Wednesday, 21 January 2015

Fun Online Polls: Charlie & Danish Kroner

The results to last week's Enquête Amusant were as follows:

Êtes-vous Charlie?

Je suis Charlie - 50%
Je ne suis pas Charlie - 33%
Qui est Charlie? - 17%

Très bien.
So, the Swiss managed to keep the exchange rate for one CHF down to EUR 0.80 for over two years (see article at the time e.g. here), but in the end it was getting too risky/potentially expensive.

Apparently the Swiss national bank ended up with a pile of other currencies equivalent to one year's GDP. Seeing as these currencies can now only be sold for one-fifth less than what they paid for them (in CHF terms), there's going to be some explaining to do.

So that's what we learn time and again, in the long run, currency pegs will be abandoned and exchange rates cannot be manipulated; unless two countries which are economically similar and geographically close together, in which case their currencies would move in line anyway.

The question of everybody's lips now is: How long will it be until the Danish crack and allow their currency to rise relative to the Euro?

(For clarity, Denmark was in the same position as Switzerland, its politicians have decided to depress the value of their currency against the Euro to make it easier for exporters and cheaper for tourists (even though the place is still pretty expensive). They can keep the exchange rate down by printing as much money as the ECB is printing and swapping one for the other.)

So that's this week's Fun Online Poll. Vote here or use the widget in the sidebar.


Lola said...

Nationalised fiat currencies are the chief tool used by The Powers That Be to keep us Plebs under control.

Luckily they all, always, eventually fail.

Steven_L said...

Pretty much wherever you have a factory, you have things leaving via the back door.

So if a central banks is printing billions of CHF to buy billions of EUR, who checks none of these EUR leave by the back door?

Mark Wadsworth said...

L, no, its mortgage debts that keep people enslaved. Those debts/currencies are created by nominally private entities.

SL, they leave the back door and go into higher 'asset' prices.

But the assets which go up in value are more akin to monopoly rights, i.e. land and shares. Real assets, like cars or fridges or education or experience do not go up in value.