In the last few months I’ve seen quite a few articles talking about the Swiss National Bank’s behavior, and I was wondering if any of you had interesting insights on the subject.
Here is what I understood so far :
- The Swiss economy is heavily relying on the export of services and high technology manufacturing, therefore, a strong franc is very bad for the swiss economy
- Most western major economies (US, Europe, Japan…) and central bank have entered into quantitative easing, thus weakening their currency again the franc
- To avoid having a franc too strong, the SNB has started printed francs and selling them against other currencies (mainly USD), keeping in this way the franc low
- with all these USD, the SNB is buying a lot of foreign assets. For instance it owns almost 2 billions USD of Apple Inc.
- American newspapers are furious, saying “Look at the Swiss people! Printing francs out of the alpine fresh air and buying our assets!”
- From my point of view, the SNB is just punishing other central banks because they made their local economies weaker (but I may be wrong). Contrary to other western economies, Switzerland is not relying heavily on debt.
My two main questions are :
-> Except an american stock market crash, how can it backfire?
-> If it backfires, what will be the consequences for investors residing in Switzerland?