Wednesday, 07 September 2011 06:19
The Race to the Bottom - a new chapter
The Swiss National Bank (SNB) opened a new chapter in the race to the bottom yesterday by introducing a ceiling on the currency. While pegs are often effective deterrents in the short term, their long-term records are questionable. It really becomes a question of ability and will to sustain the peg. Will the SNB be effective? In a world of deteriorating Euro sovereign credit, a weakening stock market and anemic global growth the real opportunity for Switzerland to weaken its currency would be to dismantle much of its secretive banking structure. One method would be taxation of non-local savings. This would send assets scurrying and would weaken the currency, but the cost to its local economy would be crippled by such a move. In the meanwhile, watch for SNB FX reserves to continue the climb that began with the 2008-09 credit crisis.
Leave a comment
Make sure you enter the (*) required information where indicated.
Basic HTML code is allowed.
