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SNB CHF Blog: A beleaguered central bank in the dangerous world of global macro and euro crisis


Over four years our association of supporters of Austrian Economics from Switzerland, Germany and Austria and helpful hands all other all over the world expressed opposition against the CHF/EUR peg or “CHF cap” in in-numerous different pages.

The posts track the strong Swiss economic performance over these years and that this is absolutely not in line with the desire of the mainstream to make our currency weaker. As opposed to the mainstream, we think that a strong country like Switzerland also deserves a strong currency.

The background or encyclopaedia pages detail the relevant praxeology, our Austrian deductive reasoning, and apply it to developments in global macro and markets.

As opposed to the mainstream hedge funds (what Austrians call “Risk Funds”), we explicitly mention benefits and costs. This mean we mention both long-term benefits and with each measure of expansionary monetary policy the associated risks.

+++NEWS++ 2015-01-15+: The SNB has decided to accept the ideas of Austrian Economics and sound money. The SNB Is ready to consequently fight the enormous money and credit bubble, the massive real estate bubble and the sooner or later coming price inflation with sound money and a strong currency.

Swiss Inflation Watch:

Swiss Yearly Money Inflation (M3) 8.1% y/y
Swiss avg. Yearly Credit Inflation 3.9%

Swiss Price Inflation: Fortunately still low: -0.5% y/y, thx imported deflation from the euro zone, but internal inflation >0

Other HICPs Y/Y: Eurozone 1.1 0.9, 0.7,0.5 0.4% -0.2%  -0.6% Germany:+0.1% -0.5%
Spain: 0.5 0.3, 0.2, 0.0% -0.5% -1.5% Italy: 0.5 0.3, 0.2, 0.0-0.2 0.0% -0.4%

 

Economic Background:

Dr. Thomas Jordan, Chairman of Our Swiss National Bank, the leader for implementing price stability after far too many years of monetary expansion, said on November 23 2014 (in response to the gold referendum): 

Money is sound when it fulfils its functions as a means of payment and store of value as smoothly and reliably as possible in people’s everyday lives. Sound money retains its value and is generally accepted. It also makes an important contribution to social harmony and material prosperity. Sound money is therefore a central pillar of our society. The mandate of monetary policy is to ensure that money remains sound. Consequently, the Swiss National Bank (SNB) bases all of its activities on this mandate. (source SNB)

 

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Munch

What Caused The SNB Financial Tsunami? Three Reasons, One Trigger, One Chain Reaction

In this post we give our (Swiss) view for the financial tsunami on January 15.
The SNB has preferred its secondary mandate, namely financial stability, and the elimination of risks on its own balance sheet caused by ECB QE.
It will not obey its primary target, price inflation, for the next three to five years. While in the mid-term (5 -10 years) inflation should move up.
Differing perceptions between Switzerland and the Anglophone world about “price stability in the medium and long-term” is the second explanation for the financial tsunami.
The massive trade surplus of 10% of GDP is the third reason.

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Munch

Where does SNB intervene against overvalued CHF and where do they sell EUR & USD?

Update January 25th.   Effectively the SNB has intervened between 1.00 and 1.05, this means that the central bank is ready to risk its own solvability, because once again they intervene far above  Friedman’s intervention level. ——————————————————————————————————————————————————- Originally written on January 15 Currency movements and fair valuation Please read the initial post on the financial tsunami, “the three …

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Baltensberger

Leading Swiss Monetary Policy Economist Proposes Dollar-Euro Minimum Rate Basket Instead Euro Floor

The most important voice in Swiss monetary policy, Professor Ernst Baltensberger suggested that the Swiss National Bank (SNB) abandoned the minimum euro exchange rate and replaced it with a minimum rate basket that consists of dollars and euros.

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German Home Prices 2009-2014

German Home Prices are Quickly Recovering the Gap against French ones

European national central banks released European household wealth reports in Spring 2013. According to that data, “median” German households were far poorer than many of their European counterparts. Based on 2012/2013 data we compared apartment prices and discovered that French prices were strongly overvalued or German ones undervalued.
We wanted to know if this is still the case in 2014 and integrated our 2012/2013 data with the one of 2014. We discovered that German home prices are quickly recovering their delay against French ones. Hence German wealth is ticking up again.

