SZ News

Budget surplus, strong currency to the point where it weakens exports if they don’t buy sufficient fx to keep the currency down. Fits the pattern.

Swiss July Consumer Indicator Declines to Lowest in 1 1/2 Years
Aug. 30 (Bloomberg) — A gauge of Swiss consumer demand dropped to the lowest in 1 1/2 years in July, adding to signs the economy is cooling.

The consumption indicator declined to 1.29 from a revised 1.52 in the previous month, Zurich-based UBS AG said in an e-mailed statement today. That’s the lowest since February 2010. It had previously reported a June reading of 1.48.

Switzerland’s Government Expects Budget Surpluses Through 2013
Aug. 30 (Bloomberg) — Switzerland’s government said it expects to post budget surpluses in every year through 2013.

The consolidated surplus for the state, cantons, communities and the country’s social-security system will widen to an estimated 0.8 percent of gross domestic product this year from 0.4 percent in 2010, the government in Bern said in an e-mailed statement today. In 2012 and 2013, the surplus may narrow
to 0.6 percent and 0.5 percent of GDP, respectively.

Public debt under the European Union’s so-called Maastricht criteria will decline to an estimated 36.4 percent of GDP this year from 38.4 percent in 2010, according to the statement. In 2012 and 2013, it is seen decreasing to 35.7 percent and 34.1 percent, respectively.

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8 Responses to SZ News

  1. TC says:

    @WARREN MOSLER, After a few years of hard thinking about this facts of the matter non-stop, one day you’re playing some tennis, then after you’re just sitting there and you start talking.

    It all comes out in a handful of minutes. It’s not many words, really, not all that many ideas. The ramifications might take volumes to explain, but the main ideas? They can be said in a few minutes.

    He’s sitting there totally bewildered, and you’re laying out 21st century economics.






  2. TC says:

    Just by looking at the sector balances, I am starting to look at interventions as “foreign fiscal policy”. It’s fiscal policy that tries to keep money out of the hands of domestic consumers.

    Interventions try to do the same thing as direct government spending inside the economy but through the foreign sector, right?

    The point of interventions is to keep the currency weak enough to keep the exports affordable for foreigners. These purchases of exports keep people inside the economy working.

    Instead of buying real world goods, interventions and “reserve currency holdings” are government purchases of foreign currency.

    In other words, it’s a realllly roundabout way of “off the Treasury’s balance sheet” fiscal spending.

    This MMT thing is starting to freak me out.


    BruceMcF Reply:

    @TC, of course, it does have to be seen in the context of the rest of the country’s economic policy. In China, with investment in infrastructure, education, R&D to try to develop and expand industrial growth sectors, that same reasoning makes a discounted and stable exchange rate looks like a “foreign fiscal policy” in addition to substantial domestic fiscal and industrial policy.

    Even there, a limitation is that it requires the at least tacit complicity of the overseas economies that are intended to provide the source of the spending on exports ~ if the US Fed insisted on a RMB/US$ closer to parity and was willing to enforce it by buying RMB with US$, its not clear that the Chinese could maintain the discount.


    TC Reply:

    @BruceMcF, Totally with you on the details of China. This is more the “high level” approach rather than applying it to China or Switzerland.

    In the case of China, it’s clearly fiscal policy designed to keep people working. Because the RMB isn’t freely tradable, it becomes really difficult for the U.S. to make policy changes that would force a reval by China.

    They have tons of other fiscal policy in place that supports domestic demand. But they’ve decided to support at least part of this domestic demand through the export channel.

    Thinking about it like foreign fiscal policy, the peg by China gives them huge amounts of exports, but at the cost of keeping their people “poorer in real terms than they should be”.

    I think I might have heard this said by someone with the initials WM? :) I swear, thinking like this is very dangerous!

    “Even there, a limitation is that it requires the at least tacit complicity of the overseas economies that are intended to provide the source of the spending on exports…”

    Switzerland is limited by this dynamic. Switzerland has floating exchange rates. They cannot force the market to hold more or less CHF than it wants to hold.

    I guess the SNB could intervene in FX markets, then offer to buy CHF denominated financial assets with USD they have on hand. Then force private parties to enter FX trades if they still wanted CHF.



    and remember i went through all that sitting in the steam at the Racquet Club in Chicago with Rummy 20 years ago.


  3. Adam (ak) says:

    The Polish Minister of Finance Jacek Rostowski bluntly warned Germany that a collapse of Euro is imminent if serious reforms are not undertaken. Poland is not a member of Euro but currently holds a rotating EU presidency.

    “European elites, including the Germans, must decide whether they want the eurozone to survive — even at a high price — or not,”

    “If not, then there should be serious preparation for the controlled dissolution of the zone, with all of the consequences this entails for Germany,” Rostowski said. “This is the logic of the current situation. Those who don’t understand it are playing with fire.”

    This is the original interview (in Polish),101716,10188885,Rostowski__Albo_solidarnosc__albo_rozpad_Europy.html

    I cannot exclude a possibility that Rostowski wanted to blackmail the Germans into a closer fiscal union which would be in the Polish interest.



    except, interestingly, a deflationary collapse means the euro goes up.


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