Why did the Swiss break the peg of the franc?

Paul Krugman writes:

Two things to bear in mind. First, having in effect thrown away its credibility – in today’s world, the crucial credibility central banks need involves, not willingness to take away the punch bowl, but willingness to keep pushing liquor on an abstemious crowd – it’s hard to see how the SNB can get it back. Second, there will be spillovers: the SNB’s wimp-out will make life harder for monetary policy in other countries, because it will leave markets skeptical about whether other supposed commitments to keep up unconventional policy will similarly prove time-limited.

Brad DeLong and Scott Sumner agree the Swiss move was a bad idea.  We’re all in accord on the economics (more or less), but I am more interested in a different question.  The Swiss central bank, had it continued the peg, probably would have had a balance sheet larger than Swiss gdp.  But does this matter?  Should anyone care?  Or does that make them “too big a guy on the block”?

I see two views of the world running around in these discussions, but not always articulated as such:

1. Bureaucrats, which includes central bankers, are not so much budget maximizers as hoarders of institutional capital.  They hoard institutional capital when they should be spending it down, in the interests of the broader polity.  So this is a public choice problem, rather than a matter of macroeconomic ignorance.  When it comes to macroeconomics, we need institutional reforms which induce them or maybe even require them to spend down this capital, come what may for their personal levels of political influence.

2. Bureaucrats hoard and indeed extend institutional capital because they know how important it is to maintain the quality of significant institutions, such as central banks.  Without such capital , semi-independent central banks would soon cease to exist, to the detriment of us all.  Outside academics, however, rarely can see the importance of this factor, because they have less experience running political institutions.  When smart central bankers — which yes includes the Swiss — are apparently doing the wrong thing, it is because they are seeing more variables of the problem than we are.  They either cannot do “the right thing,” or doing that would be too costly in terms of the country’s longer-term institutional prospects.

By the way, there is also #3, which I do not find credible:

3. The Swiss central bankers suddenly became stupid and forgot their macroeconomics.

I agree there is plenty of #1 out there, maybe for Switzerland too.  But I’d like to see more debate of #1 vs. #2, because I don’t think the Swiss central bankers — praised extravagantly by many of us not too long ago — simply would tank their economy for no good reason at all.

Addendum: Here is Dean Baker’s dissent, although I think the stock market does not agree.  And Scott Sumner comments, he seems to opt for #3.  Here are useful comments from the FT.


Its hard to

Get your

Virginity back.

Or your euros - apparently, there as been an incredible bank run in Switzerland, and at this point, no Swiss bank can provides euro notes to their customers. At least, such was the reporting on SWR on Saturday morning.

Anyone want to guess what the Swiss are doing with this delayed Christmas bonus (why yes, it is still customary for many companies to pay their employees a Christmas bonus)?

That's right, they are going shopping in the eurozone.

A tangential, but to my mind still interesting, question with respect to the actions of the SNB will be the impact on countries such as Hungary where so much debt is denominated in Swiss Francs. This is a decision that will reverberate beyond Switzerland.

Im not an economist so this may be a dumb question, but here goes. Economists seem to believe that markets should set prices and that government interference with market pricing leads to bad consequences. Yet when it comes to the price of money (in relation to other money in this case) economists seem to believe the exact opposite, that governments should set the price and any change in that price should be countered via government action. Why the stark difference when we are thinking of money and not any other good? Are these difference economists who dont believe in market pricing? Is it because the government can print money and so normal market pricing doesnt apply? Whats the reasoning here? Why not let people trade currency at whatever value they choose and let the market work things out?

A weaker franc protects the jobs of Swiss exporters. If one Swiss politician promised to freely float the currency under all circumstances, another politician would promise to maintain high employment under all circumstances. The second guy has a much more compelling campaign slogan.

That explains why politicians favor it, but why do economists favor it?

