Posted on 08/03/2011 2:14:27 AM PDT by bruinbirdman
09:30 ZURICH, SWITZERLAND – The Swiss National Bank reacted Wednesday morning 3 August to the rapid rise of the Swiss franc, calling it “massively overvalued” and saying it will “very significantly increase the supply of liquidity to the Swiss franc money market over the next few days.”
“This current strength of the Swiss franc is threatening the development of the economy and increasing the downside risks to price stability in Switzerland. The SNB will not tolerate a continual tightening of monetary conditions and is therefore taking measures against the strong Swiss franc,” the central bank noted in a statement.
Specifically, the bank’s actions include: •aiming for a three-month Libor as close to zero as possible, narrowing the target range for the three-month Libor from 0.00–0.75% to 0.00–0.25% •very significantly increase the supply of liquidity to the Swiss franc money market over the next few days: expand banks’ sight deposits at the SNB from currently around CHF30 billion to CHF80 billion. •with immediate effect, the SNB will no longer renew repos and SNB Bills that fall due and will repurchase outstanding SNB Bills, until the desired level of sight deposits has been reached.
The SNB says it is watching markets closely and will intervene again if necessary, noting that the combination of a worsening global economic outlook and sharp appreciation of the Swiss franc during the last few weeks has resulted in a substantial deterioration of the outlook for the Swiss economy.
Wanna buy some Swiss francs? Switzerland will be happy to print some up for you.
Disgusting. A world of paper money where responsible countries think they must debase their own currencies because of the irresponsibility of the rest.
The truly sad part is that most people will think this a perfectly sensible move -- and, given the current situation, they may be right. Sigh.
The race to the bottom has begun
Switzerland eagerly joins the mass dive off the cliff.
Just the opposite.
The article, perhaps, does not speak English all that well, but the meaning is there.
The Swiss franc has become "too" valuable. Because Switzerland franc is the recipient of flight to safety, people are just about paying any price. The market in CHF is not large enough to handle the demand. That is ruining Switzerland's export market.
The Yodelers are going to print 60-80 billion CHF to satisfy the customers, hoping to stem the artificial rise in its value.
yitbos
The Swiss National Bank reacted Wednesday morning 3 August to the rapid rise of the Swiss franc”
Well, good heavens, SOMETHING has to go up!
(It appears eventually, however, that only gold is going to go up, since all currencies are basically now the same.....).
How’s the Canadian dollar doing?
If memory serves, Switzerland is still on the gold standard. This is why they have an over value problem.
Anyone familiar with Gresham’s Law, in economics. Bad money will always drive out good money, good money being of good value.
It is both ironic and disturbing that a currency of value must be avoided.
Yes, I understand. It is still the result of the inflation of paper currencies, primarily the Euro and the Dollar.
The Swiss have been [relatively] responsible and now they must fend off those trying to escape somewhere into safer territory. Switzerland may be the logical place for a return to a true gold standard to start.
That's the thing about currencies: they always tell you what they are going to do -- in the long term, that is.
If both are legal tender. If you have to accept my dollar bills as the equal of my gold, I'll keep my gold and pay with my dollar bills. Without legal tender requirements, good money tends to drive out bad money because everyone will demand the gold for payment if they aren't forced to accept the dollar bills instead.
(assuming, of course, that Ben "Inky" Bernanke is printing up enough dollars to make them "bad")
Ah
Which is why I’m long on the dollar and short on the CDN.
The Swiss economy, even the prosperity of it’s citizens, is far too reliant on exports, of course, mostly financial services. Hedging against the current situation, i.e., every other national government spends itself into bankruptcy and debases their currencies, making the Swiss franc artificially strong, would be rather difficult for them.
Imagine having a banking business that deals in all different currencies that depreciate all year. You start out x number of Swiss Francs, do business all year in currencies that lose value relative to the Swiss Franc, then at year end you prepare your profit and loss statement expressed in Swiss Francs. Ouch !
Now imagine if they could have used their Swiss Francs to buy wheat, corn and crude oil all year long, and sell them to other countries and be paid in the same Swiss Franc. They could buy 10,000 lbs. of commodity on a certain day, then a few months later sell 9,990 lbs of that commodity for the same number of Swiss Francs.
Since the Swiss Franc is not the dominant world currency, the Swiss do not have the benefit of being able to buy things always in their own currency. If they did, the strength of their currency would simply give them more purchasing power internationally.
This illustrates why it is imperative for America to have the U.S. Dollar retain it’s position as the world’s foremost trading currency.
America takes for granted the fact that world trade of commodities, raw materials and goods and services of all kinds can always take place in U.S. dollars. So how well our currency performs relative to others - up until now - has not really started to hurt us in real terms.
We have no idea of what pain is until we consider what our situation will be if the U.S. Dollar loses it’s general acceptance.
Think how expensive life would be for us here if we had to trade our Dollars for Yuan or Euros every time we wanted to buy something - and our Dollars were worth less and less every time we exchanged them.
Congresscritters think they are smart alecks, devaluing the U.S. Dollar. And, mind you, if Dollars were “backed” by gold, they would be constantly knocking down the Dollar to gold conversion, devaluing them just as fast.
We shall see when things collapse.
Also, a lesson learned; local economies need to be able to thrive on their own without enormous net exports - or imports - so they are insulated from messes “outside” the local economy.
But then again, we’re asking government leaders to be wise.
I just did a bit of googling on this and it seems like they dropped gold in 2001, via referendum.....maybe that is not up to date, but that is what I got....in any event, just something to look into.
But we know that no individual country can manipulate the FX for long (cupla days). About the best they can do is talk about it. That will cause a blip, not for long.
yitbos
Respectfully disagree. Speculators can't manipulate FX or anything else for long. Countries can manipulate their currencies just like oil producers can manipulate that market. In fact, it's the duty of any modern central bank to do just that (in effect). Just look at a long term currency chart. The trends are measured in years. Moore Research Commodity Charts.
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