On the Swiss move

Bruce Krasting's picture

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chinawholesaler's picture

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mr_T's picture

Moved all my savings to PM. Just say NO to fiatz... vote none of the above... I sleep well.

Buy some gold... maybe the swiss can sell you a tooth or two.

Can't wait to buy some cheap chocolate, watches, and cheese.

 

falak pema's picture

 

-----How much intervention can the world absorb? Japan is doing it big time in both the currency and debt markets. China is manipulating its FX and interest rates. The USA is manipulating interest rates in an unprecedented way. Brazil, Russia, Korea are all doing the same. It won’t work folks. It will fail. The Central Banks are not omnipotent. The markets are.-----

This sums up the whole debate that Merkel must face: Either the EU central banks take on the market or they capitulate and its back to the EU drawing board...Merkel's historic decision.

 

janus's picture

of course you're right, Mr. Krasting.

but this is all to script.  the union will be pared back to a nine or ten member 'nordic' state plus the gauls.

which side did you think the swiss would be on?

PulauHantu29's picture

"Growth recession"...that's what they're calling it. Growth & Bonuses (steak, yachts, McMansions) on Wall Street......recession for the Middle Class.

 

Europe 'Likely to Go Into Recession': Strategist

http://www.cnbc.com/id/44404780

Europe is on the verge of recession and the US is already in a growth recession – an expression used by economists to show that growth is so slow that more jobs are lost than added, a strategist told CNBC Monday.

Steroid's picture

Is it possible that the upcoming Karlsruhe decision was leaked to the SNB?

dxj's picture

"If your odds for a USA double dip were 50-50 on Friday, they just went to 70-30."

Really, Bruce? Based on what? Switzerland is a tiny percentage of the World GDP and less than 4% of the DXY basket.

It's much more likely that the SNB will get hammered if they try to force the peg. They managed to do it in the 70's but the players are a lot bigger today.

ParisianThinker's picture

I am still long the CHF, and I am still in the position. 

Yes, I have lost a lot of my capital in this save haven. But what to do?

I just have an account which has 8 currencies in Switzerland. I can only choose the currency and you have to have real cash to make the exchange.

I phoned PostFinance.ch to trade a large amount of ChF's to any of the crosses,and instead of a 5 pip charge, now they demanded a 25 pip charge. 

Gold is down, and to buy gold, I need euros as I am in Europe. I am not thinking clearly as I don't know how to make up this huge loss.

Any ideas? I could really use some help. I don't see anything as a safe haven anymore. 

walküre's picture

Are you trying to make up the loss in a day, a week, a month?

Temporalist's picture

Check goldmoney.com you can use most major currencies I believe.  That is to buy gold and silver incidentally if you have finally decided the fiat game is a rigged ponzi "gulag casino" as Max Keiser would say.

the grateful unemployed's picture

have an interest in a swiss co with an ADR for a longtime, the common denominator in all this is China, that's where their products are made. today they are down twice as hard as the rest of the market. their ability to hedge their currency exposure is a vital part of their earnings, and this kind of volatility doesn't help.

i envision a situation where the currency markets become so volatile that the settlement banks cannot do business. a few days of extreme volatility might shut down the global economy. the feds number one job is to maintain market stability. now after aggressive bailout programs they have committed Trillions? of us taxpayer dollars to foreign banks which could evaporate in a moment?

in the end its not up or down, its volatility that will wreck the global economy.

Temporalist's picture

It's called a Currency War and volatility is the "New Normal."

Big Ben's picture

The strength of the CHF was probably due to worries about the Euro. And I suspect that the Swiss were worrying about future developments wrt. Italy and Spain. However, if I were a European looking for protection against a Euro collapse I would tend to gravitate more to PM's rather than the dollar as a safe haven. But maybe that is just me.

What a world we live in when a country with debt around 100% of GDP, plus a huge amount of off-book debt, unemployment of 9%, an aging workforce, and an out-of-control deficit is looked upon as a safe-haven currency.

ThirdCoastSurfer's picture

In a world already awash in currency, desperate for a place to hide, another wide open spigot is unleashed as the world economy is perceived to be collapsing for why else hide your money at a negative return?  

In a world where there are no guarantees, here is a place where the promise is you can borrow at near zero without fear that 1.20 will be breached and you could borrow cheaper. However, Japan has implicitly said that about 80, without much success (a zillion yen or so later) so saying so and doing so are not always compatible. 

The fact is you can now comfortably hide at 1.20 and you can borrow for near free at 1.20, because who will borrow at 1.50 when 1.20 is assured?

Besides, 1.20 is the level of max pain, not of relative strength, so this move accomplishes what? In a world already awash in currency you can now borrow more for free! 

 

AustrianEconomist's picture

The end of the great debt experiment is nearing and everything is pointing towards a big credit crash coming up. The world’s monetary system needs to be backed by gold in order to move forward with a sound financial system that does not allow banks create money out of thin air. Money should not be based on debt, but on sound intrinsic value.

