Financial island
A term that arose after 2010 in relation to Switzerland. – With growing mistrust in the wake of the debt crisis in the EMU and at the same time also in the USA, many investors worldwide switched to the CHF. This led to a very strong appreciation of the CHF. Swiss exporters suffered losses and this accelerated the tendency to shift production to the EMU area. This indicated a very painful problem solution for the Swiss economy in real economic terms, at the end of which high unemployment could be expected. The central bank of Switzerland tried to break this chain by considerably increasing the money supply. – The declaration of an exchange rate target by the central bank of Switzerland on September 6, 2011, that it would buy EUR if the exchange rate fell below CHF 1.20, meant that the SNB had to buy large amounts of EUR in the billions. For Switzerland, this did not involve a sell-off of its reserves in gold and foreign currencies; ultimately, however, this decision widely marked the end of an independent monetary policy. In addition, the Swiss National Bank’s balance sheet became more exposed to the risk of clumping; its dependence on the EUR increased. – For Switzerland, the only way out is for the financial markets to regain confidence in the EUR and USD. An isolated application for Switzerland is not seen as sustainable so far and is probably no longer possible. – See appreciation pressure, alignment, exchange rate determined, financial island, flight money, gnomes of Zurich, Helvetophobia, interest island. – Cf. ECB Monthly Bulletin of September 2011, p. 20 (effects of the Swiss National Bank’s announcement), ECB Monthly Bulletin of October 2011, p. 19 f. (problems of the CHF as a safe haven).
Attention: The financial encyclopedia is protected by copyright and may only be used for private purposes without express consent!
University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
https://de.wikipedia.org/wiki/Gerhard_Ernst_Merk
https://www.jung-stilling-gesellschaft.de/merk/
https://www.gerhardmerk.de/