"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput

Trader Dan's free work will soon be available at www.traderdan.biz

Wednesday, February 13, 2013

Wall Street Journal's Richard Barley on the Swiss National Bank

The Wall Street Journal's Richard Barley has written an excellent short piece on the predicament facing the Swiss National Bank that really hits the problem of this nonsensical ZERO INTEREST RATE policies being followed by many of the WEstern Central Banks.

The piece is by subscription only ( I am including the link if you wish to subscribe- Dow Jones subscribers have access to this in their wire feeds).


He entitles his piece: "SNB's Zero-Rate Wonderland"
Let me summarize his great analysis:

1.) The Swiss National Bank cannot raise interest rates for fear of derailing their economy

2.) The zero interest rate environment is producing a bubble in real estate prices. UBS, has constructed a Swiss Real Estate Bubble Index to measure the rise in housing prices. It is a Price-to-Income ratio that has risen to size times at the end of 2012 from four in 2000.

3.) Inflation in 2012 was a negative 0.7%.  Growth is sluggish. The SNB cannot raise interest rates because it would send speculative money flows into the Swiss Franc causing the currency to rise in value hurting Swiss exports and slowing any incipient signs of growth.

4.) This would force even more intervention in the Forex markets by the SNB to sell the Franc in their attempt to devalue it.

5.) The SNB is attempting to slow down housing loans by requiring a capital buffer for banks

6.) The Fear is that this will work to curtail loans to small and mid size businesses and enterprises

7.) The SNB has a balance sheet that is ballooning.

This well thought out and solid piece encapsulates not only the problems faced by the Swiss National Bank but the reality is that the other Western Central Banks practicing the same policies are in the exact same predicament. Here in the US, the Fed is attempting to reflate the housing market which imploded when the bubble IT CREATED in that sector burst. The problem for the Fed is that while it attempts to reflate various bubbles it has presided over, it merely creates a new one someone else. CAse in point - the US equity markets which in my opinion are in the beginning phase of yet another speculative bubble.

The exit that the Fed will attempt at some point in the future should be interesting to say the least.


  1. Very interestin Hui:SPX now sitting at a 3 year low. Ben is again crowned king for such work.

    Unbelievable. That hot money on the way out should be a sight to see. Still no issues, lowest labor participation rate since 1933, velocity of money down to all time lows, Fed balance sheet looks like 50 lbs of horse manuer in a 1 lb. sack. Private Sector small business' unable to get money to create jobs, all retiree's and savers being systematically destroyed, But boy that stock market.
    God help all of us who sit and watch the players continue to mock reality and economic rules of law. Our leader telling the world last night we are recovering and the Government can create jobs. Banks, Govt, and large corporations are directly responsible in this order. Government was the manufacturer (Barney and the boys) of illicit drugs (mortgages for everyon), banks were the drug dealers. Meanwhile on the home front guys like Immelt utilizes NBC to lie to the people. I see Mr. Immelt just sold it, I thinks he was getting alot of grief for his croney capital ways. Only the future holds the truth for all the immoral acts against the US Citizens

  2. >the Fed is attempting to reflate the housing market

    This doesn't make sense. Housing prices in an area are correlated to an areas income levels. The NWO is draining wealth from all over the US. Overall, the housing prices will go no where with Walmart and McDonald jobs being created. If housing prices fo need to rise due to inflation, most people simply won't be able to afford them unless the prices are beaten down enough.

    Another factor will be housing that gets obsoleted. This may push more people into buying trailers or dilapidated houses.

    Overall, the countries income levels and savings will continue to be drained and deleted for many years to come and this will. The Fed will do what they need to accomplish this. Maybe 70% of americans will live in shanty towns.

    1. This comment has been removed by the author.

    2. 1930 all over again even if the dirt is covered by safety nets deployed by all Western governments. Add to this disastrous situation the ongoing intervention of the governments which are all salivating at the prospect of taking over the pension money. As someone said: God help us all

      Next??? 1933...up to 1939

    3. Prioris - It's hard to reach any other conclusion than that this is precisely the desired outcome: the houses are affordable to and will continue being bought by the wealthiest individuals and hedge funds. In other words, property is being transferred out of the hands of the middle class to those with wealth in a huge land grab. We are witnessing the beings of a modern feudalism. Michael Hudson has written extensively on this for years.

