Swiss franc and the center cannot hold

   Things fall apart; the centre cannot hold;

  Mere anarchy is loosed upon the world,   

 The blood-dimmed tide is loosed, and everywhere   

 The ceremony of innocence is drowned;

- William Butler Yeats 

Central banks cannot control markets or events. They may try and their actions my slow the tide of capital flows, but eventually market forces erode central bank barriers. There is a long history of central bank intervention especially when trying to peg or target a rate. 

The market was surprised by the Swiss appreciation from the change in SNB policy, but history tells us that caps cannot last forever when the fundamentals dictate otherwise. It was surprising that the SNB was able to hold its cap for over three years. The size of the euro  liabilities was becoming unsustainable.

It is also surprising how cheap transparency and forward guidance is when it does not suit the objectives of the bank. Of course, sending any signals would have had a similar effect but how much creditability does the bank have now. Finally, it is interesting to hear the talk about systemic risk in the market when it was a central bank that created the risk in the first place. If the bank never capped the appreciation, the severe loses would never have occurred.

Now the investors and exporters will pay the price of government induced market distortions. The center cannot hold and market participants are left holding the bag.