Well, as I've mentioned a few times, I view the Swiss situation as a similar one to the Norwegian one. Through an accident of fate, but also due partly to the way they have managed things, both of these countries find themselves in situations where they have something that other people really want (safety and oil). Their governments end up sitting on very large pools of money which need to be invested. That money, with the income that it has earned, can subsequently be used to either shore up finances when the situation changes (like Norway is doing now) or distributed to citizens (SNB does a bit of that every year by paying a dividend to the cantons). SNB, just like Norges Bank, is more a sovereign wealth fund now than a central bank. When/if the time comes to unwind, they can simply sell whatever share of their FX reserves is needed to normalise and reduce the size of their balance sheet. This, incidentally, is what the Danish central bank (another pegged currency) has been able to do. As to my thinking about it being "normal", I think you have to put things into proper context. The European integration project is an unprecedented undertaking. Nothing around it is "normal", but in the grand scheme of things, compared to all the other dramas unfolding on the continent, no, I don't think the SNB's actions are such a big deal.
What forecast about the endgame have I made? You've clearly indicated your intent is to argue, not discuss anything. By bringing up the politics forum, you clearly are butt hurt from a discussion there that involved me, so I appreciate you clarifying your ulterior motive in posting in this thread. I'll let you ramble on by yourself. If you wish to engage me, we can do so in the basement and I'll be happy to further school you. Have the last word. You're going to insist on it anyway.
Good post. I think the Danish and Swiss situations aren't comparing apples with apples, simply from the matter of scale. Other than that, I think we're witnessing the end of the European experiment - but that's just me.
LOL you think too much of yourself. I brought up politics because I know you are active there. Feel free to peruse my posts there, I'm actually on your side. You sound a little defensive no? Need KY for your butt chafing? This forecast below(implicitly): Apparently you have selective memory as well. So yes, I will have the last word as is my prerogative.
The reserves of any CB are not some investment capital that you can or should risk. The excess reserves are there for two reasons: positive trade balance and non trade related demand for CHF (safe haven etc). What's wrong with holding onto these reserves? There is only one sane and logic thing any CB can do with reserves without distorting the reality, markets etc: provide orderly FX exchange rate. Buy the dips, sell the pops, make profits that way that gets paid out in CHF (obviously) to the country's budget to spend/pay off public debt. Or the profits can go to national wealth fund to invest, but it's the profits from the FX trade (for currency stability, not speculation), not the reserves that get to be invested "Normally" positive trade balance would lead to currency appreciation (making citizens wealthier, which is good) until the market reaches some point of balance. Yes that would limit the growth potential, but in global economy that's what you get. You either accept the fact that the others slowly catch up to you or we are back to duties/tariffs. One could argue that the other thing that CB could do is apply zero or negative interest rates, to tame currency appreciation. Note that this applies pretty much only to SNB since they are "hit" on both fronts, positive trade balance and safe haven demand. It doesn't apply to ECB or US though and JP is questionable since they've been printing for a long time. The problem with QE or ZIRP is that it only works for one and if only one CB is doing it. Since we have more that one CB doing it, we have a proverbial race to zero so you end up nowhere you wanted to be except a bubble somewhere else.
I am afraid this isn't really answering my question... The SNB, obviously, IS holding and will continue to hold onto its FX reserves. The question I keep asking is "what is the form these reserves should be held in". Obviously, this matters, because the possibility of choice implies risk. Therefore, your very first statement above doesn't make sense. A Central Bank's FX reserves are by construction a source of risk. This is especially and particularly true in the case of the SNB. The SNB has been attempting to do just that, but, as I am sure you're aware, in their particular case this "provision of an orderly FX exchange rate" entails them accumulating ever more reserves. Moreover, given their particular situation, they sure have been buying the dips all right. Since there have been no pops for them to sell, the only thing that they made during all this time have been losses (from the estimates I've seen, arnd CHF 500bn).