Swiss National Bank Announces CHF/Euro Peg @ 1.20 – Are They Bringing A Swiss Army Knife To A Gun Fight?

by Morpheus on September 6, 2011 · 0 comments

So the Swiss National Bank, who most (including us) thought was just “posturing”, about a CHF / Euro peg were actually serious, and have announced a peg at 1.20 CHF/Euro.

This is quite astonishing in many ways, but cutting to the chase, the biggest consideration is that long term, this behaviour has rarely, if ever, ended well.

There have been estimates that intervention may ultimately cost up to CHF 500 billion, and will eventually be overrun, by the unstoppable force of the market as surely as the tides will come in and the seasons will change.

Even CNBC have been reporting trader’s comments this morning along the lines of:

“The market will likely challenge the Swiss Bank’s resolve to defend the 120 level..”

Of course it will, that’s what it does.

Everybody queuing up to be the next George Soros take your marks, because the SNB vs the Markets in the midst of a crisis… well, if that isn’t the perfect cliche of arriving at a Gunfight with a 3 inch Swiss Army knife, we don’t know what exactly is.

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