Cross-Country Exposures to the Swiss Franc

Jointly with Agustin Benetrix, I wrote a paper on this topic for a SNB conference in November:  it is here.

9 replies on “Cross-Country Exposures to the Swiss Franc”

Thanks for the link.

One of the things that struck me about the CHF yesterday its that Switzerland is as much a prisoner of euro dysfunction as any country in the zone.

As someone in the NZZ wrote a while ago

“Die Finanzkrise hat uns gezeigt wie rasch das scheinbar Undenkbar eintreten kann”

-The Financial crisis has shown us how quickly the apparently unthinkable can become reality.

Today’s Blick (Swiss mass market newspaper) headline is “surrender to the speculators”

And there’s a warning to Germans and other northern Europeans with their fixation with hard money and debt and penance and the rest. If they really want a “protestant” currency they can take the plunge and dump the PIIGS and see the new currency soar in value just like the Stutz.

Piggies keep the Euro nice and cheapish and help German exports compete in Asia.

And it looks like there is just too much money of uncertain valuation looking for safety.

SNB, presumably in complete coincidence to Thursday’s events, has a working paper on their website whose punchline is that there was a big change in the pattern of CH capital flows pre and post financial crisis. Post crisis, the gross flows got smaller but also much less correlated with the result that the net flows rose sharply post crisis even though the gross flows were smaller. In other words, less capital moving around, but more of it inclined to move in the same direction at the same time.

Hard to run a peg when that’s going on.

An interesting view from an Alphaville blogger on Switzerland.

I would be with the contributor (Tom) who commented as follows;

“There are arguments why currency suppression is bad for the country that does it, or bad for other countries. But claiming that every country that runs a current account surplus is injuring the world by suppressing global aggregate demand is silly and wrong.”

However, as anyone that has had the misfortune to be stuck at Geneva airport will know, running an economy which makes the most ordinary of everyday items – like a cup of coffee – wildly expensive can hardly be right from the point of view of the ordinary Swiss consumer.

Gavyn Davies a must-read as usual.

One is ineluctably forced to repeat the comment by Margaret Thatcher that “you cannot buck the markets”.

The SNB has also IMHO reminded investors that it is not the job of central banks to do what markets expect of them. Indeed, if they are doing their job properly, the opposite should be the case. Thursday’s meeting of the ECB will be a case in point.

Looking at the EZ’s QE fudge where losses have to be carried by local CBs because the Germans don’t want any risk sharing there seem to be 2 opposing forces at work.

1 the Piggies give the Germans a cheaper currency
2 the Germans don’t want to share any of the benefits

with the wider context being macro chaos and megabillions looking for somewhere safe to park regardless of the implications for the economy of the haven chosen.

Would the piggies and France not be better off leaving the Euro and setting up shop together to get a nice devaluation going to help with the reform agenda and let the Dutch, the Germans and the Finns enjoy the end logic of their economic thinking along with the Swiss who have a wonderful deflationary
period ahead of them thanks to their overvalued haven currency


“you cannot buck the markets”.

Sure you can. They are shortsighted and emotional.
The Fed could raise interest rates and flush out all the stupid bets made in the last 2 years if they felt like it.
If markets won’t play ball and foster growth what’s the point of CBs supporting them ?

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