Home > Main > Swiss Intervene – and it’s widely accepted they have unlimited capacity to sell CHF

Swiss Intervene – and it’s widely accepted they have unlimited capacity to sell CHF

September 6, 2011

Can Central banks go broke?  I don’t think they can.

Todays action by the Swiss is different from other interventions we’ve seen.  Well not the action exactly, but the words.

“The SNB will enforce this minimum rate with the utmost determination and is prepared to buy foreign currency in unlimited
quantities.”

“Unlimited Quantities” .  Shocking words.

Still, not a peep by the analyst community that this will cause gigantic expansion of the SNB balance sheet, or unacceptable losses to the SNB.

It’s become widely accepted common knowledge that Central Banks can’t go broke.

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  1. September 6, 2011 at 11:00 am

    The Swiss don’t mess around. Straight in there. And they have 0% interest rates I believe.

    • beowulf
      September 6, 2011 at 12:19 pm

      “The Swiss don’t mess around…”

      No kidding, that’s just how they do things. Any country’s whose idea of homeland security includes widely disseminating a how-to guide on guerrilla warfare won’t let self-imposed political constraints stop it from pursuing its national interest (especially against the EU which doesn’t have a “national” anything).
      http://en.wikipedia.org/wiki/Total_Resistance_%28book%29

      • Oliver
        September 8, 2011 at 5:09 am

        Pragmatism, opportunism and a history of quirky individualism, combined with a whole lot of luck kept them out of both world wars. The downside is the survival of a particularly vicious strand of exceptionalism and latent xenophobia here. I dunno, if all European countries behaved like the Swiss, one could argue we’d all still be feuding. OTOH that might have spared us the concentrated glory of WWI and WWII. As Harry Lime said:

        “In Switzerland… they had 500 years of democracy and peace, and what did that produce? The cuckoo clock.“

        Except of course, that the cuckoo clock is a German invention and Switzerland sent all its impoverished farmers off to fight in the foreign legions…

  2. Tom Hickey
    September 6, 2011 at 12:07 pm

    Expected response over at ZH: Krasting, The SNB has just committed suicide. They see gold spiking up over 2000 in short order in expectation of the imminent implosion of fiat.

    Looks like a repetition of when they were all shorting tsys in expectation of imminent hyperinflation due to the spiking of the monetary base as a result of QE.

    • Tom Hickey
      September 6, 2011 at 12:45 pm

      Mishon board with ZH. “Unlike the Swiss Franc, Gold continued on its merry way in the face of competitive currency debasement.”

      • apj
        September 6, 2011 at 5:29 pm

        it’s just a safe haven trade, which the hard money wingnuts confuse with currency debasement (once again confusing correlation, causation, and all manner of other things…just like “Mr Cotton” Rogers, and pretty much everyone over at Zero Idea, oops, Hedge)….where do you go for a “safe haven” currency proxy in times of stress? CHF is a bit of a bust now, as the JPY will be when they almost surely intervene. Gold is just one thing that isn’t prone to “intervention” of this nature.

        • TC
          September 6, 2011 at 5:44 pm

          I think Japan will intervene tonight in a major way. Krastling is wrong about the not-coordinated part – this is a semi-coordinated affair.

          Re: Swiss safe haven. It’s the easiest place to go for Europeans worried about a blowup.

          I’ve been thinking the Euro wouldn’t blow up, but it turns out I am probably wrong. I suspect we could see someone leave the euro within a month.

  3. Tom Hickey
    September 6, 2011 at 6:40 pm

    “Gold is just one thing that isn’t prone to “intervention” of this nature.”

    Until the cb’s decide to intervene. Physical gold is a narrow market with a lot of leveraged players, hence, easy for the cb’s to control if they want to.

  4. September 6, 2011 at 11:06 pm

    I don’t see how Europe escapes losing a member or two at this point. That may be the bottom when it happens. Certainly the bottom will be reached if the politically improbable fiscal union is achieved. If the EU continues to slog along without meaningful reform and the economy doesn’t improve, the Swiss are going to have to prove their willingness to sell francs with impunity at some point (which is a hell of a lot easier than propping a currency up.) Not so sure about the Yen, there may be a more opportune time for them, they’ll come in at some point, if they’re smart they’ll wait for a bounce in Europe.

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