The other day I came across a note on the Swiss franc. It was said what a reliable currency it is, and that if you want to save your funds, then savings are best done in Swiss francs. It was mentioned along the way that the Swiss franc is a safe-haven currency and other similar advertising words. Reading the note, any sane person could have only one question: what was there more - stupidity or venality? But this rather refers to the field of emotions, but we should look at the essence of the issue.

Indeed, back in 1996, the Swiss franc was a safe-haven currency and was “good as gold.” The fact is that it was backed by gold. This state of affairs has existed in the Swiss financial system since the beginning of the 20th century, and a healthy backed currency gave the country considerable financial power and independence. The decline of both (and of Swiss sovereignty) began in 1992, when Switzerland made the fateful decision to join the International Monetary Fund (IMF). The IMF charter requires that no member country of the fund can tie its currency to gold, therefore, immediately after joining the IMF, Switzerland began the process of separating its national currency from gold. The process of preparing this took some time, during which the government of the country and the Swiss National Bank developed the necessary legislative and documentary base, and in March 1997 the connection between the Swiss franc and its gold backing was completely eliminated. However, the country's constitution required the existence of secured money, and this last restriction was removed by amending the country's constitution in May 2000. Since then, the Swiss franc has become de facto the same paper fiat currency as the rest of the world's currencies, although this will not be officially announced soon. This freed the hands of the Swiss National Bank to sell off and lend out the gold it held.

However, the story of the Swiss franc did not end there. The most interesting page was written on September 6, 2011, just when gold on the world exchanges set its historical record, exceeding 1900 US banknotes per ounce. It was on this day that the National Bank of Switzerland announced a fundamental change in attitude towards its national currency. It was stated that from now on the Swiss franc would be pegged to the euro. In fact, it was an official announcement that the Swiss franc had finally become fiat and unsecured. Accordingly, the Swiss National Bank from that moment was no longer required to keep any gold in its safes. It is quite possible that with the help of this metal the growth of the price of gold was stopped in September 2011.

So today it is hardly possible to talk about the Swiss franc as a safe-haven currency. At the very least, these statements contradict the essence of the current Swiss franc, which is no better in its characteristics than the notes of the US Federal Reserve, the euro, the yen or the ruble.

Perhaps someday he will be able to restore his once-existing status of a safe-haven currency, but this first requires giving him the gold backing he once had. And although the people of Switzerland have come out in favor of this, the current authorities and the leadership of the Swiss National Bank are doing their best to prevent this. It cannot be completely ruled out that the 1,040 tons of gold held by Switzerland may ultimately turn out to be not physical metal at all, but paper receipts from third parties for received physical gold, for which nothing can be obtained. And it may well turn out that such a serious opposition of the authorities to the will of the people is due precisely to the fact that the authorities are well aware that there is no real gold anymore, and are trying with all their might to delay the moment when this fact comes out.

My books
"The collapse of "money" or how to protect savings in a crisis",
"Gold. Citizen or State, Freedom or Democracy,
"Entertaining Economy"
“Money of troubled times. Ancient history",
“Money of troubled times. Muscovy, Russia and its neighbors inXV - XVIII centuries"
can be read or downloaded athttp:// www. proza.ru/author/mitra396

On October 23, 2013, the REN-TV channel aired the program “We never dreamed: the dirty secrets of big politics”, in which I also take part. It can be viewed either on the REN-TV website or at the following links:

Switzerland's central bank shocked the foreign exchange market on Thursday by lifting the ceiling on the franc's exchange rate against the euro, which had been held for more than three years. Immediately after the announcement of the Central Bank, the franc jumped against the dollar and the euro by more than 30%, and the Swiss stock market collapsed by 10% - exporters suffered

The Swiss National Bank (SNB) is abandoning its policy of containing the franc at 1.20 per euro, the SNB said on Thursday, January 15. "The minimum exchange rate was introduced during a period of exceptional overvaluation of the Swiss franc and extremely high uncertainty in financial markets," the Central Bank recalled. But lately, the euro has “significantly depreciated” against the US dollar, and therefore the franc, whose value was artificially limited by the ceiling of the Central Bank, also fell in price against the dollar. "Under these circumstances, the SNB has concluded that maintaining a minimum exchange rate for the franc against the euro is no longer justified," the statement reads ( .).

