John Taylor: "Switzerland, Surrounded Again"

Switzerland, Surrounded Again
April 29, 2010
By John R. Taylor, Jr.
Chief Investment Officer

In the late 1930’s the Fascist and National Socialist tide rose around the democratic confederation of Switzerland and, with the fall of France in 1940, completely surrounded it until late 1944. A careful reading of Swiss history, as Europe was being swallowed by this right-wing tide, shows a sharp influx in refugees and a dramatic increase in population that burdened the local infrastructure, which was still coping with the rigors of the Depression. There are thousands of anecdotal memoirs of the horrors of those times and the stresses that the Swiss were under. Although the Swiss accepted many, many more were turned away, and for those Jews not accepted their rejection most certainly ended in death.

The story is tragic and the Swiss made harsh decisions when faced with waves of desperate people fighting for their lives. In the end, the Swiss fought hard to retain their freedom as all around them lost theirs, compromising with those that encircled them on the one hand and threatening them on the other. By centering their armies in the mountains, in the national redoubt, and being willing to sacrifice the cities and destroy all the passes and tunnels which were critical to the Germans and Italians, the Swiss held their enemies at bay. Every Swiss city worth its salt has a street named after General Guisan who led the Swiss Army through that war.

World War II was fought over the control of people, whether they lived or died, their philosophical beliefs, and their land. In the end, the Swiss were willing to give up almost everything to not succumb to the National Socialists. Today, the Swiss are in a less stark, but surprisingly similar spot. They are surrounded by another all-encompassing concept: the euro. At first glance this might seem comical, but the German government stands ready to pay very large sums of money to any thief who can produce a list of German account holders at Swiss banks and the Italians are photographing the license plates of all cars crossing into Switzerland to check them against their tax records. Government agents and spies are involved as well. As far as we know there are no deaths in this war, but there are many financial losses, jail terms, and bankruptcies. In the past, the victims were wealthy men and corporations, and the battles had significant moral overtones, but the recent movement toward euro disintegration expands the battlefield, increases the risks astronomically, and will victimize all of western continental Europe, including Switzerland , from the lowliest clerk to the mightiest corporation.

Right now the flood of money attempting to enter Switzerland legally and illegally has caused the euro- Swiss exchange rate to drop from 1.51 in mid-December to 1.4325, where the Swiss National Bank has been the final bid for all euros offered for most of this month. The Swiss added 16 billion euros to their reserves in March and M-2 is growing faster than China ’s. So much money wants to get in that the Swiss are overwhelmed. It might be money not people, but it bears a clear resemblance to 1940.

Most of the world seems to think that the Americans are the ones who do the crazy things, but it is really the Europeans who commit the colossal blunders. Americans are empiricists – they will try anything, but if it doesn’t work they stop doing it. Europeans are thinkers, philosophers. They theorize and analyze brilliantly creating castles in their minds, turning them over and over to perfect them. The tradition starts with Plato, then Machiavelli, and goes through Karl Marx, Nietzsche, and Pareto, to the creators of the euro. Every philosophy can be discredited. It is only when a concept works in the real world over time and is adjusted to fit changing circumstances – like Communism in China – that one can be sure of success. All empiricists know that the euro can not work as constructed, but the Euroleaders will destroy their economies, harming the Swiss as well, until they are forced from power.

h/t Teddy KGB