Think in terms of policy regimes, not gestures

So the SNB got tired of pegging the Swiss franc, and shrugged.  A gesture.  They insist it was a successful policy, which was no longer needed.  But consider the following from Gavyn Davies:

The SNB balance sheet at the end of December was about 85 per cent of GDP, mostly in foreign currencies, and we do not know whether this has increased markedly during the bout of euro weakness in January. The SNB’s mark-to-market currency losses on Thursday were probably around 13 per cent of GDP (SFr75bn). Paul Meggyesi of JPMorgan says that “the SNB would have been bankrupted by this de-pegging had it not made such a large profit last year”. The SFr38bn profit in 2014 was announced only last week, which is surely not a coincidence.

Many economists believe that balance sheet losses are irrelevant for a central bank, so they should play no role in policy. But the SNB is 45 per cent owned by private shareholders, many of whom are individuals, who receive dividends from the SNB. The rest is owned by the cantons, which have been complaining recently about insufficient cash transfers from the SNB.

Losses of 13% of GDP are pretty significant.  And contrary to the claim of the SNB, Switzerland today is far worse off than in 2011, right before the currency was pegged.  The SF is far more overvalued, having risen an astounding 21% in just a few days.  And Switzerland was experiencing deflation at the previous exchange rate of 1.20!

Robert Lucas kept emphasizing that we need to think in terms of policy regimes, not discretionary decisions at a point in time.  And this is what defenders of the SNB miss.  They don’t have a cohesive regime in place.  It’s almost impossible to figure out what they are trying to accomplish. Even if we assume that political constraints put them in a difficult position (a hypothesis I am willing to entertain), the past 4 years of SNB policy are not defensible as making the best of a bad situation.  For instance, why wait until the peg is broken before lowering the interest rate to negative 0.75%?  (Insert horse/barn door analogy here.)

If the SNB was having trouble meeting its conflicting mandates, then it should have gone to the government long ago to discuss options.  Instead it blindsided the government with a panicky move.

A policy rule worked very well for 3 and 1/3 years, delivering good macroeconomic outcomes.   Then the SNB switched to a discretionary regime and promptly lost 75 billion SF.  Don’t blame the policy rule.

Yes, some bad things might have happened if the peg had been maintained, but nothing like the bad things that are about to happen.

There’s a reason markets didn’t expect this—it’s a really dumb move.

PS.  Of course I think NGDP targeting is far better than a fixed exchange rate regime, but there are things far worse than either.

HT:  Tyler Cowen


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45 Responses to “Think in terms of policy regimes, not gestures”

  1. Gravatar of benjamin cole benjamin cole
    18. January 2015 at 16:25

    So…why doesn’t the SNB buy premeir trophy real estate globally and funnel rents to Swiss government and give Swiss taxpayers a permanent tax cut?

  2. Gravatar of Nick Nick
    18. January 2015 at 16:38

    I’m with Ben. If you are worried that the bonds your QE buys don’t earn enough / are overvalued then buy something else! Buy a bunch of something elses. This is a world where a guy with $3000 can buy index funds diversified into virtually every asset class in the world.
    Their fear is someday there will be inflation in Switzerland and when they try to sell the rest of the world back equity and bonds representing the entire global economy no one will be willing to buy them? Even denominated in the same SF experiencing ‘too much inflation’? What???
    But I’m no economist … If I had an unlimited supply of something I considered ‘overvalued’ I would be happy.

  3. Gravatar of Benjamin Cole Benjamin Cole
    18. January 2015 at 19:23

    For that matter, why doesn’t the SNB simply print up enough to pay the Swiss national tax bill for a few years, and give a Swiss citizens a three-year federal tax holiday?

    Are central bankers and economists so wed to hoary shibboleths that they cannot fathom such actions?

    Is monetizing debt always bad? How about monetizing taxes?

    If deflation is the chronic problem….

