Swiss Franc: Still A Safe Haven?

[rj1]

Re: Switzerland is broke!

The SNB has 1154 tonnes of gold
http://en.wikipedia.org/wiki/Swiss_N...#Gold_reserves
1145 tonnes = 40 388 686.4 ounces = About $40 billion.
The (completely guessed at) amount that could vanish is about 50% of Switzerland's gold reserves.

I read yesterday that a Swiss populist party (the right one) stated a new policy that they want all Swiss government gold being held in New York to be shipped back to Switzerland as a retaliatory step.

It is interesting. Attacking Swiss bank secrecy as the EU and the U.S. are doing is pretty much declaring war (not militarily) on Switzerland.

[cjppjc]

Re: Switzerland is broke!

I read yesterday that a Swiss populist party (the right one) stated a new policy that they want all Swiss government gold being held in New York to be shipped back to Switzerland as a retaliatory step.

It is interesting. Attacking Swiss bank secrecy as the EU and the U.S. are doing is pretty much declaring war (not militarily) on Switzerland.

It's their gold they should have it. After all what good is physical gold if it's being held by someone else. Nobody here would do that.

[Jay]

Re: Switzerland is broke!

I read yesterday that a Swiss populist party (the right one) stated a new policy that they want all Swiss government gold being held in New York to be shipped back to Switzerland as a retaliatory step.

It is interesting. Attacking Swiss bank secrecy as the EU and the U.S. are doing is pretty much declaring war (not militarily) on Switzerland.

Why would they keep it in the US in the first place? Isn't the first rule: bury it in your backyard? What was behind that decision?

[rabot10]

Re: Swiss Franc: Still A Safe Haven?

Because Swiss Francs were being lent by Austrian, Swedish, Italian, and other banks.

Switzerland itself didn't do much lending to Eastern Europe, true. But its banks will still fail if the loans said banks extended to other European banks aren't repaid.

clue are you sure about that?

[due_indigence]

Re: Swiss Franc: Still A Safe Haven?

I see a motive in the Zionists knocking down all competing fiats as this strengthens dollar hegemony. The Swiss franc obviously is a venerable flight-to-safety currency. But isn't revealing the 52,000 names the equivalent of a dart thrown at the heart of the American elite? I find the crosswinds particularly fascinating here.

[GRG55]

Re: Swiss Franc: Still A Safe Haven?

The Swiss courts have forbade UBS to accommodate the U.S. DOJ and IRS insuring banking secrecy stays intact. The swiss could pay off their entire net external debt by selling a small amount of their gold if they had to. SF is still the best currency in the world today.

Better than gold?...:eek:

All the MSM out of the U.S. and the U.K. are Swiss bashers. TPTB in those countries don't like people having personal freedom and privacy. All freedoms are only to be awarded by the state don't you know?

They twist the figures like looking at stuff like debt to GDP ratios which is meaningless in Switzerland because 40% of the world's private wealth is there and they are dividing the debt over the tiny population of Switzerland. Totally misleading the reader.

Here's Sinclair's take:

Please be advised on the following concerning the Swiss Franc:

1. There is an ongoing battle between the US/GB and Switzerland over the full disclosure of the total 19,000 names on the books of UBS wherein tax evasion is said to have been solicited and abetted. In truth, very few of these accounts have been fully revealed and the US/GB wants all 19,000.

2. Since hedge funds pry on each other we are getting few very fat international hedge funds. They play the currency market in a big way as it is one of the few markets now able to absorb their interest.

As a result of both number one and two much of the media and expert commentary on the Swiss Franc is the use of media for dirty tricks as this is the major tool of these large funds and governments in conflict.

I would suggest in this case decision on the future of the Swiss Franc is better made on the 35 year technical price analysis. A short seeking to cover, which generally seems quite correct now amongst the weak versus dollar units, should and is taking place.

Negative media and short covering has gone hand in hand in this bear market. Was it not the same in all recent major market failures?

Why should currency be any different?

Agree with your sentiment, but therein lies the problem for the Swiss. The attacks on the banking privacy and tax haven jurisdictions will continue, and likely escalate, as governments everywhere become more desperate for tax revenues amid moves to compromise their citizen's freedoms for "the greater good" [take your pick: security, terrorism threat, tax "fairness", restricting citizenship, etc.].

