VADUZ, Liechtenstein, December 19, 2014 /PRNewswire/ --
- The Liechtenstein Taler
With the world's political and economic parameters rapidly deteriorating, it is not surprising that the SNB is willy-nilly forced, at an ever increasing rate, to add funds to its super suspect € portfolio. This unenviable posture by a highly competent institution is the result of a Swiss government directive, stating that the central bank has to erect an impenetrable barrier against the value of 1 € slipping under SFR 1.20.
More than 20 years have passed since representatives of the states using the Euro as their currency solemnly agreed the terms of the Maastricht Treaty, to ensure within their territories "sound fiscal policies, with the national debt limited to 60% of GDP and the annual deficits no greater than 3% of GDP."
The conclusive evidence 20 years on, that the countries of the Eurozone are not complying with their own rules, is that the ECB, the creation of these selfsame partners, finds it difficult now to dispose of its long term € denominated debentures. The reason being the lack of confidence in the future of the Euro, as there is hardly a single member of the currency union that can claim to have complied with the terms so solemnly sworn in Maastricht.
The Swiss finance minister can only be compared with the tragic figure of King Canute, who set his throne on the sea shore and commanded the incoming tide to stop, to prevent him wetting his clothes. The fact that the sea did not comply with his command had a salutary effect on the giver of this preposterous order. He never again attempted to defy the rule of nature. Owing to his subsequent acquisition of the thrones of Britain, Denmark and Sweden, he went down in history as the Great Cnut or Canute. So there is still hope that the present holder of the office of the Swiss ministry of Finance will also eventually see the light and abandon a policy "of attempting to stem the tide". Of course the officials of the SNB, as all financially qualified people, are aware that there is no escape from Gresham's Law, according to which bad money drives out good money. They must have been aghast at the decision of the government to buy Euros of an indefinite quantity yet at a fixed rate, just to prop up an arbitrary rate of exchange, ignoring the fact that in a free economy only supply and demand can determine prices or in this case currency rates and not government directives.
As a result, smart capital is now flowing into SFR, which is considered to be undervalued, not only by the usual suspect currency speculators but also by all holders of Euros, who are unsure about the future of their currency.
Yet there is no reason to despair, as long as we examine the question unemotionally.
For it is clear that every currency serves at least two separate purposes. As a means of exchange for goods and services or as a store of wealth. And that is the reason why, there is an alternative to the present currency policy of the SNB, that is doomed to fail and is bound to end in disaster.
It stands to reason that the current demand for Swiss francs is not a sudden passion for Swiss cuckoo clocks, but rather reflects the anxieties of investors who wish to invest their wealth in a currency that will stand the test of time. Taking into account the double nature of the currency, it is imperative in this case, to create a separate Swiss investment currency, that will take off the heat from the Swiss franc, which could then continue to be used for commercial purposes.
As Switzerland shares its stable money, in a currency union, with Liechtenstein, it should be no overwhelmingly difficult task, to establish a new currency, with the title "Liechtenstein Taler", to be traded as an investment currency for all non-residents merely on line, who submit their identity documentation to the authorities, in accordance with the existing compliance rules. This would result in a twofold blessing. It would take off the pressure from the Swiss franc further appreciating, by reducing the demand for the current commercial SFR and providing additional business for the banks of CH & FL.
SOURCE Albertinaplatz Communication Consulting GesmbH