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Fog of War
I think this man must be worried. He has a huge weight on his shoulders. This is Thomas Jordan, the head of the Swiss National Bank.
Mr. Jordan has excellent academic credentials. He's a scholar, and a 'lifer' at the SNB:
University of Berne, PHD Economics
Department of Economics at Harvard University,three-year post-doctoral research.
1997 SNB Economic Advisor in Department 1.
On 18 April 2012, appointed Chairman of the Governing Board of the SNB.
Unfortunately, Mr. Jordan's academic prowess is not going to be of much help with the mess now on his desk. He needs to learn how to play - and win - heads up guts poker. In my experience that's a skill one is born with, or never acquires.
Jordan is a General who has a war on his hands. It's a currency war; only financial blood will flow. But the stakes are high. Mr Jordon understands that more than the Swiss economy is at risk. The idea of the "All Powerful Central Bank" is being called into question. General Jordon is on the front lines of a conflict that could spread throughout Europe, and then to Japan.
Thomas Jordon has enormous power. He can print a biblical amount of money with a keystroke. He's pledged to do exactly that. But, Jordan also has some significant strategic weaknesses:
- Jordan has no allies in this war.
* The US Treasury has put the SNB on its watch list of 'currency manipulators'. Don't look to the US Fed to get involved in this fight.
* The Japanese could care less about the Swiss war - they're trying to wage their own war.
* The SNB has no friends at the ECB either. If anything, Mario Draghi is working against the SNB.
- Jordon inherited the Swiss Franc peg policy. He came in when Hildebrand was thrown out. For the first time in his tenure he's being called to fire his guns in anger. He's an academic, not a warrior.
- Jordon is playing defense. He has promised to hold a line in the sand regardless of the consequences. So Jordon must now stand and take on all comers. The circumstances in Switzerland are today 180 degrees opposite to that of England twenty-years ago. That said, this story is looking a hell of a lot like the devaluation of the Pound. Who can really say, "I'll take em all on at once!"
- There is a "stink' feature to the CHF peg policy. The benefits to the Swiss economy from the peg are at the expense of the French, Italian and Spanish economies.
- The peg policy has the support of the Swiss Parliament - for now.
- The Macro story outside of Switzerland is piling up on the SNB:
* Draghi has promised that a decent sized bazooka will go off at the next ECB meeting (1/22/15). One of Draghi's objectives will be to cheapen the Euro - exactly what Jordon does not want to hear.
* The ongoing Russian story is a factor that increases the need for a safe haven for hot money. Zurich and Geneva have always been a destination for money looking for a safe harbor.
* Greece is going to go down to the wire on December 29 with the final vote. It will be very close. There is a real possibility that GREXIT comes back onto the table. This development would bring with it huge pressure on the EURCHF.
* The Yen is the worst place to hold reserves. Some of the money leaving Japan is headed to Switzerland. There is no safe haven left - but the CHF still comes close. All those Francs will have to be sold by Mr. Jordon - there are no other sellers.
The one thing that Jordan can't do in this war is appear to be weak. He has to be decisive if he is to win. He has to take on the FX market and beat it to submission. Mr. Jordon is off to a bad start - I think he pulled a weak move this morning.
The SNB announced that it was going NIRP. For a few minutes there was some market shock and awe. But the new SNB rate will be -0.5% - that's nothing! The new SNB measures will not take effect until 1/22/15. This coincides with the Draghi bazooka. What the SNB has done is create a beacon that is shining on a date that is only sixteen trading days from today. The SNB should have made the measures immediate, and more costly if it wanted to win a skirmish in the war. But it chose to let the players off easy.
EURCHF forward swap bids got hit this morning with the news of negative interest rates. The swap is the cost of being short the EURCHF. As of the close in NY the two month forward EURCHF swap was a crummy 8 ticks!
This is not a penalty at all. 8 ticks goes by the spot market in seconds. This cost is not going to keep the players at bay. It's an incentive versus a disincentive. Round One was a disappointing draw for the SNB. Round Two will start in January.
