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More Italians Move Savings To Switzerland As Fears Of Banking “Doom Loop” Intensify

October 18, 2018

More Italians Move Savings To Switzerland As Fears Of Banking “Doom Loop” Intensify

With the euro weakening against the Swiss franc (recently trading at session lows of 1.14) and Italian stocks and bonds tumbling once again on reports that the European Commission is planning to reject the Italian draft budget plan submitted earlier this week – a repudiation of Italy’s populist leaders that was widely anticipated – the Telegraph’s Ambrose Evans-Pritchard offered a glimpse into how middle-class Italians are reacting to the deteriorating relationship between Italy and the EU, and its attendant impact on the country’s banks and capital markets. In a trend that’s eerily reminiscent of the banking run that precipitated the near-collapse of the Greek banking system (most recently in 2015), Italians are scrambling to convert their euros into Swiss francs and stash them across the country’s northern border with Switzerland.

Swiss

Right now, the movement has mostly been limited to the wealthy. “The big players” have already gotten out…

The Swiss group Albacore Wealth Management told Italy’s Il Sole had received a wave of inquiries from Italians with €5m to €10m in liquid capital. The super-rich are already a step ahead. “The big fish have been organizing the expatriation of their wealth for some time,” it said.

…and those with between 200,000 euros and 300,000 euros in assets are moving more quickly, inspired by memories of desperate Greeks struggling with capital controls that restricted ATM withdrawals.

“There is fear creeping in,” said Massimo Gionso, head of family wealth managers CFO Sim in Milan.

“People are concerned that if we get into the same situation as Greece, they might find the banks are closed and they can take out only €50 a day from cash machines. They don’t want to risk it,” he told the Daily Telegraph.

…click on the above link to read the rest of the article…

This Is What Global Currency War Looks Like: A Complete History Of Recent FX Interventions

August 11, 2015

This Is What Global Currency War Looks Like: A Complete History Of Recent FX Interventions

After the dramatic collapse in the SNB’s defense of the Swiss Franc peg to the Euro, there was a period of relative FX peace in which few if any central banks engaged in outright currency intervention (aside from the countless rate cuts so far in 2015 in response to the soaring strength of the USD, which has risen dramatically over the past year for all the wrong reasons). Then China last night reminded us what happens when in a centrally-planned world one or more markets take too great advantage of relative FX differentials, in this case Japan, whose Yen plunged from USDJPY 80 to 125, and the Euro, which tumbled from EURUSD 1.40 to just above parity.

Now, it’s China’s turn.

But as we pointed out before, FX interventions never take place in a vacuum, and especially during periods of rising dollar strength, when the entire FX world, and especially exporters and mercantilists, go berserk.

Furthermore as Stone McCarthy notes, “this is the sort of “international development” that the Fed will need to keep an eye on and assess as conditions align for the start of policy normalization.” The reason is simple: what China just did could make a rate hike impossible as multinational US corporations will be slammed with a double whammy of soaring dollar and sliding CNY, making US exports that much tougher. And as we won’t tire of repeating, the Fed can not print trade.

And just to help remind readers of what happens when the entire world engages in wholesale currency war, here is a complete list of all the recent FX interventions, courtesy of Stone McCarthy.

Summary of Recent FX Interventions:

The last period of any significant Fed interventions in foreign exchange markets was during 1994-1995 when the dollar reached all time lows against what were then the benchmark currencies of the Japanese yen and German deutsche mark, and the period of the Mexican Peso Crisis. After that, it was acting to defend the value of the yen and new-minted euro.

…click on the above link to read the rest of the article…

 

 

The Swiss Franc Will Collapse

January 28, 2015

The Swiss Franc Will Collapse

I have worked to keep this piece readable, and as brief as possible. My grave diagnosis demands the evidence and reasoning to support it. One cannot explain the collapse of this currency with the conventional view. “They will print money to infinity,” may be popular but it’s not accurate. The coming destruction has nothing to do with the quantity of money. It is a story of what happens when interest rates fall into a black hole.

 

Yields Have Fallen Beyond Zero

The Swiss yield curve looks like nothing so much as a sinking ship. All but the 20- and 30-year bonds are now below the water line.

Swiss Yield Curve Jan23

Look at how much it’s submerged in just one week. The top line (yellow) is January 16, and the one below it was taken just a week later on January 23. It’s terrifying how fast the whole interest rate structure sank. Here is a graph of the 10-year bond since September. For comparison, the 10-year Treasury bond would not fit on this chart. The US bond currently pays 1.8%.

 

From Keynesian Shangri-La To Outright War

January 26, 2015

From Keynesian Shangri-La To Outright War

Over the last few weeks drum beats could be heard signalling the coming of troops from abroad to lay waste to any foe ahead of them. However, unlike what we first conjure up as troops from an opposing force made up of men and weapons. This battlefield is being waged in the ether of the currency markets.

Although barely covered by the main stream press Central Bankers have now shown they’re now far from working in unison or displaying any semblance of a cohesive group. Rather, they’ve now turned their attention and policies inward in a “shoot first, screw asking any questions later” mindset.

It wasn’t hard to extrapolate recent events happening if one only paid attention to previous clues. The swiftness along with the repercussions going forward are the only thing that were hard to calculate. However, we now see the brutality and to what extent even perceived smaller entities (such as the Swiss) are willing to take to save their own sovereignty just by counting the first wave of casualties through the metaphor of empty money bags.

Once the Swiss National Bank (SNB) decisively went rouge and un-pegged the floor between the Franc and Euro everything changed. We’ll never know who knew what, if, or when. (i.e. All the other Central banks.) Yet one thing is clear: The SNB didn’t care about who or what entity was pegged to their currency in a carry trade, nor the effects it might have on its economy.

…click on the above link to read the rest of the article…

 

Swiss National Bank scraps euro cap

January 15, 2015

Swiss National Bank scraps euro cap

(Reuters) – The Swiss National Bank unexpectedly scrapped its cap on the franc on Thursday, sending the safe-haven currency crashing through the 1.20 per euro limit it set more than three years ago.

Minutes after the announcement the franc had soared by almost 30 percent in value against the euro. SNB vice-chairman Jean-Pierre Danthine had said as recently as Monday that the cap would remain the cornerstone of its monetary policy.

“This is a very risky move. You can see that in the market reaction that is extreme,” Sarasin economist Alessandro Bee said.

In its second surprise announcement in as many months, the SNB said it would discontinue the cap it introduced on Sept. 6, 2011 to fight recession and deflation threats after investors fleeing the euro zone crisis pushed the franc to record highs.

“This exceptional and temporary measure protected the Swiss economy from serious harm. While the Swiss franc is still high, the overvaluation has decreased as a whole since the introduction of the minimum exchange rate,” the SNB said in a one-page statement.

…click on the above link to read the rest of the article…

 

Olduvai IV: Courage
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Olduvai II: Exodus
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