Here is an example why the paper money-central banking regime is in peril or can't be expected to last. And also why we should expect inflation, in spite of the recent market volatility.
This from Bloomberg, (bold highlights mine)
``Swiss central bank president Philipp Hildebrand is finding himself in a tug of war with currency markets and he may be on the losing side.
``Concern that the Greek fiscal crisis will spread through the euro area is pitching the Swiss National Bank against investors, forcing the Zurich-based central bank to sell francs at an unprecedented pace to fight the currency’s appreciation against the euro. With the SNB’s foreign-currency holdings now accounting for 68 percent of its balance sheet, economists say Hildebrand may have to spend even more to maintain the resistance.
“Greece is giving the SNB a major headache,” said David Kohl, deputy chief economist at Julius Baer Holding AG in Frankfurt. “We expect the SNB to continue to lean against the appreciation for as long as possible, but they won’t be able to keep up the pace of currency purchases much longer.”
``Hildebrand is already stepping up the fight as the franc strengthened to a record 1.4003 per euro on May 17, 14 months since the SNB began its intervention campaign to insulate Swiss exports and deflect deflation threats. The central bank added 28.5 billion francs ($24.6 billion) to its currency reserves in April, the biggest increase in at least 13 years, as Greece’s turmoil undermined the euro."
``The franc has strengthened 5 percent against the currency of the 16-nation region in the last six months."
Global central banks like the US Fed, the ECB and the SNB as shown above, are not only printing money in massive scale but absorbing assets of dubious quality...
The problem is that market interventions almost always lead to unintended consequences.
A warning from Ludwig von Mises, (bold highlights mine)
``If one looks at devaluation not with the eyes of an apologist of government and union policies, but with the eyes of an economist, one must first of all stress the point that all its alleged blessings are temporary only. Moreover, they depend on the condition that only one country devalues while the other countries abstain from devaluing their own currencies. If the other countries devalue in the same proportion, no changes in foreign trade appear. If they devalue to a greater extent, all these transitory blessings, whatever they may be, favor them exclusively. A general acceptance of the principles of the flexible standard must therefore result in a race between the nations to outbid one another. At the end of this competition is the complete destruction of all nations' monetary systems."
When the public awakens to the reality that central bank balance sheets represents as the "emperor with no clothes" and that the power to tax has reached its limit, then the crack-up boom is likely to emerge.
This from Bloomberg, (bold highlights mine)
``Swiss central bank president Philipp Hildebrand is finding himself in a tug of war with currency markets and he may be on the losing side.
``Concern that the Greek fiscal crisis will spread through the euro area is pitching the Swiss National Bank against investors, forcing the Zurich-based central bank to sell francs at an unprecedented pace to fight the currency’s appreciation against the euro. With the SNB’s foreign-currency holdings now accounting for 68 percent of its balance sheet, economists say Hildebrand may have to spend even more to maintain the resistance.
“Greece is giving the SNB a major headache,” said David Kohl, deputy chief economist at Julius Baer Holding AG in Frankfurt. “We expect the SNB to continue to lean against the appreciation for as long as possible, but they won’t be able to keep up the pace of currency purchases much longer.”
``Hildebrand is already stepping up the fight as the franc strengthened to a record 1.4003 per euro on May 17, 14 months since the SNB began its intervention campaign to insulate Swiss exports and deflect deflation threats. The central bank added 28.5 billion francs ($24.6 billion) to its currency reserves in April, the biggest increase in at least 13 years, as Greece’s turmoil undermined the euro."
``The franc has strengthened 5 percent against the currency of the 16-nation region in the last six months."
Global central banks like the US Fed, the ECB and the SNB as shown above, are not only printing money in massive scale but absorbing assets of dubious quality...
Swiss Franc-Euro Trend
...with the aim of maintaining certain exchange rate levels for whatever goals (yes interventionism is always politically designed, but camouflaged by economic intent).The problem is that market interventions almost always lead to unintended consequences.
A warning from Ludwig von Mises, (bold highlights mine)
``If one looks at devaluation not with the eyes of an apologist of government and union policies, but with the eyes of an economist, one must first of all stress the point that all its alleged blessings are temporary only. Moreover, they depend on the condition that only one country devalues while the other countries abstain from devaluing their own currencies. If the other countries devalue in the same proportion, no changes in foreign trade appear. If they devalue to a greater extent, all these transitory blessings, whatever they may be, favor them exclusively. A general acceptance of the principles of the flexible standard must therefore result in a race between the nations to outbid one another. At the end of this competition is the complete destruction of all nations' monetary systems."
When the public awakens to the reality that central bank balance sheets represents as the "emperor with no clothes" and that the power to tax has reached its limit, then the crack-up boom is likely to emerge.
No comments:
Post a Comment