This page has been archived and commenting is disabled.
End of CB Power - SNB Folds
I wrote about the Swiss National Bank being forced to abandon its currency peg to the Euro on 12/3/14, 12/8/14 and 1/11/15. That said, I'm blown away that this has happened today.
Thomas Jordan, the head of the SNB has repeated said that the Franc peg would last forever, and that he would be willing to intervene in "Unlimited Amounts" in support of the peg. Jordan has folded on his promise like a cheap suit in the rain. When push came to shove, Jordan failed to deliver.
The Swiss economy will rapidly fall into recession as a result of the SNB move. The Swiss stock market has been blasted, the currency is now nearly 20% higher than it was a day before. Someone will have to fall on the sword, the arrows are pointing at Jordan.
The dust has not settled on this development as of this morning. I will stick my neck out and say that the failure to hold the minimum rate will result in a one time loss for the SNB of close to $100B. That's a huge amount of money. It comes to 20% of the Swiss GDP! If this type of loss were incurred by the US Fed it would result in a loss in excess of $2 Trillion!
In the coming days and weeks there will be more fallout from the SNB disaster. There will be reports of big losses and gains from today's events. But that is a side show to the real story. We have just witnesses the collapse of a promise by a major central bank.
The Fed, Bank of Japan, ECB, SNB and other Central Banks have repeatedly made the same promises over the past half decade:
Don't worry! We are here. We will do anything it takes to achieve the stability we desire. We are stronger than the markets. We can overwhelm all forces. We will never let go - just trust us!
I never believed in these promises, but the vast majority of those who are active in financial markets did. The entire world has signed onto the notion that Central Banks are all powerful. We now have evidence that they are not.
Anyone who continues to believes in the All Powerful CB after today is a fool. Those who believed in Jordan's promises now have red ink on their hands - lots of it!
The next central bank that will come into the market's cross hairs is the ECB. Mario Draghi has made promises that he would "Do anything - in any amount". Like I said, you would be a fool to continue to believe in that promise as of this morning.
We've just taken a huge leap into chaos. The linchpin of the capital markets has been the trust in the CBs. The market's anchors have now been tossed overboard.
- advertisements -



slicing you finger!
gotta hurt.
Quit, she'll never come-off for you.
The Swiss economy will rapidly fall into recession as a result of the SNB move. The Swiss stock market has been blasted, the currency is now nearly 20% higher than it was a day before.
I understand that international trade and economies are tightly woven together and all that but with this move, to what extent are the Swiss increasing the probability that they will avoid an even bigger/different disaster down the road by unhooking themselves from the Euro?
Maybe I'm right for the wrong reasons but I feel somewhat vindicated this morning because, as I’ve been arguing beneath Bruce's posts for years, there has to be a scenario where it makes sense to defect or opt out of that system - especially if you are a smaller, wealthy country that is relatively more nimble.
I wonder they feel about their gold and bank secrecy trades right now too.
It’s almost like the Swiss suddenly decided to drop several of their centuries-old core competencies for some magic beans…
"He that defects 1st, defects best"
The EURO is a FAILURE.
When the economic going gets tough, nationalism will re-appear.
It is
Interesting perspective. By tying to the EUR, the Swiss were informally a part of the block, without having to be bound to it. i.e. it was a relatively uncomplicated move to remove themselves from the union. What's the next level of pain required for a country that's actually formally attached to the EUR to abandon it? I don't think we're far from that level of pain.
Sure
Switzerland is evolving with 50% of the pop of somehow or completely foreign original. That said they are also more risk takers nowadays. And a stronger franc is a huge win for the people that can print. Consider also that in USD the Swiss GDP just jumped 15%. This will also push Swiss firms to become more competitive in order to survive.
This move is just a coming back to a secular CHF appreciation trend. The Swiss economy will easily survive and lie off some % of foreign workers.
But ... but ... GS just got through saying Sovereign default crisis is over in Europe!
"Anyone who continues to believes in the All Powerful CB after today is a fool. "
I doubt anyone considered the Swiss CB to fall into the category of 'All Powerful'. They comprise, what, ~0.3% of world reserves? AUD is 6x the size!
The SNB's failure is insignificant in the grand scheme of things, though I agree FX markets are flailing about like it's a big deal (it's the 5th largest currency in trading volume... though maybe not for much longer!)
Wait until the Yen or GBP flounder... or EUR!
Hey red flags, are we to understand you agree with Goldman's call?
Real bright spark. Want to explain the logic of that?
The sovereign default crisis is far from over. A new chapter on the story started today. The second half of this book is going to be a doozy!
Only been waiting since March 2010 ... should be ready for a huge dump by now.
