The Forex Rigging Irony

While Forex banks, traders, and other institutions are being blamed for market rigging, the Swiss National Bank can publish reports about its own market rigging, but instead of being a scandal, it's economic data.  That's because the vast majority don't understand how the Forex markets work.  It's not insulting - it's a fact.  Currently there are hundreds of pending litigation cases against a plethora of Forex banks, traders, and other institutions - but none against a central bank.  Of course it would be ridiculous to sue a central bank for market rigging - because it's in their mandate to manipulate the market.  Of course they don't call it manipulation, they call it 'market operations' and the Fed, sometimes known as 'market intervention' or 'stabalization efforts.'  Anyhow, it seems strange that on the one hand, central banks manipulate their own currency via 'market operations' which mostly are done through commercial Forex banks, but it is the Forex banks that receive this printed money that are sued, not the central banks.

But look from the CB perspective - what's the point of printing money if you can't use it to intervene in the market and prop your own currency?  

From Fortress Capital (source: Bloomberg):

The Swiss National Bank will probably stay on hold at its monetary policy meeting on March 17 as banks in the country are already facing pressure from negative interest rates, economists and strategists say in notes to clients.

The fact that the euro remained broadly stable against Swiss franc after the European Central Bank meeting lessens pressure on the SNB to act this week. SNB may intervene in the forex market to stem the franc’s appreciation.

The question in everyone's mind now - do these central banks really know what they are doing?  I mean, is there a coordinated international policy?  A conspiracy?  A conspiracy would imply intelligence.  Who knows.  

One perspective is to look at Forex markets from the perspective of those in power, the UHNWI, or 'them' - 'they' or 'The Elite.'  They have all the money they can possibly have - with this money they buy power, such as politicians, countries, people, etc.  They can't buy anything more.  So the only thing left is to ensure the status quo - or ensure as much as possible they maintain their position.  One way to do this which is more subtle, is to destroy the money supply.  By making currency worthless, or worth - less, any potential competition will be either wiped out or marginalized.  Would-be billionaires and up and coming entrepreneurs who are out there in the 'real world' making business, are contained.  It also affords them other opportunities, such as providing this fresh QE money to the private banks they actually own, allowing them to invest in HFT and other stat arb style investment strategies with virtually no risk, allowing them to grow their own portfolios at a level which is practically speaking, exponentially greater than the average investor.  And if their investments fail, they can always bail themselves out - or as the trend is, tax savers and bail themselves in.

Remember, our financial system is created by rules that are constantly changing.  Just as Central Bank are created they are destroyed.  Russia being one of the newest Central Bank in the game; about 30 years old:

The Central Bank of the Russian Federation (Bank of Russia) was established July 13, 1990 as a result of the transformation of the Russian Republican Bank of the State Bank of the USSR. It was accountable to theSupreme Soviet of the RSFSR. On December 2, 1990 the Supreme Soviet of the RSFSR passed the Law on the Central Bank of the Russian Federation (Bank of Russia), according to which the Bank of Russia has become a legal entity, the main bank of the RSFSR and was accountable to the Supreme Soviet of the RSFSR. In June 1991, the charter was adopted by the Bank of Russia. On December 20, 1991 the State Bank of the USSR was abolished and all its assets, liabilities and property in the RSFSR were transferred to the Central Bank of the Russian Federation (Bank of Russia), which was then renamed to the Central Bank of the Russian Federation (Bank of Russia). Since 1992, the Bank of Russia began to buy and sell foreign currency on the foreign exchange market created by it, establish and publish the official exchange rates of foreign currencies against the ruble.

If Russia can establish a new Central Bank, why can't the United States of America, Australia, Canada, Germany?  How close are we to a hyperinflationary trap, as happened during the 19th century?

Wildcat banking refers to the practices of banks chartered under state law during the periods of non-federally regulated state banking between 1816 and 1863 in the United States, also known as the Free Banking Era. This era, commonly described as an example of free banking, was not a period of true free banking, as banks were free of only federal regulation; banking was regulated by the states. The actual regulation of banking during this period varied from state to state.

According to some sources, the term came from a bank in Michigan that issued private paper currency with the image of a wildcat. After the bank failed, poorly backed bank notes became known as wildcat currency, and the banks that issued them as wildcat banks.[1]However, according to others, wildcat meant a rash speculator as early as 1812, and by 1838 had been extended to any risky business venture.[2] A common conception of the wildcat bank in Westerns and like stories was of a bank that left its safe somewhat ajar for depositors to see, in which the banker would display a barrel full of nails, grain or flour with a thin sprinkling of cash on top, thus fooling depositors into thinking it was a successful bank.  The traditional view of wildcat banks describes them as distributing nearly worthless currency backed by questionable security (such as mortgages and bonds). These actions ended when note circulation by state banks was stopped after the passage of the National Bank Act of 1863. Mark Twain, in his autobiography, refers to the use of such currency in 1853, "The firm paid my wages in wildcat money at its face value".

Certainly, our current system is better that which was used during the "Free Banking Era" because the fiat money today is NOT "worthless currency" - but Central Banks such as the SNB (Swiss National Bank) certainly are trying hard to make it such!

Forex isn't just a money market, it's the underpinning of all other markets (i.e. you sell your stocks for US Dollars).  Learn more about Forex with Splitting Pennies - Understanding Forex - the book.