8 ms·

My impression is that economists generally thought the Swiss central bank would keep the peg, because why wouldn't they? There's no economic law stopping them a

My impression is that economists generally thought the Swiss central bank would keep the peg, because why wouldn't they? There's no economic law stopping them and it was obviously good for the Swiss economy. The fear of central banks with large balance sheets is a powerful political force, one that economists don't really appreciate. The rational thing would be to keep the peg (or even better, target inflation or NGDP) but an unfortunate majority of politicians and voters are fearful of "printing money". Just as central banks around the world keep making the mistake of allowing falls in the inflation rate during a recession, economists keep making the mistake of assuming the next central bank will listen to them.

Fizzgig 12y ago
That's insane. No-one, and I mean [b]no-one[/b] thought the Peg would be kept. The issue was how it was broken, nothing more. http://www.ft.com/cms/s/8084cc9a-9cc5-11e4-971b-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F8084cc9a-9cc5-11e4-971b-00144feabdc0.html%3Fsiteedition%3Duk&siteedition=uk&_i_referer= http://www.ft.com/cms/s/8084cc9a-9cc5-11e4-971b-00144feabdc0... http://www.telegraph.co.uk/finance/economics/11353686/QE-or-not-QE-That-is-the-question-facing-ECB-chief-Mario-Draghi.html http://www.telegraph.co.uk/finance/economics/11353686/QE-or-... http://www.telegraph.co.uk/finance/economics/11321355/Mario-Draghis-QE-hints-send-the-euro-to-a-four-year-low.html http://www.telegraph.co.uk/finance/economics/11321355/Mario-...
fla 12y ago
Keeping the peg means buying more and more euros. It's not sustainable.
- Fizzgig 12y ago
  Exactly. Europe announcing QE on the scale of the US markets lead directly the CHF moves. My comment below that showed the media reporting of this is now "down-voted". >>Out. Funny. HN - the new Reddit.
- tormeh 12y ago
  It was. The Swiss central bank just had to print francs to sell for euros. It wasn't like the rest of the world didn't want those francs. Remember that this floor was about keeping the franc down.

Fizzgig 12y ago

That's insane. No-one, and I mean [b]no-one[/b] thought the Peg would be kept. The issue was how it was broken, nothing more. http://www.ft.com/cms/s/8084cc9a-9cc5-11e4-971b-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F8084cc9a-9cc5-11e4-971b-00144feabdc0.html%3Fsiteedition%3Duk&siteedition=uk&_i_referer= http://www.ft.com/cms/s/8084cc9a-9cc5-11e4-971b-00144feabdc0... http://www.telegraph.co.uk/finance/economics/11353686/QE-or-not-QE-That-is-the-question-facing-ECB-chief-Mario-Draghi.html http://www.telegraph.co.uk/finance/economics/11353686/QE-or-... http://www.telegraph.co.uk/finance/economics/11321355/Mario-Draghis-QE-hints-send-the-euro-to-a-four-year-low.html http://www.telegraph.co.uk/finance/economics/11321355/Mario-...

fla 12y ago

Keeping the peg means buying more and more euros. It's not sustainable.

Fizzgig 12y ago
Exactly. Europe announcing QE on the scale of the US markets lead directly the CHF moves. My comment below that showed the media reporting of this is now "down-voted". >>Out. Funny. HN - the new Reddit.
tormeh 12y ago
It was. The Swiss central bank just had to print francs to sell for euros. It wasn't like the rest of the world didn't want those francs. Remember that this floor was about keeping the franc down.