Published on 19 Jan 2015

Fiddling whilst the Swissie churns

So what do they know? They spend their lives dealing, trading, monitoring and watching. Yet last week, when the Swiss Central Bank detached the Swissie (the Swiss Franc) from tracking the Euro, in the immortal words of my namesake, they knew nothing.

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This despite the fact that one of the most widely followed financial operatives, the Singaporean trader Jim Rogers, had talked openly of the unease of the Swiss banks about continuing to track the Euro now that the European Central Bank is openly considering a spate of quantitative easing.

So caught on the hop were some of the Foreign Exchange dealers not clear what the evidence is for that statement? More accurate to say – that many lost significant sums of money. Citi Bank lost $150m, less than $1oom and the sponsors of West Ham football Club, Alpari UK, said last week it had entered insolvency but is now considering all options including a sale.

Strangely the ‘masters of the universe’ then appear to have sat on their hands in shock. Several dealers have told me that they did not immediately understand the inevitable impact on stocks – particularly those in which the Swissie was in play. The plunge in the FT 100 Index was slow. Only later in the day did many dealers get round to selling exposed assets.

It all recalls the ignorance and incompetence, underlying the corruption and theft that swirled around the global foreign exchange scandal for which banks and finance house are still settling their fines. Despite a number of arrests no one has yet gone to jail for fiddling the foreign exchange market.

For all the City whining about tightened controls, tougher regulation, and better behaviour on the dealing floors, the ignorance exposed by the handling of the ‘decoupled’ Swissie reveals that very little has changed since the most public display of financial irresponsibility and incompetence in 2008.

We keep being told that a lot has been fixed since the Banking Crisis. Equally we are told it could happen again. The world clearly needs a foreign exchange system that is fool proof and fiddle proof.

International trade depends on a reliable FX system. Do we have it? Who knows. But I suspect not. Then again. In this regard, I know nothing.

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7 reader comments

  1. garethw says:

    Jon, I’ve long been an admirer of your journalism but your recent tweet disappointed me…
    “One glimmer of light in a dark week: City slickers, dealers, banks lose multi millions and more 4 being on the wrong side of the Swiss Franc.” really seems like your emotions have got in the way of objectivity.
    Plenty of people have been hurt by the Swiss government’s decision the majority of whom are emphatically not city slickers or fiddlers or greedy crooks. Some have lost jobs others lost some of their pensions. Swiss companies that export will be hit hard and likely result in more job losses.
    Please try and appreciate that not all victims of this episode deserved it, by all means point out wrongdoing or greed where it occurs but some vague allusions to this being “city slickers at it again” doesn’t educate or inform it just tells people what they want to hear.

    1. jon snow says:

      Gareth I feel suitably chastened..i should have offset the crooks and fiddlers with those you rightly depict as genuine victims of the ‘revaluation’ of the Swissie

  2. Alan says:

    Government is well aware of the power of private banks. Bank of England, Federal Reserve and others in the BIS cartel, are answerable only to their shareholders. By decree of governments those shareholders cannot be disclosed. Government has done all in it’s power to deregulate the financial sector to accommodate private banking practices , at the behest of who? One can only conclude a complicity of government and private banking institutions that is not favourable to the public. Once government issues it’s own currency, regulation may stand a chance.

    1. Old Geezer says:

      Bank of England has shareholders? The Bank of England was nationalised by the Atlee Government of 1945 to 1950. It is still state owned. A bit of homework missing here.

  3. Philip says:

    Perhaps one of your contributors could explain what value these people create – other than for themselves and their employees? using other people’s money, they seem to run a game that ensures that unless they are immeasurably incompetent or too greedy they make zillions. But what benefit is that to the rest of us? I accept that a few restaurants, pubs & expensive shops gain business – but they push up the cost of housing & make sure they pay as little tax as possible. Doubtless they have private health & educations….So what exactly is the usefulness to the rest of us?

  4. Stephen Townsley says:

    Perhaps the next big question is what happens to the Danish Krone. A small currency but pegged closely to the Euro as originally Denmark was set to go to the Euro but a referendum stopped it. So it has ended up with a currency tied to the Euro.

    As the Euro moves it is going to cost the Danes a lot more money to stay there just like the pound slipped out of the ERM we might see the next currency war heading to Scandinavia.

    Movement out of the Euro might also push the pound upwards too. As the Greeks move to an election and possible Euro exit, the ECB starts printing money and the billionaire cash heads to the Swiss Franc the Euro may face even more pressure.

  5. Mike Harland says:

    Well if you had followed a few non-MSM commentators and alternative blogs such as Zero Hedge you would have been expecting this for over six months, just as you might start looking out for bank bail-ins to be the norm within the next year or so.

    The fact is the markets and the exchanges are clearly rigged – it is a mathematical and financial nonsense for the FTSE/DOW to be going up or down in parallel with the price of gold instead of in opposition, but that is what happens nowadays with fiat currency games. The 1% moving their money out of toxic assets don’t want the gold price to be high when they jump every dip, so when stocks fall so does the gold price and when they rise gold rises but lags behind. That can only happen if something is being rigged.

    No, until we have real capitalism back and a truly free market with proper entrepreneurial risk taking (and do away with these ‘futuring’, ‘hedging’, ‘optioning’ and other such fully-insured, non-risk taking, bling-boy safe betting schemes introduced since “deregulation”), you won’t get “fool proof” or “fiddle proof” anything. The City and the Goldman Empire don’t work that way – that is why they are in denial that their $400 trillion derivative black hole is unsustainable.

    Greece was only 40 billion in debt when the crisis hit, now they are 300 billion and Siriza wants to default on 150 – what is the economic sense of that? They should have defaulted to start with and they along with the whole of Europe would now be laughing. BUT the 1% would have taken a haircut … and that will never do under our present system.

    Funny how the 1% versus the rest of the world was also a big issue today … but you missed linking it to the bigger picture.

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