Has The SNB Restarted The Printing Press?

Tyler Durden's picture

Submitted by George Dorgan

Huge rise in Currency Reserves: The SNB has restarted the printing press

The game for the Swiss National Bank seems to have changed completely. Again the central bank had increase money supply, as measured by deposits at the SNB by local banks and by the Swiss confederation, this time even by 13219 mil. francs (source). This money printing implies that the SNB had to buy in Euros in similar quantities in order maintain the floor.

Already last week the central bank had to shift its strategy from selling Euros to buying Euros. The SNB managed to reduce money by 35446 mil. (i.e. sell mostly euros) between Sep 9, 2011 and May 11, 2012. In the last two week it had to increase money supply by nearly 17000 mil. CHF, loosing nearly 50% of all "gains" in the previous money supply reduction.

We have speculated that the SNB will double or triple the Forex reserves before it gives in and the floor will break. 

At the current speed of 13 bln per week, this will result in 676 bln. CHF per year, i.e. they will have tripled money supply and currency reserves in one year. This sum exceeds slightly the Swiss GDP, implying that a break of the floor from 1.20 to 1.10 (about 10%) on the basis of 50% Euros in the SNB reserves would result in a loss of around 5% of GDP at the central bank. Moreover, in the week ending in May 25th, nothing really extraordinary happened, what would happen in case of a Greek euro exit?

Is the Swiss debt soon rising more quickly than Italy's one ?

If this SNB loss is realized, it would imply an increase of Swiss total debt (here the Swiss debt clock) by around 5% in one year. This is barely better than the 5.4% yield Italy has to pay on its debt services and is only weighted by the fact that Switzerland has currently negative yields on bills and a small primary surplus between 3 and 6 bln francs per year, abstracting from the small interest part).

As opposed to Italy, Switzerland cannot devalue the debt via inflation, since Swiss inflation is about zero and Italian inflation at 2.5%. On the contrary a break of the floor would even revalue the debt via deflation,

Swiss laws prohibit the state from taking too much, formulated in the famous Swiss debt break. The only institution that can do, what it wants, is the Swiss National Bank.

Should the floor continue to hold, it is possible that even bonds with higher maturities (up to 5 years) for the Swiss confederation (10 years yield currently at 0.64%) will have negative yields.

The SNB seems to be really anxious about this sudden rise in demand for the franc, they have even announced capital controls for the case of a euro break-up.

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CvlDobd's picture


How? We are approaching he best part of the trading day. The part where they start doing push ups on the face of PMs while stocks stay high and yields are anchored near all time lows. Brilliant!

LawsofPhysics's picture

Exactly, ZIRP is printing or essentially "free money", just not for you.  If you really believe that there is no real cost for creating capital without creating anything of real value, I have a few bridges for sale that you may be interested in.

CvlDobd's picture

I hear San Fran real estate is hot! What can you do for me?

Stoploss's picture

So long Swedes, we hardly knew ye..

Don't forget the hit already taken on GDP after the first fiasco. (Peg)

Henry Chinaski's picture

The Swiss policy of neutrality does not apply to currency wars.

BeetleBailey's picture

The EUR/CHF should get busy again...or not.

Cognitive Dissonance's picture

"Has The SNB Restarted The Printing Press?"

Does a bear sh........????

Never mind.

BandGap's picture

This isn't surprising, it's something people want.

Isn't the Swiss Franc pegged to the Euro? If so, this is getting wild.

Mountainview's picture

That's why you should forget about the CHF...prefer Singapore Dollars and Norwegian Krones---real AAA currencies...!!!

Haole's picture

All this paper falling from the sky and no parades?


Dr. Engali's picture

Sooner or later somebody is going to have to throw in the towel and let the other idiots destroy their own currency. Of course this is all part of the larger plan for a world currency.

LawsofPhysics's picture

Correct, but first all currencies must come to parity, as in, they will all be worthless, must occur at the same time, then all eyes on The Fed, the ECB, and the IMF.

Mark123's picture

Got to love this crazy fiat world we live in.  Here are the Swiss - the bankers supreme - having to print their currency like mad to buy another fiat currency to offset the mad demand for their stable currency from people trying to get out of the currency the Swiss are buying like mad!!!!!


It only goes to show what a charade the whole thing has become, and how very close we are to a loss of confidence in modern currencies.  Imagine if the Swiss currency was still gold backed.

Bastiat009's picture

All that printing seems very negative for gold. I will buy Swiss francs because as we all know, the more you print a currency, the higher its value.

gatorengineer's picture

 I would love to start stacking swiss francs, short term a better play then gold.  They will have no choice but to drop their peg by June 18th....

theTribster's picture

Amazing, and these people are supposed to be intelligent bankers. What should the rate really be? About 2 Euro's to a Franc? I went to Switzerland a couple years ago (Lake Luzerne/Mr Pilatus area) and while it was absolutely beautiful, the people are very upity - like nothing I've seen before. Talk about expensive, the place is crazy expensive - everything.

It won't hold the floor beyond the middle of summer at the latest, once confidence is lost the whole system crashes and burns - including Switzerland.

scatterbrains's picture

That's about the longest hourly bar on the active gold futs I've seen in a while.  Anyone have any stats on odds of % price/time follow up after such a thing?

theprofromdover's picture

I hope they are buying gold with all these useless euros they are buying.

russwinter's picture

Committment of Traders showing commericals extreme long Swiss Francs against the speculators.


Gloeschi's picture

Very good post. Talking loudly (see Swiss Sunday press) about capital controls and negative interest rates is a lame attempt by the SNB to try to avoid the inevitable (break of the peg). Who would talk about introducting capital controls before enacting them? In order to prevent short-term frontrunning the SNB wouldn't "warn" markets of its intentions. So this is just another empty threat, like earlier ones (about raising the peg). After the SNB's credibility has been destroyed, markets will not fall for this one.

Ted Baker's picture


Nachdenken's picture

The CHF retains a safe haven flavour that lingers.

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