Swiss National Bank

It would be easy to scoff at these proposals as completely insane if the Fed hadn’t published a paper back in 1999 suggesting the implementation of a “carry tax” or taxing actual physical cash using an expiration date if depositors aren’t willing to spend the money.

"It was, at least in theory, simple enough in the old days," wrote a wistful W. Randolph Burgess, head of the New York Federal Reserve, in 1938. "In the present strange new world, where the old gold portents have lost their former meaning, where is the radio beam which the central banker may follow? What is the equivalent of gold?" The men of his era and of the late nineteenth century understood the meaning of such a question and, more importantly, why it is one that must be asked. But theirs was a different world, indeed — one without "QE," ZIRP," or "Unknown Knowns" as fiscal policy. And there were no helicopters, either.

"If banknotes are outlawed you will be forced to hold money that is a liability of a commercial bank (deposits) and refused access to money that is the liability of the central bank (bank notes)... In such a world, zero-yielding gold would be a high-yielding instrument. If the authorities ever sought to restrict access to banknotes, then gold would suddenly find itself enfranchised as money for the first time in many decades. So, given the scale of these competing forces, it is just too early to say what might happen to the gold price, but the allure of gold will grow the more it becomes clear that central bank fiat has failed and the age of government fiat is dawning."

Threatened with deflation, the authorities will want to turn the tide in the worst possible way. What’s the worst way to stop deflation? With hyperinflation. Yes, we may suffer a year or two more of sluggish growth... or even deflation. Stocks will crash and people will be desperate for paper dollars. But sooner or later, the feds will find their feet and lose their heads. Most likely, the credit-drenched world of 2015 will end... not in a whimper of deflation, but in a bang. Hyperinflation will bring the long depression to a dramatic close long before a quarter of a century has passed.

Investors are beginning to question the efficacy of these extreme central bank policies. More are joining the chorus of critics that believe policies have become counter-productive in both the short and long run.  If true, it could mean that a Fed hike might come sooner than markets believes; and may occur prior to the arrival of the desired and optimal economic conditions. There must be a lesson to learn for those investors who blindly follow central bank actions.  The lesson embedded in the dramatic re-pricing in European financial markets during the past 12 days may simply be that there are dangers when chasing assets irrespective of price levels. It seems to us that the ability of central banks to generate a Pavlovian or conditional investor response to their policy actions is now rightly being called into question.

Three days ago, when looking at the unprecedented, record outflows from US equities  we asked a simple question: "who is buying... no really". We now have the answer.

Last week we revealed that the Swiss National Bank is the proud owner of an equity portofilio that sums to $100 billion, or around 15% of Switzerland's GDP. Courtesy of the bank's latest SEC filing, we now know just what the Swiss were buying in Q1...

Easy come (print), easy go! A trillion here... a trillion there... Sooner or later we're talking some real money!

This was the “Rubicon” moment: the instant at which Central Banks gave up pretending that their actions or policies were aimed at anything resembling public good or stability

Until the advent of the BIS, gold held by central banks came in one version. Physical. It was only after the BIS arrived on the scene did gold's macabre doppelganger, so-called paper, registered or "earmarked", gold emerge for the first time. Here is a brief history of how earmarked gold came into being...

According to the latest SNB financial release, 18%, or CHF 95 ($102 billion) of the assets held on the SNB's balance sheet are, drumroll, foreign stocks!  In other words, the SNB holds 15% of Switzerland's GDP in equities!

It is undoubtedly a huge red flag when in one of the countries considered to be a member of the “highest economic freedom in the world” club, commercial banks are suddenly refusing their customers access to their cash. This money doesn’t belong to the banks, and it doesn’t belong to the central bank either. If this can happen in prosperous Switzerland, based on some nebulous notion of the “collective good”, which its unelected central planners can arbitrarily determine and base decisions upon, it can probably happen anywhere. Consider yourself warned.

Today is shaping up to be a rerun of yesterday where another frenzied Asian session that has seen both the Shanghai Composite and the Nikkei close higher yet again (following the weakest Chinese HSBC mfg PMI in one year which in an upside down world means more easing and thus higher stocks) has for now led to lower US equity futures with the driver, at least in the early session, being a statement by the BOJ's Kuroda that there’s a "possibility" the Bank of Japan’s 2% inflation target will be delayed and may occur in April 2016.

Following comments from the Swiss National Bank, reducing the group of sight deposit account holders that are exempt from negative interest rates, has sent Swissy tumbling...

In the simplest of terms, Abenomics was a form of economic warfare. It marked a transition in global Central Banking policy from an era of coordination to an era in which it is each country/ Central Bank for itself.