In an inane study of the world’s countries by the U.N. and released on World Happiness Day (what an absurd concept) the land locked nation with its active printing press was heralded as ranking FOURTH while the U.S. fell to 14th. To paraphrase Tolstoy: Happy countries are all alike; every unhappy country is unhappy in its own way. On March 17 Bloomberg ran a story, “Swiss National Bank (SNB) Foreign Reserves Soar, Signaling Interventions.” In February the SNB’s reserves increased by 3.8% to 668.2 billion francs, “the biggest increase since December 2014.”
SNB President Thomas Jordan regularly opines that is Swiss currency is overvalued. The SWISS bank reserves are not increasing because of robust Swiss exports. However, the SNB regularly turns on the printing presses to produce Swiss francs to sell and purchase other currencies in an effort to meet the insatiable demand for the Swiss foreign currency. Currently, SNB foreign reserve holdings are equivalent to the entire GDP of the Swiss economy. The SWISS FRANC represents the fragility of the global financial and political system as investors are willing buy Swiss assets with negative yields out to over TEN years.
The Swiss are doing nothing more than printing more SWISS FRANCS to meet the demand. When they use the fiat francs to purchase other currencies the SNB converts those currencies into EQUITY AND BOND assets in a symphony of some of the most high-quality worldwide corporations. THIS IS FINANCIAL ALCHEMY OF THE HIGHEST ORDER. The SNB owns almost $2 billion of APPLE Corporation.
While the Swiss increased its portfolio of foreign assets by almost 21 billion francs last month, the targeted EURO/SWISS crossrate barely moved as it remains in a well-defined range of 1.06 to 1.08 during the last eight months. Yet again the SNB is merely keeping the FRANC from appreciating and not having any success in weakening its OVERVALUED currency. No wonder the Swiss are so happy. They are laughing as the world keeps willing to swap its banknotes for real assets, helping Swiss citizens become the world’s largest hedge fund.
The SNB has discovered the PHILOSOPHER’S STONE and lo and behold it is a printing press. The VIX may represent investor complacency but the SNB’s attempts at financial alchemy represent something else. Not sure as of yet but if I were a Swiss national I would be voting for the SNB to be increasing its GOLD RESERVES.
***President Trump and the U.S. Treasury are the “guardians” of the DOLLAR, not the Federal Reserve. It is important to remember that the DOLLAR is a potential tool of the executive branch. When Germany and others threaten to sue in world judicial settings to counter the potential Border Adjustment Tax, the Trump Treasury can pursue a weak dollar policy as a counterweight.
It is not the FED that sets dollar policy but the central bank can affect potential dollar value by manipulating monetary policy. If the FED were to raise rates and strengthen the DOLLAR to curtail the inflationary impact of fiscal stimulus, the President could set in motion a weak dollar policy by intervening. (See Clinton, Bill and the dollar/yen policy of June 1998.) This is a heads-up for all my readers as we try to understand Trump’s efforts to prevail with his agenda.
Tags: Fed, SNB, Swiss Franc, Thomas Jordan, U.S. Dollar
March 22, 2017 at 10:16 pm |
Yra, I was just told about Joyce and my heart dropped out of my chest, I am so sorry for your loss. Being one who has a lost a sister I know what your feeling. All I can say is I’m sorry, Joyce had a great sense of humor and I always enjoyed her company.
If you ever just need to talk or cry please let me know and I’ll be there for you. Hopefully one day we can toast our beloved sisters and Laugh again at some of the fun times we all shared together.
I’m there for you. Please feel free to reach out to me when your ready. Best to all my friend. Scott Slutsky
March 23, 2017 at 4:00 am |
Both your comments today concern two of the strongest currencies in the global currency markets, the Swissie and the dollar, with the central banks and governments of those countries trying to put a lid on their comparative values. The printing press has been the machine of alchemy and they together with Japan and the UK have produced what is arguably the biggest asset bubble in history.
But with the Atlanta Fed again lowering its Q1 GDP estimate to .9% and retail, 70% of the economy soft, while at the same time global debt/GDP at nose bleed levels, sustained by interest rates at superficially low levels, how long to the inevitable crackup in the markets is the 64 dollar/franc’yen/pound question.
Your sage advise to the SNB increasing its gold reserves I would add is good advise for all your readers.
March 23, 2017 at 6:39 am |
Asherz–that is my point indeed and the Swiss as you imply is the paradigm of madness but yet is continues unabated.And yesterday the RBNZ held rates and continued to say that the kiwi dollar needs to”depreciate to achieve more balanced growth”Wow the hypocrisy that plays out in global finance is ain sof
March 23, 2017 at 11:02 am |
Alchemy indeed. Perhaps the holders of Swiss Notes will be satisfied with repayment in shares of Apple, Google, SNAP and other titans of the 21st century. Interesting in that two of these three shares have restricted/non-existent voting rights. Why value property rights when we have happiness? So old world!
Pay no attention to that man behind the curtain….
March 23, 2017 at 4:27 pm |
Professor—I defer to you if you were behind the curtain.I will click my heels and say I want to go back to Urbana—-and it is fitting that Dorothy travels in a hot air balloon