SNB Warning Gold Initiative "Fatal Error Of Judgment" Sparks EURCHF Peg Test

Tyler Durden's picture

Having bounced modestly yesterday, EURCHF is testing new lows post its peg (at 1.2020 vs 1.20 peg) as the reality of the referendum on the "Save Our Swiss Gold" initiative starts to get priced in. The Swiss National Bank has decided to unleash some propaganda, as WSJ reports, Thomas Jordan, president of the Swiss National Bank, warned adoption of the so-called 'Save Our Swiss Gold' initiative would be a "fatal error of judgment." With the vote looming on Nov 30th, Jordan explains that maintaining stable prices would be harder to achieve if the call for gold repatriation and increased reserves is approved. The M.A.D. rhetoric has begun as not just stability but jobs are at stake, according to Jordan.


EURCHF continues to drop (Swiss Franc strengthening) towards a test of the 1.20 peg...


And The Swiss National Bank is stepping up the M.A.D. rhetoric... (via WSJ),

The head of Switzerland’s central bank has warned that maintaining stable prices would be harder to achieve if the Alpine country votes to require the bank to keep a minimum amount of gold in its vaults.


The adoption of the so-called “Save Our Swiss Gold” initiative would be a “fatal error of judgment,” Thomas Jordan, president of the Swiss National Bank , told Swiss newspaper 20 Minuten in an interview published Wednesday.




Mr. Jordan said the proposals would damage the SNB’s ability to deal with inflation, while jobs could be endangered.


“Too little gold in the economic crisis was never the problem, the strong franc was the problem,” Mr. Jordan said in the interview. “We had a massive overvaluation which has led to major problems.


“We must be able to dampen this problem, but our ability to do this would be severely restricted,” he said. The initiative would force the SNB to buy gold every time it buys euros, which it has done to curb the rise of the Swiss franc.

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So fire and brimstone if the SNB can't just print Francs willy-nilly...

As Grant Williams perviously concluded,

Sometimes I think these people are completely delusional.


So, let me get this straight: gold is a relic which restricts your ability to do such vital things as... oh, I dunno, promise to print unlimited amounts of your currency in order to peg it to another, failing currency and thereby debase it by 9% in 15 minutes? Or it might mean the market doesn’t have complete faith that you might be completely relied upon to do really smart things like that?




Somebody. Please? Make it stop.


The Swiss establishment has been reliant upon the public’s ignorance in these matters, but now they are up against a formidable opponent in Egon von Greyerz. Not only that, but they can clearly see that, as elsewhere around the world, the public is fast becoming disenchanted with the status quo; and that is potentially very dangerous for these people.


What is important to understand here is that if the initiative passes it will be part of the Swiss constitution IMMEDIATELY — not in two years, as many blogs and websites are suggesting. This means that the government and parliament cannot touch it. Only another referendum can change it. This is proper democracy for you.


The closer we get to the vote on November 30, the bigger this story is going to become, and the bigger it becomes, the higher the chance that the yes vote wins.


Should that happen, it will undoubtedly set off alarm bells throughout the gold market, as yet more physical gold will need to be repatriated and another sizeable, price-insensitive buyer will enter the marketplace.

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LULZBank's picture

Trust us, we are scared!


kliguy38's picture

And now the propaganda begins.......lets see if the Swiss are sheep......I say yes they are

Silky Johnson's picture

To hell you filthy banker, TO HELL! I so hope that shit passes.


Big ups for Egon von Greyerz, his name alone is big pimpin. I hope that son of a bitch succeeds in shining a light on those Swiss banker roaches.

TahoeBilly2012's picture

No sound money for you Swissies, get back to your Facebook accounts.

BaBaBouy's picture

"Fatal Error Of Judgment"


The Whole Fucking Keynesian Paper Fiats & Paper GOLD Rigging Complex May Collapse Into A Pile Of Shit Rubble???

Clint Liquor's picture

It is a threat. The Central Planners don't need this shit to catch on around the world. If the Swiss pass this the Banksters will make them pay dearly.

greyghost's picture

Thomas Jordan: chairman of  the  Central Bank Counterfeit Deterrence Group!!!!!!!


Mountainview's picture

Jordan's policy of fixing the CHF at 1.2 to the EURO will be the most disasterous policy step in SNB's history. Nothing speaks against gold as a reserve instrument. But fools follow other fools.