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"King Playstation", as Pepe Escobar calls him, do something? If that "something" doesn't have a remote control, it won't get done.
Peg a currency to a fiat currency.
That will end well (not).
Deny true value (gold) for BS.
Maybe the Swiss will go down in flames before Venezuela?
The swiss are like the hungry defense attorneys of the world.....
They take anyone's money with little to no questions.
Mayhap the last of the nazi plunder as finally gone and all thats left is goobers' purloined milk money?
Bullies should receive negative interest once the emotional capital has already veen spent.
HOW MANY GOOBERS HERE THINK THIS IS A GOOD THING?
Appeals Court Rules People Institutionalized for Mental Illness Still Have Right to Gun
If you read the facts of the specifc case you would probably think differently.
I was not the headline writer, the headline is misleading. The case was of a 73 year old trying to get a permit. He was "institutionalized" in the 80's for 30 days after a particularly bad divorce.
That's what happens when labels are applied with broad brush.
And I have no resemblance to a Goober.
Spit it out kiddies. Are the down votes because you don't think it's a good idea to let mental defectives own guns or because you didn't like being called a goober?
I suppose the mental defective thing could be a problem for quite a few folks here cuz they'd sure hate to give up their guns.
Don't make me throw down my 6th grade A education on you pal, you'll come out lookin fugly, and that's fuckin ugly.
I believe its because you commented on something completely unrelated to the topic and then failed to source anything you said as being more important than the topic at hand.
Thus identifying yourself as "a goober" or a troll ;-)
I'm schizophrenic, and so am I
There was a recent post here at ZH regarding Emerging Economies.
http://www.zerohedge.com/news/2014-12-19/biggest-economic-story-going-20...
I came across this tidbit and according to the above, appears that emerging BRICS economies are in the cross hairs. Methinks the pushing, shoving, lying and propaganda will bite someone seriously in the ass. They didn't ask for this shit (nor did we) and history will not be kind to the perps.
http://www.timeshighereducation.co.uk/world-university-rankings/2014/bri...
Nope. Emerging economies only submerge.
Most are staggeringly corrupt and backward. They have no middle class to fall back on. When one or two exports fail, or imports increase in price, they fold like a cheap card table. This has been going on for centuries. I hate TPTB and the Jew owned media, but the third world is what it is, and what it will be.
Forget that its switzerland. The model is, reduce your currency, to support exports...which supports your internal economy, and garners other currency surplus to add to your reserves. But the growing health of your exports makes your currency go up (supply/demand)...This should be a natural balancing done by Market forces...but there are no market forces when CB's enter the markets. The Swiss try to game supply/demand , by spending Swiss CHF for EUR currency. Since it washes Swiss currency into the outside world, it should expect the supply demand to balance....but i think the Swiss would have better success if they just encouraged Euro partners in selling their goods to the Swiss....that way, the supply demand balancing would have worked.
Ahh well, its all in the model. If we had a real capitalist world, Currency balancing would be the necessary and successful govenor on the world economy. A country that spends what it doesn't have would soon see the reflection in the currency price.
What is the paradox of being a 'World reserve currency'. It means you have to supply the world with your currency, so that they have enough to buy from other countries. The US has fallen into the paradox. Politicians /economists have succumbed to the cocaine that their currency is valuable, even when it was becoming worthless. They have finally reached the point where the supply of US currency is past the demand for the same. When the world revolves to a new 'World reserve currency', the us will soon find out how little they were appreciated for taking on all this debt.
It's a Big Club and you ain't in it
Grammar Nazi Alert!
"* The Japanese could care less about the Swiss war - they're trying to wage their own war."
No! It should be: "The Japanese couldn't care less about the Swiss war."
You're welcome from Japan!
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Good article, but I am not sure I agree with this one line: It's a currency war; only financial blood will flow.
Switzeralnd has a huge problem with social unrest sitting just below the surface. Migration, immigration and Islamization are contentious issues among others. Three years ago, the Swiss military's annual exercise revolved around wide spread social unrest and violence in the streets - a first for them.
