Tuesday, September 6, 2011

Swiss National bank throws Franc under the bus

The Swiss National Bank made the following statement today:

The current massive overvaluation of the Swiss franc poses an acute threat to the Swiss economy and carries the risk of a deflationary development.

The Swiss National Bank (SNB) is therefore aiming for a substantial and sustained weakening of the Swiss franc. With immediate effect, it will no longer tolerate a EUR/CHF exchange rate below the minimum rate of CHF 1.20. The SNB will enforce this minimum rate with the utmost determination and is prepared to buy foreign currency in unlimited quantities.

Even at a rate of CHF 1.20 per euro, the Swiss franc is still high and should continue to weaken over time. If the economic outlook and deflationary risks so require, the SNB will take further measures.

The Swiss Franc was known as a safehaven currency for many years because the Swiss were seen as prudent people who managed their finances in a prudent manner. What this now means is that the Swiss will print whatever amount of Francs is necessary in order to weaken their currency against other currencies. This will weaken the currency and make their exports more competitive in the short term but in the long run it will cause inflation in Switzerland. We can now say that the only currency that is not being debased is gold. Gold soared in price denominated in Swiss francs on this news. Gold and silver are real money and this is proven day after day.

1 comment:

Craig Cavanaugh said...

Tangibles are the only things that are real... So how was South America? I'm looking really hard at relocating to Roatan myself. There is a niche there as yet unfilled, and opportunity knocks...

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