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Thursday, February 19, 2009

Switzerland: Another Iceland?

[ snip ]

Now, the possible losses caused by these loans must be made transparent. Above all, all of the Eastern European risks must be fully disclosed. Together with the loan losses from UBS and Credit Suisse, the entire writedown for Switzerland could exceed the Swiss gross domestic product.

That is to say?

Switzerland, like Iceland, is threatened with a potential national bankruptcy. One consequence would be that the Swiss currency could fall massively in value — possibly even crash. Another would be that Switzerland’s credit rating would be massively downgraded. That would be a trauma for the country: Switzerland was always as a stronghold of stability. The franc could become an unstable soft currency. Then Switzerland would perhaps be forced to abandon the franc and take on the euro.

[ snip ]

The full article Switzerland Threatened by Bankruptcy can be found at Credit Writedowns.

Trading the Franc in for the Euro would just be trading one unstable, failing currency for another unstable, failing currency. If anything, strange as it may sound, the Swiss would switch to US Dollars.

26 comments:

Anonymous said...

Wow. How amazingly ironic -- francs for US dollars.

Anyone have thoughts on the yuan? China, for all it's problems, seems to be the only country with any net cash.

Also, how's Canada look? I haven't been able to keep an eye on them.

Thanks,
Phil Gomez

Tord Steiro said...

The Euro is fragile, that's fine. But why should the US$ be more solid?

Why would the Swiss not trade the Franc for a gold-backed, currency?

I am not saying that this will solve the solution, I am simply curious about your line of reasoning.

Anonymous said...

"Trading the Franc in for the Euro would just be trading one unstable, failing currency for another unstable, failing currency."

The euro is not unstable nor failing. You're an idiot, probably an American, get your news from Fox News, and have no idea about anything going on in or around Europe.

Anonymous said...

12:54 Anon - Dude, you must be confused with a different Ninja. If you're so confident and he's such an idiot, go by the Euro. Or the pound. Or the Icelandic krona.

Let us know how you make out.

Anonymous said...

It appears by the euro comment that no one likes to think that their currency is in jeopardy. The euro, the dollar and the pound are all in trouble. It would be helpful to have someone answer the original question that was posed: What is the logic behind saying that the Franc would be traded for the dollar vs. any other currency? Where are you getting that idea from?

fajensen said...

... Or maybe the Swiss could open the vaults and spend some of the alleged Nazi hoard on the daily necessities!

It's not like they need food & water - they got very good wine to that they do not export to foreigners.

Ben Bittrolff said...

"The euro is not unstable nor failing. You're an idiot, probably an American, get your news from Fox News, and have no idea about anything going on in or around Europe."

I love funny comments.

1) I'm actually German. Born there. German citizen.
2) I've lived in Canada for over 20 years.
3) I actually do know whats going on in Eurpoe as I have extended family there... assets and investments there.
4) WTF is Fox News?

Anonymous said...

"I love funny comments."

And yours are the funniest.

"1) I'm actually German. Born there. German citizen."

I'm American. Born there. American citizen.

"2) I've lived in Canada for over 20 years."

I've lived in Grenoble, France for the last 16 years, since 1992.

"3) I actually do know whats going on in Eurpoe as I have extended family there... assets and investments there."

I actually do know what's going on in Europe (sorry - don't know where Eurpoe is) as I live here and have assets and investment here.

"4) WTF is Fox News?"

WTF is your point? Is this a game of "Your balls are bigger than mine?" Well you lost.

My point is clear: the euro is a solid currency and when you write that the euro is an unstable and failing currency you only show what an idiot you are.

Overwatch said...

"The euro is not unstable nor failing. You're an idiot, probably an American, get your news from Fox News, and have no idea about anything going on in or around Europe." -Anonymous

Dear Anonymous, your ad hominem attacks do nothing to prove your point regarding the relative strength or weakness of the euro vis a vis other currencies. In fact, they do nothing but make you look less intelligent than you no doubt are. Why not enlighten us as to why you believe the euro is not unstable and declining, then back it up with data?

Sincerely,
Overwatch

Anonymous said...

"Dear Anonymous, your ad hominem attacks do nothing to prove your point regarding the relative strength or weakness of the euro vis a vis other currencies. In fact, they do nothing but make you look less intelligent than you no doubt are. Why not enlighten us as to why you believe the euro is not unstable and declining, then back it up with data?"

The author made an idiotic declaration and made it without giving any supporting data. It was beyond ignorance. I called him out.

His response to my post did not provide any support for his claim, nor any substantive reasoning or data but rather attempted to claim a superior knowledge of the subject. I called him out again.

I have little tolerance for these individuals who so freely throw out disinformation, making absurd statements without any justification. Isn't that the definition of an idiot?

It is not my responsibility to prove the author wrong. It is the author’s responsibility to prove his absurd declaration. Against my better judgment, I'm going to provide you with a link that may or may not be what you are looking for – enlightenment.

"Stability of the euro" by Jean-Claude Trichet, President of the ECB, Osnabrück, 12 February 2009

http://www.ecb.int/press/key/date/2009/html/sp090212_1.en.html

This is my last post.

Anonymous said...

Must be an American????? And let me
guess, you must be a sissy european? You know I am tired of
your little rude remarks.
It seems to me everytime your little country needs saving its OUR DEAD BODIES that pay for it.
But I guess where dumb, I guess
the next time you get bombed and you run like the cowards YOU ARE
dont come crying to us.

