Swiss surprise, broken laws and a pink Learjet

I know it has been ages since I blogged. The developments of the past weeks and especially yesterday compel me to draw your attention to the events. And no, this blog isn't about terrorism. So what am I referring to?

Yesterday the Swiss central bank let the CHF loose. Finance you say? Yes finance but with global consequences. You all know that since the 2008 financial crisis, central banks worldwide have thrown all care and common sense out of the window and are using their own equivalent of nuclear weapons to keep their currencies and economy adrift. The US and Japan have created enormous amounts of money (and still there is no inflation, isn't that strange), the ECB reportedly is on the brink of going down the same path next week, and no one is blinking an eye. Except for the Swiss. They blinked yesterday.

During the euro-crisis many were running out of the euro into the CHF which led to the CHF quickly becomming more expensive. As an expensive CHF is problematic for the Swiss economy, the Swiss central bank interfered and decided to keep the Euro/CHF rate at 1,2. For years they have done this by constantly interfering in the exchange rate. And yesterday they stopped.
This was the result:

On one day the CHF became 15% more expensive, so the Swiss export suffered suddenly a 15% hurddle. Just check the Nestlé shares what it means.

So why did they do this? Why does a central bank suddenly punish its own economy with 15% in one day? They must have a very good reason, they surely know something we don't. Some say it is because next week the ECB will start the printing press and the Swiss don't want to follow suit (which they would have to if they wanted to keep the CHF at an unchanged 1,2 exchange rate). I don't know if that is the reason, future will  tell. Fact is that the Swiss move took everyone by surprise. Yesterday we were all turkeys (Taleb afficionades will get this). Even the IMF was not informed and quite appalled that they were not. Here are some quotes from Lagarde:

“This was a bit of a surprise…I find it a bit surprising that he (Swiss central bank chief Thomas Jordan) did not contact me, but you know, we’ll check on that.”

According to Lagarde, Thomas Jordan may not have warned European Central Bank chief Mario Draghi and others about the move, either: “I would hope that it was communicated with other colleagues from central banks. I’m not sure it was.”

There you go, Switzerland surpised the world.

Some other development that is underreported in the news (and that is an understatement) is the situation in Greece. Next week they have elections and the party that is likely to win has said that they will reform taxes and renegotiate the national debt. Result: people don't pay taxes anymore. Why should they if the new government would abandon those taxes? It surely is a bit silly to still pay them now. Secondly, if Greece would leave the euro (I know euro politicans keep on telling that the law forbids it - but hey politicians never break laws do they) then new Drachma would quickly and sharply devaluate. So any Greek who believes the Grexit is a possibility what does (s)he do? Go to the bank and withdraw all savings in euro. That's what I would do too. When banks run out of cash as a consequence they can ask the ECB to use the ELA (Emergency Liquidity Assist). That's what Greek banks had to do at the height of the eurocrisis and two Greek systemic banks asked for the ECB ELA on Wednesday as well. 3 billion € was withdrawn in December and almost the same amount already this month.


So there you go: Swiss lets its CHF appreciate with 15% in one day, the ECB may start money creation next week, and the Greeks are preparing for the possibility of a Grexit. But do we read this in our national press? Nope. Does anyone care to explain the consequences of this on a global, European or local level? Nope. Does someone explain what it means for our personal wealth (irrespective of the size of that wealth)? Nope.


But lets end this blog in good tradition with some aviation stuff. I came across a movie which made my eyebrows raise. It's a Learjet cutting a ribbon being held up by two guys on flyboards. Crazy crazy crazy. Just watch. But the thing that threw me most is: who in his right mind paints his Learjet pink???