If the Swiss have some sort of financial collapse (with or without the rest of Europe) the result could be blood in the streets.
So it goes...
Good to see you back on here BK ,great piece as always ......
There is NO fog. EVERYONE can plainly SEE what the heck is going on here. It remains the most mind-blowing thing to see how many are actually paying first in vital life force and the time they waste to support the beast system, and how many work so hard towards their own demise.
Nope, there is no fog at all. It is all as plain as day. These arseholes are bound and determined to take the world's unknowing people to world war for the almighty dollar and future world control using the electronic track, trace, and tax money-god system. All other distractions and GOVT SPONSORED FALSE FLAG EVENTS ARE ONLY caused to further this evil agenda. How much did you pay to get closer to world chaos and death?
http://www.reuters.com/article/2014/12/19/us-russia-crisis-eu-idUSKBN0JX...
The new "four muskateers" of europe, armed with swords but NO muskets.
>"The door is always open if Russia changes its behavior," said British Prime Minister David Cameron. "If it takes Russian troops out of Ukraine, and it obeys all the strictures of the Minsk agreement, these sanctions can go."
Still waiting on CNN to show us all these Russian troops... Unless Cameron believes that now the 10th aid convoy from Russia to Lugansk and Donetsk somehow counts as "Russian troops"...
This article is written like a movie trailer.
It's a wolf....it's a rattlesnake...it's a bear... It's bigfoot... It's a vampire... It's a herd of zombies..........
It's all fucking bullshit.
The Swiss need to take some of the pain like everyone else, if they are seen to be shirking their end through explicit currency manipulation, then they deserve what's coming.
"He has to be decisive if he is to win. He has to take on the FX market and beat it to submission."
He could take on a few speculators who couldn't be definitive on whether the franc was overpriced in the heat of the moment way back when (a time when there was plenty else to focus on), but when the market decides that it is certainly not overpriced, then he's fucked. He will have to pull a Russian move and pretend that he is letting it all happen; save some credibility so that when he moves again, people wont ignore him.
ps i'll just add, the longer he lets it go on, the bigger those positions get.
If he's the boss of the SNB he was central to the plot against the Swiss and their economic future. He sent his minions into the churches to spread the lies.
Let him learn to fly from the 23rd floor. Nailgun, shorted out jacuzzi, who gives a shit what method.
Fog of War and Jordan. You should change the title - looks like another ME war opinion piece. Jus tsaying
To see the British Prime Minister watching the company, with six or seven senses not available to ordinary men, judging character, motive, and subconscious impulse, perceiving what each was thinking and even what each was going to say next, and compounding with telepathic instinct the argument or appeal best suited to the vanity, weakness, or self-interest of his immediate auditor, was to realize that the poor President would be playing blind man's bluff in that party. - the blackard Keynes
Always worth reading Bruce - thank you.
It is curious that the CHF can still be thought of as a safe-haven. Clearly people are relying on tradition - the fact is that since the imposition of the ceiling it cannot be a safe haven.
It's also curious how precious metals can be a 'tradition' (Bernanke) or 'a 6000 year bubble' (Citibank) and disregarded while AA sovereign paper is quality collateral, something a country should fill its vaults with.
As always it will be so until it is not so. Many, many people in Germany were awaitingl the miracle weapons and the "throwing back" of the Russian Meaat Grinder in late 1944. The Public mind believes until it cannot believe. Then it capitulates.
so Bruce whats the chance that a real electronic transaction only currency is floated, and that the central bankers disappear?
In the next 20 years? I would say about a zero chance in that time frame. After that everything will be run by computers.
zero
That's called Bitcoin
except Bitcoin has stored value. you can hold bitcoin on account, the fed actually wants to implement features in the currency which prevent hoarding, but such a thing taken to its logical extreme puts them out of a job. and you see when the currency is transaction only, then gold has real value. instead of holding paper money you would use the currency to buy and sell gold. its all dependent on electronic speed, but we have it now
Just like Russia.
Sell the energy for currency
Exchange the curency for gold.