The relentless attacks have a corrosive effect and over time the privacy barriers are chipped away a bit at a time. Switzerland today is less than it used to be. That gradual trend will probably continue...

[c1ue]

Re: Swiss Franc: Still A Safe Haven?

Rick, renewable,

I don't have a smoking gun, but look at it from this point of view:

(all numbers following 2007 est.)

Austria: GDP= $322B pop.= 8.2M

Eastern Europe in contrast:

Ukraine: GDP= $140B pop.=46M
Bulgaria: GDP= $86.7B pop.=7.2M
Romania: GDP= $166B pop.=22.2M
Hungary: GDP= $138B pop.=9.9M
Slovakia: GDP= $110B pop.=5.5M
Poland: GDP= $420B pop.=38.5M

There are a number of other nations...

So we are to suppose that Austria was the nation lending to an area with 3x the GDP and 15x the population?

Clearly Austria is WAY too small to be able to lend to these nations to any degree, much less the $1.7T estimated to date.

If, in addition, we use Iceland as an example - where predominantly British Isles money was used to multiply domestic money - then the question becomes where is said money coming from?

The Baltics had Sweden and Denmark.

Iceland had the UK.

Eastern Europe has Austria, some Italy, but who else has the money to lend? Germany didn't do it nor did France. Russia lend a little in private form, but had major ideological barriers at the nation level.

Follow the money:

Switzerland: GDP=$303B, pop.=7.6M - but its primary economic activity is banking.

Call the Swiss the Promethean FIRE bringers to Eastern Europe, who will now be chained to a rock and have their livers devoured each day...

[renewable]

Re: Swiss Franc: Still A Safe Haven?

But Iceland didn't bring the UK down - sterling's decline is due to the UK's problems.

Wouldn't this only be a problem for Switzerland if the EU allows the intermediary EU banks to go bust? Would have thought that the ECB will not allow e.g. Austrian retail banks to fold.

This is assuming that the EU intermediaries are retail banks and not investment banks such as Bear Stearns.

[c1ue]

Re: Swiss Franc: Still A Safe Haven?

Renewable,

If you think Iceland and the UK's present situation are unrelated, then I guess we have very little to talk about.

After all, Iceland was so unimportant that the UK made Iceland a terrorist nation in an effort to claw back citizen's savings.

Similarly the UK financial sector was heavily involved in the Iceland bubble.

As for the EU and Austrian banks - the point again is that the EU doesn't have a Fed nor a EU Treasury.

Ultimately the rescuer for Austria must be Germany or France - no one else has the money.

But Germany has bigger problems than just Austria - PIIGS (Portugal, Ireland, Italy, Greece, Spain) for example.

Do I think Switzerland is going to turn Mad Max? No.

But I do see a major problem unless all that Eastern European debt was truly loaned from somewhere else. But where else?

The offshore banking industry is something like $7T - of which a significant chunk is based in Switzerland.

Iceland on Lake Geneva

[renewable]

Re: Swiss Franc: Still A Safe Haven?

Renewable,

If you think Iceland and the UK's present situation are unrelated, then I guess we have very little to talk about.

After all, Iceland was so unimportant that the UK made Iceland a terrorist nation in an effort to claw back citizen's savings.

Similarly the UK financial sector was heavily involved in the Iceland bubble.

As for the EU and Austrian banks - the point again is that the EU doesn't have a Fed nor a EU Treasury.

Ultimately the rescuer for Austria must be Germany or France - no one else has the money.

But Germany has bigger problems than just Austria - PIIGS (Portugal, Ireland, Italy, Greece, Spain) for example.

Do I think Switzerland is going to turn Mad Max? No.

But I do see a major problem unless all that Eastern European debt was truly loaned from somewhere else. But where else?

The offshore banking industry is something like $7T - of which a significant chunk is based in Switzerland.

Iceland on Lake Geneva

Wouldn't it be London on Lake Geneva if your comparison holds true? (although London on Lake Zurich would be more apt for banking problems). If we disagree then we have even more to talk about - unless you are infallible! I originally come from the UK - the problem with the UK (and resultant sterling decline) was the massive housing bubble there and the huge reliance in London on the FIRE economy. US subprime assets hurt the UK far more than anything to do with Iceland.

