Last year I was annoyed when the government of Switzerland broke the last link between the Swiss Franc and gold.
I was annoyed as it was yet another defeat for tradition and decency in the world. Decay and collapse may be a process we have to go through to get to a position where people can rebuild – but that does not mean I have to like the process. But I thought the broken link would have little practical importance – as the Swiss Franc was (like all other currencies) basically a fiat (government command – token money) currency already.
It seems that I was quite wrong. The Swiss money supply (whether one measures narrow money or broad money) has been expanding like mad.
Not only are the Swiss powers-that-be expanding the money supply faster than the American powers are, but they are doing so faster than the British or even the European Union authorities. I have been watching the progress of the various money supply expansions via the back pages of The Economist for quite some time.
I wonder if the Swiss authorities are trying to get some temporary economic growth (via the standard credit bubble) in order to influence the elections in October?
Looking at reality (even the imperfectly measured expansion of money supplies) does make watching political debate quite a strange experience. For example, in Britain, virtually everyone talks of how the European Union Central Bank is following too ‘tight’ a policy – whereas in reality it is inflating the money supply more than the Americans or even the British are doing.
Both pro and anti Euro forces in this country are deeply ignorant of even the most basic facts.
I have some sympathy for the Swiss wanting to devalue their currency a bit against the monolithic chokehold of the eurozone for competitive reasons.
Especially since ever fewer foreign depositors find it easy to stash away their cash snugly under those snow-covered toblerones without international interference, the Helveticans must be wondering if a strong Swiss Franc serves their interests so well any more.
That said of course they could have changed the gold-rate link rather than removing it, in line with current fashion. But might more of us have noticed what they were up to then?
For all my dislike of David Hume I agree with his warnings about credit bubble games. Expanding credit may bring economic benefit in the short term, but in the long term the harm it does is very great.
As for Lord Keynes and his “in the long run we are all dead”, the long run is not that long.
As for “last year” turning out to be 2000. Ah the failing memory of a middle aged man. Que the violins.
ever heard of the phrase pushing on a string?
Switzlands just about in a depression, what the bejesus to you think it should do – follow the BOE a la 1931?