Currency crises: swiss franc also with negative interest

currency crises: the swiss franc also with negative interest rates

Swiss banknotes; image: swiss national bank; public domain

The swiss central bank follows the ecb and gives another signal for a devaluation race of the currencies

After the fall in oil prices caused the currencies of many oil exporting countries such as russia, norway, nigeria or canada to lose massively in value against the euro or the dollar, the swiss central bank has now also lowered its key interest rate below the 0 percent mark.

Deposits of more than 10 million swiss francs in central bank accounts will in future be subject to a 0.25% annual deposit fee. The central bankers apparently felt compelled to do this because the demand for swiss francs increased due to the current currency crisis. At the same time, the central bank announced that it would continue to withstand the upward prere on the swiss franc and would not allow the exchange rate to the euro to fall below chf 1.20 by selling off francs.

In doing so, the swiss central bank is following the example of the european central bank, which since june 2014 has been "negative interest rates" on coarse deposits. In the euro area, this step has already led to a slightly negative interest rate on the interbank market and to an increasing number of money-holding fees being charged for large overnight deposits (see: post-growth economists). The effect of this development in the euro system seemed acceptable or even beneficial to the swiss.

On the one hand, the move must be seen as a paradigm shift in the swiss currency system, as there have never been negative interest rates in the modern swiss franc before. On the other hand, it points to an increasing devaluation competition between the world’s truths.

In order to maintain the export economy within its own currency area, the currency is devalued so that exports do not become excessively expensive for buyers. The long-term risk of such a devaluation race is the inflationary devaluation of monetary assets and savings.

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