SwissCake's picture

He was vice-chairman at the time but probably in favour of it although he's more prudent than the other two chairmans. The biggest blame is on Hildebrand. The most funny part of all of that were unions discovering the business of central banks after the introduction of the floor and shouting for a peg of... 1.40.

lickspitler's picture

Egon like all the other King World fucktards is getting it up the blurter being so long gold.

Trying to bail himself out with a totally bullshit vote.

Ironmaan's picture

It won't be ALLOWED to pass.

StandardDeviant's picture

You think not?  The Swiss take their referendum process pretty seriously.

Groundhog Day's picture

another victory for the banksters.  so for anyone keeping score


Banksters   1000

Citizens           0


to rephrase from a great comedy... Groundhog Day.  "today is the same day yesterday and the same day as tomorrow....what if tomorrow never comes"  or something like that.  The bankers will never lose...I'm convinced

Groundhog Day's picture

another victory for the banksters.  so for anyone keeping score


Banksters   1000

Citizens           0


to rephrase from a great comedy... Groundhog Day.  "today is the same day yesterday and the same day as tomorrow....what if tomorrow never comes"  or something like that.  The bankers will never lose...I'm convinced

GetZeeGold's picture



My fellow Barbarians.......just say no!



If the Huns know we have gold....they're sure to attack us.

Quintus's picture

I've spent a reasonable amount of time there, and in my view the Swiss are definitely not sheep in the sense that our bubble-gum TV watching populace are.

On the other hand, the strong military influence produced by mandatory national service may make them more likely to 'Just follow orders' from above.  Hard to know whether this will trump their natural conservatism and independent streak though.

duo's picture

The gold intitiative, Obmacare for the Swiss.

Ghordius's picture

as I wrote before, the referendum goes too far. to the point that you have to be a very simple-minded goldbug to love it, of the kind of "whatever, as long as gold is involved"

meanwhile, the Swiss have a varied political landscape, and political parties are very important. all except one are against it, nearly the whole political "elite" has spoken against it, and nearly all newspapers too

"Swiss are sheep"? I beg to differ, they are exceptionally well versed in things financial. "buying, buying and never selling" strikes them as a very odd way to use gold. as I wrote before, if "never selling" would be a good practice... well, then we would not be talking of the Nixon Shock of August 15th, 1971, then this is what he did: he forbade the FED/Treasury to sell gold against USDs

and the Swiss economy - including and particularly the incredibly important SME sub-strate - is heavily integrated with the eurozone's economy. Just recently the Swiss gov explained patiently to France and Germany that Swiss trade with them is bigger then China's. which explains the CHF "floor" (aka peg) to the EUR

and this is real economy and trade, folks. chemicals, machines, machine parts, turbines, watches, chocolate, etc. etc.

Creepy A. Cracker's picture

Name calling (simple-minded, goldbug) as your first "argument."  No point in reading on...

Ghordius's picture

then exchange "simple minded" with "not Swiss and not caring what would happen to Switzerland, as long as it's gold and it goes higher"

if "simple minded" was an argument I would use it often. here it was not meant as argument but as "wait a moment, what are the consequences?", followed by real arguments, imho. I firmly believe I have a track record of not using dirty tricks in my argumentation here on ZH, including swearing, even though it's labelled a "fight club". So suit yourself

Consuelo's picture

This is how I interpret your argument Ghordius:

- 'These are issues far too complex for the average person to wholly grasp, therefore, best that these issues are left to the much higher qualified authorities to sort out.'

My response:

- The monetary 'authorities' of the world have acted in such an undisciplined and egregious manner with the citizen's finances, that short of a bold and rather 'blunt' implementation of discipline, it is highly unlikely that the declining fiscal 'morals' of the West will ever be brought to heel, let alone righted on the tracks. 


Ghordius's picture

Consuelo, the average person is not interested in anything that has to do with monetary matters. That's the very basis of fiat currencies, and why some central banks can do what they do

CrazyCooter's picture

Can you expand your acronym SME? I have only seen it used as Subject Matter Expert (Usually pronounced Smea, but jokingly called a Smeagal in some circles). I get your meaning, but it bugs me I can't parse it out.