In September 2011, the SNB capped the franc at 1.20/€ (in other words, banned the franc from being worth more than €0.83), as the appreciation of the national currency hurt Swiss exporters and jeopardized the stability of the Swiss economy. About 45% of Switzerland's exports go to the Eurozone countries.

The franc is traditionally considered a safe haven currency that attracts investors in times of crisis. The SNB notes that the franc is "still strong" but not as overvalued as in previous years.

Chaos and panic

Currency markets have experienced "a few chaotic minutes" since the SNB announcement, Reuters writes. The euro / franc pair quickly broke through the parity level: soon one euro was given only 0.8052 francs compared to more than 1.20 before the decision of the Central Bank (that is, the euro fell against the franc by 33% at once). The dollar fell against the franc by 31%.

As of 15:30 Moscow time, the franc against the euro is close to parity, and the growth of the Swiss currency against the European currency is 17%.

Terrible day for Switzerland Inc.

The Swiss stock market crashed after the SNB decision. The Swiss blue chip index SMI fell by 13%, as of 15:30 Moscow time, the fall compared to the previous day is 10.5%. If SMI ends the session at about the same levels, it will be the largest one-day drop in the index since October 1989, the FT notes.

Among the leaders of the fall are the shares of exporters, whose revenues may now suffer due to the strengthening of the franc. Watchmaker Swatch, luxury brand owner Richemont and cement maker Holcim fell more than 10%. According to Reuters, the capitalization of Swiss blue chips today has decreased by more than $ 100 billion. The panic sentiment of exporters was expressed by the head of the Swatch Group, Nick Hayek: "Today's action by the SNB is a tsunami for the export industry and tourism, and, finally, for the whole country."

“This is a terrible day for corporate Switzerland,” said Jon Cox, an analyst at brokerage Kepler Cheuvreux.

By the end of the day (as of 21:00 Moscow time), the franc strengthened against the euro by 16%, against the dollar - by 14%, and the Swiss stock exchange SMI index closed in the red by 8.7%.

From a conventional point of view, the collapse of a currency, especially one such as the Swiss franc, is an unlikely event. The version that the central bank can print money indefinitely is very popular. But the collapse of the currency has nothing to do with such actions of the Central Bank.

This is more of a story about what can happen when bond interest rates are too low.

The Swiss bond yield curve looks like a sinking ship right now. All but 20- and 30-year-olds now have yields below zero.

And profitability fell in just one week. This essentially means that the entire interest rate structure is at risk. And it doesn't even make sense to compare with the benchmark US Treasury bonds, they are now trading at a yield of 1.8%.

As early as January 2, the yield on Swiss 10-year bonds was 37 basis points (0.37%), and already on January 5, the figure fell to 28 points. After the National Bank of Switzerland announced the abolition of the hard rate of the franc to , the yield fell to 7 basis points, and now it is -26 points.

How can this epic collapse be explained?

If the bond rate is zero for a long time, then the net present value of all debt is infinite. In fact, any monetary system that depends on servicing its debt is bound to collapse when returns go to zero.

Not to print, but to borrow Quite recently, the Central Bank of Switzerland borrowed a huge amount of francs. Most people say that this money was printed, but it was borrowed.

The problem is that by borrowing francs, the Central Bank could not break out of the debt circle. He could only borrow permanently and push back the final repayment date.

But the bank can service the debt calmly. And everyone does it, because otherwise it will be a default. At the same time, the bank must also maintain its obligations, which it uses to finance its assets. If commercial banks withdraw deposits, then the Central Bank is forced to sell assets. And this is contrary to his goal and can be a real shock to the fragile economy.

If liabilities exceed assets, then even the central bank can go bankrupt. The cash flow will soon become too small to service the debt. Roughly speaking, it is necessary to somehow reduce the rate on your short-term obligations so that the return on assets is higher than the cost of servicing the debt. This is difficult to do if the return on the asset becomes negative.

So, the Swiss Central Bank borrows francs to finance the purchase of the euro. Further, these euros are placed in the assets of the eurozone, for example, in German bonds. It is well known that the Central Bank used such trading very actively, being one of the most active buyers of securities in European countries, in order to keep the franc at the right level. It also helped lower interest rates throughout Europe, as well as in Switzerland itself.