Floating prices would pretty much upend a hundred years worth of business accounting thinking. It's pretty hard to read a P/L statement when the numbers mean something wildly different every quarter. Let alone the difficulties in making a projection.

Floating currency can really wipe out people paying or receiving interest on money, since debts are always in nominal currency. Since our entire economy is structured around debt as the reliable, default form of investment (including most countries entire public and private pension systems), the transition would be pretty traumatic.

Menu costs are also a factor, Amazon might be able to tabulate and quote a new price for every item on a minute-to-minute basis, but most businesses can't.

It's possible that price levels could smooth out with a robust currency futures market (like, a hundred times more liquid and responsive than even the NYSE), prepayment for goods and services, basically a complete reengineering of the financial system -- and commensurate transfer of rents to futures brokers, who suddenly become the new central bankers, except they work on commission. And in the end all "important" transactions are happening not with currency, but with futures contracts, which in effect become the new currency.

I mean it could work, but getting there in one piece is the hard part, and once you're there is it really all that different?

What planet are you posting from? Name a single, stable price, for anything, anywhere.

Currencies, stock prices, futures contracts, etc. all fluctuate wildly, every day.

That's why derivatives exist, to insure against, among other things, adverse fluctuations in currency relationships.

A bank which lent to a Hungarian wanted to see its loan repaid in swiss france. If the currency appreciated dramatically, default risk would as well and the bank would lose money on its loans.

So? Why should a country manipulate its currency just to protect one particular industry from potential loss?

Why should it indeed. But, if you are a depositor in the bank, and your bank suddenly has a bunch of bad loans because your currency appreciated, you might weigh the cost of protecting depositors, your banking system, etc. That said, I don't think they should manipulate their currency by pegging it.

Think of it as banks v. exporters. There is a price to pay if you are a haven currency. And, some benefits as well.

If you are a US citizen living in Switzerland and working for a drug company and getting paid in dollars you might also have a different attitude. The thing to do right now is sign up for a Swiss tour package that hasn't had time to change prices in US dollars.

Armchair economist here, but here goes.

Firstly, the basic reason that governments try to control the price of money is because its effects are so widespread—since everything is priced in money, changes to the price of money affect everything. If the price of money moves in the wrong direction or at the wrong speed, it can cause inflation, deflation, stagnation, bubbles, mass unemployment, recession, and all sorts of other economic ills. Governments influence the price of money to try to keep it somewhere that's healthy for the economy as a whole.

Why not let people trade currency at whatever value they choose and let the market work things out?

This is called a floating exchange rate, and it's actually the normal state of affairs for most currencies today. The value of the dollar, for instance, floats; the Federal Reserve influences the price by changing the amount of money in circulation, but it doesn't directly set the price.

The Swiss franc used to float, but when the euro started running into trouble a few years ago, people with euros started moving that money into the franc instead. That drove up the franc's value so quickly that it caused serious problems for the Swiss economy. So the Swiss National Bank set a cap on how high the franc's price in euros could rise; if it went higher than that cap, they would buy euros with newly-created francs, reversing the flow and lowering the franc's value. This is called "pegging" a currency; we say that the Swiss franc was pegged to the euro.

Now the Swiss National Bank has removed the peg. The market has taken over setting the price of the Swiss franc, and it's decided that, without the peg in place—and with a very surprising difference between what investors thought the Swiss National Bank was planning for the economy's future and what they're actually planning—the old price was wildly inaccurate. That's why the franc moved so quickly yesterday.

You might also want to check out this great Brad DeLong post that lays everything out very well I think. http://delong.typepad.com/sdj/2010/06/is-macroeconomics-hard.html

But you could make the same argument for a lot of things. The price of food is important, effects everything and its movement could cause nflation, deflation, stagnation, bubbles, mass unemployment, recession, and all sorts of other economic ills. Same with gas or energy generally.

Once you accept the logic that the role of government is to prevent bad things from happening as a result of market forces, then what market forces are immune?