Ghordius's picture

gladly. Small and Medium Enterprises. half of the eurozone's economy? it's them. can't compare with most countries. the German speaking countries sometimes use the term "Mittelstand" for Medium. it's that part of the economy for which lobbying is a bit more difficult, and has to be structured around principles and not ad-hoc laws, and is often really private, using business loans from retail banks instead of exchange-traded stocks and bonds. in Switzerland, they are as important as in the eurozone

in contrast with "megabusiness", which easily becomes global in scope, and sets up gargantuan multinational constructs, with an epitome in the megabank

DeadFred's picture

Switzerland is known for it's dairy cattle not so much for sheep. I'll be interested to see how they respond to propaganda

Urban Redneck's picture

We eat sheep and pigs. Do you have any idea how expensive it is to raise and graze cows on outrageously expensive Swiss real estate? CHF 75/kg for basic steak cuts at my grocery store... and this is with a "weak" CHF.

Ghordius's picture

UR, are you applying for Swiss citizenship? have you had a look at the more debated other two federal initiatives, in particular the "ecopop"? two Swiss contacts I have told me they already voted "Yes" with a very typical Swiss explanation: "I know it will not pass, and it's good so, but I wanted to give a shot across the bow"

SwissCake's picture

True, our government has shown so little commitment on the immigration issue (both pre and past the february vote) than a share of the folks are logically ticking the yes out of emotion, or to send a message.

Would our government get off its ivory tower and address in a compelling way the loose family reunification possibilities, EU migrants' access to social prestations and automatic renewal of permits as well as the surge of asylum seekers this would be no issue. Unfortunately they show no commitment in that regard.

Ghordius's picture

but you Swiss had a referendum that puts all your dealings with the EU in jeopardy by making the old "contingents" coming back. you practically already toppled that "ivory tower", which is now in full "damage control" mode. What do you want more?

it pains me to write this, but as long as the UK is in the EU club, the EU has to keep strict adherence to the very simple Four Freedoms. Britain's governments otherwise always try to weasel some special bargain. It's in their blood, to first commit and then renegotiate better terms until Britain has "both the croisson and the five pence" (it's a Swiss saying, isn't it?)

SwissCake's picture

I agree with the zero leeway we have with the EU in regard of the UK situation.

It's not that simple regarding the vote, in practice even though the inititative went through, we have no idea as to what will come out of it. There is no consensus on the method (e.g. contingencies, corporate tax on foreign hires, ..) and as you poitned out most of them contradict with our EU contract. Thus the odds that the elites pull off some sort of smoke and mirrors output instead of a clear control on immigration is fairly high, hence the temptation to go radical on the 30th of this month.

Ghordius's picture

I think I can empathize on that. btw, radical? That's your confederation's middle name. you Swiss are the only polity that is truly in constant revolution, with your referenda. the only polity that "rides the beast" in the proper manner. many of us europeans secretly and less secretly admire you and hold you as a... template

but I think your government is doing a good job of procrastinating the matter in Brussels. some things have to. having said all that: do you really suffer by EU immigration? or is it more a mixture of that and the asylum policy?

SwissCake's picture

Regarding whether or not it's the right play for our government to play the clock, I'd say we actually have a very bad timeline no matter what precisely because of the UK situation. We have 3 years to renegociate immigration with the EU. In the most likely scenario of UK conservatives winning the 2015 election, they will hold the EU referendum in 2017 which matches our deadline. In other words the EU would grant us nothing, or a symbolic token that our government would try to sell us as a breakthrough. Whether this works or not is tough to assess; immigration will only be part of a new treaty we currently negociate with the EU, whose goal is to institutionalise our bilateral agreements with the EU. Needless to say it is very controversial topic for several reasons we will probably have the chance to discuss here timely.

