Trouble in the Mountain Hideout

Capital flight has made Switzerland rich, but now it threatens the real economy.

Even the shrewdest parasites such as the Swiss can’t live off of a dead host for very long.

In August, the SNB had instituted a floor of CHF 1.20 to the EUR and had sworn up and down to defend it by printing unlimited amounts of francs to acquire unlimited amounts of euros, a potential fiasco if the euro were to collapse. Jordan swore once again that the SNB would maintain the minimum exchange rate and that interest rates would “remain at zero for the time being.”

“But there’s a housing bubble,” he said. And and a dangerous conundrum: "In considering the threats facing Switzerland, we concluded that the focus must remain on the minimum exchange rate. As a consequence, interest rates are at zero, and so we have enormously expansionary conditions."

Panic now, while there’s still time, but don’t forget your coocoo clock.