And thus you see price supports for farmers.

I think it was good move looking the current circumstances. One should question the previous move, imposing the peg, more than this one.
SNB panicked on the back of Euro crisis a capital influx to perceived safe Switzerland pushed the franc up, making the life of Swiss exporters a bit harder.

The trouble is, you need cash to sustain a peg keeping your currency bellow it’s real market value. Apparently, demand for Swiss financial services sky rocked with Russian crisis and posed fresh pressure on SNB so the only way out was get rid of the peg and let the market determine the real rate.

I like when markets do their job freely.

Most economist also believe that a state should establish a legal system that arbitrates and enforces contracts. You could argue that each and every contract should make provisions for some sort of enforcement mechanism should a dispute arise. And that mechanism could be priced in a market. But economist generally see a stable legal system as beneficial to markets.

Just as economist generally see a stable monetary system (price, employment, however you want to define stable) as beneficial to markets.

Questions like this arise when you think of markets as some sort of state of nature. Markets, even ones generally described as "free" are purposefully set up to achieve a desired outcome. One way to think of it would be that economists think that a market will be most "free" if certain parameters are set up for the market to work in. Currency being one of those parameters. Conflating "free" with "natural" leads to misunderstanding.

Thats an interesting take, but couldnt you use that logic to defend any sort of price manipulation? Why not oil? Or Copper?

No just like you cant use "but we have a free market" as justification not to establish a manipulation - saying manipulation X works well so that justifies manipulation Y isn't a convincing argument.
Some ways of establishing markets works well. Some don't. Studying which are best is something economist do - but typically not against a backdrop of uninhibited nature.

But thats merely proof by assertion. The reason i bring up oil and copper is to illustrate that you have merely pronounced currency as something that should be manipulated. Ok, why not oil then? Why not everything?

You're correct, I'm not trying to offer proof that fed control of monetary policy is good. I'm saying it's not inconsistent with what "economist seem to beleive".

Different economist have different ideas about what parameters (legal system, police enforcement, enviromental regulations, monetary system, etc...) should be established outside of the market. There is much disagreememt, some favoring much more, some favoring much less.

If you'd like specific arguments in favor why most economist favor some sort of monetary policy - look elsewhere, I'm not providing it. But I don't know any economists that favor singleing out currency as the only non-market based parameter, which is what your original question implied.

I worked at the Bank of England when the Quantitative Easing Program was being designed. Much of the external and quasi-academic commentary on the design of the programme ignored what was one of the BoE's primary objective's in designing the scheme - to safeguard the BoE's balance sheet.

So the programme largely took the form of swapping monetary reserves for extremely high quality paper, with the monetary reserves being liabilities on the BoE's balance sheet, and the paper bought being assets. The external commentary that called for the BoE to create money to buy (e.g.) underperforming loan books, or just to write every citizen a cheque always completely missed this point.

To be clear - I'm not saying what the BoE did was necessarily right (or that it was wrong) - just that it was interesting that objectives of what the BoE was trying to do, were not the same as people outside assumed.

Thanks for your insight. I don't think many people outside assumed the BoE was trying to underwrite bad loans--but surely the whol point of QE wasn't just to change the makeup of the BoE's balance sheet. It was also to EXPAND that balance sheet, which would in turn provide liquidity and hopefully encourage investment, thus jobs, thus consumption.

The people arguing for basic income or underperforming loan purchases were arguing these would be more effective than a Central Bank balance sheet expansion. Lacking a counterfactual, we don't know if they're right. I suspect they are.

Not a basic income, but printing money to buy government bonds that finance a tax rebate to all citizens.

Citizens use that money to spend (stimulus), pay down debt (deleveraging) or save (investment.)

This should be the more egalitarian response to the need for QE.

