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 Cyrille - Apr 12 24 comments
by DoDo - Apr 6 39 comments
by Cyrille - Apr 8 6 comments
by ARGeezer - Mar 31 10 comments
by Zwackus - Mar 29 6 comments
by aquilon - Apr 3 156 comments
by Xavier in Paris - Mar 27 5 comments
by ManfromMiddletown - Mar 20 66 comments
by Oui - Apr 16
by Cyrille - Apr 1224 comments
by Cyrille - Apr 86 comments
by DoDo - Apr 639 comments
by aquilon - Apr 3156 comments
by ARGeezer - Mar 3110 comments
by Zwackus - Mar 296 comments
by DoDo - Mar 279 comments
by Xavier in Paris - Mar 275 comments
by ManfromMiddletown - Mar 2066 comments
by DoDo - Mar 1818 comments
by ARGeezer - Mar 1737 comments