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Peter Schiff: Swiss Surrender Wins Currency War
Submitted by Peter Schiff via Euro Pacific Capital,
By ending its three year currency peg to the weakening euro Switzerland has become the first major economy to surrender in the international currency war, and in so doing has given a long-delayed victory to the Swiss people. Contrary to the indignant reaction by the media and financial establishment, the decision is not a disaster for Switzerland. A continuance of an open-ended peg to the euro could have ultimately ruined the country. Its surprise move, perhaps prompted by the European Central Bank's recently announced intentions to unleash its own quantitative easing program, may be looked at in the future as the first significant counter-attack against our current global system of monetary insanity.
With a centuries-old legacy of economic independence, the Swiss initially had the good sense to avoid joining the monetary quagmire that became the Eurozone. But when the Swiss National Bank (SNB) decided to enforce a peg against the euro in 2011, the country de facto joined the currency union. The result was that the franc sank along with the euro and SNB's balance sheet ballooned. In order to maintain those levels, the SNB had to buy approximately $10,000 of euros per year per Swiss citizen! These are enormous sums, even for a rich country. The francs used to buy euros were taken out of the Swiss economy to effectively languish at the SNB. Although the Bank achieved its objective of creating a weak franc, its goal of printing its way to prosperity was far more elusive. In fact, the policy was doomed from the start. If continued indefinitely, the SNB's balance sheet would have stretched beyond its breaking point.
With the risk of full-blown European QE, bringing with it the prospect of having to back up the toboggan to buy an ever larger quantity of euros, the SNB had no choice but to pull the plug. The mistake was not ending this peg, but in adopting it in the first place. The franc has now rallied anyway (which contrary to conventional "wisdom" is a good thing for the Swiss). The Swiss once again have a strong currency with expanded purchasing power. But now Switzerland is stuck with tens of billions in losses on the SNB's bloated 500 billion franc foreign exchange reserves. In the meantime, enforcing the peg has led to economic and financial mistakes that market forces must now correct.
Ironically, without the support of the SNB, full-blown European QE may now be a far more remote possibility, and a euro rally against the dollar may not be too far off. Goldman Sachs notes the Swiss' message is that QE is going to be done and perhaps even larger than previously thought. But perhaps it will have the opposite effect, with tough love from Switzerland forcing the European Union to consider real economic reform rather than QE without Swiss support. In fact, the forces now in motion, accelerated by the SNB's move, may push the Fed that much closer to launching QE4.
Since the "long dollar, short euro" trade is predicated on the expectation of QE in Europe and rate hikes in the U.S., if we end up with QE4 in the U.S. and no QE at all in Europe, the fireworks in the foreign exchange market are just getting started.
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"But now Switzerland is stuck with tens of billions in losses on the SNB's bloated 500 billion franc foreign exchange reserves".
this is not a given
Currencies are rocketing upwards and I'm supposed to buy gold? Eh, I guess... in the long run...
Maybe the SNB starts buying gold with those excess reserves, without a referendum.
and incur the wrath of the gold-bashers? I sense a lot of "why don't foreigners fight our wars" in your gentle... wish
So the Dutch and Germans can quiety repatriate gold but not the Swiss? And in the gold war foreigners already are in a big way. China and India are unstoppable.
it's a generalization, isn't it? the Swiss have a different history about where they usually kept their gold.
for example, don't forget that most of the German gold was American gold, used as payment for German exports to America and kept in NY for safekeeping
but yes, Switzerland is fundamentally alone in this world, or at least not tied so much to others in alliances like the Netherlands and Germany
my point about all this is not what they can do, but about that wish that foreigners fight for gold against the gold-basher alliance
where is the gold-basher alliance... headquartered? which is the most gold-unfriendly country of the world?
You know the answer to your own questions. There is no wish here since it is irrelevant. This is not some fight against a "gold basher alliance". It is a cultural belief system, often tied to religion, that has been in place in Asia for many years. Although some Western countries appear powerful in the gold market, this is an illusion and with time will be revealed as such.
https://www.bullionstar.com/blog/koos-jansen/chinese-lunar-year-gold-buy...
This probably was written by Peter Schiff but it's a bit odd because it came out of EuroPacific Capital as a press release without his byline nor even a quote from him. Maybe cover for the call? ...content of the Press Release pans out, he claims it -- if not, well, hey, his name isn't on it.
Just call me cynical.
Original: http://www.europac.net/press_release/swiss_surrender_wins_currency_war
from the timing of this move in a middle of what looked like a huge rally...looks like the SNB have gone Rogue, Lagarde was on this morning saying she had not been told about it, and it looks like no one was by the ensuing carnage, looks to me the Swiss have had enough of the ECB , the Fed and all these artificial games...are the CB's having big disagreements among themselves? PBOC next?
Interesting to note that the SMI hit and all time record nigh the day before this move
Iceland hammered the Bankers too.
The thing that i find interesting is, since the SNB is controlled by the same skumbags that run all the central banks, so what do they gain by this move? Have they decided to maintain one functioning central bank going into the crash, or what?
Peter Schiff saw the last economic collapse coming. He was ridiculed and paraded on CNBC as the laughing stock for a couple of years. But in the end he was proven right. His "bet" with Art Laffer will go down in history as one of the funniest exchanges in CNBC history.
https://www.youtube.com/watch?v=T67keZzv3Tc
Schiff is talking about this bubble... which just started to burst wide open...
http://www.globaldeflationnews.com/anatomy-of-a-bubble-how-the-federal-r...
Peter Schiff:
2005:
"The US Dollar's Day as the World's Currency are Numbered"
2008:
"Last Gasp of a Doomed Currency"
2012:
"The Dollar's Lucky Streak"
Advises Buying the Euro @ 1.50 + .....
Advises Buying Commodities at All Time Highs....
Advises Buying Gold @ All Time Highs
Advises Buying Foreign Securites @ Dollar 70.....
The List goes on......
Being "Right" that there will be Serious Consequences is NO Matter, and something a Child can see.....
Knowing "What" those Consequences will be and Most Importantly WHAT POSITION to take to Profit therefrom is what really matters.....
Another attention seeking Pseudo Guru Book Peddler whose Record Says All.....