Switzerland is fighting a losing battle to stop massive inflows of funds from investors fleeing sovereign risk in the euro area and the rest of the world, raising the risk of a violent spike in Swiss franc if global debt jitters return.
The Swiss National Bank (SNB) said it lost over 14bn francs (£8.8bn) in the first half of the year in a forlorn attempt to hold down the currency against the euro.
“If we have a US slowdown with a fresh financial crisis, everybody is going to want to buy the Swiss franc, along with bottled water, tins hats, and a shotgun,” said David Bloom, currency chief at HSBC. “Now that Japan’s debt is around 200pc of GDP the franc has displaced the yen as the ultimate safe haven.” Click Here for the rest of this story.
Switzerland Under Siege: Free Markets May Yet Save the Swiss Franc
Axel Merk, Portfolio Manager, Merk Mutual Funds
July 20, 2010
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 by a Don Quixotian battle by a lone warrior, a warrior armed with a license to print money.
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(Bloomberg) — Dennis Gartman, an economist and editor of the Gartman Letter, speaks about Europe’s sovereign debt crisis and the outlook for the euro. Gartman also discusses gold prices. Gartman talks with Matt Miller and Carol Massar on Bloomberg Television’s “Street Smart.” (Source: Bloomberg)
According to the economist Friedrich von Hayek, the development of welfare socialism after the Second World War undermined freedom and would lead Western democracies inexorably to some form of state-run serfdom.
Hayek had the sign and the destination right, but was wrong about the mechanism. Unregulated finance, the ideology of unfettered free markets, and state capture by corporate interests are what ended up undermining democracy both in North America and in Europe. All industrialised countries are at risk, but it’s the eurozone – with its vulnerable structures – that points most clearly to our potentially unpleasant collective futures.
BRUSSELS (AP) — A bold $1 trillion rescue by the European Union halted the slide of the euro on Monday and sent markets soaring worldwide in a gambit that may ultimately be seen as the moment Europe truly became a union.
The sweeping cash injection was greeted with euphoria on Wall Street, where stocks rocketed to their biggest gain in more than a year.
Still, the package did not resolve the basic dysfunction at the heart of Europe’s monetary union: Governments can still spend recklessly and saddle their partners with the bill.