D, I think what you may also be saying is that the Bank purchased loans so that the loans it purchased would not become bad loans had they not purchased them. In other words, the act of purchasing loans raises the prices of good and risky loans relative to what they would be had there not been the purchase of loans. If you have an over leveraged banking system, there has to be a way to deleverage.

Then there is another option which I find pretty credible:

4. The Swiss central bankers did not suddenly forget their macroeconomics, but it has always been wrong in its core.

Both inflation targeting and currency pegs never worked properly. Let's face it.

The Swiss Central Bank was printing itself into self-destruction. It finally had to kill the CHF pegging at 120... before the ECB printing presses exploded the Swiss National Bank's vaults with a tsunami of deteriorating Euros.

Of course, the Swiss Central Banksters had assured the world they would never, never, ever do such a thing. But big lies are an essential component of the basic central banking con game; so routine that many banksters start to believe them too. Central Banksters violate every rule of sound money and financial market integrity, and have lately created almost $20 Trillion out of thin air.
This Swiss event is mildly interesting, but you ain't seen nuthin' yet in really bad world financial news.

You could have done worse, like having purchased gold at $2000.

"The Swiss Central Bank was printing itself into self-destruction. It finally had to kill the CHF pegging at 120… before the ECB printing presses exploded the Swiss National Bank’s vaults with a tsunami of deteriorating Euros." The problem with that theory is that since mid 2012 the SNB balance sheet was not growing as a proportion of GDP and in recent weeks had actually started to fall - http://clamo.ftdata.co.uk/files/2015-01/16/GUEST%20CHART.JPG.
My latest theory, the SNB saw this fall and believed (wrongly) that the problem was over and there was no need anymore for the peg policy.

Correct me if I am wrong.. Corrupted politicians deposits, if deposited in francs, must have the benefits of currency appreciation besides the fact hiding money in safe haven...

Switzerland is no longer a safe haven for 3rd world politicians. Several have been burned by this, including Chen Shui Bian.

The Swissies will now tattle to the IRS as well.

Tyler, a really sober look. Even considering #2 as a possibility talks about a mind open to learn.

Krugman's text is kind of condescendent to the Swiss, I don't know where he's standing to look them down with such arrogant confidence.

It seems simpler to believe in the well-documented phenomenon of groupthink pushing yet another central bank committee to mistakenly believe, in the aggregate, that some particular measure (here, lowering the deposit rate even further below zero) will have more effectiveness than it would really have.

#2 sounds like the Efficient Central Bank Hypothesis.

I'm a layman here, but it seems pretty straightforward. The SNB is betting the value of the euro will drop further, as it surely will. Why would it be in their interest to pretend otherwise? Why continue the charade and expose themselves to much greater losses in the near future? It seems to me there is too much an air of unreality about the value of currencies these days. The SNP seems to be striking a blow for iconoclasm: some emperors really have no clothes.

The SNB faced a referendum in November. Any policies that would move the country further away from "hard money" would invite more support for a referendum restricting central bank power. Economics may think the SNB move is bad for central bank credibility, but it is good for central bank independence.

So, is this why they had to drop the peg? I still don't get it from the point of view of the balance sheet: it baloons, so what? They could buy gold or other quality asset with proceeds from sales of CHF...

How many Euro-denominated government bonds have they bought with their Euros? I wonder if, at the margin, they aren't the real reason Spain and Italy can borrow at 10 years cheaper than the US. I think they see the ECB QE coming and realized there aren't enough such assets left for purchase afterwards.

Wait, so the Swiss were kind of doing QE for the EU already?

Does hard money bounce?

I would agree with #2 which the peg to the Euro hit its point of severe Diminishing Returns and might have created a bigger issue in 12 months. Switzerland had to stop hot money flows due to the Russian ruble undervalued (due to political concerns) and the rest of Europe is becoming Japan Part Deux. They feared what would happen if the balance sheet grew too big to the rest of the economy.