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Handel Lascia ch’io pianga_

Happy Xmas Lars von Trier

Dear friends and readers, Christmas is family time. But since my blog is contrarian, you read here a contrarian family post by one my idols, Lars von Trier. I just want to thank all my loyal readers and followers for following and commenting on my blog and any discussion on Twitter. Since the blog is driven by …

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SNB Introduces Negative Rates, a Toothless Measure?

The Swiss National Bank has introduced negative interest rates. They apply only to sight deposits in excess of 20 times minimum reserves. Therefore they will affect hardly any bank and can be considered symbolic or even toothless. The view of the SNB is different.

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Results Gold Referendum

The Swiss Gold Referendum: An Analysis by George Dorgan

In a referendum the Swiss have to decide about:
1) Ecopop, a ecological-political movement that wants limit immigration to 0.2% of the population,
2) Abolish tax advantages for rich foreigners and
3) the gold initiative.
All three initiatives got rejected, the gold initiative by 78%. What does it mean for the Swiss Franc, the SNB and gold?
An analysis by George Dorgan

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Euro Loans

Keith Weiner: SNB Must Keep Euro over 1.20 To Avoid Losses of Swiss Banks

The recognized Austrian economist Keith Weiner and the Wall Street Journal argue that the SNB must keep the euro over 1.20 in order maintain stability in the Swiss banking system. A rapid appreciation of the franc would create losses on the balance sheet of Swiss banks.

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MMT US Sector Balances 2

Why was the gold price so low in 1999/2000?

To find further explanations as to why the gold price was weak in the late 1990s we analyze sector balances. Effectively private spending and private debt went in two different directions: a heavy increase in private spending and debt in the US against less growth in private spending and less debt in the rest of world. This combination fostered GDP growth in the US and weakened it in other countries. Real interest rates were positive. Markets thought that the debt-financed growth could continue for years; they created the dot com bubble on top of it that strengthened technology stocks and the related currency, the dollar. This rare situation led to excessively weak oil and gold prices.

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Arena SRF

Vier Meinungsgruppen im Schweizer Goldreferendum, eine Übersicht

Das Thema der “Abstimmungs-Arena” im Schweizer Fernsehen war „Gefährdet die Gold-Initiative die Handlungsfreiheit der SNB“? Dieser Blog versucht zu vermitteln, dass die SNB ihre Handlungsfreiheit im Sinne der Einhaltung der Preisstabilität schon im September 2011 verloren hat, als sie den Euro-Mindestkurs einführte.

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470 bln Euro instead gold

Swiss Gold Referendum: Proponents Now Actively Fight SNB and Euro Floor

Latest gold referendum poll November 19: The latest poll shows 27% surely in favor of the gold initiative, 36% surely against the initiative. The most important development is the decision of the gold initiative to actively fight against the SNB’s minimum euro rate.

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Peter Schiff

Peter Schiff’s Message to Switzerland: Preserve Your Wealth, Gold is Better than Pegging to the Euro

Peter Schiff, an Austrian economist who predicted the financial crisis urges the Swiss to preserve their wealth. Therefore, they should vote yes in the gold referendum. He thinks that buying gold is better than pegging to the euro. The Swiss will be better off if they possess a strong currency. Pegging to the euro implies that the Swiss Franc will become a new Italian Lira, Peseta or French Franc.

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Swiss Gold Referendum by Income

Swiss Gold Referendum: Opinion Polls

According to the latest polls 38% of voters would support the Swiss gold initiative, 47% are against it. The previous poll, recognized as more reliable, showed 45% pro gold and 38% against.
A win of the initiative would most probably imply a breakdown of the EUR/CHF floor.
According to the polls, low income groups are in favor. Effectively their purchasing power would increase when the CHF appreciates.
High income earners and stock owners are rather against it. If CHF improves Swiss stocks could collapse; this explains their voting intentions.

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