UK anti terrorist legislation was used, but that was just the way Gordon Brown stupidly chose to avoid bailing out relatively few UK savers' accounts; proves very little. Things like Baugur are more significant in the dynamic between the two countries. Landsbanki is currently more relevant to Guernsey, which is not part of the UK, etc.

edit: Nouriel Roubini: http://ftalphaville.ft.com/blog/2009...s-not-iceland/

In many ways the UK looks more like the US than Iceland: a housing and mortgage boom that got out of control; excessive borrowing (mortgage debt, credit cards, auto loans, etc.) and low savings by households; a large and rising current account deficit driven by the consumption boom (and private savings fall) and the real estate investment boom; an overvalued exchange rate; an over-bloated financial system that took excessive risks; a light-touch regulation and supervision system that failed to control the financial excesses; and now an ugly financial and economic crisis as the housing and credit boom turns into a bust. This will be the worst financial crisis and recession in the UK in the last few decades.

If Iceland is to UK as EE is to Switzerland, then Switzerland will have few resultant problems. I feel it is a poor comparison. From everything else you have said, the EE problem is far more relevant to Switzerland.

I own property in Switzerland and spend a lot of time there, so I was and am still concerned. Thank you for spending the time to explain the rest of the situation further - the majority of what you have posted is very interesting and useful.

[c1ue]

Re: Swiss Franc: Still A Safe Haven?

Renewable,

Your note about Switzerland being more equal to the UK than Iceland is correct in the lender/borrower sense.

However, Switzerland is structurally much closer to Iceland than the UK in the economic sense.

The 'Icelandic miracle' was a combination of investment/real estate boom plus a massive influx of foreign capital serving as a basis for leverage consumed by said boom.

The 'Icelandic crash landing' was not just due to that bubble bursting, but to the fact that the Icelandic banks had borrowed so much as for the leveraged debt losses to be unrepayable even were the entire Iceland GDP employed.

Switzerland already has tremendous real estate prices as you know - and it is also due to a massive concentration of foreign capital in the Swiss banks.

This capital - if it was deployed in Eastern Europe - also then enjoyed the leverage. Surely you don't think any such loans were made for free!?

Between loss of capital, loss of 'safe haven' investment status from said capital loss (plus Madoff), loss of 'safe haven' tax status from UBS/IRS, and the previous 3 factors combining to impact the overall Swiss economy - you may get a first hand view on whether Switzerland will be different than London.

I hope not! but fear it may be so.

The good news is that the Swiss Franc is a national currency. Switzerland has the printing press option at worst case, but that also would not be positive for the offshore banking business.

When you play with FIRE...and can you really say Switzerland is not significantly based on FIRE?

[renewable]

Re: Swiss Franc: Still A Safe Haven?

When you play with FIRE...and can you really say Switzerland is not significantly based on FIRE?

Not at all - the purpose of my starting this thread was to try and find an answer to the question: whether to keep CHF cash or not (switzerland is in many ways an amazing place to spend time and I am uninterested in real estate prices). I found myself arguing in Switzerland's favour - more as a devil's advocate than anything else - so thought I should declare my small vested interest - beyond that I have no view really. I simply don't know.

My erroneous impression was that you were arguing that EE would damage CH the same way Iceland damaged the UK. I stand corrected.

[touchring]

Re: Swiss Franc: Still A Safe Haven?

Depending on how well the Swiss defends its secrecy laws, Switzerland might well benefit from the crisis. Imagine the amount of money the Oligarch class will stash in Swiss banks to escape "nationalization".

[renewable]

Re: Swiss Franc: Still A Safe Haven?

Renewable,
The 'Icelandic miracle' was a combination of investment/real estate boom plus a massive influx of foreign capital serving as a basis for leverage consumed by said boom.

....

Switzerland already has tremendous real estate prices as you know - and it is also due to a massive concentration of foreign capital in the Swiss banks.

Actually, thinking about it..... this graph may explain why the comparison is possibly somewhat invalid:

http://www.globalpropertyguide.com/E.../Price-History

Swiss property Prices:


Index of prices of rental apartments (1990=100)

[renewable]

Re: Swiss Franc: Still A Safe Haven?

http://www.globalpropertyguide.com/r...house-prices/I

Iceland Property Prices:


House price index (2000=100)


N.B. I am not in the least bit interested in property prices in Switzerland or Iceland or whatever. Merely querying your assertion that they are one of the root causes of the current relative situations of the 2 economies.