The Swiss have been known for many things. They are renowned
chocolate and watch makers as well as financiers. They are well known
as a very low crime society where nearly everyone has a gun (maybe this is
why crime is low?) but their greatest claim to fame has been their
“neutrality. They did not participate in either World War I or WWII.
They did however do business with both sides during World War
II and profited handsomely. If you recall, many accounts they
had held went unclaimed for years because many of the “depositors” were
killed during the holocaust.
Swiss bank money repaid to Holocaust victims
When the settlements were made some 15+ years ago, the survivors and heirs
received “paper” settlement for their gold deposits. It is also highly
likely Switzerland still has untold tons of gold in their vaults from the
Nazi Germany regime which was stolen from overrun people and even
nations. I bring this up because it is important you are fully aware
that Switzerland “knows” gold. Not only do they know gold, they know
which is better, paper or gold …which is why they reimbursed claims with
paper rather than gold.
With the above in mind, the Swiss National Bank as you know were very
big “supporters” if you will of the European paper currency unit,
amassing nearly 600 billion euros on their balance sheet. They shook
the financial world last week when they announced a drop to the peg floor of
1.20 after publicly confirming it just three days earlier. In fact, the
ripples (unintended consequences) have yet to fully play out or be disclosed
as derivatives of all sorts were affected.
We asked the question “why”, last week. Why did they drop the peg,
especially after confirming it just 72 hours earlier? The common sense
reason was because they had to. Euros were piling up on the SNB’s
balance sheet with the current 60 billion per month more staring them right
in the face. Why accumulate more of something the issuer publicly and
purposely wants to dilute?
Fast forward less than one full week and another, maybe the BIGGEST piece
to the puzzle has emerged! It appears the Swiss may have been given an
offer they couldn’t (shouldn’t) refuse? It was announced yesterday that the Chinese and
Swiss have agreed to opening a “renminbi hub” based out of none other than
Zurich.
Do you think this deal just came out of the blue? Did the Chinese
request, or offer, a renminbi hub AFTER the Swiss announced the end of their
euro peg? Or, do you believe the louder Mr. Draghi became and the
closer the date of QE announcement came, the Chinese and the Swiss were
meeting behind closed doors? As an earth shattering side note, the
Chinese publicly and formally also announced yesterday of their intentions
for the yuan to be an internationally traded currency!
The obvious takeaway from these announcements is twofold. One we
could have certainly speculated on, the other a surprise. First, it is
and has been common sense that the yuan (renminbi) was going to eventually
become an internationally tradable currency with the speculation of
eventually becoming “a” if not “the” reserve currency. This, we could
have expected, the timing though was unknown. The not so obvious take
and maybe just my own opinion, the Swiss just took and changed sides! I
know this is a big statement so I will try to explain my thinking here.
The Swiss surely had to know when they dropped their peg, speculators,
financial institutions and even some central banks would be offside and take
losses, BIG losses. They could have dropped the peg differently.
They could have even moved the peg slightly and not forecast further
moves. In other words, they could have made the move slower. They
chose not to and according to Christine LaGarde, they gave no prior notice to
the IMF. I was not sure last week but now, after the Swiss/Chinese
alliance I believe her. I believe this was a bolt of lightning out of
the blue to the Western banking system and probably a shot across the bow by
the Chinese.
Going just a bit further, the Swiss have actually injured the Western
financial system with their overnight and sudden move. Derivatives
have taken hits and very well could have set off a chain reaction behind the
scenes …which have not yet surfaced? They did this AND moved Eastward
at the same time. In my opinion, the Swiss “know” the direction where
the power structure is moving. You see, Switzerland has “re” refined
several thousand tons of gold over the last few years. They know
where the gold came from, they know they received London good delivery
gold, they know they recast this gold into “kilo” bars which is good delivery
in the East …and they know where they shipped all of this gold. You
would not have to be as bright and precise as the Swiss to understand what is
happening. They have seen the flow, done the math and watched as
“power” (gold) has been moved from West to East.
Before finishing I would like to comment on their “neutrality”. The
Swiss have always been connected to the Anglo banking and financial
systems. Over the last 3-5 years they (the Swiss financial
institutions) have been attacked time and again by Washington DC. with
new rules and regulations, FATCA being the obvious. Their institutions
have been blackmailed and strong armed into breaking secrecy laws which
stood for well over a century. Do you think they liked or enjoyed this?
Would they have changed their practice unless they were forced to? Of
course not.
So, “what’s in it for them” you ask? This is easy! Switzerland
by allying with China is simply following “the power”. They will also
be doing business in a “respectful” manner with the Chinese rather than with
the disrespect they have worked under with the West. They also will now
have another way to transact business, they will be entitled to and even
enticed to use the new clearing system that Russia has formed… and not under
the watchful eyes of SWIFT! As a speculation on my part, I believe the
Swiss fully understand “what” it is that is coming. They can see as
well as we can, the collapse is coming. A banking collapse, a
derivatives collapse, a trade “war” and collapse, and a currency/credit
collapse. If it is obvious to people like us who are not plugged in, it
is more than obvious to them being at the heart of global finance. I
believe they are simply positioning themselves ahead of collapse and “gittin’
out while the gittin’ is good”! I might add, they are doing this on
their own terms and timing, not terms, conditions and timing which are forced
on them!
In my opinion, when we look back at what the Swiss are doing and have
done, we will simply look at it as “the Swiss did what they had to do and
what was best for the Swiss”. They have changed sides so to speak and
done so in a front running and hands on manner. This is simply
Switzerland doing what it does best …business!
Regards, Bill Holter