Check out the latest from the Capital Research Institute (CRI): The Debt End Game

www.capitalresearchinstitute.org

Alvaro de Esteban's picture

In this global interventionist mess, my only faith, in the medium term, is not Goverments, it is people and I trust much more in american people than in european. So just regarding currencies I will stick to my old green calvinist-masonic chap, the dollar.

I don´t really see great problem with a moderatily stronger dollar in the near future, but my limited english does not allow me to argument it properly.

WFO's picture

They talked a line in the sand...we'll see. Gold has reassumed its currency role now that no government can be trusted. No counter-party risk is becoming the only option.

bankruptcylawyer's picture

bruce i love your articles, but maybe i'm missing something here. 

swiss have a relatively balanced import export with u.s. at 20 billion. link at bottom. 

i thought trade is important too. you really think the swiss franc is going to affect the dollar and balance of payments with major trading partners like the e.u. , JUST because credit spreads on german/french debt with pigs are going to widen?

seriously????

the only net affect i see is the swiss losing money to make their political parties of farmers and other exporters happy. the swiss franc is just not important. the only important thing about switzerland is its banking secrecy laws for the ultra wealthy of europe and other countries. and we are going to see more unravelling of these laws soon. ( at least as far as the news is saying the u.s. is getting on top of swiss banks other than ubs as in the past) 

http://www.census.gov/foreign-trade/balance/c4419.html

duckhook's picture

Does the much ,much larger manipulation by the FED  fall into that category?

kaiten's picture

1.20 is only the beginning. In few months time, it will be moved up to 1.30, or even 1.40. Just as I said few weeks ago. Wait and see.

oldman's picture

Bruce,

Thanks for this piece; it gives me another way of viewing the move by the SNB.

If it acted alone then I have completely mis-read this event. I cannot imagine any CB making such a brash move by itself, though, and even if you are correct there will be the proverbial 'un-intended consequences' from this.

I am such a non-professional that I wrote last night:

"This is interesting. The Swiss chose to back the Euro rather than the dollar. I like this if it is as it appears to be. The system is much weaker than any of us imagined; all the central banks of the planet have bet the fucking farm that this will work. I don't know if it will work or not---we'll see, but I think that it will not. In any event this may have finished the dollar---the Europeans stuck together---probably with our money---irony is the only true humor--shit, I just love this!"

This article makes me appear to be simply an old fool, but I am grateful for it because it forces me to re-evaluate and arms me with that which I did not know.

Having said this, I respectfully remain hedged in the euro, chf, and gold. I will leave the dollar to others unless an amplification is forthcoming from you that awakens this oldman. When you have the time will you further enlighten the non-professionals at ZH regarding your ananylsis, please. I do not understand how the SNB could have acted alone on this---no, I cannot accept it. Understanding is beyond my capacity unless the Swiss mind has just snapped, which may be the case.

Thanks again for the piece    respectfully   om

 

Bananamerican's picture

cabins bitches...this ole world's gone swiss cheese

mackusick's picture

So what does a holder of cash CHF do? Get rid of them of wait?

 

franzpick's picture

Yes, then sit back and watch the Danse Macabre of the currencies begin.

Dick Darlington's picture

Thanks for the article BK, keep up the good work!

Spartan's picture

What I have not seen is a deep analysis of the amount of CHF mortgages outstanding outside of Switzerland. One Reuters article recently said that 44% of mortgage debt in Hungary is held in CHF. Just taking Hungary alone that creates a constant upward pressure each month on the CHF as local currency is converted to make mortgage payments.

Any good articles exploring the numbers in more depth?

Canucklehead's picture

The Swiss move makes sense if you feel the Euro will disappear. The European market will sop up those extra francs while they buy time to bring back their national/regional fiat currencies.  The Swiss franc will be greasing the wheels of European commerce.  Ring fencing the franc with backstopped German (et al) Euros is a good risk mitigation strategy.

There will be cultural change.  First and foremost will be a change in the perception of money being a store of wealth.  With the internet and electronic trading, the store of wealth is any "asset" you feel will retain wealth.  It may be gold, other commodities, stocks, some emerging market bonds so long as it can be easily traded.

If the internet goes down, there goes the neighbourhood.  How do you find the "true" market price for anything, gold included?  How do you tell the "real thing" from the counterfeit?  Would communication companies become the new "banks"?  Would communication infrastructure protect one's wealth?

There are too many banks in Europe.  The Swiss want to ensure they have a seat at the table when discussing the "New Europe".

walküre's picture

If you paid attention over the last decades in all things Eurofication.. what is happening now is nothing but an evolution of the European concept. Of course there are too many banks, too many governments, too many accountants.

