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Swiss National Bank Explains Why It Is Against Repatriating Gold

Elite Forex Blog - Market Research & Analysis
The Swiss National Bank has lashed out at the so-called “gold initiative” efforts to “Save Our Swiss Gold” unsurprisingly proclaiming it as a bad idea. AsRon Paul previously noted, “The gold referendum, if it is successful, will be a slap in the face to those elites,” and so the full-court press ahead of the Nov 30th vote has begun (a la Scotland fearmongery) as SNB Vice Chairman Jean-Pierre Danthine explains how a ‘yes’ vote for the initiative“would severely constrain the SNB’s room for manoeuvre in a future crisis,” as it “poses danger to the conduct of a successful monetary policy.” His reasoning (below) is stunning…
On 30 November, the Swiss electorate will vote on the so-called “gold initiative” (“Save our Swiss gold”, in full), which, paradoxically, would severely constrain the SNB’s room for manoeuvre in a future crisis. Let me digress for a few minutes to explain why the SNB is opposed to this initiative.
The initiative is calling for three things:
first, the SNB should hold at least 20% of its assets in gold;
second, it should no longer be allowed to sell any gold at any time; and
third, all of its gold reserves should be stored in Switzerland.
Let me address the last point first. Today, 70% of our gold reserves are stored in Switzerland, 20% are held at the Bank of England and 10% at the Bank of Canada. As you know, a country’s gold reserves usually have the function of an asset to be used only in emergencies.
For that reason, it makes sense to diversify the storage locations. In addition, it makes sense to choose locations where gold is traded, so that it can be sold faster and at lower transaction costs. The UK and Canada both meet that criterion. In addition, they both have a strong and reliable legal system and we have every assurance that our gold is safe there.
The initiative’s demand to hold at least 20% of our assets in gold would severely restrict the conduct of monetary policy. Monetary policy transactions directly change our balance sheet.
Restrictions on the composition of the balance sheet therefore restrict our monetary policy options. A telling example is our decision to implement the exchange rate floor vis-à-vis the euro that I mentioned above: with the initiative’s legal limitation in place, we would have been forced during our defence of the minimum exchange rate not only to buy euros, but also to buy gold in large quantities. Our defence of the minimum exchange rate would thus have involved huge costs, which would almost certainly have caused foreign exchange markets to doubt our resolve to enforce the rate by all means.
Even worse consequences would result from the initiative’s proposal to prohibit the sale of gold at any time. An increase in gold holdings could not be reversed, even if necessary from a monetary policy perspective. In combination with the obligation to hold at least 20% of total assets in gold, this could gradually lead the SNB into a situation where its assets would mainly consist of gold: each extension of the balance sheet for monetary policy reasons would necessitate gold purchases, but whenever the balance sheet needed to be reduced again for the same reasons, we would not be able to resell our gold holdings. This would severely restrict our room for manoeuvre.
Furthermore, because gold pays no interest or dividends, the SNB’s ability to generate profits and distribute them to the Confederation and the Cantons would be impaired.
As a final point, note that currency reserves which cannot be sold are not truly reserves. It does not make sense to call for an increase in emergency reserves – gold holdings – and simultaneously prohibit the use of these reserves even in emergencies.
The SNB’s overriding objection to the gold initiative stems from the danger it poses to the conduct of a successful monetary policy. It would severely impair the SNB’s ability to fulfil its constitutional and legal mandate to ensure price stability while taking due account of economic developments, in the interests of the country as a whole.
*  *  *
We will hazard a guess that the voting will go exactly as Scotland’s independence vote went – young vote for it, old against it… as fearmongering status quo managers step up the propaganda with no regard for what happens next.
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“Common People Do Not Carry This Much Currency” – How Police Justify Stealing American Citizens’ Money

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Submitted by Mike Krieger via Liberty Blitzkrieg blog, Police confiscating Americans’ hard earned cash, as well as a wide variety of other valuables, without an arrest or conviction is a disturbing and growing practice throughput these United States. Since cops get to keep the seized funds and use the money on pretty much anything they want, the practice is […]

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Russia Spends Up to $1.75 Billion in Two Days to Buoy Ruble

Elite Forex Blog - Market Research & Analysis
Russia’s central bank spent as much as $1.75 billion to prop up the ruble over the last two trading days, its biggest market intervention since President Vladimir Putin’s incursion into Ukraine in March.
Russia’s central bank spent the equivalent of $980 million to shore up the ruble on Oct. 3, the latest data on the authority’s website showed today. The bank also said it shifted the upper boundary of the currency’s trading band by 10 kopeks yesterday, a move that may have involved spending between $420 million and $769 million that day. The exchange rate weakened 0.3 percent to 44.6234 versus the basket by 5:12 p.m. in Moscow, set for a record low for the fourth time this month.
Putin is suffering the consequences for shaking up the post-Cold War order in eastern Europe as the U.S. and European Union impose sanctions on his economy and investors pull money out of the country. Demand for dollars and euros is growing among Russian companies locked out of western debt markets as they contend with $54.7 billion of debt repayments in the next three months, according to central bank data.
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Questions and Answers: Estimating the Future Number of Cases in the Ebola Epidemic—Liberia and Sierra Leone, 2014–2015

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Summary This week’s MMWR, Estimating the Future Number of Cases in the Ebola Epidemic—Liberia and Sierra Leone, 2014–2015, estimates the future number of cases if current trends continue. The MMWR also adjusts the number of cases based on estimated underreported cases. By September 30, 2014, CDC estimates that there will be approximately 8,000 cases, or […]

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Top Doctors: Ebola May Become Airborne … And May ALREADY Be Transmissible Via Aerosols

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Michael T. Osterholm – director of the Center for Infectious Disease Research and Policy at the University of Minnesota – wrote in the New York Times last month: Viruses like Ebola are notoriously sloppy in replicating, meaning the virus entering one person may be genetically different from the virus entering the next. The current Ebola […]

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Doctor Boards Atlanta Flight In HazMat Suit To Protest “Lying CDC”

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“If they’re not lying, they are grossly incompetent,” said Dr. Gil Mobley, a microbiologist and emergency trauma physician from Springfield, Mo. as he checked in and cleared Atlanta airport security wearing a mask, goggles, gloves, boots and a hooded white jumpsuit emblazoned on the back with the words, “CDC is lying!” As The Atlanta Journal-Constitution […]

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