The Swiss will not have more EU QE
In
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
