“Central banks everywhere are trying to debase their currencies and Japan is just the latest episode. A few weeks ago it was the Swiss National Bank and we’ve seen continuous debasement by the Federal Reserve with it’s dollar money printing and artificially low interest rates. This is exactly what happened in the Great Depression. Back then they called it ‘Beggar thy neighbor.’
Each country was trying to seek a short-term solution to fundamental ills by manipulating their respective currencies. Manipulation doesn’t solve underlying problems. It doesn’t even offer a band-aid because it disrupts the market process. The net result of this turmoil is hot money, which is constantly looking for a safe home. The underlying chaos detracts from businessmen making sound investment decisions in plant and equipment which creates long-term growth, employment and wealth.
When all countries are aiming to debase their currency, the conclusion is quite obvious. First, you will see money rushing from one currency to another, depending on what central banks are doing at that moment. Second, and more importantly, all currencies are being debased against gold, so its price will rise. The value of gold comes from the market and not from central banks. Central banks can debase currencies, but they cannot debase gold.”