By Keith Weiner
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In 1985, Arnold Schwarzenegger played John Matrix in the action movie,
Commando. One line
stands out. While dangling a bad guy over the edge of a cliff Matrix said,
“Remember, Sully, when I promised to kill you last?” The frantic man replied,
and Matrix added, “I lied.” He let Sully go.
Thomas Jordan, Chairman of the Governing Board of the Swiss National Bank
(SNB), must be channeling John Matrix. On December 18, 2014 Jordan said,
“The SNB remains committed to purchasing unlimited quantities of foreign
currency to enforce the minimum exchange rate with the utmost determination.”
Last Thursday, not even a month later—he said,
“The Swiss National Bank (SNB) has decided to discontinue the minimum exchange
rate…”
Schwarzenegger said it better. Besides, Commando was just a work of fiction.
Central bankers toy with people’s livelihoods. Several currency brokers have
already failed, only one day after this reversal.
When a central bank attempts to peg its currency, it’s usually trying
to stave off collapse. The bank must sell its foreign reserves—typically
dollars—to buy its own currency. Recently, the Central Bank of Russia tried this
with the ruble. It never lasts long. The market can see the dwindling dollar
reserves, and pounces when the bank is vulnerable.
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