  3. It is amazing Hubert. The world is printing, printing, printing and the supposed Forward looking market is saying liquidate gold and gold stocks. I think England comes to mind, selling at a bottom and hoping for the best. Reminds me of the squished oranges after you put in one of those drink type plastic squeezies. No more juice is left in it on the miners side. How about those two stocks KGC and ABX. Appears mouth to mouth (i.e. life) was forced into the lungs of the HUI & GDX. Dan kept harping on the miners to stop their never ending "empty low grade" high fixed cost search for growth mindset; and it appears that it is working. From my perspective it means that certain members of our MSM have been alerted and the monkeys are decending on societies computer screeens. They have started beating much stronger on the drums, trying to beat em down some more. The numbers spoke for themselves on KGC, the media is perplexed and deer in the headlight syndrome is erupting. Soon, very very soon, the HUI:SPX will turn, as will the Juniors. The naysayers in the MSM media will turn up the heat only to be scorched by the light. So, I am getting more confident, meaning the beatings must contine..until ...BOOOM..their goes their Anchor. A house built on sand will certainly collapse. The DXY is the house built on sand. Max 83, I think this time the hot money will direct itself just like water. To the easiest drain, GOLD MINERS!!!!!!!!!!!!1

  4. http://www.zerohedge.com/news/2013-02-14/guest-post-unending-british-deleveraging-cycle
    Velocity of Money down.
    Financial Repression High

    Croney Capitalism and preganant banks unwilling to have the baby and/or let the babies drink from their breasts. No, the banks fooled the lords who rule us, therefore, they are one and the same. Short the large banks, Buffett, and the rest of the crew

    1. I have been saying in my blog since 2009 that QE will never work as long as the governments (all over the world not only the US and UK) do not FORCE the banks to lend money to businesses instead of speculating on derivatives and other toys created by the same banks that got taxpayers money.
      This is not only a financial crisis (turning to a monetary one) but a political crisis too where the political elite doesn't dare challenge their financial masters. This will lead to a revolution where the citizens finally wake up and take their future into their own hands. It has been a slow process but it is coming to an end. The detonator could be the pensioners who are going to see their pensions money taken by the governments...

      The bad smell is getting stronger everyday...be prepared for garbage day

  5. Dan -

    With the bullion banks in control - do you worry that the cot reports may be manipulated?

  6. At this point there is just way too many banks chasing business on the upper end of deal size and scale and credit worthiness. Most of the small mom and pops were crushed in many of the brick and mortar industries. So when Ben opened his mouth and said more lending should be made, it was just words to deceive. They are playing with each other and the Fed wants the Banks around to help deflate that large bag of bs in his balance sheet. They are desperately trying to inflate stocks, inflate the housing market. Demand is natta. Everyone is broke or being fired. The tale of two cities. The same banks that received free money for helping to blow up the world on government mandated loans. Isn't that nice of Ben to help out the corrupt. I would say the time is getting nearer Hubert. As for this latest dip, before everyone sells their gold and silver, lets look at a few real stats the MSM will not disclose.

    Silver: Oct. 2007=$13, Today=$30
    Gold: Oct 2007=$760, Today=$1,620 (or whatever they hammer it to...)
    Reported Unemployment: Oct 2007=4.7%, Today=7.9%
    Case-Shiller Home Index: Oct 2007=190.9, Today=144.9
    New Home Sales: 2007=774K, 2012=367K
    Housing Units Built: 2007=1,500K, 2012=651K
    Fed Reserve Balance Sheet: Oct 2007=$873B, Today=$3.11T
    Food Stamp Recipients: Dec 2007=28.7M, Today=48.2M
    Federal Spending, Annual Rate: 2007=$2.7T, Today=$3.6T
    Fed Tax Revenues, Annual: 2007=$2.5T, Today=$2.4T
    Retail Gasoline Price: 2007=$2.84/gal, 2012=$3.68/gal
    Money Supply: Oct 2007=$851.6B, Today=$2,760.7B
    Personal Bankruptcies: 2007=801K (75% up from 2006), 2012=1,245K
    Foreclosures: 2007=405k (40% up from 2006), 2012=742K

  7. The problem the SNB has is that it s currency is appreciating because of speculative inflows.
    Switerland has a strong economy compared to other EU countries, in fact they want to raise interest rates but because of all the speculators who buy the swiss franc they cant. It s a bit different to keep zero int rate because the own economy sucks so that you can borrow more, or to keep it down because your neighbours suck.
    Switzerland cannot compete against the market forces it s not its fault if it has a solid economy


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