A couple of weeks ago I had an interesting conversation with a cab driver in Zurich about Swiss monetary policy. Unlike most cab drivers in Zurich, this chap was Swiss.
We both agreed that Switzerland had become too expensive, especially for people coming in paying with dollars or euros. But I volunteered that I like the high Swiss franc. It’s not for nothing that the Swiss franc is an attractive reserve currency. Despite the bickering by chocolatiers and purveyors of plastic watches, Switzerland still looks prosperous. The plastic watches are for export… you won’t see the Swiss wearing them! You just don’t see the signs of recession there that you would driving around say Ireland, Spain or the USA.
Today’s strong Swiss franc represents centuries of stable government, rule of law, independence, and freedom, and those are precisely the reasons that I was in Switzerland doing business. Before dropping me off at the Hauptbahnhof, the driver agreed with me wholeheartedly.
An article in today’s Economist, called Francs for Nothing, covers Switzerland’s decision to try effectively to fix its currency to the Euro. The Swiss National Bank chose remarkably strong language in announcing its decision, clearly intended to jolt the market – which it did.
In the Economist’s view, which we share, this decision is regrettable – but, like the stream of proposals coming out of Washington, New York and Frankfurt – it is highly questionable whether it will work in the long run. It is just further evidence that all the financial markets are being manipulated by politicians all the time. There is one recognized world value that the politicians cannot manipulate – and that is gold. That’s why they hate gold.
Anyway, back to the Swiss franc. The last paragraph of the Economist article concludes:
Imposing a ceiling carries big risks. Central banks cannot target both their exchange rate and inflation. The Swiss monetary base is almost 50% of GDP (the equivalent figure for America is 18%), although inflation remains subdued at 0.2% in August. There are also questions about what happens if the strategy fails. The SFr20 billion losses ($23.3 billion) incurred in 2010 thanks to previous interventions have sparked calls for the resignation of Philipp Hildebrand, the SNB’s president. This looks like a last throw of the dice.
Even though the Swiss franc is no longer backed by gold, it is inextricably linked to gold in my psyche. As fiat currencies go, it’s certainly one of the best. I would consider buying some Swiss Francs right now while the SNB is keeping them artificially low, because I don’t see this policy lasting long. In fact, I just exchanged a bunch of dollars into CHF myself.
HOW TO BUY SWISS FRANCS
How do you buy Swiss francs? Simple – open an offshore bank account. If you’re not American, a Swiss bank would be an obvious solution. Unfortunately Swiss banks no longer do business with Americans. We have a Swiss private bank where Q Wealth readers can open an account with as little as CHF 5000 with no need to travel there. By arrangement with the bank we won’t name them here, but paid-up members should contact our offices for a personal referral.
If Switzerland is not suitable for you, you might want to consider the Caribbean. One of the banks we recommend there will open Swiss franc accounts by mail, with full internet banking. The same bank has also just launched a physical gold storage program that I really like, where they will buy and store gold on your behalf in your name at ViaMat vaults in Switzerland. They will also loan you dollars secured by that gold if you need liquidity. The minimum entry for a Swiss franc account is almost nothing, while the minimum entry for physical gold is just $5000. If you’re interested in opening an account with them, and you’re a paid up member of Q Wealth, you are also welcome to contact our office for a referral. If you are specifically interested in the new precious metals program you will need to tell them so in your e-mail in order to get the full details, as it is not yet on their website.
Of course, these are just a couple of our recommendations. You’ll find many more in the Practical Offshore Banking Guide 2011, available for instant download in our Members Area. If you are not yet a member, find out what you are missing by visiting this page.