Posted Jan 15, 2015 by Martin Armstrong
On September 6th, 2011 the Swiss National Bank (SNB) was aiming for a substantial and sustained weakening of the Swiss franc after Swiss companies threatened to leave because the rising franc reduced their exports. The SNB would no longer tolerate a EUR/CHF exchange rate below the minimum rate of CHF 1.20. The SNB set out to enforce this minimum rate with the utmost determination and it began to buy Euros in unlimited quantities.
In 2012, I met with a member of that board to manage the peg – an academic. I explained it was a dangerous path for they would end up buying Euros at the high and ultimately sell it at the low when the free markets would break the peg.
Socrates has been warning about January for the last year. Here is the forecast array on a daily level and it pinpointed the rise in in volatility for today the 15th with a Panic Cycle and turning point due as well as we can see.
When we look at the Weekly, this was the week with the start of the Directional Change. Volatility and confusion will now prevail and the final low for the Euro against the Swiss is not yet in place. It looks like we have another two weeks.
What this proves is that FUNDAMENTAL analysis is really bogus because it boils down to opinion and nothing else. Everything is CONNECTED. How could the the computer project these targets and that the peg would fail? It is only monitoring capital flows. The abandonment of the peg is more than just a vote against the Euro. It is more than just the departure of the Greeks as a member.
The Swiss are bailing out of the peg because the European Central Bank (ECB) will more-likely-than-not begin buying sovereign debt of its member states. We are recommending to clients to off-load EVERYTHING you possible can to the ECB and say thank you very much. Our models are warning this is the culmination of the bond bubble and it is the ECB who is buying the top.
Germany offered Greece 100 year debt just to stay in the Euro. Greece should exit now while they can and DEFAULT on the debt owed. The system is so corrupt you would not believe what will happen here. Banks use member debt as RESERVES. Because this is government debt, it is considered “safe” and is not marked-to-market. As long as a member still pays something, then their debt is still reserve quality. If they default, then the banks are forced to show the loss.
The ECB will buy sovereign debt and the banks should be selling their Greek debt to the ECB before they default. Once a default takes place, there goes the European banking system. Now you can see WHY the Swiss had no choice but to exit the peg. They were buying Euros to support the peg and losing a fortune.
Our computer is warning this is not the end of the game, it is the beginning. Socrates has been monitoring the interconnections that are complex. No individual can possibly keep track of the ramifications from so many angles.