Switzerland’s Keynesian Dunderheads
There is an initiative underway in Switzerland to once again increase the gold backing of the Swiss Franc. Readers may remember that the Swiss Franc was the currency that held out the longest with an almost 100% gold backing. Then came the 1990s and plenty of political pressure, until the Swiss buckled and began to sell most of their gold – at ridiculously low prices, natch.
We don’t know what kind of thinking informed Switzerland’s central bankers at the time, but we certainly know that their modern successors are a bunch of Keynesian dunderheads and committed central planners. If you don’t believe us read their papers, which can be found on the SNB’s web site, or just look at their policies (the SNB does maintain a very good web site by the way, we have to give it that. A number of euro area NCBs would do well to adapt their useless web sites along similar lines).
Not surprisingly, they have been printing money like crazy in recent years, as they are suffering from deflation-phobia, similar to most modern-day central bankers (as you will see further below, this fear is quite misguided).
The SNB’s flexibility may be curtailed a little bit if a higher gold reserve at a fixed percentage were to become a legal requirement. From the perspective of central bankers, the problem with gold is that they cannot print it, although it is certainly not immune to shenanigans in the hands of minions of the State.
Given the current thinking at the central bank, the above mentioned efforts have brought its members and its political supporters to the barricades to sotto voce denounce the initiative to increase the franc’s gold backing. Parliament has already rejected it, but there will be a referendum, and that referendum will be binding.
Destroying ‘Credibility’ with Gold?
In the course of the debate over the gold initiative, a number of absurd arguments have been forwarded by all those who directly benefit the most from the central bank’s inflationary policies (the government) and those whose power is derived from the status quo.
