BATR – by James HallIn the ridiculous charade that passes for the foreign exchange currency markets, the ease upon which a 39% spike in the Swiss Franc to the EU has most financial journalist puzzled. A flagship of establishment journalism like the Washington Post provides a quaint explanation in Why Switzerland’s currency is going historically crazy. The Swiss intend to keep their exchange rate at 1.2 Swiss francs per euro caused unsustainable negative competiveness in Swiss exports to EU customers. How many times have you heard that same old song? Corporatist media consistently spins a yarn that suppressing one’s own currency is good for business.
Rely on viewpoints from reliable sources like The Economic Collapse. Their insight should be obvious to anyone with an ounce of common sense left. “The euro is falling apart, and the Swiss did not want to be married to it any longer. Unfortunately, when any marriage ends the pain can be enormous.”
Peter Schiff, who is a major precious metal dealer, is getting a boost in this latest development. The article Switzerland Surrenders the Currency War, but America Still Racing to the Bottom published in the Libertarian and Austrian Economic site, Lewrockwell.com provides an expected response.
“The Swiss are going to be able to get a better deal on all the products that they import from Europe and from other countries, so they won’t have to export as much to pay for their imports. So that’s positive for the Swiss. I would be worried about the Europeans who are now going to have to spend more money to buy Swiss products. They’re the ones that hurt, as are Americans. Swiss products are now going to be more expensive for Americans, but American products… are going to be cheaper for the Swiss. So the Swiss win because they have a stronger currency, and Europeans and Americans lose because we have a weaker currency… “
These conclusions are so basic and correct that when mainline economists preach their financial orthodoxy, the idiocy of the “Free Trade” hoax screams out for a sense of monetary sanity.
Not to spoil the cheers for the Swiss, an important component must be factored in. When the Swiss Voters Reject Initiative on Central-Bank Gold, the hard money advocates expressed great disappointment.
“Swiss voters overwhelmingly rejected an initiative on Sunday that would have forced the country’s central bank to hold one-fifth of its assets in gold, a move that would have eroded its ability to conduct monetary policy.
Critics of the initiative feared that the SNB’s commitment to the cap would have been challenged because the central bank would have been forced to buy gold every time it intervened in the currency market.”
This result seems to reinforce that the gnomes of central banking were once again in control of their gold hoards and refused to share any of its value with the holders of the Swiss Franc.
So how can one account, after rejecting the plebiscite on adopting making the Swiss Franc as a real hard money value currency that the exchange rates raise so sharply?
Fundamentals and measures that favor and protect the wealth of a national currency are not applied as standards, when central Banksters play the money float game. In order to understand why the Swiss Franc surged, one must examine the sickness within the EU and the extreme pressure on the EURO coming from desperate measures to keep the single European currency afloat.
The panic begins as the ECB Stimulation: The Trap Closes. Last week the EU Court of Justice advocate general ruled that the central bank could purchase sovereign debt.
“It referred to an existing ECB program called Outright Monetary Transactions — which isn’t quite QE but which does involve purchases of government bonds. The court won’t rule for another four to six months, but it’s likely to follow the advocate general’s guidance. That’s good enough for Draghi to act now.
Many in Europe, especially in Germany, remain opposed. They see QE as a ruse by which the richer members of the currency bloc will end up paying for the fiscal misadventures of their neighbors.”
Let the race begin and only the quickest will be left sitting tight, when the music stops playing. It seems that Steen Jakobsen writing in Endgame for central bankers agrees.
“Many central banks will envy the SNB (Swiss National Bank) for its move last week, as it at least tries to regain some control of its future, but the conclusion remains: central banks have as a group lost credibility and when the ECB starts QE this week the beginning of the end for central banks is completed. They are running out of time – that’s the real real bottom line: the SNB ran out of time, the ECB runs out of time this week, and the Fed, Bank of Japan and the Bank of England ran out of time in 2014.
What comes now is a new reality – the SNB move was true paradigm shift – we can no longer look at central banks, the markets and extend-and-pretend in the same light as we did last Wednesday (the day before the SNB pounced).”
Now for the kicker . . . When a solid financial adviser acknowledges in their financial letter, like Chris Hunter, Editor-in-Chief, Bonner & Partners – Did the Swiss Just Burst the “Central Bank Bubble”?, that the crown prince of collectivist economics condemns the Swiss; you know they were correct in ditching their peg ratio to the EURO.
“We usually don’t see eye to eye with economist Paul Krugman. But he’s hit the nail on the head about the “Swiss shock.” From his New York Times column: “The SNB’s wimp-out will make life harder for monetary policy in other countries, because it will leave markets skeptical about whether other supposed commitments to keep up unconventional policy will similarly prove time-limited.”
How evil those Swiss must be to actually defend their currency and their own wealth. As the EU implodes, the smart money will sit out the coming grand depression, provided by your friendly central banks, in the charm of the Swiss Alps.
James Hall – January 21, 2015