Jonathan B. said...

Let me apologize on the behalf of reasonably intelligent Americans for the comments of Anonymous.

Anonymous: With which unit did you serve in WWII? Exactly. So can it. You don't get to claim moral authority for something infinitely better men than yourself did.

Tord Steiro said...

Hmm, interesting clientele here Ninja? I must say...

However: The strength of the Euro is basically founded in the size of the Eurozone, and the solidness of this zone. At the moment, that is scant. Eastern Europe, however not all of them use the Euro, is in shambles. These are all EU countries, and closely tied with the Euro-zone. Secondly, large Eurozone countries, like Italy, Spain, and poland, are in severe economic difficulties. Then is the question, how much will it take before the Germans or the French call it a day, and pulls out of the Euro? Because the alternative for them is to bail out Spain, Italy, or Poland when/if they fail. My bet is that small countries, even Poland or Spain failing is manageable, but if Italy goes, the Euro is over.

However, the Euro is also a currency union still in the making. The system is indeed flexible, it's new, and it's continuously developing. Hence, it is a system that can be fixed with relative ease. Or closed down, of course.

The dollar is different. It's one country, and one state failing means that the rest are going to bail them out anyhow. As far as they can, and here is the US problem. Can they really bail out for instance, California? Further, the dollar is a set system, not very easy to change. While the Euro system is still in it's infancy, still developing it's institutions, the dollar is stuck in the form it is. Reforming the dollar is going to be hard and costly, and not an option during the current crisis.

So, as far as I can see (and spell out in this very short version)the dollar and the euro have different strengths and weaknesses, and they are both uner severe stress. Both can fail, by either going Iceland (dollar) or out of existence (Euro).

You don't have to have roots one or the other places in order to see that. In the present market sentiment, emotions are going to kill you.

Then again, I would like to hear te Ninja's arguments to my above posted question, and perhaps his reflections on Joe Stiglitz's idea about a "Global Greenback" issued by the IMF - in a reshaped form as the world's Reserve Bank.

fajensen said...

I have worked in Switzerland on various occasions and have some experience with the Swiss. Based on that I think that:

The Swiss will simply never take on the EUR, the USD or any other currency that thay do not control instead of the CHF - they are much too independent and self-sufficient for that!

Switzerland is entirely like a fortress with it's own food, water, energy, deep shelters, narrow easily defended access routes e.t.c.

The Swiss *have* the "well armed militia" that the USAnians always rant about - *without* USA's gun-related casualty rate! IMO the rate is so low because a gun becomes a really boring tool when you have to do 6 weeks military training with it every #&&&# year for 32 years. If you don't like that your only escape it to leave the country and pay 2% tax to Switzerland ;-)

They do not need anything outside the country and they are proud of it!!

Recently the EU has been busy trying to bully the Swiss into accepting their destructive immigration policies. The backlash has been interesting to watch ;-)

Anonymous said...

"Secondly, large Eurozone countries, like Italy, Spain, and poland, are in severe economic difficulties."

Poland is currently NOT in the Eurozone.

http://www.forbes.com/feeds/afx/2008/09/18/afx5440142.html

Eurozone banks are in much better condition than U.S. banks. With the exception of Spain (which had its real estate run up by Brits buying winter vacation homes there), bank lending has always been very stringent, almost too stringent in the Eurozone. Most if not all of the bad assets on the books of Eurozone banks has come from the U.S. and the U.K.

Real estate went up in the Eurozone as it did all over the world since 1999, but not as much in the U.S. and the U.K.

Real estate is now going down in the Eurozone as it is all over the world but not as much as in the U.S. and the U.K.

Anonymous said...

""well armed militia" that the USAnians always rant about - *without* USA's gun-related casualty rate!"

if you see the statistics for whites and asians only, there is no difference between the USA and Switzerland. But once you take into account that 30% of the US is not white nor asian ....

Ben Bittrolff said...

Tord Steiro,

Excellent comment. I'll do a post on it over the weekend.

Srdan said...

ninja, about your money supply thesis: it's correct that bernie is trying to make up for the vast broad money supply destruction with an expansion of (mostly) narrow money. but, you've got to keep in mind that the broad money has an inherently lower velocity than narrow, i.e., despite huge money creation in the past by commercial banks, this money had low velocity to begin with, ergo, once the velocity picks up we'll find that we have a similarly large money base, proportionally narrower with a much bigger velocity factor. willkomen nach weimer republik!

Anonymous said...

again you are showing your ignorance as with gold. you have clearly not a clue of what you are talking about

Tord Steiro said...

Sorry about the Poland blunder... going a bit too fast here now.

Nevertheless, the challenge for the Euro is not that small countries collapse. Even if the Austrian banking sector collapses, which may happen, the Euro is relatively safe. The problem for the Euro is if, or when, a large country goes into default. Like Italy. Or, of course, of all the small countrie sgoes into default simultaneously. Which won't happen.

It is not a threat to the Euro that small countries will pull out. It is far too costly for a small country to do that, so they rahter help bailing out someone else.

Srdan & Ninja:
I also think that once the velocity picks up again - which it eventually will - the newly created money will undoubtedly start going around creating inflation, right?

Anon Feb 21. 6.40 AM:
I have no clue what YOU are talking about. Could you please explain carefully, so the less bright among us can understan exactly what you think the Ninja have no clue about?

Ninja:
I am looking forward to you new post!!!

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