SNB & CHF

Jackson Hole: Cherry Flavored Cyanide, or Strawberry The American Principles Project and the Atlas Network Sound Money Project, provided a much needed alternative in the Jackson Hole Summit. Move Over Entrepreneurs, Make Way for Speculation! The development of lending was a revolutionary breakthrough. Lending allowed the retiree to do business with the entrepreneur. The retiree has wealth, but no income. The entrepreneur is the opposite, with income but not wealth. The retiree lets...

Overview: Sight deposits are currently the by far most important means of financing for SNB currency purchases, for interventions. Sight deposits are assets for commercial banks, the Swiss confederation and other counterparties that deposit money at the SNB, but for the SNB they are liabilities, debt.Sight deposits are always denominated in CHF. The SNB finances itself with Swiss Francs. With a rising CHF the debt relative to assets gets bigger, because the assets lose their value. As...

Both Chinese PMI and the producer price index (PPI) are in deflation since 2012. This opens a lot of questions about the sustainability of Chinese economic growth, but also about the certain economic theories that consider deflation as a precursor of depression, as it did in the early 1930s. China’s speed of economic growth simply slows, recently to 7%, according to China statistics “China’s Economy Showed Moderate but Steady Growth“. Notice For the second year producer prices remain...

Many claim that China manipulates its economic data. We explain why the best way not to get caught is to lower the GDP deflator, as lower inflation helps to increase real GDP. Lombard Street Research assumes that Chinese officials followed that approach. Standard Chartered economist Stephen Green has said that China’s official GDP figures were boosted by government statisticians underestimating inflation, which results in an overestimate of actual growth. And the New York Times recently...

A programme has been set up in one Swiss canton to teach unaccompanied minors practical skills. (SRF/swissinfo.ch) In the last two years, the number of children seeking asylum in Switzerland without their parents has skyrocketed. They are usually placed in public schools nearest to the asylum shelters where they live. But some are too old for the school curriculum, and are left to linger in the transit centres. To solve this problem, a school has been opened in the town of Weinfelden in...

If you’re an American over a certain age, you remember roller skating rinks (I have no idea if it caught on in other countries). This industry boomed in the 1970’s disco era. However, by the mid 1980’s, the fad was fading. Imagine running a rink company at the end of the craze. You know it is not going to survive for long. How do you operate your business? You milk it. You spend nothing on capital improvements, slash maintenance, and reduce operating expenses. There’s no return on...

Marc Meyer argues that the Swiss National Bank must build up reserves, but this does not mean “foreign exchange reserves”, but “Swiss Franc reserves”. According to the constitution these reserves are owners’ equity denominated in Swiss Franc and some gold. Thomas Jordan’s famous paper “Does the SNB need equity” tries to overturn the constitution suggesting that the constitution accepts FX investments as “reserves”. Russia builds up foreign reserves with national resources, with equity, the...

Small arms manufacturing is on the decline in Switzerland. It’s a long way from the boom days. (SRF/swissinfo.ch) Small weapon manufacturing in Switzerland is on the decline. Even though manufacturers haven’t released trade figures, the downward trend is clear. Gone are the days of the booming Swiss arms industry. One beneficiary was the Swiss company SIG, the official supplier of automatic assault rifles for the Swiss army. During the 20th century, its facilities in Neuhausen produced...

I wrote a story about poor Clarence who retired in 1979, and even poorer Larry who retired last year. I created these characters to challenge the notion of calculating a real interest rate by subtracting inflation. The idea is that the decline of a currency can be measured by the rate of price increases. This price-centric view leads to the concept of purchasing power—the amount of stuff that a dollar can buy. It’s the flip side of prices. When prices rise, purchasing power falls. Recall in...

In 1978 the SNB established for the first time a cap on the Swiss franc, to prevent the inflows of American funds into Switzerland that escaped the US stagflation but caused some “imported inflation” in Switzerland, too.  The Swiss introduced a DEM/CHF floor at 0.80 CHF on October 1, 1978, having known that the US government and the Fed were ready to fight inflation and the weak dollar. About one month later the FOMC hiked rates to 9%. Paul Volcker With the money supply (M1) targeting...