  4. Gravatar of Ray Lopez Ray Lopez
    18. January 2015 at 20:54

    Sumner: “Robert Lucas kept emphasizing that we need to think in terms of policy regimes, not discretionary decisions at a point in time. And this is what defenders of the SNB miss. They don’t have a cohesive regime in place.”

    Absurd, discredited, structuralism claim (http://en.wikipedia.org/wiki/Structuralism – “structuralism was criticized for its rigidity and ahistoricism.”)

    And R. Lucas’ model of rational expectations is absurd as it fails to account for bounded rationality. I recall arguing with econ students in the 1980s with their absurd models of rationality; it was ‘physics envy’ by them. BTW, where is your formal model of targeting NGDP? Why not get somebody as skilled as Basil Halperin to model it for you, now that you have a budget?

  5. Gravatar of Benjamin Cole Benjamin Cole
    18. January 2015 at 22:10

    Ray Lopez–We don’t need no stinkin’ models. Just run the money presses red-hot for a really long time.

  6. Gravatar of Blue Eyes Blue Eyes
    18. January 2015 at 23:13

    “So…why doesn’t the SNB buy premeir trophy real estate globally and funnel rents to Swiss government and give Swiss taxpayers a permanent tax cut?”

    A sort of Norwegian-style sovereign wealth fund, except the Swiss don’t even have to go to all that effort of digging its resources out of the ground!

  7. Gravatar of benjamin cole benjamin cole
    19. January 2015 at 02:32

    Blue eyes–this is a problem I would die for.

  8. Gravatar of Blue Eyes Blue Eyes
    19. January 2015 at 02:41

    Ben – I know, and think of all the fun the SNB could have at the same time! For example, it could buy up all the cheap oil and sit on it until it gets expensive again; or buy up Chinese industries thus recycling the money back around yet again. It could pump cash back into the economies from where the money is flying out of in the first place, like Greece and Germany.

    It could do for European monetary policy what the UK is doing for European employment.

    The possibilities are endless. I tend to agree with Scott, continuing to let the Franc get more and more expensive is the worst possible answer.

  9. Gravatar of TravisV TravisV
    19. January 2015 at 06:16

    “What more can the BOJ do? I think the central bank can hold off on action and take a wait-and-see stance for the time being,” Yamamoto told Reuters in an interview.

    http://www.reuters.com/article/2015/01/19/us-japan-economy-boj-idUSKBN0KS0MO20150119

    ‘Abenomics’ architect says no need for more BOJ easing

  10. Gravatar of ssumner ssumner
    19. January 2015 at 06:32

    Ben and Nick, Good question.

    Ray pulls out Cliff’s Notes on Robert Lucas, attacks views that have no bearing on this post.

    Then ridicules Lucas belief need for structural models, as he asks me to produce a structural model.

    You said:

    “where is your formal model of targeting NGDP?”

    Why not ask Woodford?

    TravisV, Good luck with that. The Japanese markets certainly don’t see 2% inflation.

  11. Gravatar of jb jb
    19. January 2015 at 06:52

    passed from Professor Cowen: This caught my eye, as an explanation for why this isn’t a dumb move by the SNB after all:

    http://www.forbes.com/sites/francescoppola/2015/01/17/oh-switzerland-what-have-you-done/2/

    it makes a lot of sense to me, but I’m just a illiterate peasant in the more esoteric “meta-level” economic theories

  12. Gravatar of Bob Bob
    19. January 2015 at 07:26

    The Forbes article is interesting: The one thing that can stop a central bank from deflating to match a peg is to have the central bank controlling what we are pegging to decide they do not like our peg, and say they’ll do whatever is necessary to get the results they want.

    Now, what I find really surprising is the whole idea of the entire ECB QE being gobbled up by the SNB: The size of the economies we are considering is quite large.

    It’s also interesting to see how many places on the internet fail to notice the big difference between a peg like the one on the SF, where the central bank is printing to maintain the peg, with something like your typical Latin American peg, which is far harder to defend, and ultimately doomed to fail.

