The most recent money supply data
from the Swiss National Bank (SNB
) has shown increases of huge amounts. As compared with its loss of 19 bln. francs in 2010
(3% percent of the Swiss GDP), the central bank printed tremendous 17.3 bln. in the week ending in June 1st and 13 bln. in the one ending in May 25th.
These numbers were not seen since August 2011 when the SNB increased money supply by 50 bln and 40 bln per week buying the EUR/CHF at rates between 1.00 and 1.13. Now, however they are buying at 1.20 and are risking extreme losses, especially because many other central banks are dumping euros
In the 6 winter months the SNB managed to reduce money supply by 34 billion CHF selling euros
from its balance sheet. However, only in the last three weeks, the SNB lost all these "gains" and had to buy euros for a similar amount.
Last week rumors at CNBC about some developments at the SNB before the release of the Swiss GDP led us to the conclusion
that the SNB either drops the floor or prints enormous amounts. A better than expected Swiss GDP
and very bad US jobless figures were the reasons that the SNB had to print even more than in the preceding week. We calculated last week
that if the speed of 13 bln. CHF per week is maintained, then currency reserves will more than double this year, a weekly increase by 17.3 bln. would mean they rise by 3 to 4 times. A member of the SNB board, Jean-Pierre Danthine
said that the central bank is worried about the size of the balance sheet, but pledged that the central bank will defend the floor. No reference was made to capital controls.
Earlier in March he told
that Swiss inflation will come back. In earlier posts (here
) we also showed that Swiss inflation will pick up sooner or later and that at this point the SNB must adhere to its main principle of price stability
, will stop printing and realize its losses like it already did in 2009 at 1.50 and 2010 at 1.40
think that SNB can print as much as it wants. But similarly as central banks do not posses unlimited forex reserves (like the Bank of England vs. George Soros), a central bank cannot print ad infinitum without risking that inflation will strongly hit back. This inflation hit after SNB money printing has often happened to Switzerland and caused e.g. the huge Swiss real estate crisis
of the 1990s.
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Tags: Capital Controls
,Swiss National Bank
,Swiss real estate
,Switzerland Money Supply