Meh, does it matter? Keep stacking physical. These tremors are inevitable, and will only increase in magnitude as the shell game gets more desperate.
I wonder if Mrs Jordan happened to open an FXCM account last week and put on a short Euro/Swiss trade like the previous Governor's wife did? (expect she did it in reverse). Interestingly the whistleblower on that trade who alerted the media was arrested!
Maybe she's as good a novice as Hilary Clinton in this trading lark? Beginners luck eh?
As of now I see no evidence that this was leaked. That said, some people did know in advance. Who were they? Did the big Swiss banks get a call early this morning so that they would not get flatfooted?
If this did happen it would be a huge development. Heads would roll, people would get fired and the lawsuits would go on forever.
"Heads would roll, people would get fired and the lawsuits would go on forever.:" ---
LOL! Are you suggest that there are real consequences for bad behavior in banking and finance?!?!
You really are a fucking shill aren't you?
There will be, eventually, but not before the supply lines break down in earnest. Don't worry, you're on the list.
Well, there's the issue of banker "suicides," and those do appear to be real consequences.
look at the breakdown of GDP. The "financial sector" has been consistently growing.
more and more useless fucking paper-pushers, fewer and fewer actually adding any real value, hence I don't see any fucking consequences for all these fuckers actions. Don't worry, there will be.
Let's just nail something down here. Do you believe in capitalism or not? If you do, how can you argue that those who allocate the use of capital are "useless paper pushers"?
Does your definition of "capitalism" mean bad actors and poorly run business models are actually allowed to fail, go bankrupt and to fucking prison where appropriate?
Hey asshat, the majority of the western economies have not had capitalism for 30+ years.
John Corzine is that you?
LMFAO!!!
You call this capitalism? Seriously?
How is capital allocated in a ZIRP/negative interest rate MM with non stop printing, phoney economic statistics and manipulations in ALL markets?????
You're dodging the question and using a straw man argument. In capitalism without intervention, do you still consider these people making investment decisions to be useless "paper pushers"?
Dickhead, capital is deferred consumption. In 'capitalism' the banks would have people's savings and lend that out, as well as various credit derivatives that would trade at varying discounts to money good.
Look around, munchkin. When commercial banks can magic up legal tender out of thin air; when a central bank can quintuple its balance sheet in a couple of years, and hold the cost of credit far below natural rates for years; do the resultant humongous 'capital' flows appear to you to derive from deferred consumption?
Because the huge financial industry that has metastasised throughout our economies due to government subsidies in the form of legal tender laws and deposit insurance sure don't look like capitalism to me.
No but lets get to the correct terminology.
Bank Robbers.
Central bankers will sell their mother's and children to carry out the tribal "directives" so of course they lie 24/7.
This is a sign of the demolition to come. Solidarity among liars is impossible to maintain forever.
Thanks for your insights Bruce,
More steering of the herd towards the USD.
It's just the biggest ship, but it's going to sink too.
Does the ship's band know the German or Russian national anthem?
I am in awe at how worthless Swiss currency is...we're gonna charge you .75% just to keep the worthless shit in our bank. That statement should tell everyone what is and isn't money. Price discovery.
I also note the banker troll hitting everyone's down arrow. Here's a fuck you in advance.
I think Bernanke got your msg.
The second-coming of Robo.