  13. Gravatar of Vaidas Urba Vaidas Urba
    19. January 2015 at 07:33

    Krugman on Switzerland:
    “Actually, the success of the currency program suggests that other central banks might want to try things like setting a ceiling on some long-term interest rate.”
    http://krugman.blogs.nytimes.com/2015/01/18/switzerland-qe-too/?module=BlogPost-Title&version=Blog%20Main&contentCollection=Opinion&action=Click&pgtype=Blogs&region=Body

    What’s next – a floor on some NGDP-linked contract?

  14. Gravatar of TravisV TravisV
    19. January 2015 at 08:08

    “The global deflationary storm is abating”

    http://humblestudentofthemarkets.blogspot.com/2015/01/the-global-deflationary-storm-is-abating.html

  15. Gravatar of TravisV TravisV
    19. January 2015 at 09:54

    On December 31, 2014, David Beckworth suggested that real interest rates will rise this year (see his post “Farewell Secular Stagnation”).

    Unfortunately, long-term interest rates in the U.S. have crashed since then…..

  16. Gravatar of TallDave TallDave
    19. January 2015 at 10:40

    I will also second Ben above, although I think index funds are the most logical choice.

    They don’t have a cohesive regime in place

    And without that, you can buy a whole lotta assets and not change the inflation picture much.

    But the SNB is 45 per cent owned by private shareholders, many of whom are individuals, who receive dividends from the SNB. The rest is owned by the cantons, which have been complaining recently about insufficient cash transfers from the SNB.

    That seems like an obviously bad idea. Just as the Post Office stops being a private entity when it receives a monopoly on first-class mail, the SNB stops being a private entity when it’s allowed to print money. The task of a CB is to manage monetary policy, not maximize returns to shareholders.

  17. Gravatar of Chuck Chuck
    19. January 2015 at 16:22

    SNB was bleeding itself. Decided to stop. Bankers cry.

  18. Gravatar of ThomasH ThomasH
    19. January 2015 at 18:48

    Blue Eyes,

    They could buy dollar assets to compensate for the Fed’s premature abandonment of QE. And the dollar assets would yield them some income.

  19. Gravatar of Ray Lopez Ray Lopez
    19. January 2015 at 18:54

    @Sumner: I sometimes feel I am the one educating you, rather than the other way around as it should be. Reading comprehension is your weakness? Your hero Woodford, who does not reciprocate the love and in a WashPost interview says your targeting NGDP advocacy had no influence on him, apparently did not produce exactly what you are promoting, see Andy Harless on this topic (oh my, I’m afraid this compound sentence is lost on Scott):

    https://longandvariable.wordpress.com/2015/01/02/the-silliness-of-ngdp-targeting-again/

    Andy Harless: “Woodford came up with something ***fairly close*** to NGDP level targeting as being at least provisionally optimal in his Jackson Hole paper (2012, was it?).” Emphasis added. Fairly close is not the same, and Woodford himself says his model is not influenced by you, ergo, you still don’t have a model of your scheme. Got it now?

  20. Gravatar of benjamin cole benjamin cole
    19. January 2015 at 19:23

    As public institutions deeply invested in their own rhetoric and self-image, I wonder if central banks rival militaries in ossification.
    The Spaniards didn’t give up heavy galleons after just one lost battle; it took several.
    Can central banks adopt new strategies? Monetizing national debts? Tax relief through monetization? NGDPLT targeting? Big balance sheets?
    What if all of the above are now good central bank policy? Does anyone think central banks can adapt?

  21. Gravatar of TravisV TravisV
    19. January 2015 at 19:57

    Eric Peters:

    “Will interest rates rise or fall this year?

