A fiasco occurred last week in Switzerland which illustrates just how the reckless financial policies in Washington are destabilizing the entire global economy. At 9:30 a.m. Swiss time on January 15, the Swiss franc increased in value by 30% against the euro in just a few minutes, after the Swiss National Bank announced that they were ending their three-year policy of pegging the Swiss franc to the Euro at a 1.20 ratio. Presumably this is because the Euro has decided to engage in accelerated money printing to keep up with the amount of money America has been printing for years. Switzerland could not continue to control the value of their currency relative to the euro and was apparently forced into the decision.
This decision was not made lightly, as millions of dollars worth of financial positions were lost in minutes, and some exchange firms even went bankrupt. The strengthening of the Swiss franc will hurt their exports such as their famous watch making industry, but they essentially had no choice. Consequently, their decision is an ominous sign for the global financial situation.
The U.S. Federal government has engaged for years in endless money printing to pay for vast increases in budget deficits due to out-of-control Federal spending. The President’s budget for 2015 includes only 16% for military spending, while much of the remainder goes towards social programs of some description. The American taxpayer now pays for birth control, abortions, fertility treatments, child support, food stamps, birthing costs and numerous other assorted subsidized programs. Our national debt is approaching $18 trillion, the largest in the world. Our gross national debt as a percentage of GDP was under 40% in 1980; now it exceeds 100%. Since the dollar has been the world’s reserve currency since WWII, America has been able to get by with such fiscal irresponsibility. The continual devaluation of our currency has forced other political entities, such as the European Union, to engage in similar policies in order to prevent their currencies from becoming too strong relative to the dollar, which hurts their exports and economies. Thus, the Federal Reserve and U.S. government have created a race to the bottom as the rest of the world is forced to engage in similar fiscal irresponsibility to devalue their own currencies in reaction to our endless money printing. The resulting global financial instability destroys the foundation necessary for prudent capital investment necessary for technological development for the good of all mankind.
The incredible, unforeseen move by the Swiss National Bank is an example of one country saying they have had enough of this financial madness. The immediate increase in the value of their currency shows the result of a sound monetary policy, when the free market is allowed to determine values, and not elitist financial planners. In fact, the US dollar subsequently dropped in value as a result of this instability. Perhaps this is a harbinger of the future which does not bode well for America.
By the grace of God, this author was in Switzerland when this event transpired and took the accompanying photo just perhaps an hour and a half before this financial chaos occurred. One can see from the photo that already prices in Switzerland were through the roof. The Burger King Whopper sandwich was priced at 16 1/2 Swiss francs, or about $18. Switzerland has a reputation of being a spotless, beautiful country of thrifty, hard-working people and low taxes, thus as a highly-desirable location it is expensive and its currency is strong, in contrast to America,.
All over the world, central bankers are trying to manipulate currencies instead of letting the free market determine values. This is typical of the liberal view which says that elitist planners are more capable of managing an economy than the free market. But they have caused so many imbalances through their ineptitude that when the system inevitably unravels, and the free market is allowed to dictate prices, the result is $18 dollar hamburgers to account for all the global financial dysfunction they created.
The major impetus for this fiscal irresponsibility is liberal America, possessor of the world reserve currency since WWII. More specifically, it was our out-of-control spending and money printing to pay for exorbitant, wide-ranging social programs. It was a tremendous responsibility and we blew it. This topic is much too complex for an article, but it is well-documented. The abrupt actions by the Swiss National Bank indicate that they are tired of this financial madness. Many nations are weaning themselves of dollar dependency, as it would appear that the rest of the world is tired of paying for America’s profligate spending. Ominously, the Swiss franc/dollar ratio is a silent witness to the long-term collapse of the dollar. After the abandonment of the US gold standard in the early seventies, it cost four Swiss francs to buy one US dollar; now it costs less than one Swiss franc to buy a dollar. So the dollar has lost 25% of its value in four decades against the franc. If America does not stop this wanton spending, we might be well-advised to also prepare for $18 hamburgers.