Is a New Gold Swiss Franc in the cards?

There is talk on the Internet that the Swiss parliament is looking at the possibility of putting a new, ‘official’ Gold Swiss Franc into circulation. If this talk is true, then the ramifications for a 21’st century Gold Standard are tremendous. The source of this story is Herr Thomas Jacob, and apparently the Swiss People’s Party, the largest political party in Switzerland, is supporting the introduction of a Gold Franc.
There are many good reasons why the Swiss parliament out of all the countries in the world should be first to look at Gold money seriously; Switzerland has a long, positive historical link to Gold. Switzerland was the last country to cave in to American pressure to abandon Gold after the collapse of Bretton Woods… and to sell Gold from its central bank vaults to help suppress the paper price of Gold. Indeed, to legalize central bank Gold sales, the Swiss constitution had to be re-written… under duress.
Switzerland has been a safe haven for Gold fleeing chaos, economic collapse and warfare for centuries. Also, Switzerland has the highest per capita ownership of Gold in the world; although admittedly most of this Gold is in bank vaults, not in citizens’ hands like in India.
The Bank of International Settlement, the ‘Central Banker’s Bank’ …located in Basel Switzerland… has until recently kept its books in Gold units, rather than paper; until pressure from Washington forced it to abandon this system.
Mind you, I for one am convinced that in a ‘back room’ of the BIS there are still Gold ‘Gnomes’ keeping the faith by keeping a second set of books in Gold units. It only makes sense; what other stable unit of measure can they possibly use… the rapidly depreciating Dollar, the imploding Euro, or the skyrocketing Franc? Maybe Zimbabwean Dollars, right.
The implosion of the Euro is the very reason that the Swiss are just now considering re-establishing a Gold Franc; the pressure being put on the (paper) Franc is intolerable. As the Euro disintegrates, Europeans are looking for a safe haven for their wealth. The USD is also collapsing, so moving wealth from Euro to Dollar would be like flipping from the frying pan into the fire… not good.
Consequently, there has been a growing demand for the paper Franc… Why? Because it is Swiss money, money within sniffing distance of Swiss Gold. This makes holding the Swiss Franc highly desirable… at least compared to holding the Euro or the USD. Unfortunately, relentless buying of the Franc is causing it to rise in value vs. the Euro and the Dollar. This makes Swiss products uncompetitive in international trade… and wakes up the old mercantile instincts.
In an effort to stem the tide, the Swiss National Bank (the central bank of Switzerland) recently intervened in the markets, selling Francs and buying Euros, in a futile effort to hold down the value of the Franc. They now hold a huge short position in the Swiss franc. This position has lost tremendous value already, and can only lose more and more as the Franc relentlessly climbs… or more precisely, as the Euro declines ever faster. The SNB’s intervention has been an unmitigated disaster.
Mr. Christoph Bloch, head of the Swiss People’s Party, has openly called for the resignation of the President of the SNB… claiming that Mr. Hildebrand ‘behaves like a speculator and is therefore not qualified for the job of President’.
It is clear what the situation is; the Swiss are between a rock and a hard place. Either they accept a declining competitive position due to the soaring value of the Franc, or attempt more intervention (i.e. printing more Francs, and buying more Euros) to try to stem the tide. Neither choice is conducive to a positive outcome for Switzerland… or the SNB. The ECB… and the Fed… can print a lot more paper a lot faster than the SNB can! The Swiss Franc is bound to lose the ‘currency race to the bottom’.
But there is a third way; if a new Gold Franc is put into circulation, the pressure on the paper Franc will disappear in a nanosecond… and demand for the real Gold Franc will soar to unprecedented heights. In one fell swoop, the Swiss can dodge both the rock and the hard place; the paper Franc will resume its fall along with the Euro, keeping Swiss industry competitive… and when the Euro (and the paper Franc along with it) hit zero… they will have a highly valuable Gold currency already in circulation.
In any race, the first horse out of the gate has a huge advantage… and the first country to openly embrace Gold will also have a huge advantage. If the Gold Franc is re-established, Switzerland will be first out the gate… with a bunch of also ran nags chasing it desperately; you can bet on that.

About Rudy Fritsch

I was born in Hungary in 1947, and fled Socialist tyranny during the Hungarian Revolution of 1956. My family had lived through WWII and the consequent Hungarian hyperinflation, thus I have intimate experience with financial destruction. My Dad used Gold to buy our way out of Hungary. Paper money was as good as toilet paper. Later in life, during my studies of Austrian economics, I came to realize that only Gold could solve the Global Financial Crisis (which should be called the Global Monetary Crisis), just as Gold solved our otherwise insoluble problem of getting out of Communist Hungary.
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