Tsunamis Most Often Come Without Warning…” the Swiss have opened a window of reality on the massive central bank scheme.”
By: John Browne Senior Market Strategist, Euro Pacific Capital, Inc.
GoldSeek.com
Friday, 23 January 2015
On Thursday, January 15th, the Swiss National Bank (SNB) discontinued its three year effort to maintain its minimum currency floor of the Swiss franc. In a single day the move sent the Swiss Franc (SWF) climbing a massive 21% against the U.S. dollar and 41% against the euro. The move sent shockwaves of unprecedented ferocity through the massive foreign exchange (FX) market, which is by far the largest, and most highly levered, trading market in the world. The monetary tsunami threatened both FX participants and even their brokers. But more importantly, even as the rest of Europe looks to suffocate itself in a blanket of debased currency, the Swiss have opened a window of reality on the massive central bank scheme. Hopefully some of the fresh air will spread throughout the rest of the world.
Most of the so-called developed world has followed the U.S./UK-led ‘Anglosphere’ in pursuit of Keynesian economics, focusing on consumption-based economic growth that can supposedly be stimulated by currency debasement.
On the other hand, the Germans and the Swiss have long been seen as the champions of Austrian economics, which favored an economic growth based on savings, production and sound money. During the second half of the 20th Century this philosophy lent tremendous strength to both currencies and led private investors and corporations to rely on the Swiss Franc and the Deutsche Mark as highly liquid and interest-yielding alternatives to gold as a store of wealth. It is interesting to note that both economies developed strong exports in the post-War years despite the consistently strengthening currencies. The Germans entered the Eurozone in part to protect their exporters. Outside the EU, the Swiss had no such shield.
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