Swiss Franc pegged to Euro

[scorza]

http://www.guardian.co.uk/business/2011/sep/06/switzerland-pegs-swiss-franc-euro

I have no idea what this means but it sounds interesting.

 

[muon]

Wow, that will anger a lot of people. Will result in high inflation though.

 

[pingwing]

Thats AWESOME! Should go there now for a bit of legal gambling as the exchange rate will be better.

Was there last summer and its a really nice place to be, just expensive.

 

[robmol]

Awaits the OcUK Switzerland expert.

 

[A2Z]

Definately good news, anything that makes the unbelivably poor £ worth more is good news

I was in Switzerland about 20 months ago...and it was 1.5CHF to the £...and damn that place is expensive...so to think it was 1.2CHF only yesterday..definately not a place to go with £

 

[JAzz]

http://www.guardian.co.uk/business/2011/sep/06/switzerland-pegs-swiss-franc-euro

I have no idea what this means but it sounds interesting.

Too many people using their currency as a safe haven during these rough economic times which in turn is making the currency too strong which in turn is causing problems to their economy as their exports are becoming too expensive.

Something like that anyway

 

[Nerusy]

Borrow CHF @ 0.25% rate.
Invest into Euro @ 1.5% (6times the SNB rate)
Profit to cost 6:1 since EUR:CHF pegged
Problem?

 

[muon]

Borrow CHF @ 0.25% rate.
Invest into Euro @ 1.5% (6times the SNB rate)
Profit to cost 6:1 since EUR:CHF pegged
Problem?

Well I see it this way. To force the currency rate down, the Swiss Central Bank will have to initially print lots of money satiating the demand of people wanting francs. This initially causes inflation to rise (price levels to jump).

Once the peg is achieved (i.e. supply and demand are such that the exchange rate would normally be at the peg) the carry trade will mean that there must be an equalisation in real rates. That means there must be an expectation of lower inflation than in the Eurozone (as long as expectations aren't false that should happen, and it does due to certain reasons).

 

[scorza]

Have the Swiss National Bank basically just repeated the same mistake Brtiain made in the '80s when we pegged the value of the pound via the ERM?

 

[muon]

Have the Swiss National Bank basically just repeated the same mistake Brtiain made in the '80s when we pegged the value of the pound via the ERM?

No, its much easier to weaken a currency then strengthen it. The former you just print more money buying up foreign currency (see China) and the latter requires you to buy up pounds using foreign currency.

 

[TRNC]

Borrow CHF @ 0.25% rate.
Invest into Euro @ 1.5% (6times the SNB rate)
Profit to cost 6:1 since EUR:CHF pegged
Problem?

The problem is that 99.999999% of people cant do this, so for those who arent traders its completely useless.

 

[Andy]

Tax haven scumbags.

 

[Danthus]

Tax haven scumbags.

Someone should RTM this.

 

[Dr House]

Tax haven scumbags.

lol is all I have to say

 

[Morgoth]

He's jelly.

 

[Strife212]

Surely if you were Swiss you'd be raged by this? The value of their currency has just dropped a lot.

 

[[TW]Fox]

Surely if you were Swiss you'd be raged by this? The value of their currency has just dropped a lot.

Only because it went up by too much in the first place.

 

[Strife212]

Still not nice if you hold large savings / import goods.

 

[A2Z]

Still not nice if you hold large savings / import goods.

Well im pretty raged that the value of Sterling has dropped against nearly every other currency in the world, but what can I do about it hey?

 

[scorza]

Still not nice if you hold large savings / import goods.

It's hard cheese isn't it? Governments and their state apparatus do (or are supposed to do) what is in the national interest, now what is in the interests of any particular minority.