Switzerland Under Siege: France Threatened From Within

Efforts are underway to undermine Switzerland’s rock solid reputation as a safe haven. The alpine nation, famous for its readiness against enemies with citizens storing military assault rifles at their homes, is under attack. The attack, however, comes from one of their own, the guardian of the Swiss franc: the Swiss National Bank (SNB). In any other country, a central bank may have the power to derail the currency; in Switzerland, however, efforts to undermine the franc may be more appropriately characterized as a Don Quixotian battle by a lone warrior, a warrior armed with a license to print money.

Prices, be they for goods and services, stock prices or currencies, are best set by free markets. The euro and the Swiss franc are traditionally two highly correlated currencies; however, there are rational reasons why each currency has periods of strengths and weakness. SNB Chairman Philipp Hildebrand does not appear to see it that way; he was on a mission against “speculators” that gauged the Swiss franc to be a safer place than the euro. As his influence rose in early 2009 (his promotion from Vice President to Chairman was announced in early 2009, but did not take effect until early 2010), Switzerland began to intervene in the currency markets, apparently with the aim of pegging the Swiss franc to the euro. Below is a chart of the Swiss franc versus the euro over this time period (a rising trend reflects Swiss franc strength versus the euro); sharp moves downward tend to coincide with larger interventions to “punish” speculators:

View the Original article