Q, involving your question about artificially lowering exchange rates: And nation can't just lower an exchange rate, because exchange rates are independent for each currency involved in the exchange. For example: The US can't simply say, "We're going to change the exchange rate involving Yen and leave the exchange rate where it is for the Yuan." They could do that, but arbitragers would soon move in to take advantage of such artificial aberrations. In other words, traders would say: It takes more dollars to buy the yen today than it did yesterday and the same amount to buy yuan, so let's buy yuan with our yen and then go trade them for dollars, then take those dollars and buy yen.

This is similar but not exactly what happened with the Yen Carry Trade. Japanese authorities had lowered interest rates in Japan to such an extent, thinking it would spur commerce, that arbitragers borrowed yen at low rates then bought bonds in America or somewhere else that yielded higher rates and made money on the spread.

What you need to keep in mind is that the floating exchange rate system is essentially a dishonest system, a system of constantly changing weights and measures that only appears to have stability because a tremendous amount of work goes into the system to attempt to keep it that way. Martin Armstrong (www.martinarmstrong.org) is probably better than anyone else at elucidating the inadequacies and inherent detrimental qualities of such a system. Where no media of exchange have fixed values and are only regulated by artificial interest rate controls and quantitative easing, i.e. printing of money, i.e. inflation, there simply cannot be lasting prosperity or honest production without corruption of numerous processes. A good analogy has been given several times by James Dines and that would be like trying to build a house with a ruler that was constantly changing the length of inches.

Commerce, trade and industry, all bases for what might be termed civilization, the ability of one man to freely trade, without fighting, his products or services with another, must have an honest, unchanging system of weights and measures, i.e. money, or the system will inevitably break down and cease to function.

Through trial and error for thousands of years, civilization after civilization has found only one thing that can do this. That one thing is gold. I understand your concern and argument about gold having no intrinsic value. All I can tell you is that gold has acted as money in every culture, in every civilized society since the beginning of man. Wars have been fought over it. Kingdoms have been destroyed over it. There is a reason for that.

When paper currencies are strong, gold acts as an industrial metal. When currencies collapse, as they always do, gold remonetizes and becomes money again, until things are set in order. The mistake in reasoning you are making is the same many great rulers have made throughout history, mistaking a time of relative peace to mean the end of war forever. Such a ruler drops his defenses and spends his funds on other aspects of life until a foreign power invades him and massacres his men and enslaves and carries away his women and children. When this happens, it can ruin one's entire day.

James Turk gave me the best bit of advice anyone has involving gold. He advised me to buy some and hold it in my hand. I regret that when you were here the other night I did not pull out a one ounce gold coin and allow you to hold it for a few moments. Thousands of years of history sits right there in your palm, and you suddenly get an understanding of what I am talking about. It is difficult to describe without experiencing it. It is quite real, however.

The fact that you have trouble seeing the real value of gold is not surprising. It is that exact difficulty that has been enabling me to prosper financially during this cycle as gold continues to remonetize. It is very difficult to make money in any venture that others are acutely aware of involving its inherent advantages. Eventually, that time will come, as it always has, and as if must, where the general populace suddenly recognizes that there must be something more to gold than just a name. Members of the greater society around us will suddenly realize how much they absolutely need something that only weeks before they considered totally worthless. When this happens, things will change suddenly to reflect a new monetary reality as they have done repeatedly for millennia. I write a "new" monetary reality here. The truth, however, is that such a reality is quite ancient. The only truly "new" thing is our inability to understand it.

Be careful in calling gold just a metal with no intrinsic value as you would in calling the Bible just another book or the Complete Works of Shakespeare just another collection of plays. Indeed, "There are more things in heaven and earth, Horatio, than are dreamt of in your philosophy."

Going back to the original question: What the author is talking about is the way other countries devalue their currencies against the US Dollar. They inflate their currencies by increasing the money supply. The result of this is the result of an increase in the supply of anything, essentially a devaluation against everything else.

Hope that helps, Bull