Rates have been falling in many developed countries. In general, this is a normal development of a developed economy. In the US, for example, rates have been falling for 34 years.

True, the use of various monetary instruments, such as quantitative easing, usually has some purpose. , for example, clearly defined this goal, so she successfully left the QE program. But the National Bank of Switzerland acted without a purpose, if you do not take into account the maintenance of the necessary course. As a result, the strongest pressure was exerted on interest rates.

But at the beginning of the year, something changed. Why did rates start falling so fast? To begin with, the Central Bank was forced to remove the peg as it had to borrow more and more francs to buy bonds. At the same time, risks on other assets grew.

Due to the unlinking, many of the players were forced to close positions urgently due to a sharp increase in risks. Therefore, the franc quickly strengthened. Roughly speaking, positions on euro assets were closed in order to receive francs. Companies then began buying assets denominated in francs, such as Swiss government bonds.

The market has turned upside down. Since if the francs were used to buy assets in the eurozone, which is much larger than the Swiss economy, everything was fine, but as soon as they returned "home", the system failed and the yield curve shifted into the negative zone.

Lower rates raise risks and imply lower profits. This means that over time, the demand for bonds will fall, and the Central Bank simply does not have enough funds to service the debt. Zerohedge.com notes that there is simply no way out for the Swiss Central Bank and the franc now, within the framework of the existing system. Perhaps some non-standard step will help, but if you can’t get out of this situation, then bankruptcy is inevitable.

And then the domino effect will start to work. Somewhere during this process, there will be a stampede out of the franc, huge sales. And it will have nothing to do with the amount of money or the "printing press".

Of course, the Swiss National Bank can still somehow save the situation by selling assets in euros to buy francs. This should support the currency, and speculators, who will know about the intentions of the Central Bank, will also support a high demand for the franc, preferring to hold it and wait for strengthening.

But there is already little reason to buy Swiss bonds. What is better, to get 1.8% on 10-year bonds from the US Treasury, or to pay 0.26% to the Swiss Central Bank? The difference is simply huge, and the trickle, denoting the flow of capital from the franc to , can become a full-fledged flow very quickly.

Keith Weiner of Monetary Metals believes that the franc's collapse may start as early as next week, but may not happen at all this year. It is only obvious that once the process starts, it will become explosive.

In September 2011, the Swiss central bank imposed a cap on the franc against the euro. The decision was dictated by a large influx of foreign capital into the country, which was a real threat of the collapse of the local economy. Until mid-January 2015, the Swiss Central Bank kept the franc at 1.2 against the euro.

The euro exchange rate against the dollar has recently fallen significantly. The artificially limited franc naturally followed the euro. The artificial retention of the franc against the euro has become inappropriate. Approximately this meaning was carried by the statement of the Central Bank of Switzerland, in which he announced the abolition of the regulation of the franc against the euro. The result was a sharp rise in the Swiss franc - 28% against the euro and 26% against the dollar.

The amount of damage suffered by financial market players has not yet been calculated, but will probably become known soon. Naturally, on such a movement, and someone fabulously enriched. I wonder who it could be? Is it the Swiss national regulator and the forces behind it?

Such questions must have already stirred in the depths of the mass of the ruined, and gradually began to surface. However, such conclusions are still premature due to the following considerations: The Federal Law on the Swiss National Bank positions it as a joint-stock company with a special status, and therefore, its activities are regulated by special provisions of federal law. The management of the bank is carried out with the participation and under the supervision of the Confederation.

55% of the shares are owned by the Swiss cantons and cantonal banks. The remaining shares are distributed among private owners. But the most interesting is the procedure for distributing the bank's profits. The net profit of the SNB, in accordance with the relevant article of the Law on the National Bank of Switzerland, is distributed in such a way that after the deduction of dividends to shareholders in the amount of 6%, the remaining part of the profit is sent to cantonal banks, 5/8 of which is directed to the needs of the population of the canton, and 3/8 to cantonal financial institutions. Thus, the shareholders of the bank cannot be participants in the financial conspiracy.

