The yen weakened against its 16 most-traded counterparts after Bank of Japan Governor Masaaki Shirakawa said he’s ready to act to ensure “market stability.”
It slipped 1.3 percent to 48.6930 against the real and was 1 percent weaker against the rand at 11.9594, after Shirakawa said at a conference in Tokyo that the Bank of Japan is prepared “to act swiftly and decisively should concerns re- emerge that financial market stability might be hampered.”
"Market stability" in terms of fiat (paper) money invariably suggests that recent currency strength is undesirable. In other words, they are trying to jawbone their currency lower. This is the motivation behind fiat's race to the bottom and the implementation of beggar thy neighbor economic policies. It explains why gold is rising in terms of the not only Yen but also all major fiat currencies around the globe. These secular trends do not reverse due to proclamations emanating from Davos.
In comments delivered on the fringe of the World Economic Forum, Mr Soros said: "When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment. The ultimate asset bubble is gold."
Ultimate bubble? This implies that fiat money is the ultimate deal. How something printed into existence with impunity could be considered valuable is indeed strange. Thus, the saying talk is cheap. Granted, gold could head dramatically lower if central bankers and governments around the world pulled their support for the waffling debt pile. Why not let the system collapse and pick up real assets at bargain basement prices, right?
A big catch to this seemingly plausible outcome is public rage. Every day people are having trouble making ends meet. Bankruptcies and foreclosures are soaring. A recent report suggested that 1 in 5 Americans struggled to buy food in 2009. How long will the status quo be maintained if this number grows to 1 in 4 or 1 in 3? Of course, the answer is not long. This is why we have seen and will continue to see support of the debt pile and stimulus after stimulus.
This talk of the ultimate bubble ignores the reality of economic problems at hand. Problems that we have faced before in 1873 and 1929.
Gold is the tool used to combat the effect of debt implosion to maintain the economic status quo. Those that suggest that stocks and gold are nearing an imminent decline ignore historical cycles/patterns.
Quick glance at long-term historical patterns:
Source: telegraph.co.uk
Source: bloomberg.com
Definition: beggar thy neighbor polices
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