Now this is an example of real economic policy put in practice through the votes. At the end of this month, the Swiss will have a "Save Our Swiss Gold" referendum to determine whether the Swiss central bank will be required to hold a fixed percentage of gold to back reserves. The Swiss monetary reserves, about $550 billion, would have to be backed by 20% in gold. It now holds about 7.7% in gold, so there would have to be a massive buying program to bring back gold into Switzerland or a significant cut in reserves.
This new policy would do the exact opposite of what the SNB has been trying to do with its money supply and currency.The central bank has been attempting to reduce the upward march of the the Swiss franc which has hurt the Swiss export business. Right now the Swiss franc is working under a floor of 1.20 euros, so the exchange rate has not been very volatile given the constraint has been binding. This floor has caused significant selling of francs.
This passage of this vote is real and has not been the focus of the market. We will all hear more about gold, money and exchange rates in the next four weeks.
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