Jean-Pierre Roth and SNB work to destroy Swiss franc

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Published : March 15th, 2009
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Category : Gold and Silver





Learning Markets reports that quantitative easing could send USD/CHF to 1.2300.


(emphasis mine) [my comment]


Quantitative Easing Could Send USD/CHF to 1.2300

The Swiss government appears to be playing "follow the leader" with the British government and the U.S. government as it jumps into the quantitative-easing game.

On the heels of an interest rate cut from 0.50 percent to 0.25 percent by the Swiss National Bank (SNB)---led by Jean-Pierre Roth
[aha! Now I have the name of the man leading the Swiss franc to ruin.], the Swiss government began flooding the market with Swiss francs (CHF) to curb the increases in value the CHF has seen during the past few months.

As a so-called "safe haven" currency, the CHF has been appreciating in value during this economic crisis. But now, with the Swiss government intervening, the CHF will most likely continue to lose value---which could push the USD/CHF currency pair as high as 1.2300 in the short term.


My reaction: Swiss National Bank (SNB) is “flooding the market” with printed Swiss francs in order to buy worthless dollars. (Reminder, I used to live in Switzerland long, long ago. So I am a little ticked off by the poor leadership of the SNB in recent years).

Why is the SNB working to destroy the Swiss franc? The credit goes to Jean-Pierre Roth, president of the Swiss National Bank.

Who was responsible for
Switzerland’s disastrous decision to sell 1300 tons of gold? You guessed it, the current head of the SNB: Jean-Pierre Roth. The details are below.

Swiss Info reports gives a
quick bio of Jean-pierre Roth.


Jean-Pierre Roth was born in 1946 and started working for the Swiss National Bank in 1979 after a period of teaching at Geneva University.

Between 1986 and 1996 Roth was in charge of foreign exchange and money market operations at the central bank.

In 1996 he was made a vice-president with responsibility for capital markets, bank notes, liaising with the government and controlling gold reserves.

Five years later he was promoted to the role of president, steering the central bank through the challenges of the 9/11 terrorist attacks in the United States in 2001, the introduction of the euro currency throughout Europe and the start of the current financial crisis.

Roth has also chaired the board of the Bank for International Settlements, based in Basel, since 2006. He will step down from this role in March.


Finally, in Berne on April 29 2005, Jean-Pierre Roth, speaking at the general meeting of shareholders of the Swiss National Bank, gave the following speech about the completion of the Swiss gold sales.


Completion of the gold sales

On 31 March, we completed our sales of the 1,300 tonnes of gold no longer required for monetary policy purposes [Arrrg]. These sales had begun on 1 May 2000. The fears expressed in some quarters that our gold sales would destabilise the market have proven to be unfounded [Of course they did.]. By selling the gold in small instalments and according to a fully transparent schedule, we succeeded in assuaging the market's fears. Moreover, our sales strategy and risk hedging also proved effective in financial terms: the 1,300 tonnes of gold were sold at an average price of CHF 16,241 per kilo [CHF 16,241 per kilo. Keep that number in mind]. This was CHF 700 more than the average market price during the same sales period. An additional profit of more than CHF 900 million was therefore realised.

At the end of the sales program, the National Bank still held 1,290 tonnes of gold, corresponding to one third of the value of its currency reserves. [In other words, instead of being two third gold and one third wortless paper dollars, Swiss foreign reserves are now two thirds worthless paper dollars and one third gold.]

Even though it has been demonetised, the yellow metal still plays an important role in our reserves [Then why did you sell over half of it?]. It is an asset category that traditionally affords good protection in times of crises in the international monetary system [Yes, wouldn’t it be nice to still have that gold now?]. It also allows us to hold part of our reserves on our own country, which is not possible with financial assets. Moreover, as expressly requested by Parliament, Article 99 of the Federal Constitution requires the National Bank to hold part of its currency reserves in gold [Thank god! Otherwise you would have sold all of it, wouldn’t you?]. The Governing Board considers that the holdings of 1,290 tonnes are appropriate to the current international environment. It does not intend to proceed with further sales of gold.


Average price of Swiss gold sales: CHF 16,241 per kilo
Price of gold today: CHF 35,405 per kilo
Difference: CHF 19,164 per kilo

MINIMUM cost of Jean-Pierre Roth’s decision to sell 1300 tons of Swiss gold: CHF 22,600,874,865

Conclusion: Switzerland might be a safe place to keep your gold, but the Swiss franc is not a safe currency to hold your cash. Jean-Pierre Roth is a true Keynesian who believes “gold is a relic” and printing money (quantitative easing) is the costless solution to all the world’s problems. So until Jean-Pierre Roth from the SNB, stay away from the Swiss franc.


Eric de Carbonnel

Market Skeptics

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