The Big Swiss Faustian Bargain

Guest Post: The Big Swiss Faustian Bargain

Submitted by Tyler Durden on 09/03/2012 - 21:13 Ben Bernanke Bond Central Banks Dorgan Espana European Central Bank Eurozone France Germany Gross Domestic Product Guest Post Money Supply Mortgage Loans Poland Quantitative Easing Real estate Swiss National Bank Swissie Switzerland United Kingdom We recently discussed Guggenheim's 'awe-full' charts of the level of central bank intervention from which they noted that the Fed could lose 200 billion US$, when inflation comes back again. Interest rates would increase by 100 basis points and the US central bank would be bankrupt according to US-GAAP. We explain in this post the differences between money printing as for the Swiss National Bank (SNB), the ECB and  the Fed. We show the risks the central banks run when they increase money supply, when they “print”. As opposed to the ECB, the SNB only buys high-quality assets, mostly German and French government bonds. However, for the SNB the assets are in foreign currencies, for the big part they are denominated in euros. Further Fed quantitative easing drives the demand for gold and the correlated Swiss francs upwards.  Sooner or later this will pump more American money into the Swiss economy and will raise Swiss inflation. For the SNB these two are the Mephistos: Bernanke and Draghi, the ones who promise easy life based on printed money.