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Frances Coppola — The Swiss Have Eliminated The Zero Lower Bound

So, this is fun. Via Zero Hedge comes this report from a Swiss website, Schweizer Radio und Fernsehen (SRF). It seems that a Swiss pension fund tried to evade negative rates on deposits by withdrawing a very large amount of physical cash with the intention of vaulting it. But the bank refused to allow it to withdraw the money in the form of physical cash....

This could have far-reaching consequences. The monetary policy of the last few years has been hampered by the supposed existence of the “zero lower bound”, at which (it is assumed) everyone would opt for physical cash instead of bank deposits and bonds. We already know that the lower bound (if it exists) is actually slightly below zero, since it is the point at which the cost of negative rates on deposits and bonds starts to exceed the cost of holding physical cash (vaulting charges, theft risk and so on). But if investors simply cannot obtain large amounts of physical cash because banks won’t issue it to them, the slightly-below-zero lower bound cannot bind. In which case negative rates could be very negative indeed and no-one would be able to do much about it. There would be no need to abolish or tax cash, as Citi’s Willem Buiter suggests. It could simply be ignored. Welcome to the negative-rate universe.

Forbes
The Swiss Have Eliminated The Zero Lower Bound
Frances Coppola

Does anyone else have the feeling that the wheels are coming off?

Swiss National Bank rising up the ranks of Biggest Policy Maker Idiot list

Swiss National Bank broadened negative interest rate policy by reducing the class of entities that were formerly exempt. This meant deposits related to government, such as pensions. Now they'll have to pay interest to the central bank.

How many ways can you say, "idiots?"

The Swiss National Bank, formerly a relatively obscure institution, is now rapidly rising up  the ranks of the list of Biggest Policy Maker Idiots of All Time.

It abruptly ended its EURCHF peg in January, wrecking innocent brokerage firms in the process who were just custodians of customer accounts. (They had no position.)

And why did it end that peg? Your guess is as good as mine, but there is ZERO inability for a central bank to credit users of its own currency. Hong Kong's been doing it for a long time against the dollar. Saudi Arabia, too.

Now the SNB is expanding its negative rates program like that other idiot central bank the ECB (which still sits atop the Policy Maker Idiot rankings). Negative rates are a tax--a confiscation of money--so what is stimulative about that?

Maybe a) they believe this will weaken the Swiss franc and; b) "need" the cash to pay out their traditional dividend payments to the Swiss cantons. (But that's like taking from the cantons and giving it back.)

Suffice it to say none  of this makes any sense in a normal world, but in the Bizarro world that we live in today, it all makes perfect sense.