Swiss Miss

The shocking move by the SNB to remove the Euro/CHF peg resulted in seismic moves across all currency markets. Not only has the Swiss Central Bank taken a massive hit to its reputation (having assured markets only days earlier as to the viability of the peg) but we believe that this is the first chink in the armor of all Central Banks. If one believes (as we do) that the value of precious metals are partially a reflection of the markets belief in the credibility of Central Bankers, the significant rise in the price of gold is telling. If you thought Janet telegraphed her moves prior to this SNB action, one will have to be deaf, dumb and blind to not know the next Fed move. In our opinion however, a surprise move by the Fed will not  ultimately be the death blow to Central Banker credibility but rather a collective realization that the efficacy of Central Bank policy has limits and  that those limits were breached many QEs ago. Perhaps the greatest implications one can draw from this surprise move however is that finally a Central Bank has the fortitude to stand up and say: ” We know that these monetary science experiments have consequences and we are not fully sure what those consequences will be, to continue to backstop any currency with ones own sovereign balance sheet is foolish, we were wrong and we are stopping”. Let the currency wars rage on: Buy Stuff