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. While pegging to the euro implies that the Swiss Franc will become a new Italian Lira, Peseta or French Franc.
Effectively, the Swiss and rich Germans have started again to hedge themselves against future inflation. Both typically protect themselves with Swiss real estate. UBS reports that the Swiss real estate bubble has risen more strongly again after being steady for some months.
UBS Swiss Real Estate Bubble Index – 3Q 2014
The latest inflation data from Swiss statistics show that food is up 0.8% YoY, clothes 0.9%, shelter and housing energy 0.9%, education 0.7% and restaurant and hotels 0.6%. One popular inflation measurement in Switzerland is the yearly increases in health insurance premiums. According to Swiss television, they are up 4% this year.
Fortunately, imported communication and IT equipment, imported durable goods and oil prices in the other categories of the CPI exercise some deflationary
pressure purchasing power gains. Thanks to these cheaper imports and many technological improvements, and against the SNB’s idea to inflate the country, the total Swiss CPI was unchanged against last year.
According to the latest UBS salary survey, Swiss wages should rise by 0.9% in 2015. As opposed to Southern Europe, there are no “deflation dangers” in Switzerland. Energy effects will be washed out and inflation will finally tend towards those moderate Swiss wage developments.
In Germany, however, the fear of strikes and inflation, becomes stronger: the 1970s feeling when the country was paralysed by public strikes is coming back. Rail-road workers currently block the whole of Germany to obtain 5% higher wages. Even the formerly hawkish German Bundesbank wants 3% higher wages, German wage inflation is currently a bit less. As we know from history, Italians, Spaniards and the French will be happy with inflation too.
Due to political constraints, the ECB was obliged to outsource money printing to Switzerland, and the SNB has done quite a good printing job for their European friends, and inflated itself with more and more credit and money.
Fortunately for the SNB, the rest of the world, the U.S., Southern Europe and even China and Emerging Markets sit on too much debt. Moreover the global expansion of production capacities and better utilisation of labor world-wide helped to reduce inflation (see below).
The world urgently needs debt deflation, and nobody can stop the necessary adjustments and positive effects of technology and globalisation. This helps to contain price inflation contagion from Germany. But given that Switzerland lives in debt inflation, it will be one of the first countries to follow Germany into price inflation.See more for