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The Swiss Central Bank Conundrum: Fighting Fire with Kerosene

2014-05-11 2 comments

When the Swiss Franc started appreciating against the Euro (or was it the Euro depreciating against the CHF?) the Swiss National Bank vowed to fight tooth and nail to keep the Swiss Franc at a 1.20 parity “at all cost”.

Time to wonder how such a “fight” is fought, whether it can be successful and what are the consequences.

The currency “stabilisation” choices a central bank has

A central bank is the master of its own currency, i.e. the currency it is meant to issue.

In today’s world of unbacked (“fiat”) currencies even the Swiss Central Bank has no real restriction as to how many units of its currency it can create. It can virtually create infinitesimal amounts of it. Read more…

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