ROTHSCHILD OWNED & CONTROLLED BANKS:
Afghanistan: Bank of Afghanistan Albania: Bank of Albania Algeria: Bank of Algeria Argentina: Central Bank of Argentina Armenia: Central Bank of Armenia Aruba: Central Bank of Aruba Australia: Reserve Bank of Australia Austria: Austrian National Bank Azerbaijan: Central Bank of Azerbaijan Republic Bahamas: Central Bank of The Bahamas Bahrain: Central Bank of Bahrain Bangladesh: Bangladesh Bank Barbados: Central Bank of Barbados Belarus: National Bank of the Republic of Belarus Belgium: National Bank of Belgium Belize: Central Bank of Belize Benin: Central Bank of West African States (BCEAO) Bermuda: Bermuda Monetary Authority Bhutan: Royal Monetary Authority of Bhutan Bolivia: Central Bank of Bolivia Bosnia: Central Bank of Bosnia and Herzegovina Botswana: Bank of Botswana Brazil: Central Bank of Brazil Bulgaria: Bulgarian National Bank Burkina Faso: Central Bank of West African States (BCEAO) Burundi: Bank of the Republic of Burundi Cambodia: National Bank of Cambodia Cameroon: Bank of Central African States Canada: Bank of Canada – Banque du Canada Cayman Islands: Cayman Islands Monetary Authority Central African Republic: Bank of Central African States (BCEAO) Chad: Bank of Central African States Chile: Central Bank of Chile China: The People’s Bank of China Colombia: Bank of the Republic Comoros: Central Bank of Comoros Congo: Bank of Central African States Costa Rica: Central Bank of Costa Rica Côte d’Ivoire: Central Bank of West African States Croatia: Croatian National Bank Cuba: Central Bank of Cuba Cyprus: Central Bank of Cyprus Czech Republic: Czech National Bank Denmark: National Bank of Denmark Dominican Republic: Central Bank of the Dominican Republic East Caribbean area: Eastern Caribbean Central Bank Ecuador: Central Bank of Ecuador Egypt: Central Bank of Egypt El Salvador: Central Reserve Bank of El Salvador Equatorial Guinea: Bank of Central African States Estonia: Bank of Estonia Ethiopia: National Bank of Ethiopia European Union: European Central Bank Fiji: Reserve Bank of Fiji Finland: Bank of Finland France: Bank of France Gabon: Bank of Central African States The Gambia: Central Bank of The Gambia Georgia: National Bank of Georgia Germany: Deutsche Bundesbank Ghana: Bank of Ghana Greece: Bank of Greece Guatemala: Bank of Guatemala Guinea Bissau: Central Bank of West African States (BCEAO) Guyana: Bank of Guyana Haiti: Central Bank of Haiti Honduras: Central Bank of Honduras Hong Kong: Hong Kong Monetary Authority Hungary: Magyar Nemzeti Bank Iceland: Central Bank of Iceland India: Reserve Bank of India Indonesia: Bank Indonesia Iran: The Central Bank of the Islamic Republic of Iran Iraq: Central Bank of Iraq Ireland: Central Bank and Financial Services Authority of Ireland Israel: Bank of Israel Italy: Bank of Italy Jamaica: Bank of Jamaica Japan: Bank of Japan Jordan: Central Bank of Jordan Kazakhstan: National Bank of Kazakhstan Kenya: Central Bank of Kenya Korea: Bank of Korea Kuwait: Central Bank of Kuwait Kyrgyzstan: National Bank of the Kyrgyz Republic Latvia: Bank of Latvia Lebanon: Central Bank of Lebanon Lesotho: Central Bank of Lesotho Libya: Central Bank of Libya Uruguay: Central Bank of Uruguay Lithuania: Bank of Lithuania Luxembourg: Central Bank of Luxembourg Macao: Monetary Authority of Macao Macedonia: National Bank of the Republic of Macedonia Madagascar: Central Bank of Madagascar Malawi: Reserve Bank of Malawi Malaysia: Central Bank of Malaysia Mali: Central Bank of West African States (BCEAO) Malta: Central Bank of Malta Mauritius: Bank of Mauritius Mexico: Bank of Mexico Moldova: National Bank of Moldova Mongolia: Bank of Mongolia Montenegro: Central Bank of Montenegro Morocco: Bank of Morocco Mozambique: Bank of Mozambique Namibia: Bank of Namibia Nepal: Central Bank of Nepal Netherlands: Netherlands Bank Netherlands Antilles: Bank of the Netherlands Antilles New Zealand: Reserve Bank of New Zealand Nicaragua: Central Bank of Nicaragua Niger: Central Bank of West African States (BCEAO) Nigeria: Central Bank of Nigeria Norway: Central Bank of Norway Oman: Central Bank of Oman Pakistan: State Bank of Pakistan Papua New Guinea: Bank of Papua New Guinea Paraguay: Central Bank of Paraguay Peru: Central Reserve Bank of Peru Philip Pines: Bangko Sentral ng Pilipinas Poland: National Bank of Poland Portugal: Bank of Portugal Qatar: Qatar Central Bank Romania: National Bank of Romania Russia: Central Bank of Russia Rwanda: National Bank of Rwanda San Marino: Central Bank of the Republic of San Marino Samoa: Centra+D574l Bank of Samoa Saudi Arabia: Saudi Arabian Monetary Agency Senegal: Central Bank of West African States (BCEAO) Serbia: National Bank of Serbia Seychelles: Central Bank of Seychelles Sierra Leone: Bank of Sierra Leone Singapore: Monetary Authority of Singapore Slovakia: National Bank of Slovakia Slovenia: Bank of Slovenia Solomon Islands: Central Bank of Solomon Islands South Africa: South African Reserve Bank Spain: Bank of Spain Sri Lanka: Central Bank of Sri Lanka Sudan: Bank of Sudan Surinam: Central Bank of Suriname Swaziland: The Central Bank of Swaziland Sweden: Sveriges Riksbank Switzerland: Swiss National Bank Tajikistan: National Bank of Tajikistan Tanzania: Bank of Tanzania Thailand: Bank of Thailand Togo: Central Bank of West African States (BCEAO) Tonga: National Reserve Bank of Tonga Trinidad and Tobago: Central Bank of Trinidad and Tobago Tunisia: Central Bank of Tunisia Turkey: Central Bank of the Republic of Turkey Uganda: Bank of Uganda Ukraine: National Bank of Ukraine United Arab Emirates: Central Bank of United Arab Emirates United Kingdom: Bank of England United States: Federal Reserve, Federal Reserve Bank of New York Vanuatu: Reserve Bank of Vanuatu Venezuela: Central Bank of Venezuela Vietnam: The State Bank of Vietnam Yemen: Central Bank of Yemen Zambia: Bank of Zambia Zimbabwe: Reserve Bank of Zimbabwe.
