The Swiss National Bank Gives Up

September 19, 2011 – The Swiss National Bank finally gave up.  For months it tried standing alone against all of the bad monetary policies being pursued by the ECB, the Federal Reserve, the Bank of England and indeed, nearly all of the central banks of the world, but it was a losing battle.  So last week the Swiss National Bank succumbed to these pressures and pegged the Swiss franc to the euro.

Consequently, as the euro is debased, the Swiss franc will head south with it.  The world’s last safe-haven national currency has finally disappeared, making the ownership of physical gold and silver all the more important.

One thing is clear in a world of fiat currency that begets hot-money.  One country cannot stand alone pursuing prudent monetary policies, at least if it aims to be politically correct and avoid being ostracized from the clubby world of central banking.  But this outcome is not a surprise.  I wrote about it this past March and illustrated my point with charts showing gold’s hyperbolic trajectory in four currencies, including the Swiss franc.

Here are the same four charts from that March 28th article updated through Friday’s close.

The above charts are in essence identical.  The rate at which these currencies are being debased varies, but they are all headed in the same direction.  This point is clear from the following chart that presents a Base-100 analysis of gold’s appreciation this decade against these four currencies.

That the pattern of the Swiss franc in the above chart is similar to those of the other three currencies may surprise some people.  The obvious conclusion though is that the Swiss franc has not been a safe haven for at least a decade.  All currencies are being debased against the world’s time-tested and trustworthy numéraire – gold.

As I wrote last March, “the gold price is rising at an accelerating rate” meaning that national currencies are “losing purchasing power at an accelerating rate.”  These quotes accurately describe what happens to national currencies moving toward hyperinflation and collapse, which is where the above four currencies are headed.