Posted on 01/16/2015 5:49:10 PM PST by Lorianne
The Swiss National Bank has lost control. It is the latest in a list of venerable central banks to be overwhelmed by deflationary forces and global economic disorder.
The country is already in deflation. The Swiss franc ended Thursday 13pc higher after the SNB abandoned its three-year efforts to defend a currency floor of 1.20 to the euro. “We have a free exchange rate once again,” said the SNB’s president, Thomas Jordan.
Indeed, but nobody is fooled by the SNB’s attempt to spin this as benign. “This is a huge hit to their credibility,” said Deutsche Bank.
The official statement claimed that the exchange floor is no longer needed and that “overvaluation has decreased as a whole since the introduction of the minimum exchange rate”. This is eyewash.
“They have had to throw in the towel. They couldn’t hold the line anymore,” said David Owen, from Jefferies Fixed Income. “This is going to cause extreme pain for parts of the Swiss economy but the SNB are trapped.”
The franc has been level over the past year on a trade-weighted basis. Even before Thursday morning's events, the exchange rate was 25pc above its decade-long average. It is now 40pc higher. Just one month ago the SNB argued in its quarterly report that currency floor was imperative to stop Switzerland relapsing back into deflation.
(Excerpt) Read more at telegraph.co.uk ...
Me thinks the euro is in trouble, not the SF.
Switzerland isn’t part of the European Union. A friend of mine found that one out the hard way when embroiled in a legal dispute with a Swiss piece of crap that ripped him off (yes they exist).
Given the ocean of fiat money that has been created out of thin air, whatever we have in the monetary system, it is NOT deflation. It is the effect of vast amounts of “liquidity” (note: not even money any more) that is sloshing around looking for safety and yield.
So... bad news for people with money in Swiss bank accounts or not?
If you had a Swiss account in the local currency this week you made out like a bandit, 30% in a day, ten minutes actually. Very weird. Feels engineered to me, designed to benefit somebody or a group of them.
What the Swiss authorities are fretting about is the fact that a very strong currency will lead to falling prices on imports and will also cause wage and price pressure upon domestic industries that are heavily export-dominated, leading to an economic slowdown which will further exacerbate the price pressure exerted by the very strong currency.
Only the US seems to benefit from a strong currency, and that’s because we have never been export-dominated. Domestic industry and imports rule the day with comparatively little export.
Depends how much I suppose and if they do bail-ins. It could still be safer there than elsewhere. We’ll have to see.
I hear rumblings that traders are looking to cement that wild gain by moving into dollars.
In with tea and popcorn.
A stronger currency that reflects market value. I don’t see the problem.
If anything the problem was keeping the currency artificially low.
And what effect might this have on the Eurozone. They do a lot of trade with Switzerland.
a currency that is increase in value is like having the stock price you own increase in value. Its not a negative despite what main stream economist say
this is excellent news for swiss and swiss bank holders
It is not good for Swiss exports and jobs dependent on them.
The only reason a country should export is to import. Trade what you export for things you want from other countries
Euro is $1,15, lowest I’ve ever seen it.
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