    If I’d assembled the 100 smartest economists, strategists, investors, policy makers and a bunch of dummies 5yrs ago, and told them what the Fed would do, how their balance sheet would grow, where the stock market would be, not a single one would have guessed where inflation is, and where long-dated yields are. So we’ve had one of these historic market situations where nearly everyone has been wrong in an enormous structural way. And they’ve had to admit they’re wrong; no ones likes that. But now people have finally begun to intellectualize why yields are so low, and inflation is muted. The weight of the newly converted will drive the final blow off lower in yields. Which will see new rounds of global stimulus – the final overshoot that you tend to see in these cycles – and that will be the catalyst for a bond reversal.”

  22. Gravatar of ssumner ssumner
    20. January 2015 at 06:13

    jb and Bob, Someone will have to explain to me how the Swiss could absorb the ECB QE, Does the SNB buy euro currency? (I thought they bought euro debt.) If not, what is the claim?

    Vaidas, No, that’s three more steps down the road.

    Chuck, The SNB was not bleeding itself, decided to start doing so and immediately lost 13% of GDP.

    Ray, You said:

    “I sometimes feel I am the one educating you, rather than the other way around as it should be. Reading comprehension is your weakness? Your hero Woodford, who does not reciprocate the love and in a WashPost interview says your targeting NGDP advocacy had no influence on him, ”

    Two whoopers in one sentence. Woodford is hardly my hero, and I never claimed I influence him. That would be an absurd claim.

    “Woodford came up with something ***fairly close*** to NGDP level targeting as being at least provisionally optimal in his Jackson Hole paper (2012, was it?).” Emphasis added. Fairly close is not the same, and Woodford himself says his model is not influenced by you, ergo, you still don’t have a model of your scheme. Got it now?”

    You continue with more nonsense:

    No I don’t get it. You’ve told me that PLT is the same as NGDP targeting, and yet when Woodford specifically says he favors “nominal GDP” targeting, using exactly those words, it isn’t. So I’m confused. BTW, I’ve advocated many types of NGDP targeting, are you sure his proposal doesn’t correspond to any of mine.

    BTW, I do have a model, but I won’t give you are hard time on that because even 99% of economists don’t know what “models” are. They think it must be mathematical.

  23. Gravatar of Brian Donohue Brian Donohue
    20. January 2015 at 07:22

    OT- Jeffrey Gundlach was one of the few people who made the correct call on interest rates in 2014 (lower, despite economic growth). He’s bucking the trend again this year, calling for lower rates still (and he’s right so far):

    http://www.advisorperspectives.com/newsletters15/Gundlachs_Forecast_for_2015.php

  24. Gravatar of Ray Lopez Ray Lopez
    20. January 2015 at 07:39

    @Sumner – thanks for that reply. Not clear why, if you’ve advocated NGDP targeting since 1989 as you claim, why it’s not absurd for Woodford not to cite you as an influence, but let’s move on, maybe he’s egotistical or simply believes you were not an influence. As for PLT vs NGDP targeting, this is red herring as I merely said earlier than PLT targeting seems to me (and I was apparently wrong says you) to be closely related to NGDP targeting. Why bring this up now except to confuse everybody, Mr. Obscurantist? As for your ‘word model’ I have no problem with that, even though I code and prefer computer simulations. But in your reply you admit you have several NGDP target models, so which one are you talking about at any one time? All of them? Some of them? Cherry picking bits and pieces from each? It’s all a muddle, as is your writing style. Sorry, it seems that way.

    Final thought: how does this effect your models? “How about a Fisher effect question:? “If people expect prices to go up in the future, why don’t a lot of those prices go up right now?” Thereby removing much of the inflation premium from the nominal interest rate – See more at: http://marginalrevolution.com/#sthash.nX7kHYeX.dpuf ” I bet your models assume some sort of “confidence fairy” (read: fudge factor) meaning if they don’t work as warranted, you can blame the confidence fairy (or ‘central-bank credibility fairy’ or lack of a ‘credible regime’ as in your post here) as suspect–that is, as in Japan now, if people don’t believe the central bank will do what it takes to raise prices, they will not spend money and stimulus comes to naught. But that’s hardly a robust model, even though it may be accurate as to how people behave. In short, how is your targeting NGDP framework any different from this framework: “do something, anything, in times of distress, and see if it works. If it does not, do something else until it works, or simply give up.”? That’s pretty much what your scheme is, from a “meta” level, if you think about it.