Reference: Educate Yourself
‘Rothschild Banking Empire Valued at $100 Trillion’
http://humansarefree.com/2013/11/complete-list-of-banks-ownedcontrolled.html#sthash.XyMig9Pd.dpuf
How are they in "control" over RUS, CHN, IRN, IND, and JPN?
Can you elaborate further than a claimed list?
Thanks.
rothschilds are merely employees. One of them just got married to a real power family, and the rothschilds were thrilled. Finally they will have relatives, niece? nephew? they can think gets them in.
That's what you get when you let the Fed get into your bed. Swiss citizens, get some gold to save your own arse before its too late.
Great call Bruce,
I remember you said before that the markets will be testing SNB decision and finally they did and SNB failed.
Yes the Central Banks trust has been lost, more volatility will be coming days ahead.
Volatility you say? Please, this is a good thing for the trading arms of the CBs as there is no skim without some churn...
"Full faith and credit"
By the way, the Swiss own a lot of equities around the world. They will start selling.
The Mystery of the Shemitah?
I have not embraced prophetic uterances in general in my life, often writing them off as charlatans trying to incite control.
I'm changing my tune on this particular biblical warning, 2015 is the third 7 year cycle and the pivot for a jubilee year in 2016.
It would appear that this is the first shoe to drop.
What or who's next? If ECB has a similar event, chaos could be an understatement in financial and economic realms.
Bruce, thanks for manning up and admitting your powerlessness...keep coming back!
DaddyO
well, if you into that, then keep updated. Here you go. https://www.youtube.com/watch?v=vqErRElt2kc
Don't forget about Aries and the rams horn, Taurus, the Bull, Pisces, the fish,,,oh guess who's coming? Aquarius, are ya thirsty yet. :) JB and his crew are a couple thou years off,,,but hey.
Those Swiss Francs will buy a lot of the new Deutsche Mark
Paper covers rock:
Thomas Jordan, the head of the SNB has repeatedly said that the Franc peg would last forever, and that he would be willing to intervene in "Unlimited Amounts" in support of the peg.
Mario Draghi, July 26, 2012: “Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.”
Je suis Liar!
u must be juncker
Great call Bruce and congrats for being one of the few to focus on this folly by the SNB.
Question: does this action today suggest immediately forthcoming QE from the ECB, or was it purely driven by internal Swiss politics/pressures?
I and others would be grateful for your views on this question.
This confirms (to me) that a very big QE from the ECB is coming. Why else would the SNB have folded today? They looked around the corner, saw what the ECB was planning, and then ran for the hills.
Whaterver you were expecting from the ECB yesterday, you can double that amount today.
But it won't work - at least not for long. When there is a long line of sellers of Italian/Spanish bonds then the ECB will give up on its "Unlimited" promise
Would you please stop this black/white painting of everything?
The last 3 years have been a desaster for the SNB balance sheet already if you seriously weigh the risks it carries.
I do not believe QE by the ECB is already carved in stone at this point, but the SNB may have estimated the probability is too high to stick to the peg, because with it such a QE would make the SNB eat a lot of the EUR devaluation.
Why can't they just purchase ALL of the bonds with their printed euros? It seems to be working for the Fed and for the BOJ.
They can. The ECB could allow its States to issue 30 year 0% zero-coupon bonds and buy them all. They have a big problem, though. Without a central EU treasury that can tax and issue its own bonds, the ECB can only buy bonds of individual States. The ECB can't be seen as favoring some of its States over others by too much. To do so has substantial political risk. If the French or Germans get angry enough to elect secessionists, the EU is over.
There is only one way out. The EU must give its Federal Government the full powers of taxation, spending, and borrowing. It must take over many governmental functions currently handled by EU States. If the ECB does QE, the time bomb clock will be ticking. They have very little time.