In Krugmans original article he states the following:

"You might think that making your currency worth less is easy — can’t you just print more bills? — but in the post-crisis world it’s not easy at all. Just printing money and stuffing it into the banks does nothing; it just sits there. The Swiss tried a more direct approach, selling francs and buying euros on the foreign exchange market, in the process acquiring a huge hoard of euros. But even that wasn’t doing the trick"

Why does this not work? He doesn't fully explain and as a non economist I don't understand why printing more money would not cause inflation at some point.

josh moss "Why does this not worl?" Printing money that "just sits there" is functionally no different than printing more money that no one knows has been printed and that is never circulated.

But the part that is hard to understand is why the money "just sits there".

It's not money, it's credit. And nobody wants more debt.

It's even worse than just sitting there. It's losing 0.75% a year with their negative interest rate. Does that put Krugman's position about a lack of demand in a better light?

Central banks don't need credibility, currencies do. The fact that the peg needed to be defended in the way it was indicates that setting the exchange rate of the euro and the franc to equal did not make them equal; people were still choosing francs over euros. I don't see how the SNB suffers institutional damage by accepting that fact. Yesterday the franc showed credibility of the kind you can take to the bank. Que sera sera for all that macro stuff.

There's also a legal dimension. The Swiss constitution says that the Swiss National Bank should act independently and autonomously. So according to Swiss law professor Paul Richli there is no legal basis for a long-term peg of the Swiss franc to any other country, as that would undermine its independence. Thus, from a legal perspective, it had to be given up at some point in time. (Source: http://www.nzz.ch/meinung/debatte/die-nationalbank-zwischen-realitaet-und-recht-1.18462205) Furthermore, it was announced as a temporary measure from the beginning.

As long as the currency peg was voluntarily, I don't understand how it undermines the bank's independence.

It undermines the Swiss franc's independence when all the ECB's decision have a 1:1 impact on it. So one reasonable point in time to abandon the peg was indeed just before the probably announcement of the ECB to implement a policy (QE) that does not fit the Swiss situation.

Note that even though the Swiss stock market tanked nominally, it is still up in USD or EUR terms. By not being bound to the "titanic" any more, the Swiss franc can regain its status as safe haven, which could help Swiss banks in the long run. With unemployment at 3% and low energy prices, the timing might be right for the Swiss economy to withstand the shock. I prefer having exchange rates determined by the free market than by a central bank.

"semi-independent central banks would soon cease to exist, to the detriment of us all"

The "detriment" is a religious belief.

The two financial reversals of US history with the most negative effects were after the establishment of the Federal Reserve.

The pre-Fed reversals were largely bank panics only, as was the 2008 one until the Fed (and the rest of the government) intervened. Then, it became the Great Recession because the Fed (and other central banks) choose to protect banks, not people.

Bob, You might want to download a course on US economic history. There is one by Brad de Long which is pretty good. To say that pre-Fed were largely bank panics is to say that bank panics is just are financial crises.

My dead horse needs another flogging. RE: Krugman's graph.

Expansionary fiscal policy? Check - according to his graph
Expansionary monetary policy? Check - according to his graph
Lost decade? Check - as long as “lost decade” means what I think it does

v is defined as (P/M)Y, so even with no assertion of any theoretical relationships, an increase in monetary policy may merely lead to a decline in velocity, and to neither real growth nor inflation. There is no assertion of always or never or most of the time. Merely a statement of what an uninformed person like me understands as consistent with the definitions as implemented by the folks who measure macroeconomic variables.

So, go to the FRED database at the StLouis Fed, and look at a graph of velocity for 1995-2015 (or any other suitable period that includes 2007-2010). During the crisis, the Fed expanded its balance sheet. Did the economy recover quickly? No. Did inflation result? No. Did velocity decline? Yes.

Unless I start from the assumption that monetary policy affects a component of NGDP, the Japanese lost decade example does not lead me there. (Nor does the comparative US and Canadian experience during the Great Depression, nor does the US experience during the Great Recession). Happy to discuss other historical examples more consistent with velocity not offsetting monetary policy.

