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SNB Busted Twice In 1 Month: Swiss Franc "Corridor" Breached Following Greek Shocker
Over the weekend we reported, amazed, that not even a month after its hard Swiss Franc cap was breached in spectacular fashion when the EURCHF plunged from 1.20 to 0.80 in milliseconds, that the SNB would repeat its folly again, this time with a soft ceiling in the form of a EURCHF 1.05-1.10 "corridor."
We explicitly said what would happen next: "The SaS added that "defending the corridor would cost the SNB as much as CHF10 billion." Actually, if and when the Greek deposits outflow accelerates in coming weeks ahead of the Greek February 28 D-Day, it will cost far, far more." Of course, as everyone knows, exactly an hour ago, the ECB decided to explicitly accelerate said Greek deposit outflow by itself instituting a bank run after it unceremoniously pulled Greek govt debt as eligible collateral, in the process collapsing Greek bank liquidity.
And then we added:
"what's worse, there is no "utmost determination" language present anywhere, which means that the lower bound of the corridor will be promptly attacked at which point the story will be quietly retracted, only to reemerge in a few weeks with a "new" corridor suggestion, this one even lower for the EURCHF."
Sure enough, moments ago the latest attempt by the SNB to halt the surge of the CHF ended in flames, when following the ECB story, the EURCHF just tumbled well below 1.05, with barely a fight to keep it above the lower end of the corridor.
At this point, sadly, the SNB has lost all credibility and what happens next is EURCHF going back to parity if not much lower.
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Beware Greeks bearing bonds
The following pic should be captioned "Hey kid! Wanna buy some Greek bonds?"
https://i0.wp.com/www.best-horror-movies.com/images/it-pennywise-basemen...
So Greece has two choices: a lifetime of hardship and servitude to Brussels and Berlin, or alifetime of hardship with its own currency nd sovereignty,
Still happy you saved your euros instead of going into gold?
That same question should be directed to the Japanese regardig JPY. For the life of me, I cannot understand why there has not been a run on Gold in Japan (Maybe there has but the MSM have been instructed not publish the facts? Giving the Muppets any way out would be anathema to the CB's)
+100 - that there is some funny shit!
Revelation you GURUs. The Swiss Franc is no better a steaming pile of fiat nothing than the Euro, USD or the Yen. All will become worthless pieces of toilet paper.
At this point the only question is which pile is steaming less.
"All will become worthless pieces of toilet paper."
It's plastic these days... it's not even useful as toilet paper.
Maybe their short the drachma?
Early in my life as a ZHer I had to make a decision to give up my grammar-nazi tendencies or give up ZH. Five years later hear I am. *smile*
Explains how you got their.
Good luck trying to correct sprelling on the Internet ...
Bah, verbogeny is one of many pleasurettes afforded a creatific thinkerizer.
The small Swiss economy just can´t handle that much capital inflow, no matter what the SNB is doing. I suggest a 1 trillion Swiss national wealth fond by the Swiss government based on 30 year CHF bonds at 1% interest they use to buy hard Euro assets in the Euro zone. OR they adopt the Euro as their currency and join the Eurozone. But if they do nothing the Swiss economy will be toast within 6 months or so.
soo ... you're saying stock up on swiss army knives while i still can??
Dirty shirts for sale!
No, all the Swiss need to do is erect a space fence around their currency, and nothing can harm them.
The future is space fences.
How much do u bet on the 6 months?
I do business with Swiss companies for years. Even at that 1.20 rate to the Euro the Swiss Franc was absolutely overvalued and the Swiss industrial companies suffered a lot because their German competitors just had much better prices to offer. Now those Swiss companies are at the death row. Same thing with tourism or retail in Switzerland. A fair value for the Swiss Franc is at about 1.50 to the Euro.
The exchange rate is only a small part of the problem. The SNB defended a 1.50 peg between March and June 2009, then 1.40 in May 2010, then 1.30 in September 2010, and 1.20 more recently. That defense cost a lot of money. The SNB balance sheet has increased 280% since 2008, to more than 80% 0f GDP, and thanks to the failure of the recent plebecite, only 7% of Swiss reserves are in gold. The rest of the central bank's reserve "assets" are foreign currencies, wildly volatile and inherently worthless.
The Swiss are arguably in worse shape than the Japanese, since the Bank of Japan (and the Fed) owns mainly local bonds, (only 5% in foreign assets), and thus faces inflation risk but no currency risk. The SNB has to worry about both.
http://snbchf.com/snb/snb-balance-sheet-expansion/
ALL HELL BREAKS LOOSE.....
https://www.youtube.com/watch?v=c9G4LQ9H_50
There is ZERO gold in those accounts.
Thanks for playing....have a nice day!
I've been saying this since they pulled their peg: the SNB is in a world of pain being forced to walk a tightrope between commercial banking failures and their own insolvency, forcing losses on their taxpayers every step of they way across the yawning black hole beneath their rope.
This is why German bunds are trading below JGBs.
The SNB is certainly being helped in a coordinated effort by other CBs, but they have effectively lost control.
This might be the blue event horizon we've long been waiting for. Watch the yield curves try to escape the gravity well.
no choice
Kaboom now
or
KABOOM! later
Q: how do you separate the men from the boys in the greek army?
A: with a crow bar
+1 gezzzus orange - you know you're going to hell right? he he heeee
"At this point, sadly, the SNB has lost all credibility and what happens next is EURCHF going back to parity if not much lower."
maybe ... depends on how goldman sachs positioned ...
Or Chelsea's husband.
Wow! From 1.05 to 1.06, and then back to 1.05 in the course of over 24 hours.
What a ride!
zzzzzzzzzzzzzzzzzzzzzzzzzzzh
Are you not entertained?
100 pips! Damn that shit is crazy. /s