Jim,

In response to Ira’s comments…

The US devalues, which in essence devalues the Renminbi. This leaves the European exporters bearing the brunt of the dollar devaluation. As their slice of the exporting pie begins to shrink, they naturally complain. Rumblings about competitive Euro devaluation begin to emerge. Even if a Euro is weakened, how long will it last? As long as global economic imbalances exist, the necessity for further dollar weakness will not go away. In other words, any weakness in the Euro will be met by further dollar devaluation. The cycle of competitive devaluations, thus, will repeat.

What Ira is describing is the race to the fiat bottom. Global trading currencies are devalued to gain an exporting edge. Devaluation without technological innovation serves to only rearrange the allocation rather than increase the size of the global economic pie.

What devaluation does accomplish is an erosion of purchasing power for its citizens. When the world finally embraces this reality, an eventually that draws nearer with each passing day, gold will be sought and accepted for its ability to preserve purchasing power over time regardless of the carry trade or any other trading algorithm.

CIGA Eric