Switzerland: Swiss Franc -ly Under Attack

Separate reports this week in the Swiss newspaper Neue Zuericher Zeitung (NZZ) are highlighting the difficult choices Switzerland, and by extension other nations, are facing in the continued onslaught of effective currency devaluation by US and Eurozone officials. The Greenback and the Euro have fallen significantly against the Franc and other currencies in the past years as their governments and central banks have created a glut of supply; by loosening monetary policy, lowering interest rates and creating massive amounts of new debt to bail out ailing banks, businesses and governments.   The choices for nations such as Switzerland are clear:  Reduce living standards and income values through inflation, or see a massive outflow of jobs and industry from their borders. 

Swiss Banknotes by kalleboo

The Swiss National Bank (SNB) has announced losses of 8.5bil Swiss Francs in the first 3 quarters of 2010, resulting from their foreign exchange interventions intended to curb the effect of the inflating Euro and Greenback on their economy.  These losses stem from the SNB's massive selling of Swiss Francs and purchasing of Euros in order to simultaneously increase market supply of Swiss Francs to lower it's exchange rate; and increase competition in the Euro-dollar market to help support/increase its value.  Despite these efforts and the losses thereof, the Eur/Chf (Euro/Swiss Franc) exchange rate has fallen from late 2007 highs of 1.68 to current levels of 1.25.  This has had a severe effect on Swiss industry, most of whom must repatriate sales made in the Eurozone in order to book profits.  This peak to trough fall represents a loss to Swiss exporters of 0.43 Chf in every dollar they earn, or roughly 0.25 in aggregate terms.

Such extreme cuts to profits have Swiss industry chiefs remarking that in current conditions they cannot consider new hiring or expanding production in Switzerland, and making controversial threats to move jobs out of Switzerland and into the Eurozone, where wages have dropped along with the Euro relative to the Swiss Franc.  Retailers are also complaining that more and more Swiss shoppers are travelling the short distance to make their purchases accross the border, which is not far from any point in the small landlocked Alpine country.  The tourism industry is also feeling the pinch, as it is more expensive for Europeans to buy Francs.  Some doubt the long term viability of small and mid-sized businesses in Switzerland if the Franc's value to the Euro cannot be stabilised above 1.30.  The NZZ this week specifically quoted Georges Hayek, chief of Swatch-Group and Hans Hess, president of Swissmem, an association representing the mechanical and electrical engineering industry, as calling for government intervention in this regard.

However, such government intervention would in all cases amount to a rapid inflation of the Swiss currency.  This would cause prices of goods to rise generally, affecting the value and purchasing power of all Swiss incomes, from wage-earners to business owners to pensioners.  The Swiss authorities thus face a double-edged sword:  To take action is to lower living standards for all Swiss residents and cut the value of savings; to hold firm is to risk a general flight of industry and jobs and support a loss of value in local stock market investments.  In all cases jobs, savings and investments are threatened.  This dilemma is at the root of the murmurrings of currency war surrounding the G20 meetings in Seoul, which saw the US and Europe insisting that China allow the yuan to rise, and China along with Brasil, Korea and a host of other nations from across the globe complaining of the ill-effects to their economies caused by the effective devaluatoin of the Euro and Dollar by Western central banking authorities. 

Just as the European central bank (ECB) was forced to bail out Greece and Ireland by helping to create new money, and is currently fighting to prop up the Portuguese national budget with bond purchases, so are Federal authorities in the US now facing calls to bail out hopelessly indebted states and municipalities.  The Wall Street Journal reports that Federal Reserve chairman Bernanke has scuttled such talk by pointing out that new rules under the Dodd-Frank laws enacted by the federal government last year limit the fed`s ability to intervene should states or municipalities go into default/bankruptcy.  Such issues in Europe and America will, regardless of how they are addressed, create more instability in foreign exchange markets, to the detriment of economies outside their borders; from first world economies such as Switzerland, Canada and Japan, down to China, Brasil, India and all others dependent on the global economic model. 

Read more:

German Language Sources:
http://www.nzz.ch/nachrichten/wirtschaft/aktuell/tiefer_euro_gefaehrdet_wohlstand_1.8958738.html
http://www.nzz.ch/nachrichten/politik/schweiz/schweiz_nationalbank_verlust_85_milliarden_franken_2010_1.8356119.html

Other English Language Reports on the Swiss Franc and US Debt:
http://online.wsj.com/article/SB10001424052748704739504576067602380461160.html
http://online.wsj.com/article/BT-CO-20101112-701368.html
http://www.swissinfo.ch/eng/specials/swiss_franc/Strong_franc_continues_to_haunt_Swiss_economy.html?cid=17955460

Drones, Torture, Rendition: Democratic Values?