    Will await your cryptic one-liner response, always good for a laugh.

  25. Gravatar of John Becker John Becker
    20. January 2015 at 07:50

    Why are people using business language to describe the operations of a central bank? It isn’t a business. There are no stockholders. No one’s job depends on their profitability. Their financial statements look like speculators gone wild with no desire to ever make any money. The bills people carry in their pockets are a liability on their balance sheets that pay 0% interest and in this regard the central bank can “borrow” at will.

  26. Gravatar of John Becker John Becker
    20. January 2015 at 07:53

    Sorry there are stockholders in Switzerland but not in the U.S. However, do they actually get to make Swiss monetary decisions?

  27. Gravatar of Derivs Derivs
    20. January 2015 at 10:40

    “”If people expect prices to go up in the future, why don’t a lot of those prices go up right now?”

    Lets go one further and say it is known that prices will be higher in the future. Why would prices not already be higher today.

    Assume you live in Zurich and were about to pick up a new Mercedes. Your online website tells you to pay dealer cost +10%. At this level he and you will always both agree immediately. A week ago you took for granted that dealer cost and replacement cost are, within pennies, the same thing. So last Tuesday the dealer cost of the car (assume he has already paid) was 70,000 EUR or 84,000 CHF. Both of you would happily agree on 92,400 CHF.

    Today, replacement value on that car is still 70,000 EUR but that is now 70,000CHF and the dealer will gladly sell that car at Dealer +10%, which is 77,000CHF. But he can not sell you the car out of current inventory for that price or he will lose money. You can not pay his price because the next car he brings in next week will happily transact for 15,200CHF less than you just paid.

    What we see is a stickiness problem between present cost of goods, inventory, and replacement value. Actually in the above instance we could have a frozen market. I don’t think the market could freeze the other way though, consumers would be cleaning the shelves.

    The problem we see inter-day, appears to be the same exact thing as stickiness, just the stickiness problem is stretched out along time. (and normally thought of in reverse – higher future prices), When you enter into a retail store, the cost of all goods available for sale was priced 3+ months ago, and the price of all inventory, that will be in that store for the next 3+ months, has already been determined. Somewhere stickiness is created because what we are accustomed to view as Pto is really Pt-100, cost of goods sold has already been determined for the next 100 days. After 100 days, the product now entering at the higher price, would start to raise your average cost of inventory, forcing you to move up prices by 1/100th the differential (assuming no frictions). In reality, since P* would be moving every day it should create a smooth function (again assuming no frictions).

  28. Gravatar of Derivs Derivs
    20. January 2015 at 10:43

    oops.. 15,400 less. if you can please change and delete this one.

  29. Gravatar of Charlie Jamieson Charlie Jamieson
    20. January 2015 at 10:47

    John … yes, a central bank has unlimited reserves and can expand its balance sheet to infinity — the only constraint is the real economy, inflation and market/public confidence.
    Ben … we’re going to see monetization in the future, but first we’ll see government debt interest rates going to zero.
    BlueEyes, the Swiss central bank could buy all that stuff (with Swiss francs) but the Swiss franc would likely lose its value very quickly.

  30. Gravatar of TravisV TravisV
    20. January 2015 at 11:20

    U.S. stocks seem to be shrugging this news off…..

    http://blogs.wsj.com/economics/2015/01/20/feds-bullard-eager-to-raise-rates-soon

    “Fed’s Bullard Eager to Raise Rates Soon”

    Context:

    https://thefaintofheart.wordpress.com/2014/10/21/the-bullard-factor

  31. Gravatar of TravisV TravisV
    20. January 2015 at 13:10

    Prof. Sumner,

    You should read this new piece by “The Editors” of Bloomberg:

    http://www.bloombergview.com/articles/2015-01-19/it-may-already-be-too-late-for-europe-s-economy

    Awesome awesome awesome!!!!

