These days, currencies are like families – all more or less dysfunctional. National authorities must decide whether to indulge the neuroses or try out therapy. The appeal of the latter is increasing, from Bern to Beijing.
The Swiss can be excused for feeling that the troubles of the world are resting on their shoulders. Only a little diversification from the troubled currencies of the eurozone and US (total gross domestic product of $31,000bn) into the freely traded franc will greatly distort the Swiss economy (GDP $550bn). Last week the franc traded 25 per cent above Credit Suisse’s estimate of fair value.
The Swiss National Bank has fought back by pushing short-term interest rates below zero, flooding the banking system with cash and selling francs. The currency has fallen back, but the upward pressure is still strong. The central bank may yet have to resort to capital controls, about as welcome in rich countries as a prescription for antipsychotic medication.