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.
Skepticism is the first step on the road to truth. -- Denis Diderot
I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by A swedish kind of death - Sep 15 9 comments
by ChrisCook - Sep 14 53 comments
by Frank Schnittger - Sep 11 129 comments
by Luis de Sousa - Sep 9 69 comments
by Crazy Horse - Sep 6 10 comments
by Migeru - Sep 4 38 comments
by Metatone - Aug 30 5 comments
by gmoke - Aug 26
by A swedish kind of death - Sep 159 comments
by ChrisCook - Sep 1453 comments
by Frank Schnittger - Sep 11129 comments
by Luis de Sousa - Sep 969 comments
by Crazy Horse - Sep 610 comments
by Migeru - Sep 438 comments
by Metatone - Aug 305 comments
by Xavier in Paris - Aug 293 comments
by gmoke - Aug 26
by Metatone - Aug 227 comments
by eurogreen - Aug 2133 comments
by afew - Aug 1965 comments