  32. Gravatar of TravisV TravisV
    20. January 2015 at 13:21

    Bloomberg’s editors:

    “To deliver the necessary stimulus, the ECB needs to surprise financial markets with a bigger-than-expected announcement.

    How could Draghi do that? A program of 1 trillion euros instead of 500 billion, for example, would be mildly surprising, and therefore mildly helpful. Far more surprising, and therefore much better, would be a program unlimited in scale and duration — whatever it took, as he might put it, to push euro-area inflation back up to 2 percent.

    Suppose Draghi decided, as he should, to go for outright shock and awe. Then he could add that the ECB would not regard its 2 percent inflation target as a ceiling so long as demand in Europe was insufficient. He could call on governments to increase their borrowing and tell them that the ECB would buy the new debt directly, in a coordinated monetary and fiscal expansion. He could say that monetary policy, as he understands it, includes the option of “helicopter money” — and that the bank would shortly begin sending out checks to every EU citizen.

    The problem is that the ECB has shown, again and again, that it is temperamentally and institutionally timid…….”

  33. Gravatar of TravisV TravisV
    20. January 2015 at 14:14

    Prof. Sumner,

    This seems like the kind of thing you might like to fact-check:

    http://www.slate.com/blogs/moneybox/2015/01/20/state_of_the_union_2015_obama_s_new_economic_agenda_is_progressivism_on.html

    “Combined, Obama’s hikes would raise $320 billion over a decade, or $32 billion per year. That’s just a smidge more than 1 percent of last year’s federal tax revenue””more than a rounding error, but not much more. Obama isn’t looking to soak the rich at this point so much as lightly spritz them.”

  34. Gravatar of Ray Lopez Ray Lopez
    20. January 2015 at 21:46

    @TravisV – you do realize you are, like Keynes’s madman (just in case you’re not versed in economics, which seems to be sadly most of the posters here, and sometimes I even wonder about the author, “Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back”) espousing the Lucas Rational Expectation fairy when you seek a “unanticipated monetary shock” to make people start spending more. Paradoxically, this logic is also the rationale for making the Fed more transparent rather than less, as was the norm years ago, so people know where the Fed is going and act accordingly. The trouble with this logic is that it’s just a hypothesis, not a fact. And Lucas’ hyper-rationality has been discredited. The result of your “shock” will simply be that people will save even more money now, negating more spending, in anticipation of future tax increases to cover the “shock” in the future (again, hat tip to Lucas, and Ricardo Equivalence). And the only way to avoid Ricardo Equivalence is to say the shock will be temporary, but, paradoxically, if people refuse to spend, a temporary shock is useless. So back to square one. The best guide to economics is not macro theory but history: as Rogoff et al say in “This Time Is Different”, financial panics take about 20 yrs to work out, so 2007+20 = 2027, about ten more years. And (IMO, though I can’t prove this), Keynesian and Sumnerian economics only delay the necessary adjustments, hence, Japan has been in an economic funk for close to 25 years and still no adjustment. It would have been better to do a Andrew Mellon type ‘liquidation’ and start over, 19th century style, than the slow cancerous coma bedridden remedy of Keynesianism that Japan has adopted. As the internet meme says: “car crash not cancer” (meaning, a sharp and swift liquidation, 19th c. style, is preferred to 20th c. print money Keynesianism)

