Now that the dust raised by the announcement of the abolition of the 'floor rate' has settled somewhat, I am convinced of the logic of this abolition, despite the protests from all sides. We were faced with an untenable situation. Switzerland, so often tossed around and mistreated in recent years by foreign governments (unclaimed funds; taxation; banking secrecy) was able to demonstrate its sovereignty in a... sovereign way! The SNB also thumbed its nose at all the speculators, some of whom will not recover. Even if the tourism industry, in particular, will have a very, very hard time recovering, we must not forget that the cost of supporting the floor rate is shared by all Swiss taxpayers. And if we have not yet had to pay up, any extension of the floor rate would only have increased the bill.
As for those who would have liked the SNB to show some warning signs of its intentions, this is reasoning that goes against common sense: if speculators had sensed the slightest flaw in the SNB's determination, they would have rushed in and the national bank would have lost in a few days what it has lost in the last 3 years. Ex-post (it's always easier!), it was the SNB's visible intransigence in the days before the abolition that should have put us on our guard.
I have a lot of sympathy for the businesses and people who will suffer from this strong franc (I am part of both categories!), but as a believer in economic liberalism, I can only applaud a correct gesture, which was announced 3 years ago, and which is logical.
And for those who have Swiss francs, the market has become a little more affordable again!
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Armand,
No national bank, no country therefore, lets its currency go with the flow of the markets. It is thinking this that is "against common sense". The USA is printing greenbacks left, right and centre, Europe is doing its QE, China is preventing its currency from increasing in value (which makes the Yuan the most undervalued currency in the world), Japan has manipulated its Yen... And you think that Switzerland must let itself be carried along by economic liberalism, the very same one that has brought down the global banking system! We are in an era of currency wars and it is as foolish as it is illusory to believe that Switzerland will be able to watch the Franc increase in value beyond a certain threshold without taking action...
That being said, your analysis is wrong on another point: with the introduction of a negative rate and its amplification to -0.75%, Switzerland continues to try to steer its currency. And I do not think I am wrong in saying that the SNB intervenes or is ready to intervene on the markets to buy currencies if necessary, the abandonment of the floor rate in no way signifying the definitive end of intervention. In short, it is absolutely not a question of economic liberalism but rather of situational pragmatism. Because let us not delude ourselves, the abandonment of the floor rate was not wanted on January 15, it is indeed a defeat of the SNB in the face of the markets.
As for the snub from the BNS and your sovereign sovereignty, exporters, borrowers in Francs, the tourism industry... will appreciate it.
Yours sincerely,
Thierry.
Well apparently there are things moving with the CHF… it seems that the BNS is acting in a submarine manner…
It is obvious that Switzerland cannot let its currency slip away. Liberalism exists only in theory, in reality everyone tries to pull the blanket over themselves.
This seems to be confirmed by the rumours that the SNB is intervening in the markets. There is even talk of a range of 1.05 to 1.10.
If the Greek situation remains under European control, it is tenable, if so I fear a sharp rise in the Franc...
Speaking of currencies, is there a graphical tool that allows you to evaluate one against a basket of others, to your knowledge?