets to Brazil and India or the Claymore/BNY Mellon BRIC ETF (EEB), which boasts nearly 67% of its assets to these two nations.
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BKF $30.41 0.00%
BZF $15.17 0.00%
DBC $14.58 0.00%
EEB $26.63 0.00%
EPI $19.58 0.00%


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