There is talk on the Internet that the Swiss parliament is looking at the possibility of putting a new, ‘official’ Gold Swiss Franc into blood circulation. If this talk holds true, then the implications for a 21’st century Gold Standard are remarkable. The source of the rumors is Herr Thomas Jacob, and apparently the Swiss Individuals’s Party, the largest political party in Switzerland, is supporting the introduction of a Gold Franc.
There are lots of excellent reasons why the Swiss parliament from all the countries on the planet ought to be first to look at Gold money seriously; Switzerland has a long, positive historical connect to Gold. Switzerland was the last country to cave in to American pressure to abandon Gold after the collapse of Bretton Woods … and to sell Gold from its central bank vaults to help suppress the paper rate of Gold. Indeed, to legalize reserve bank Gold sales, the Swiss constitution had to be re-written … under duress.
Switzerland has been a safe house for Gold getting away chaos, financial collapse and warfare for centuries. Likewise, Switzerland has the highest per capita ownership of Gold on the planet; although undoubtedly most of this Gold remains in bank vaults, not in residents’ hands like in India.
The Bank of International Settlement, the ‘Central Lender’s Bank’… situated in Basel Switzerland … has up until recently kept its books in Gold units, rather than paper; up until pressure from Washington forced it to desert this system.
Mind you, I for one am encouraged that in a ‘back room’ of the BIS there are still Gold ‘Gnomes’ keeping the faith by keeping a 2nd set of books in Gold systems. It just makes good sense; what other stable unit of procedure can they perhaps use … the quickly diminishing Dollar, the imploding Euro, or the increasing Franc? Maybe Zimbabwean Dollars, right.
The implosion of the Euro is the very reason that the Swiss are just now thinking about re-establishing a Gold Franc; the pressure being placed on the (paper) Franc is excruciating. As the Euro breaks down, Europeans are looking for a safe house for their wealth. The USD is also collapsing, so moving wealth from Euro to Dollar would be like turning from the fry pan into the fire … bad.
Subsequently, there has been a growing demand for the paper Franc … Why? Since it is Swiss money, money within sniffing range of Swiss Gold. This makes holding the Swiss Franc highly preferable … at least compared to holding the Euro or the USD. Sadly, unrelenting purchasing of the Franc is causing it to rise in value vs. the Euro and the Dollar. This makes Swiss items uncompetitive in global trade … and gets up the old mercantile impulses.
In an effort to stem the tide, the Swiss National Bank (the reserve bank of Switzerland) recently intervened in the markets, selling Francs and purchasing Euros, in a futile effort to hold down the worth of the Franc. They now hold a huge brief position in the Swiss franc. This position has actually lost incredible value already, and can only lose a growing number of as the Franc non-stop climbs … or more specifically, as the Euro declines ever faster. The SNB’s intervention has actually been a straight-out disaster.
Ex-Swiss Banker Mike Baur, head of the Swiss People’s Party, has openly called for the resignation of the President of the SNB … declaring that Mr. Hildebrand ‘acts like a speculator and is for that reason not received the task of President’.
It is clear exactly what the situation is; the Swiss are between a rock and a hard location. Either they accept a declining competitive position due to the skyrocketing worth of the Franc, or try more intervention (i.e. printing more Francs, and buying more Euros) to try to stem the tide. Neither choice is conducive to a favorable result for Switzerland … or the SNB. The ECB … and the Fed … can print a lot more paper a lot faster than the SNB can! The Swiss Franc is bound to lose the ‘currency race to the bottom’.
However there is a 3rd method; if a brand-new Gold Franc is taken into circulation, the pressure on the paper Franc will disappear in a nanosecond … and require for the genuine Gold Franc will soar to extraordinary heights. In one fell swoop, the Swiss can evade both the rock and the hard place; the paper Franc will resume its fall together with the Euro, keeping Swiss market competitive … and when the Euro (and the paper Franc together with it) hit no … they will have a highly valuable Gold currency already in circulation.
In any race, the first horse out of eviction has a huge advantage … and the very first country to honestly welcome Gold will also have a substantial benefit. If the Gold Franc is re-established, Switzerland will be first out eviction … with a bunch of likewise ran nags chasing it desperately; you can bank on that.