The Economic Consequences of Mr. Schneider-Ammann

As National Councillor, President of the Swiss Machine Builder Association and manager of a construction equipment manufacturer in Switzerland Mr. Schneider-Ammann started in summer 2010 to intervene with the Swiss National Bank (SNB) to do something against the strong Swiss franc. He also accused Swiss banks to speculate against the Euro. One year later as member of the Swiss government he redoubled his effort and organized a secret meeting with representatives of industry, banks and officials to convince the SNB of the lower limit. “Now Mr. Schneider-Ammann could notify the National Bank that it has the undivided support of the economy to intervene. ” On September 6, 2011 the SNB began with the purchase of Euros and increased its balance sheet fivefold. On January 15, 2015 the SNB threw in the towel and gave up the lower limit. Result of this action were record-high reserve accounts of banks with the SNB; in other words, the banks did not know what to do with all the money and parked much of the new money at the SNB. The SNB in May 2015 went a step further and introduced negative interest rates, ie the banks receive no more interest on their reserve accounts but must pay a “parking fee”. A portion of the new money ended up in the property sector. That M3 and real estate prices have run parallel in the last ten years, did not surprise the monetarists but should give pause to all the so-called Neo – Keysians. Thus, the Swiss pay for the increase of the money supply with a 30% price increase in the residential real estate market; we also see price increases in state taxes and fees, health care and public transport.


The Forex market is so large that interventions by central banks make only a difference in the short-term and can do nothing in the long-term. In particular, a strong upward or downward trend cannot be stopped. In other words: Do not Catch a Falling Knife. However, the SNB was politically compelled to take action at the wrong time against a rising Swiss franc. It should have waited until the trend was over, and then intervene. With the appropriate communication to the markets it would have been possible.

With the introduction of the lower limit and its interventions the SNB has only postponed the upward trend of the Swiss franc. This measure should not have been taken. Others respond with the excuse that the three year period of adaptation was necessary. But it has only postponed the adjustment. For a time we felt sure and planned as if the lower limit would apply forever. Then the market prevailed again. Now the problems come to light which have been hidden or not been been tackled. One also tends to forget that we live in a global world, where in general the market determines the price. Who opposes the market short- term is risking long-term damage, which is larger than the problem itself.

Who has intervened with the SNB? An interest group among many declared its own interest as the general interest. What are the choices of a construction equipment manufacturer producing in Switzerland? Either the product is of such high quality so it can be exported anyway, or he has to move part of the production abroad. Switzerland is doing this since the 1970s, when the dollar said goodbye to 4 francs. A strong Swiss franc is forcing companies to improve productivity and innovation. What is often concealed is the fact that a strong Swiss franc reduces the cost of importing raw materials and semi-finished products. The same applies for imported consumer goods. Result is that we live in one of the richest countries in the world.

The Swiss franc is now probably the only currency in Europe which meets the Maastricht – criteria. That’s one of the reasons for its continuing strength. Switzerland is the victim of its own success. Nevertheless, for years Swiss industrialists and trade unions regularly complain about the strong currency and warn of Swiss deindustrialization. The reality is rather different. To lament the strong franc today and demand even more counter measures means to long for inflation, public deficits and unemployment in Switzerland. Only in this way there would be a sustainable Swiss franc weakness. A race to the bottom, so to speak.

Dr. Flurin von Albertin

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