Trust me on this. In 10 years, Europe, the EU, the Euro will be much stronger, meaner and leaner than they're appearing at the moment.

The Swiss are NOT an island anymore. They can't afford to literally "play Switzerland" and remain neutral.. what a crock of shit that was during WW2 anyway.

Switzerland might even join the EU, nobody can predict either way.

As far as Europe is concerned however, they're on a path of consilidation and reconciliation.

Here's one ugly thought. The ECB will emerge bigger than the FED. Ouch!

Canucklehead's picture

The Swiss are printing money, investing it in North Europe bonds et al and capturing a portion of the premium between the euro and the franc.  When Northern Europe kicks out Southern Europe, Switzerland is there with their investments and the market links.

Germany et al get cheap financing from the Swiss.

Bananamerican's picture

"As far as Europe is concerned however, they're on a path of consilidation and reconciliation"

Bull. The banking ticks may prefer to ride around on a single dog but there is something in Man that needs a place to Defend, also, a single world (which is what you're scenario implies) can ONLY be brought about as a Corporate State which is tantamount to the parthanogenesis of a rotting corpse. Auto FAIL


scratch_and_sniff's picture

Lets hope you're wrong Bruce, lets hope you're wrong...

Catullus's picture

It feels like a very reactionary move contrary to what had made the franc a safe haven currency. But still, if the rise in franc versus the euro over the past years was a slow motion bank run, pegging the rate doesn't change the flow of money in. They've just locked everyone in who took this bet before 3 months ago to a guaranteed good move. It's not as if money will begin rushing back into the euro zone. The conclusion that the SNB will be tested again is spot on. as Europe deteriorates, the SNB will tested at every news event. Their hand is forced.

DeadFred's picture

Gold can't be the only flight to safety, I love the stuff but there isn't enough of it. As slimed as the dollar is I still expect a massive flight to the dollar. It may be short but I think it will be steep. I'm not much of a currency wonk, but is there a way this Swiss move can be used to force a dollar short squeeze? Borrow CHF convert to Euros then buy dollars? If it can be done I expect it will be done, too much money to be made on a squeeze to resist the temptation.

Spirit Of Truth's picture

The bullishness around gold is so extreme, I'm coining a new term: EBULLION.

Can't last.

Roger Knights's picture

"... gold is so extreme ..."

But we're in "Extremistan."

Smiddywesson's picture

Yes, if there's one take away from The Black Swan, it's that anything is possible in the world of Extremistan.  Gold can go as high as they need it to go to wipe out the debts of the powerful and set up a new system that keeps them powerful.  Extremistan doesn't bow to your petty realities. 

kito's picture

nothing lasts forever. but gold is NOT a trade right now. the comex is completely disconnecteed from the physical market. gold is a store of value. you dont understand the difference i see.....

Lord Koos's picture

Gold is not a trade, it's a stack.

Mediocritas's picture

Haven't touched the CHF since first rumours of a peg went up. Don't intend to start again now.

gerryscat's picture

If they Swiss print money and exchange that money for Euro's, they should not then buy up debt they should buy hard assets around Europe, such as green energy providers.

ConfederateH's picture

Bruce, you didn't discuss how this relates to the push for a "gold franc". Could it be that plans are moving ahead on this, and that this similar to Roosevelt's move in '33 to devalue the dollar against gold? If you look at it from the standpoint that Swiss export industry could no longer allow the franc to remain constant in gold price while the entire rest of the world are busy inflating away their currencies in this world currency war, then this makes sense. Especially if it is a stop-gap until the gold franc arrives in the near future.

walküre's picture

Bruce,

This was a good move. The ceiling is putting a floor under the markets in the coming days as well.

Gold may be at a double top here.

I think it's time to look ahead and start investing into quality. America is turning a corner at this juncture, is my opinion.

Too much negativity lately.

Smiddywesson's picture

One of us is holding an empty fifth of gin and has his ear on the desktop, because you see us turning a corner and is see us going over a cliff.

Lord Koos's picture

Got any extra crack to share?

phyuckyiu's picture

Walkure, I PRAY you spent real money backing up your false presumption that Amerika is 'turning a corner', but I know you're just a chicken shit and just spewing shmegma. Turning a corner of course involves a gain of zero jobs?

Freddie's picture

"America is turning the corner" with ethe islamo-marxist Kenyan?  Oh the train rounding the corner where the bridge has collapsed and the train goes off into the river?  That corner?

walküre's picture

PEAK ARMAGEDDON.

World is turning, whatever O. says or doesn't say. Hoarding cash is boring. Who wants to be the richest guy on the cemetery? Not me.

anyways's picture

+1

Good work! And EURUSD goes allready in ur predicted direction.

whstlblwr's picture

I certainly don't understand currency market like BK, but if higher dollar is death for US economy, then just admit it not real recovery.

I don't think man on street would agree with this that lower dollar that buys less food and less gas is good for his economy.