Gold Could Offer a Way out of Switzerland’s Failing Inflationist Experiment
Never mind that the US Treasury’s indictment late last year of Switzerland as a currency manipulator rested on some flawed evidence and does not identify the crime. The clash between Washington and Berne marks another episode in this alpine nation’s dark history of trucking with foreign repression rather than developing its potential as a global haven and beacon of freedom. Occasionally there have been bright interludes but none so far with respect to the last quarter century of growing monetary repression as led by the US and now prevalent throughout the world.
The Trump administration’s Treasury based its indictment of Switzerland on crossing the three boxes on the ridiculous checklist for manipulation inherited from the Obama Treasury—current account surplus, bilateral trade surplus with the US, and foreign exchange intervention during the past year all above the permitted ceilings. There was no mention of the strongest basis for the charge of manipulation—failure to reverse huge past intervention and the deepest subzero interest rates in the world. The smugness of the top Swiss monetary bureaucrat’s response to the indictment, declaring that the Swiss National Bank (SNB) would continue with its massive interventions as appropriate, seems to have impressed markets where the Swiss franc (CHF) is well below its pandemic high point against the euro. The bureaucrats may yet have to eat humble pie if the Swiss government is serious about striving for a free trade deal with the US.
It could have all been so different. Think back to the early and mid-1970s when Switzerland was ahead of Germany in defying the repressive inflationary monetary hegemony of the Arthur Burns Federal Reserve. The SNB instituted a strict monetarist regime and allowed its franc to float freely and sharply higher.
Monetarism as practiced in the 1970s, however, was not a secure basis for a Swiss pathway to sound money through the 1990s and beyond. The SNB totally failed to build an alternative firmer foundation. Instead, in 1999, it followed the US and the global central bankers’ club in adopting an inflation target, albeit somewhat lower in effective terms than that of the US and the European Central Bank, jettis
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