  35. Gravatar of Ray Lopez Ray Lopez
    20. January 2015 at 21:56

    @Derivs- thanks for that “sticky price car dealer analogy”, it was persuasive and I agree. But consider another scenario: prices will continue to drop, so if the car dealer will not sell now–at a loss–he will have an even greater loss later (since his competition will drop prices, since, let’s assume, they are either more desperate to get rid of inventory or they have lower average/marginal costs). So, rather than seize up, the market will clear. But let’s assume the car dealers say: “let’s not cut prices, since the US Fed / EU central banks will increase the money supply, so prices will soon rise”. Then the market DOES seize up, in anticipation of a central bank “bailout”. BTW, this is exactly why John Taylor of Stanford claims that the bailout (or talk of one) made the financial market seize up in September 2008: the expectation of a bailout (as did happen) made people refuse to get rid of their bad paper. I’m not entirely convinced this is true–I think the arbitrary decision to let Lehman fail was as significant–but I do believe there’s a large kernel of truth in this explanation. Thanks for the reply. We need a better forum, like a Simple Machines (TM) driven forum–so we can have more intelligent conversation like this rather than the one-liners common here.

  36. Gravatar of Jim Glass Jim Glass
    21. January 2015 at 09:09

    Switzerland’s monetary policy

    The three big misconceptions about the Swiss franc

    http://www.economist.com/blogs/freeexchange/2015/01/switzerlands-monetary-policy

    “Switzerland’s cap on its currency, which it removed on January 15th, was unsustainable, protectionist and exposed the central bank to catastrophic losses, according to many commentators.

    “Not so…”

  37. Gravatar of ssumner ssumner
    21. January 2015 at 14:23

    Ray, You said;

    “Not clear why, if you’ve advocated NGDP targeting since 1989”

    Yes, as if it’s not in the public record. Maybe you should check to see if I’m lying. You can’t trust these econobloggers.

    Not sure what your odd rambling comment about the Fisher effect is getting at. Are you denying the possibility of high trend rates of inflation?

    Lucas and Barro would have a heart attack, drop dead, and start rolling over in their graves if they read your explanation of their ideas.

  38. Gravatar of Swiss National Bank | Michigan Standard Swiss National Bank | Michigan Standard
    22. January 2015 at 23:01

    […] in response to the breaking of the Euro peg by the SNB. Tyler Cowen, Paul Krugman, and Scott Sumner all lament the loss of “credibility” by the SNB in the wake of its sudden change […]

  39. Gravatar of Swiss National Bank: Hero or Villain? « Financial Survival Network Swiss National Bank: Hero or Villain? « Financial Survival Network
    23. January 2015 at 12:01

    […] in response to the breaking of the Euro peg by the SNB. Tyler Cowen, Paul Krugman, and Scott Sumner all lament the loss of “credibility” by the SNB in the wake of its sudden change of policy […]

  40. Gravatar of Swiss National Bank: Hero or Villain? – The Daily Coin Swiss National Bank: Hero or Villain? - The Daily Coin
    23. January 2015 at 13:29

    […] in response to the breaking of the Euro peg by the SNB. Tyler Cowen, Paul Krugman, and Scott Sumner all lament the loss of “credibility” by the SNB in the wake of its sudden change of policy […]

  41. Gravatar of adam adam
    23. January 2015 at 17:44

    what do you mean by
    “The SF is far more overvalued,”

  42. Gravatar of ssumner ssumner
    23. January 2015 at 19:40

    Adam, Overvalued in the sense that at the current exchange rate Switzerland will have deflation. And by this criterion, even more overvalued than in 2011.

  43. Gravatar of James in London James in London
    28. January 2015 at 02:30

    That didn’t take long! SNB back on the intervention treadmill.
    http://www.bloomberg.com/news/articles/2015-01-27/snb-can-still-intervene-on-franc-danthine-tells-tages-anzeiger

    With central bankers of this caliber in charge of monetary policy it’s no wonder we have business cycles.

  44. Gravatar of ssumner ssumner
    28. January 2015 at 10:15

    James, I saw that too, Do you know where I can get recent data on the Swiss monetary base?

    We’ll have to revisit that when the data comes in.

  45. Gravatar of James in London James in London
    29. January 2015 at 15:09

    Have e-mailed it to you

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