Wednesday, February 25, 2015

Swiss now ratcheting it down domestically...


Evidence now coming in of Swiss firms making moves to reduce costs (and hence prices...)




Continued CHF bearish.

9 comments:

Neil Wilson said...

"and the state pays for a shortfall in employees’ wages."

A form of time limited income guarantee then.

Michael Norman said...

Good find.

Ralph Musgrave said...

I’m not sure what the best strategy is for a country which experiences excessive demand for its currency. Perhaps Mike the forex trader knows. My best guess is this.

Just let the currency rise in value. That will make some of the country’s exports uncompetitive and throw people out of work. So combat that with Mosler’s law, i.e. just print money and spend it so as to bring AD back up to where it should be.

Net result will be more people employed making stuff for domestic consumption rather than for export.

Ignacio said...

These countries are hyperinflation hyperventilators (Germany incl.) so it won't happen.

Each time they have to 'print money' (what they perceive as money printing even if it's just balance sheet shuffling) they die a little inside.

That same solution could have been also implemented in Germany instead of the euro, but they are just gold bugs at heart so this try to avoid any sort of money printing as long as possible.

Kristjan said...

I don't think they really believe hyperinflation happening Ignacio. It seems more of a moral battle for them. I've heard people commenting news that US economy grew by this much: yes, but it was all because of money printing. When I say: was it, let's do some more of it then? They immeadetly think that I am a bad person. To them it is cheating I guess. This is the main obstacle for MMT I think.

Ignacio said...

Kristjan I don't think many really believe hyperinflation is not a possibility, but they fear that once you open the genie's bottle, it will eventually happen.

Like: "if we start printing, we won't ever stop, and it will happen at some point".

But it's all probably related to a moral issue as you say, the 'hard money' mentality in the central-north Europe which is quite unique there compared to the rest of the world. It's cultural and moral certainly, and maybe inherited from puritanism of the worst kind, hc calvinism etc.

All naughty irrational stuff.

Matt Franko said...

Ralph it just seems like there are some national cultures out there that just want to export.... they want to see their products being used around the world and look at it as some sort of "competition" or something...

So this is what the Swiss look like... they are exporters, the Germans like to be seen exporting... the Japanese, the Chinese... then if they are successful, they can run their balanced budgets too...

This has been easier for them when the US fiscal backdrop has been more accommodative, now with a US fiscal policy at best tepid, they are having a harder time of it over here and are having to lower prices...

It all comes back to what the US is going to do this year... Obama admin has a 7% lift on the table, GOP has not (publicly) reacted to this.... if we get this 7% lift, then the Swiss/Germans are going to have a bit easier time of it and the CHF will probably stabilize... this fiscal issue should be worked out in March over here.... until then, I look for the CHF to keep drifting down vs USD as the Swiss exporters keep cutting and lowering their prices in USD terms..

You can see here how the German auto makes are heavily discounting (see audi, BMW, Mercedes...) so the EUR is very weak in here:

http://www.cars.com/go/advice/incentives/incentivesAll.jsp?zc=21401

These are the current deals over here thru end of Feb.... we'll see what they do on March 1, if they take these up for spring sales, then more EUR bearishness...

rsp

Tom Hickey said...

But it's all probably related to a moral issue as you say, the 'hard money' mentality in the central-north Europe which is quite unique there compared to the rest of the world. It's cultural and moral certainly, and maybe inherited from puritanism of the worst kind, hc calvinism etc.

The "moral" concerns norms — values are norms —that structure world views and delimit the ideologies that express them. Meaning is context-based, so meaning is determined by the world view in which it context is seated.

The implication is that morality, that is, the normative, is bound up with the positive through determination of context. Facts are embedded in world views and influenced by "morals."

Michael Norman said...

My advice would be to spend more of it into existence. Meet the hoarding desire and then some. Exporters can cut their prices (as Matt alluded to), which would be a natural reaction to an "uncompetitive" exchange rate and that would do the trick, but the process could be accelerated by higher levels of net gov't spending. That's what I would do.