A possible problem may lie in the behavior of the affected financial institutions - banks, brokers and others, who do not stop complaining about the problems that arose as a result of the change in the franc. Thus, the leading sponsor of Alpari Ltd UK, West Ham, experienced the biggest shock from the actions of the Central Bank of Switzerland, and the currency broker himself announced his financial insolvency. Here is the message

The company's announcement states that the losses of customers who are not able to cover their losses are borne by the company, in connection with which it is forced to declare bankruptcy. New York-based broker FXCM is no better off, with shares plummeting 90%. And this is just the beginning of the list. The pillars of the European financial system were no less affected - Deutsche Bank lost at least $150 million, and the financial conglomerate Barclays - about $100 million. Stock prices of banks such as Goldman Sachs, CitiGroup, Merrill Lynch, and J.P. Morgan.

And as you know, the problems of such major figures in the global financial system can signal only one thing - the beginning of a new crisis. Considering that even before this cataclysm, the world was, if not on the verge of a crisis, then facing a major recession, then problems must arise. True, it will be possible to see this only after the release of the financial results of the first quarter.

The actions of some owners of large companies selling large blocks of their shares are catching up with a wave of anxiety. So one of the founders of Google, Sergey Brin, sold a package of 22 million shares, and the top manager of Page Lawrence got rid of his package completely. Surely such news will appear regularly - Wall-Street tycoons have woken up, which makes the financial world become more vigilant.

And what does the barometer of the American economy show in this situation? S&P 500, which had its historical maximum in November 2014? US stock indices, after the release of corporate reports for 2014, showed a slight increase. The DJIA rose 0.02% and the S&P 500 rose 0.15%. On January 21, North American oil and gas equipment supplier Halliburton Inc reported a 1.7 times increase in profit compared to 2013, and Morgan Stanley bank received a profit of 2.19 times more than in the same period. However, there is also a constraining factor associated with a slowdown in global economic growth this year. A number of well-known analysts predict the imminent onset of a bearish trend in the index, which can be expected to begin as early as February this year. If these forecasts come true, a correction can be expected in the middle of the year, after which the decline in the indices should continue.

However, back to Swiss franc. In the information field, there were suggestions that a number of large financial players could be seriously affected by the unpredictable actions of the Swiss Central Bank, or other own actions with assets that put their clients in a negative position.

Such situations became the causes of more than one global crisis, including 2007. In global terms, this may portend a significant downgrade and an outflow of funds from funds, a decrease in the capitalization of leading companies and a general recession, smoothly turning into a global crisis. And many industries can fall into this negative process against the backdrop of financial panic, which entails great economic troubles.

The uncertainty and uncertainty about the processes taking place in the banking sector, which could have gone too far with investments, do not allow us to look at the future of the world economy with confidence. Moreover, the economy, built on the dollar equivalent, is very dependent on its condition. And now he is showing unprecedented growth. In turn, the United States, whose economy also depends on the exchange rate, is not interested in the expensive dollar due to its great propensity to export. An expensive dollar is simply not profitable for them. But what interests of the States will be stronger and whether they will attempt to depreciate the dollar is not yet known.

Another consequence "Great Leap Forward" Swiss franc may be an attempt to regulate prices by administrative resources. History knows such attempts - the frequency of crisis situations may not please the world community, for which the stock market speculator is one of the negative representatives of modern society, and if there is an opportunity to put him in his place, the world community will take advantage of this opportunity with pleasure. Thus, the movement of the franc can lead to different scenarios. There are historical examples of this that can be found in these charts.

Of course, this article does not pretend to be a prophecy, but given the short duration of the practice of stock speculation, of course, relative to the duration of the era of development of the global financial system as a whole, the situation can develop according to any scenario. You have to be ready for this.

Now the next and, perhaps, the most important question: where do ordinary traders and investors carry their money? Today, as an Alpari client, I received an email with the following content:

Dear Clients! Alpari specialists are constantly working to make your working conditions even more comfortable. Starting January 21, 2015, we are holding an unprecedented promotion: we are resetting the minimum deposit requirements on all trading accounts! If earlier you wanted to work on a certain account of the company, but you were stopped by the amount of the minimum deposit, now you do not need to limit yourself. Trade and improve the efficiency of your work! Follow the updates on our website. We wish you good luck in the financial markets!

That is, as far as we can conclude, the broker simply does not have enough own liquidity to close all the holes and the gaps begin to be patched up in this way by attracting new capital. I don't know about you, but I wouldn't risk trusting them with my big money right now.