I can only speak about myself and sort of conjecture that my view is shared by a broader share of the citizen. First off, there is a substantial share of citizen for which immigration is no issue. But it remains the main concern of the population when polled. The concern is immigration in general, not limited to the EU. Asylum is on top of the list. There is no difference between EU and non-EU immigration in my opinion. Simply the latter is 80% of our immigration, hence the higher voices. Our government in a very technocratic manner perpetrates this feeling by refusing to take the issue at hand. There is a strong conservative feeling of wanting to preserve our culture, which, in face of the demographics we've had over a decade or two is bound to at least be mitigated. The clear cut correlation, and I would argue causation, betwwen immigration of certain countries (mostly out of the EU ones) and crime. Economically, the fact of being fed up with the easy access for EU's low-skilled workers, whose mentalities with regard to the state differs with ours (prone to suck out state benefits without caring whatsoever). All of there are exacerbating by the government policies. If they had put in place those measure I wrote 2 messages ago (toughen up family reunification for low-skilled immigrants and asylum seekers, non-automatic renewal of permits, etc) I am sure most of us would be satisfied. Yet they do not usr the room of maneuver they have within their international obligations, instead, they extend the right of appealing for asylum seekers, and state our "asylum tradition" in an ongoing manner. This is very frustrating.

In a nutshell, even though most of us is pro-economy, there is a tradeoff with culture, and currently not only is our government getting a bit more intrusive economically-speaking, but the perception is that they're not protecting our culture enough, hence the backlash. Worth stating that this is our most centrist government ever with one FDP trending center and only one SVP. No wonder the population went as much against that government's recommendations than any other one in popular vote. Clear disconnect. Clearly, when you stroll in cities' streets you see demographic swings you may not be used to as a native, that in a matter a decade time. It is tough not to get emotional over it.

Urban Redneck's picture

I actually just put in an early renewal for my residency permit because I will be on the road for a couple months when the current one expires.

I think Martin Armstrong came close to the truth when he characterized the gold initiative as a protest against government, and more specifically, "It will have no impact upon saving the franc and it certainly would not change the direction of the currency without removing the peg"

The SNB is being somewhat disingenuous when they say the initiative will "tie its hands", but the gold initiative supporters are either outright lying or simply stupid to argue that the initiative will strengthen the franc or bring stability to monetary policy.

What the initiative will actually do is increase CHF volatility and force the SNB's hand to do things that most paper pimping central banksters can only dream about, none of which involve purchasing over 1000 tons of physical gold and storing it in Switzerland.

It's too bad more people don't understand how central banks actually work to manage/manipulate their balance sheets, or they might see the (un?)intended consequences of this poorly though out attempt at reform.

As to Ecopop, since I'm already here- it doesn't affect me either way, and I'm generally for stricter immigration controls anyway... since Switzerland is not part of the EU, despite what certain people in Brussels may believe.

Ghordius's picture

fully agree. if the Swiss Gold Initiative was divided in it's three parts, I'd advocate two yes (repatriation because Switzerland can easily become a major gold trading center and quota of assets for what you describe) and one no (regarding ban on sales). But this way? overengineered

CrazyCooter's picture

You make interesting points.

But it sounds like you don't think this would be the begining of the unravelling ... which seems to be inevitable at some point. First to panic and all that?




Ghordius's picture

it depends. in which direction your "unraveling" goes. different scenarios give different outcomes

example: the US could go back to a gold-backed USD. it's only a question of the price for the fix. 50'000 USD per ounce would be... confortable. for the FED. and probably cause massive deflation in the US, which again brings you to... scenarios

Urban Redneck's picture

Switzerland is a tiny country (1000 tons of gold notwithstanding), so unless by some strange fluke the initiative violently disrupts markets in New York or London, I don't think the referendum would actually cause the great unraveling to commence. It's not in the SNB's interests to collapse the house of cards or do anything which could lead to their being blamed for bringing it down. The SNB also has a lot of tools at their disposal to manipulate the "will of the people" for change into perpetuation of the status quo (at the expense of the "the people").

The initiative actually reads:

I: Die Bundesverfassung wird wie folgt geändert:
Art. 99a (neu) - Goldreserven der Schweizerischen Nationalbank
1 Die Goldreserven der Schweizerischen Nationalbank sind unverkäuflich.
2 Die Goldreserven der Schweizerischen Nationalbank sind in der Schweiz zu lagern.
3 Die Schweizerische Nationalbank hat ihre Aktiven zu einem wesentlichen Teil in Gold zu halten. Der Goldanteil darf zwanzig Prozent nicht unterschreiten.

II. Die Übergangsbestimmungen der Bundesverfassung werden wie folgt geändert:
Art. 197 Ziff. 94 (neu) - 9. Übergangsbestimmung zu Art. 99a (Goldreserven der Schweizerischen National-bank)
1 Für die Erfüllung von Absatz 2 gilt eine Übergangszeit von zwei Jahren nach Annahme von Artikel 99a durch Volk und Stände.
2 Für die Erfüllung von Absatz 3 gilt eine Übergangszeit von fünf Jahren nach Annahme von Artikel 99a durch Volk und Stände.

