Friday, January 16, 2015

Our lesson: Tiger eats the Swiss Central Bank

The SNB shocking depegging of the Franc from the Euro caused massive losses to many especially the small guy.

Many hedge funds got slaughtered too because the smart money cannot be smart when it is the market right?

I was clueless for a while since I had duly forgotten about the peg.

To me the SNB tried to get off the tiger it had ridden for the last few years and got mauled and eaten by it. This is a massive screw up and will inflict lasting damage to the Swiss. Meanwhile their exports just became totally uncompetitive over night. Rolex, Patek Philippe etc., might still sell some but Swatch and perhaps Victorinox are in trouble. I just had a Toblerone after lunch. May be add that one too if it comes from the Alps.

The Swiss have certainly lost their way. I wonder if they even knew they were riding a tiger and those who knew never imagine they would be so crazy to get off it.

If the ECB prints money, I am afraid the SNB must also do the equivalent. Once you have decided to go down this path, you must go all the way. It is like joining the triad, you can't get out any time you like.

It is too late now.

I hope this never happen to Singapore because we have also developed similar bad habits as the Swiss. We want to ride the Tiger and also get off and on as and when we like. Luckily for us the Tiger was busy with other matters but one day we will get mauled like the Swiss if we don't know well enough what we are doing.

Singapore cannot mortgage what it is to be Singaporean and still remain Singaporean. The voters grasp this fact better than the PAP.

Printing Francs is absolutely un-Swiss. So they decided to be Swiss like again and remove the peg and trigger a disaster. One day we will also wake up and realize that we have to make some very un-Singaporean choices after a long series of un-Singaporean choices ("money most important") which our leaders thought were worth it. What happens then? Is it already too late for us?

Update: 10:30 pm

Just read this by Paul Krugman. Very similar thinking  but coming from a different perspective. He was thinking of America's interest and me Singapore.


  1. Time for sanity to return. One should know all the QEs are irresponsible, destroying the virtues of savings and the dignity of work. Why follow is a question one should also ask.

  2. "SNB President Thomas Jordan: First Horseman of the Apocalypse". Why call him the horseman? It is all those greedy and irresponsible banks and "investors" who bet against a currency (and thus derailing economic development) who are the real horsemen!! So Citi, Deutsche, Goldman, FXCM, Oanada and their "customers" cried of losing millions of dollars - they expect the rest of the world to bail them out just like those who lost money from structured products like the minibond and got the rest of the hard earning saving population hep them out?? This is the sick world of financialisation - no real growth to benefit people, just punting on numbers and ruining lives.