Fact Checking the MSM’s SNB Figures

Analysis: ECB’s nuclear option better as deterrent than weapon | Reuters.

SNB Graph FX reserves Money July27

Check out this quote from the article:


As an example of successful deterrence, he cited the Swiss central bank’s capping of the Swiss franc’s exchange rate against the euro.

“I don’t think the SNB had to intervene in any significant volume. Once they had said they would do whatever it took to defend that parity, nobody was going to test it,” Portes said.


Are you sure, Mr. Portes? Let’s do some fact checking here. Switzerland announced its €1.20 floor for the Swiss franc in September of 2011. At first, the jawboning worked, and SNB reserves declined from just over CHF300bn to CHF250bn to February, 2012. Then, the SNB actually did have to intervene, and its euro purchases drove its reserves up to CHF400bn as of the end of July, 2012.

These purchase needed to be kept somewhere and much of this money found its way to German bunds causing the yield to slide to the disadvantage of the periphery.

I remember the pound coming under attack and the Bank of England’s intervention ultimately failing. It is my opinion that these intervention only work in the short-term. Eventually, market fundamental will assert themselves, and the Swiss will have a large pile of rapidly depreciating foreign currency on their hands.


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