What the referendum does not say, do or prohibit:

1) The initiative doesn't actually define "gold" so the SNB is free to buy GLD or CRIMEX futures (The latter is intellectually interesting because if they mark them to notional value and let them expire worthless it gets around the sale prohibition, or if they desire to hedge increased "gold" holdings the could simply buy gold large quantities of puts, which would further suppress the paper price of gold)

2) The initiative doesn't prohibit gold leasing, so if the SNB needs to bring back about 300 tons, leasing 300 tons of the roughly 700 tons already in Switzerland would facilitate obtaining 300 tons from London, Toronto (or NY). (The initiative also doesn't prohibit gold sales during the next two years, and gives the SNB 5 years to get all its future "gold" holdings relocated back to Switzerland.)

3) The initiative does not change the central bank's single mandate under article 5 of the National Bank Act - which is price stability (and hence currency stability vis-a-vis the largest trading partner - the EU), allowing rapid appreciation of the CHF after passage of the referendum would actually explicitly violate Federal Law. So if the referendum passes the SNB will be forced to intervene even more actively in the markets to devalue CHF, so in addition to the two typical bullion bankster shenanigans identified above there is also the possibility of:

a) outright monetization - they print CHF and don't even demand EUR or USD reserves in return

b) reduce the reserve requirements/increase bank leverage

c) setup a special purpose vehicle/sovereign wealth fund and move existing SNB assets off balance sheet until existing gold reserves are 20%.

At the end of the day I think the SNB would view passage of the referendum as a legalese or accounting gimmick challenge to overcome instead of a mandate to do anything real in regards to SNB physical gold holdings. As long as they can convince their bankster buddies that the SNB has everything under control -- I don't see anything more than a one-off headline pop, which would probably run head first into a Kevin Henry CTRL-P dump on the bid stack.

However, the SNB (and Swiss in general) don't necessarily do very well forced to communicate. Perhaps they could hire the stuttering Bernank, since he is still apparently preaching the status quo, unlike Greenspam.

SwissCake's picture

Great analysis.

"At the end of the day I think the SNB would view passage of the referendum as a legalese or accounting gimmick challenge to overcome instead of a mandate to do anything real in regards to SNB physical gold holdings. As long as they can convince their bankster buddies that the SNB has everything under control -- I don't see anything more than a one-off headline pop, which would probably run head first into a Kevin Henry CTRL-P dump on the bid stack."

I am afraid you're right. Every word fucking counts in that important an initative. In fact even well-defined initiatives such as expelling foreign criminals are overstretched such that half the substance is removed.

If, however, the SNB behaved in a way that was not aligned to that of the substance of the initiative, that would ring the demise of the relative political independance it enjoys. Expect the SVP to make big waves.

CrazyCooter's picture

I live in Alaska and stay fairly busy with work/life, so I came back to this thread long after it was likely dead.

I did want to say thanks to you (UrbanRedneck) and Ghordius for sharing insights on this topic. Very interesting.

ZH used to have a great deal of folks like you, but that has waned in recent years. The stupid sound bit/political pissing contests get old; this thread was refreshing.



StandardDeviant's picture

I second that.  Actually learned a few things.  Vielen Dank (or "merci villmool"?) to UR and Ghordius.

thunderchief's picture

We will see!

If the Swiss can't pass something like this, and such a basic principle of
Sound banking and accounting, in line with their traditions, well then I will start calling them Europeans.

Good luck, its just another little piece of your soveriegnty Switzerland..

samcontrol's picture

Not sheep, swiss are very independent and single minded..
The vote will be rigged or it passes.

Wrong again vader.

Ghordius's picture

? how do you rig a paper ballot done in the classical way? it's not rocket science, it's tried and tested methods

Latitude25's picture

I think a few Latin American countries can help out with this.  Who counts the votes?  Ballot boxes disappear and others magically appear.  Plenty of ways to get this done.

Ghordius's picture

I've witnessed as foreigner Swiss referendum voting. no way, there. everybody even remotely interested is there. yes, plenty of ways... if not done properly