A Huffington Post column by Johann Hari summarizes certain revelations stemming from the leaked USG diplomatic cables by Wikileaks.  The piece posits that Julian Assange's efforts have made the world safer and are a boon to US National Security, that a better educated public with proof of government wrongdoings can better bring its government to account.

Hari's column touches on a cable which proves the US Armed Forces were operating in Yemen while denying it publicly, and references an article which discusses 'Reaper' or 'Predator' drone attacks in Pakistan.  Drone attacks there are a very messy situation; Pakistani officials publicly deny their tacit approval of US drone attacks within their territory, rejecting them as a violation of their sovereignty and of dubious value and causing massive civilian casualties. According to Pakistani Foreign Ministry spokesman Abdul Basit, drone attacks "are having long-term negative consequences.”  Indeed, the Pakistani and American governments likely will suffer "long-term negative consequences" from the resulting radicalization of Muslims when they employ drone tactics such as attacking a funeral procession; waiting for a time until villagers come out from cover after the attack in search for survivors and to pray for the newly slain; then attacking again.  Certainly they make bitter enemies of the villagers who lose their homes and family members in such wanton displays of imperial might; people who may have nothing left to do to support themselves except to take up arms, if it does not generally galvanize the entire population against them, to whom the notion that US forces are in the region to restore security and human rights must seem something of a Hitlerian joke.

The article also highlights pressure the US Government exerted on Germany to quash an investigation into the rendition of an innocent man, Khaled El-Masri, who was mistaken for an insurgent with a similar name. El-Masri was kidnapped from Europe and brought to the CIA's infamous 'Salt Pit', a secret interrogation facility in Afghanistan.  A Harper's Magazine article, The El-Masri Cable, describes the treatment he received: "Despite El-Masri’s protests that he was not al-Masri, he was beaten, stripped naked, shot full of drugs, given an enema and a diaper, and flown first to Baghdad and then to the notorious “salt pit,” the CIA’s secret interrogation facility in Afghanistan. At the salt pit, he was repeatedly beaten, drugged, and subjected to a strange food regime that he supposed was part of an experiment that his captors were performing on him. Throughout this time, El-Masri insisted that he had been falsely imprisoned, and the CIA slowly established that he was who he claimed to be. Over many further weeks of bickering over what to do, a number of CIA figures apparently argued that, though innocent, the best course was to continue to hold him incommunicado because he 'knew too much.'"  While this kidnapping, torture, sexual violation and starvation of an innocent man had already been revealed, the leaked cables show the US Government's expectation of impunity for its agents who execute these illegal actions in sovereign foreign nations; in this case, Germany's unwillingness to cooperate by dropping charges in the matter against 13 USG agents is met with threats from US diplomats.

Hari's article points to other abuses by Western governments and the lies they tell their people to cover it up.  He expresses outrage in the poignant observation that "There is a squalid little irony when you see people who are literally bombing innocent civilians every day feverishly accuse a man (Julian Assange) who has never touched a weapon in his life of being 'covered in blood.'"  He names Western governments as the prime threats to their own population's security, and suggests that the unmasking of this hypocrisy must lead to positive change, stability and security.  What will the view of the Muslim and 3rd world be, if Western 'democracies' fail to address the abuse of power by their governments?  Al Qaeda already names Western voters as sponsors of the military occupation of Palestine and the general misery of the third world, offering that ignorance is not an excuse for imperialism.  Many amongst the populations of the world's Muslim nations already view Westerners, especially Americans, as ignorant, militarist and corrupt materialists.  Now that Western tax-payers and voters cannot hide behind the veil of ignorance, how will the world view of Western 'democracies' change, should they fail to expel the ruling classes who have sown war, death, torture and poverty in their people's name?  What is the risk that Westerners come to be seen as knowingly complicit in the heinous crimes of their governments by their 'democratically' expressed unwillingness to stop these crimes, let alone rectify and bring their authors to justice?  Whatever blood Julian Assange and the American government have on them, it is more and more smeared onto each of us, here in Canada, in the US and in Europe.


Read the Johann Hari- Huffington Post article here:
http://www.huffingtonpost.com/johann-hari/julian-assange-has-made-u_b_793504.html

More on Drones by Johann Hari and others:
http://www.independent.co.uk/opinion/commentators/johann-hari/johann--hari-obamas-robot-wars-endanger-us-all-2106931.html
http://news.antiwar.com/2009/06/23/at-least-65-killed-as-us-drones-attack-south-waziristan-funeral-procession/
http://www.qatar-tribune.com/data/20101202/content.asp?section=pakistan1_3
http://geo.tv/6-24-2009/44711.htm

Harper's Magazine on El-Masri Rendition:
http://harpers.org/archive/2010/11/hbc-90007831

BBC on American intervention in Yemen:
http://www.bbc.co.uk/news/world-middle-east-11918037