Swiss De-Pegging Reveals Worthless Western Currencies

switzerlandJeff Nielson: A major economic event has occurred. The government of Switzerland ended its “peg” to the euro with its own currency, the Swiss franc. This resulted in the franc catapulting higher in its exchange rate versus the euro (as well as other currencies). We know this is a major economic event, because the Corporate media has expended a considerable amount of time/energy “covering” and “explaining” this event.

However, as all regular readers know; the Corporate media doesn’t engage in its coverage and explanations to provide information to the general public. It does so to provide misinformation, i.e. propaganda. We see this dishonesty evidenced by the efforts of the Corporate media to portray this move as a surprise.

The Swiss National Bank stunned markets on Thursday, when it scrapped its three-year-old peg of 1.20 Swiss francs per euro.

The obvious question which arises in the minds of those viewing this lie is this: since the Swiss government had no choice but to end the peg; how can doing something it had to do be considered a surprise? This question becomes “obvious” as soon as readers are given an explanation of how a government “pegs” a currency, and why a government pegs a currency – something which the propaganda machine refuses to do.

“Pegging” a currency is a simple, brute-force act of market manipulation. Indeed, the manipulation is directly implied in the term itself. In a world of (supposedly) “floating markets”; one government endeavors to literally “fix” its currency to another, at a constant rate of exchange. As regular readers have been told on many previous occasions; no form of market manipulation can be maintained permanently, since any ongoing manipulation creates greater and greater economic imbalances – and thus ever-increasing “pressure” in markets to correct this imbalance.

Therefore the day that Switzerland’s government began this act of currency manipulation, it already knew that this could only be a temporary band-aid. Thus we immediately see that the efforts of the Corporate media to depict this as a surprise are obvious lies. But it brings us to the second question (which the Corporate media also refuses to answer/explain); why did Switzerland’s government originally feel compelled to engage in this unsustainable policy of market-manipulation?

Typically, when one government seeks to “peg” (fix) its currency versus another currency, it is a stronger currency being pegged to a weaker currency, as we saw with China’s peg to the U.S. dollar. The motive for stronger currencies being pegged to weaker ones is relatively simple.

When a currency rises in value; this is almost always good for the people of that jurisdiction, but usually bad for the government. Why is this? Simple. As holders of that currency; the people naturally benefit, because as the currency rises in value, so does their purchasing-power – they get more “bang” for every “buck”.

Conversely, as (inevitably) the biggest Debtor of that currency; governments don’t like to see their currency rise in value because it increases the “size” of their debts (in real dollars). The second reason why governments like to debase their currencies (rather than allow them to rise in value), is the silly “import/export game” in which nearly all governments now engage.

International trade, as a simple function of logic/arithmetic, must always be a zero-sum game. For every seller (i.e. exporter) there must be a buyer (importer). Total global exports must always equal total global imports. Yet to try to gain an (illegitimate) “advantage” in this game; we see governments deliberately destroying the value of their own currencies.

By destroying the value of their currencies (our “money”); exports of that nation become cheaper (in real dollars), thus our simplistic/idiotic governments believe they can all “increase exports” by destroying the values of their currencies simultaneously. This is called “competitive devaluation”, and it is the official economic policy of all Western governments – including the government of Switzerland.

There are two extremely obvious problems with respect to this idiotic policy, and numerous other problems which are merely obvious. To begin with (as already noted); everyone cannot increase their exports in a zero-sum game. And (as also explained) no individual nation can gain a permanent advantage by cheating in this manner, since the market-manipulation involved in this cheating is unsustainable over the long-term. Thus all our idiot-governments are accomplishing with this insanity is to (pointlessly) destroy their own currencies – i.e. economic suicide.

To understand how destroying the value of a currency destroys an economy, we need merely look toward Russia, and the current economic terrorism being directed against it. How is the U.S. (i.e. its puppet-masters, the One Bank) endeavoring to destroy the Russian economy? By destroying the ruble. Meanwhile, our Kamikaze governments have been doing the same thing to themselves (and us) for decades.

The second, extremely obvious reason why “competitive devaluation” is a terrible idea is that while it may (temporarily) increase the quantity of exports for that nation, it reduces what they are paid for their exports – in real dollars – because their own currencies are worth less (worthless). We are effectively giving-away the production which the workers of that nation toil to produce, day after day, year after year.

It is in this context of manipulation and suicidal insanity that we can now view the non-surprise of Switzerland’s government ending its peg to the euro. With the Swiss franc being the “stronger” currency (in a world of weak-and-weaker paper currencies); in order to maintain the peg, it was forced to buy-up enormous quantities of euros.

These sham-transactions create artificial demand for the euro, thus pushing up its exchange rate (temporarily). The problem is that this is the ultimate short-term band-aid, and every few weeks the Swiss government would be forced to “buy” more euros, to create new/artificial demand.

The result of all this silliness is that (surprise! surprise!) Switzerland’s government (or rather its central bank) had ended up with a huge hoard of euros, prompting this headlineeight days before Switzerland supposedly “stunned” the world:

Swiss forex reserves hit record high after December intervention

Of course the word “intervention” is just the liar-talk of media drones, politicians, and (most-particularly) the bankers pulling their strings. What they mean is the latest manipulation by Switzerland’s central bank, after three years of such serial acts of market-manipulation.

How large was the mountain of euros being hoarded by Switzerland’s central bank? With official reserves approaching $500 billion (US); the Swiss central bank was hoarding a mountain of money nearly equal to the national GDP of that nation.

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