If people wonder why policymakers don't find macroeconomist theorists persuasive, it is because they fail to reject other plausible explanations of the facts, which is a different burden than merely presenting an internally consistent account of the facts. To say that the interest rate in Japan shows that Japan's monetary policy was actually something other than that depicted in the graph is fine to describe an internally consistent theory, but there is still a burden to reject the plausible alternative interpretation that money growth might just lead to a decline in velocity under some circumstances, especially if velocity just declined by a very large amount when the central bank balance sheet expanded.

in today’s world, the crucial credibility central banks need involves, not willingness to take away the punch bowl, but willingness to keep pushing liquor on an abstemious crowd

This is an alien mindset to me.

Perhaps Krugman's alien invasion was not so alien after all...

"Without such capital , semi-independent central banks would soon cease to exist, to the detriment of us all."

This is just a sad, sad statement. Especially coming from a supposed supporter of market economics. What, you support markets, except when you don't?

Semi-independent central banks have done nothing for social welfare. They exist purely to enrich the political class, at the expense of everyone else.

The Swiss supported the euro (with the peg) because, well, the Swiss are the world's bankers and the euro countries make up a large part of the world. But the Swiss couldn't keep buying euros forever (in order to sustain the peg), and I suspect the Swiss project even worse days ahead for the euro. So the Swiss could adopt a gradual policy (by gradually cutting its purchase of euros) or do it in one fell swoop. Drip, drip, drip or swoosh. The former runs the risk of a fall that gains momentum and can't be stopped. The latter releases all the energy of the fall at once, so there's no place to go but up.

TC asked an interesting question. Apparently no one has any answers so they went off on a variety of tangents, some pretty loony. (You know who I'm talking about.)

Maybe I'm just a layman finding patterns in consecutive events without any causality relationship but.....http://www.bbc.com/news/business-30810137

Here's an answer: something that can't go on forever won't. The ECB clearly has no intention of getting its house in order and the Swiss are getting tired of mopping up a mess they didn't create.

+1 So much for ECB bank regulation.

I wonder. Showing a willingness to do something crazy can be a good game-theoretic strategy to gain power. (somebody tweeted this)

And: can it be that the SNB is already planning it's exit from the exit from the peg? Maybe they just set the Frank free for a bit, to see what ECB policies will do, with the plan to introduce a new peg somewhat later this year.

But if that were true. Would it not be better for them to state that intention now already? Showing a willingness to do something crazy can be a good game-theoretic strategy to gain power. Or would their keeping it as a surprise be a demonstration that what we now perceive as crazyness is a sign of their power? Now their secret weapon is that they can drop the hint of thinking reintroduce a peg. That threat hanging over the market could be as effective as OMT is for ECB.

The SNB was having trouble meeting their price level targets and tried depreciating their currency ... and got deflation. I think they realized that using a currency peg for monetary policy wasn't doing anything and so stopped.


Actually, the SNB makes me think of the ECB (which is universally seen as doing a bad job too). The ECB tried a little bit of QE and got zero macroeconomic response, then they tried some more after a double dip recession seemed imminent. Still no macro response. So they gave up on QE:


The Euro is a bad idea to begin with. Even regions within a single country have different economic issues and need different, and even contradictory monetary policies, of which exchange rate is an important one. Having one single currency across so many countries with different economic and political conditions is asking for economic and political trouble.

Printing a bunch of money and yet getting deflation sounds like the best news for a central bank ever, as it's a license to print even more money, and use it to buy more things, like the national debt, or all of Monaco.

It makes absolutely no sense that a central bank would have trouble creating inflation. If Zimbabwe and the Weimar Republic could do it, so can our top economists.

