SNB & CHF

Consider the sport of betting on the sport of horse racing. It’s actually similar to the analysis of the gold and silver markets. How’s that? First, there is the manic-depressive crowd. Sometimes (as we are told—we don’t hang out at race tracks) the bettors sometimes get overly excited about a horse with slim chances to win, or get totally unexcited about a strong horse. The track responds by lowering or raising the payout for winning, respectively. The more betting on a horse, the lower...

As I have discussed previously, if you borrow cash then it’s not income. This is why no one in his right mind borrows to buy consumer goods. Those who try cannot sustain it for long.What if someone else borrows? Suppose someone else—let’s call her Jordyn—buys your house from you, at a higher price than you originally paid for it. You can spend some of the gain. Of course she is just paying you with her borrowed proceeds, but most people think this is totally different than if you borrow to...

John Henry Smith of Grail Securities (Switzerland) shows that the financial markets have always been awash with its own brand of Sirens, who dolefully prophesied the complete collapse of whole economic systems. For him Pericles gave the best advice: “The key is not to predict the future, but to be prepared for it!” —————————————————————————————— In Homer’s Odyssey, the Sirens were dangerous and beautiful maidens, who irresistibly lured sailors with their enchanting, but sad, music and...

The Federal Reserve puts on a conference in the idyllic location of Jackson Hole, Wyoming. Of course it’s all about how best to centrally plan our little lives for us, and who is to be sacrificed to whom. The American Principles Project and the Atlas Network Sound Money Project, provided a much needed alternative in the Jackson Hole Summit. By choosing the same time and place as the Fed, Steve Lonegan capitalized on the publicity. In fact, the #jacksonholesummit hashtag was trending on...

Since the financial crisis central banks in developed nations increased their balance sheets. The leading one was the American Federal Reserve that increased the monetary base (M0, often called “narrow money”), followed by the Bank of Japan and recently the ECB. In most cases the extension of narrow money did neither have an effect on banks’ money supply, the so called “broad money” (M1-M3), nor on price inflation. For the Swiss, however, the rising money supply concerned both narrow and...

Swiss GDP increased by 0.2% q/q and 1.2% y/y. Once again, investments on equipment and software (+3.6%) was one of the main drivers. For many economists investment on equipment and software is the most desired GDP growth component. SECO: Gross domestic product in 2nd quarter 2015  (source)Each quarter, the Swiss department of economics (SECO) estimates the GDP and its components. The main purpose of these estimations is to provide data that allows for an assessment of the cyclical...

National accounts in Switzerland in 2014 Press Release by Swiss Statistics (FSO) Foreign trade the main source of growth Neuchâtel, 27.08.2015 (FSO) – In 2014 the Swiss economy registered a growth in grossdomestic product (GDP) of 1.9% at the previous year’s prices (+1.8% in 2013).Taking a slight  decrease in the general price level into account, GDP at current prices grew by 1.2% (2013:+1.7%). Foreign trade strongly contributed to the rise in GDP in 2014 due to sustained growthin exports...

After the strong revaluation of the Swiss franc in recent years, some economists, like the ones at the Swiss National Bank (SNB), claim that the franc is overvalued. Many use misleading Purchasing Power Parity (PPP) measures like the Big Mac index, the OECD index or the PPP based on consumer prices for computing fair values. The second big mistake is to compute the Real Effective Exchange Rate (REER) with the wrong “base year”, i.e. to assume that in 1999 the CHF was correctly valued. The...

Once upon a time, before banks and before even private lending, there was only one way to prepare for retirement. People had to hoard something durable. Every week, they would set aside part of their wages to buy salt (later, it was silver). Assuming it didn’t get wet, the salt accumulated until they couldn’t work any longer. Then, they would begin selling it off to buy groceries. This was the best they could do. By modern standards, it wasn’t a very good method. Stockpiling a commodity...

This year began with the U.S. stock market facing ever increasing headwinds that whipped up choppier waves with whiter crests and deeper troughs. These harsh winds have blown from the four points of the compass, namely the U.S. Federal Reserve Board, the Euro/Greek crisis, the energy and commodity maelstroms, and now the icy chills out of China, all combining to stir up the treacherous currents of globally unstable economic weather patterns.When the market’s weather is sunny and breezy, the...