Japan's Currency Intervention: A Cautionary Tale for Fiat Currency Investors

Japan's recent currency intervention has taught investors an important lesson about trusting fiat currencies. Two Japanese savers, one who left their money in yen and another who bought gold, demonstrate this point. Ten years later, the gold holdings rose by 375%, while the precious metal itself only rose by 205% in US dollars.

The extra gains came from the yen's decline, which was exacerbated by Japan's decision to defend its currency. The US government joined in, buying yen on the open market and providing a rescue worth between $53 billion and $90 billion.

This intervention is significant because it affects the global economy, particularly for investors holding US Treasury debt. Japan is the largest foreign holder of this debt, and a defense of its currency could involve selling these assets into the market, potentially causing instability.