The European Tribune is a forum for thoughtful dialogue of European and international issues. You are invited to post comments and your own articles.
Please REGISTER to post.
The SNB can always, should it so desire, use open market operations to place a hard upper bound on the Swiss Franc's appreciation relative to any other currency it cares to name. That's one of the privileges that comes with being a central bank.
Austerity can only be implemented in the shadow of a concentration camp.
But (a) simply defending the existing exchange rate is neither inflationary nor deflationary and (b) they can't seriously affect our trade-weighted exchange rate even if they were to try. The Swiss Franc simply isn't a big enough currency. Any Franc/-Mark exchange rate movement large enough to appreciably influence the Eurozone trade-weighted exchange rate is also large enough to cause politically unacceptable dislocations in Switzerland. And since the Swiss Franc is the currency under upwards pressure at the moment, the Swiss CB can always curtail such disruption.
It will be more interesting to see what happens if the Swiss CB fails to use the current upwards pressure to accumulate sufficient hard currency reserves to cover the inevitable exit from the Swiss Franc when the immediate panic subsides. Because then they will be defending against a potentially substantial depreciation of their currency.
Cutting to the chase: not much. Certainly they are not paying the full price for the benefit although the Swiss economy is paying the full cost of the benefit. Which argues the Swiss Franc is being bought below the (cost of production + profit) at this time, in these market conditions.
She believed in nothing; only her skepticism kept her from being an atheist. -- Jean-Paul Sartre
I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by gmoke - Nov 19 5 comments
by Cyrille - Nov 24 6 comments
by ARGeezer - Nov 24 1 comment
by ARGeezer - Nov 20
by gmoke - Oct 28 16 comments
by Luis de Sousa - Nov 1 6 comments
by ManfromMiddletown - Nov 6 16 comments
by das monde - Nov 3 59 comments
by ARGeezer - Nov 241 comment
by Cyrille - Nov 246 comments
by ARGeezer - Nov 20
by gmoke - Nov 195 comments
by Migeru - Nov 725 comments
by ManfromMiddletown - Nov 616 comments
by das monde - Nov 359 comments
by Luis de Sousa - Nov 16 comments
by afew - Oct 3164 comments
by Democrats Ramshield - Oct 312 comments
by gmoke - Oct 2816 comments