Pegging one's currency with a foreign one while not having influence or control in their monetary nor fiscal policies is like pegging your life on someone you have no control of his/her movements and activities. It is getting in to the world economic competition with one of your hands bound to a leg. It is about time nations stop seeking foreign exchange stability by pegging. Different nations in different economic cycle or situation need to have independent monetary policies, of which the exchange rate is an important one. Handing over the control of that to a foreign country(ies) having different economic (and political) needs is crazy.

I don't see any reason to dismiss 3). Yeah, they were congratulated for earlier for moving to a peg, but that doesn't mean everyone thought they knew what they were doing just that they got it right.

That being said, I think 1) and 2) probably are playing a role here. There was a lot of domestic pressure to do something differently it seems. It's just a little odd to abandon CB independence as a way to preserve CB independence. I don't think the policy actors are nearly as shrewd in this sense as TC makes them out to be.

Disclaimer: Swiss who had most of his financial wealth in CHF cash - unsure whether the SNB just did him a service by inflating his wealth by 20% or not (because the potential for a bad recession).

However, what I am sure about is that I am really starting to be annoyed by the level of discussion within Switzerland but even more so in US-centric sources (which is basically a bash fest lacking both theoretical grounding as well as cold hard data). It's hard to believe that the SNB did not thoroughly consider this move (I actually had a bunch of lectures by Thomas Jordan back in the mid 2000s back when I did my Econ Masters. And while he truly cannot deliver speeches, he is a lot smarter than people will give him credit for - he coincidentally wrote critical papers of the Eurozone construction back in the 1990s).

As a matter of fact, the SNB has always said that the semi-peg was a "temporary" measure. Anyone who found themselves on the wrong side of the appreciation after the peg was dropped conveniently ignores this (this includes both Swiss exporters AND everyone who was short CHF for financial engineering reasons). I had my doubts back in 2011 whether the semi-peg was a good idea but looking back, it seems to mostly have been vindicated (comparatively, Switzerland fared very well through the crisis). Possibly the most ridiculous request is that people should have given advance notice (I think it's obvious why that is a phenomenally bad idea). One way or another, the gravy train had to come to a very abrupt end. Whether now or some other point in time would have been more appropriate is ultimately hard to tell but overall, it seems like 90% of the whining is because people did fail to listen to the explicit guidance that the peg was temporary. I personally did not expect them to drop it this early but it was obvious that it would not persist forever (and not because it could not have as you can obviously ALWAYS deflate your own currency, the question is more whether it is a good idea/worth the price)


You could argue a lot about how this was handled tactically. But is there any sane person who does not want to believe that this would have to end sooner or later? The Swiss have only two choices, adopt the euro or have an independent monetary police. Having a peg precludes option two and would eventually force option one. Either way it had end.

I think this is probably the thinking of the SNB. As I mention above, the SNB balance sheet has started to decline as a percent of GDP in recent weeks, and had been pretty stable since mid 2012. http://clamo.ftdata.co.uk/files/2015-01/16/GUEST%20CHART.JPG
I guess they decided they had won the battle and now was as good a time as any to shift of the peg.

Krugman: "crucial credibility central banks need"

I guess Krugman's "confidence fairy" is real after all.

That reliable contra indicators, evil people, like Krugman, deLong, Sumner , Baker oppose it,

makes the Swiss move an evidently clever move.

Adding the speculator Soros to the evil side makes it brilliant

Money is too important to be left to economists.

Hold the presses!

Krugman reveals that he is opposed to a central bank, any central bank that stops printing unlimited quantities of money.

Hold the presses!

Not really an economics move at all, but a marketing move: trying to keep the CHF relatively "premium" and in turn to preserve the upmarket and "premium" quality of the Swiss national "brand" for the long run. Piaget watches, a chalet in St Moritz, a week at la Prairie ... all would suffer from being "affordable" and benefit from increased exclusivity in the ultimate gated community of Switzerland.

Ignore economists who call the SNB swiss franc cap a "peg"

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