The Swiss were the only honest man in the room - but once the US IRS / Treasury forced them to fold, the darkness was complete. If there's an honest man present, the other lying thieves can't devalue / manipulate / lie about their own fiat currencies at will. But the lying thieves are about to find out that reality will set in - and all the lying they can do won't overcome an ounce of reality, gold, silver, platinum, palladium, crude oil, industrial machinery, corn, soybeans, control valves, ...
Bruce - what if the SNB sold Swiss Francs for Rubles and invest the Rubles in Russian Hard Asset Backed Bonds? Two birds, one stone. Since the SNB doesn't have many friends to choose from, why not the Russians?
The SNB invests its reserves in AA sovereign paper. No Russian junk allowed.
Right. Because the S&P is such an upright arbiter of ratings. Why do we keep using the same agencies that have been proven to be fraudulent and acting under conflicts of interest or under duress? (Remember what happened to S&P the last time they downgraded the US? The DoJ sued them in 2013). Oh yes, the SEC decides which companies can issue NRSRO grades.
There's really nothing fishy at all about giving junk status BBB- to a country that has high-income mixed economy with vast natural resources, with the 8th largest GDP in the world, and fiscally responsible government.
Go ahead and take your worthless dollars to Russia....
Bruce Krasting:
“The SNB invests its reserves in AA sovereign paper. No Russian junk allowed.”
My comments:
Russian woodland should not be regarded as junk although central banks, as far as I know, usually don´t buy such assets.
The SNB could print CHF, buy Russian woodland and the Russians could buy USD and EUR for the CHF they get. That would prevent the CHF from appreciating.
I suspect that the SNB should change its investment policies and allow itself to buy Russian woodland, which probably is undervalued.
Spontaneously, I also think that it would be harder to make woodland worthless than rubles. I think that you can compare woodland to gold, especially if we talk about clear-felled areas for which the buyer just pays for the land. On the other hand I think that it would be easier to find buyers for woodland with trees, or at least for the timber. Also keep in mind that almost all land owners who own large areas of woodland have forestry insurances that cover fire and wind damage etc. Woodland combined with forestry insurance should make this asset class almost as safe as gold. Or perhaps safer in some respects since timber has more intrinsic value than gold and since Russian woodland probably is undervalued. Perhaps the problem is that central banks like the SNB are not used to buy assets like woodland and know too little about such investments?
Wood, the original renewable fuel.
Yup, I got a stack of firewood too.
Stack On
I remember well when the SNB had -2% interest rate penalties on foreign accounts in Switzerland during the "dying dollar" panic in 1979, I believe, or around there. I was trading Silver at the time and I remember thinking that it was an amazing thing to do; but they were overwhelmed with money seeking a refuge, not from any Euros, but from Dollars; different, but the same. I agree with what you say -.5% is to laugh; that won't get any respect from serious people.
seems like the only thing that will help the Swiss (if I am correct ) would be the thing they recently voted down. then again I am only a spectator that hopes the change left on the table will be enough.
I skip over Bruce Krasting articles,...as he is a statist banker foot soldier.
There is a professional troll out there these days. His name is Ken M. He says silly things in comment sections. Some of it funny.
i think we should give that deer a name, let's call him Stock Market. now its time to rush Stock Market to the veternary hospital and give him CPR (or her) then some essential Yellen therapy, which is a soft cozy bed, and plenty to eat without worrying about deer hunters, or wolves. Finally some day Stock Market will be released into the wild, by then he will be too fat too walk, and malnourished as well, from living off the leaves of the fiat tree, and never having to run or work for anything, but he will stagger off into the forest, for a happy ending
Guys who manage public web sites have to contend with Ken M. Must drive them crazy...
Oh Bruce!
You had me at 'dead fawn'
xoxoxoxoxo
Often described as the most flamboyant and notorious of the major Romantics, Byron was both celebrated and castigated in life for his aristocratic excesses, including huge debts, numerous love affairs with more than one gender, rumours of a scandalous liaison with his half-sister, and self-imposed exile.[2]
But you could'nt help to skip or reply now?