I found this article interesting, on a number of levels.
Ponder this phrase:
Switzerland, the nation that hasn’t gone to war with a foreign power since Napoleon, is reluctantly debating a generational taboo: ceding monetary independence to win a battle over its runaway currency.
“Runaway currency”? What has happened here? Switzerland has pursued a rational monetary policy, which to this day, in my understanding, includes gold backing. What has happened around them is OTHER countries have pursued insane, unaffordable spending, and paid for it by printing money.
The next paragraph reads:
Swiss National Bank Vice President Thomas Jordan said the central bank is assessing “a whole range of options” to prevent the franc, which reached a record against the euro this month, from making Swiss goods prohibitively expensive. Even a cup of coffee at Cafe St. Gotthard in Zurich costs $8.30, with one Swiss franc buying $1.2816 at today’s exchange rate.
Please understand this: coffee has not gotten more expensive IN FRANCS, which is what the Swiss use. It has gotten more expensive in DOLLARS, because–like the EU, but to a lesser extent–the US has also pursued stupid monetary policies. In our case, we can’t help it: we don’t control our money. Ben Bernanke and an elite group of bankers and large corporations do.
But you have to ask about the journalistic integrity of Bloomberg, in phrasing it like this. I sent an email to the author, but have not heard back. Several points needs to be made, though.
The most important is that this emphasis on export through devaluation is Keynesian. It is what the IMF and World Bank that he helped found always promote. It leads to short term gains, and long term losses. It leads to the erosion of national sovereignty, and indebtedness to global elites like the IMF.
The argument being made in favor of devaluing the franc–more on this in a second–is that it will promote exports, by making Swiss goods–chocolate, watches, pharmaceuticals–less expensive in foreign markets. Half of their income comes from exports, according to the article.
Logically, then, half of their income does NOT come from imports. What is being proposed is helping half the economy at the expense of the other half of the economy. As things stand, imports are cheaper, and domestic production and consumption is entirely unaffected by exchange rates.
Inflation erodes value. It makes savings less valuable. It erodes property values. It is a tax, or a property seizure.
We need to be clear about what the Swiss National Bank is proposing, in discussing a “target”. They are talking about consciously inflationary policy designed to erode the value of the money the Swiss people use. This will benefit some, and hurt others. It will benefit, presumably, those lobbying for this, and hurt those who do not understand what is being presented.
The Swiss National Bank is talking about printing money. Where does this money go? How is it distributed? In the United States, we very literally have NO way of knowing where the TRILLIONS of dollars that the Fed has printed have gone. But let’s consider some scenarios.
Let us say I am John Smith, and I run ABBA, which designs and builds Swedish supergroups. We are a publicly held company. I have a friend at the Swiss National Bank, and we spend a lot of time in the wild drinking schnapps and yodeling together. The SNB determines that inflation is needed. But how to put money into the economy? Well, why not buy up a whole bunch of my stock–which we will issue for the purpose–so we can fund a business expansion? This is a great deal for me. It doesn’t affect the SNB in the slightest. But it hurts, in the long run, the Swiss consumer, the value of whose money goes down, and he doesn’t know why. I got money for free, though, which is a very good price.
Or let’s add a level. Let’s say that the money is actually granted through the banking system. Let’s say that the SNB buys shares in WBBB, the We Be Bankin’ Bank. That bank now has more money to lend, and it lends it to me, at a very attractive rate of interest. The same thing has happened. Ostensibly the economy has been “stimulated”, which is not entirely inaccurate, but at the cost of transferring, over some period of time, some portion of the general wealth to the bank and to me.
Bloomberg is published and controlled by people with business interests. So are all other financial publications. In this particular case, given the language, and given the failure to explain what is actually being proposed, one can infer that the author had a vested interest, for whatever reason, in supporting a view of reality that to be generous was incomplete, and to be honest was likely openly, cynically misleading.
BANKERS UNDERSTAND THESE THINGS. The rest of us don’t. As Henry Ford said:
It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.
Hopefully I have done something to further that revolution by pointing out some of these normally hidden realities.
I will add, actually, that one title for the book I keep threatening to write that occurs to me is “A Capitalist Revolution”. For anyone new to this blog, the ideas are here: http://www.goodnessmovement.com/Page14.html