WC Varones

Don't lend your hand to raise no flag atop no ship of fools

Global Competitive Devaluation comes to Switzerland

Remember that Global Competitive Devaluation thing we've been talking about? The idea is that when the US and EU start printing money and devaluing their currencies, all other fiat currencies will have to devalue in order to keep their export and labor markets competitive.

Well, here it is with a vengeance. The Swiss Franc, long known as a rock solid, safe haven currency, just went Full Bernanke. Goldman Sachs elaborates via Zero Hedge.

In reaction to the sharp appreciation of the CHF over the past couple of weeks, the SNB announced a rate cut this morning, reducing its 3-month CHF Libor target to 0.00-0.25%, from 0.00-0.75% previously. Given that the SNB was targeting 0.25% within the old range - and 3-month rates were actually below that target – this change in target should be seen mostly as symbolic. However, it also shows that the risks to the monetary policy outlook have shifted significantly and our rate forecast is under review.

The SNB also announced that it would increase the supply of liquidity to banks by raising banks’ sight deposits at the SNB from around CHF30bn to CHF80bn. The idea behind this measure seems to be that, by increasing the liquidity available to banks, some of that liquidity will flow into Euro-denominated assets, thereby reducing the pressure on the CHF. Put differently, the SNB is aiming at the exchange rate channel in this latest ‘quantitative easing’ exercise.



Got gold?

2 comments:

Mark S said...

You realize of course that if push really comes to shove that gold WILL be confiscated. After all, the US govt has done it before.

W.C. Varones said...

Oh, I realize they'll try.

But it's a big world, and there are lots of spots to stash a little gold where the Obama regime or its successors will never find it.

Let's just hope there's one free country left to flee to when that time happens.

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