Are governments going bankrupt? Or are they quietly "eroding their debt" through inflation?

Over the past 300 years… the pattern repeats almost mechanically.

A recent study from the Centre for Economic Policy Research analyzed bond market performance in the United States and United Kingdom during major wars and pandemics.

The result?

Not just numbers… but an "unwritten rule" in economic policy.

During the first 4 years of major crises:
• Bond holders lost approximately 14% of their real value
• Stocks and real estate outperformed bonds by more than 20%
• Average cumulative inflation reached approximately 20%

But what matters most isn't the numbers… it's the mechanism.

How does it happen?

When governments face massive spending shocks (wars, crises, pandemics):
• They can't raise taxes fast enough
• And they can't stop spending
• So they choose the "silent solution": inflation

Simply put:

The debt gets paid in full…
But with far less purchasing power.

The result?

As a bond holder, you don't lose nominally…
But you lose in real terms.

And here emerges a very important concept:

"Financial Repression" (Financial Repression)
• Artificially capping or lowering yields
• Forcing institutions to buy government bonds
• Allowing inflation higher than returns

This isn't conspiracy theory… it's policy used for centuries.

Let's look at today:
• Military spending on the rise
• Debt-to-GDP ratios at historical levels
• Central banks beginning to hint at "flexibility" regarding inflation

The real question is no longer:

"Are bonds safe?"

But:

"Is the real return positive?"

I personally work with bonds daily… and believe in them as an asset class.

And today specifically there are real opportunities:
Returns we haven't seen in years… and attractive pricing distortions.

But every discussion with clients starts from one point:

Inflation first… then return.

Because:

A 5% return means nothing…
If inflation is 6%.

The bottom line:

Government bond safety isn't an absolute fact…
It's an assumption that only works in peacetime.

And with global fragility today…
That assumption may be tested.

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