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Comment by arez | Hacker News Reader

you can just print money, no need to have any revenue as a state. States are run different than a household

For many economies that's a possibility, but the Swiss Franc has a much larger circulation than proportional to economic fundamentals (like the pound and dollar). That has to do with the perceived stability of the currency. Normally, a run on a currency doesn't work because it's locally used, but as seen in the collapse of the pound in 92 that made Soros a household name, it could. That would force much higher interest rates in Switzerland (or politically unacceptable inflation).

No sign of stress on the franc yet, actually up against the euro:

https://www.cnbc.com/quotes/EURCHF=

But wow, an intra-day move of 2%!?! I guess it's been banging around a lot lately.

> much higher interest rates

Last time I looked Swiss rates were -0.75%, so I don't think having to go back to positive rates would be an unspeakable horror.

Are you aware what happened in the last months? You should check the rates again.

Yep, Inflation at 3%, short rates at 1%, rising 50bp a meeting, expected to hit 2% by June.

Yeah, but they’ll just blame immigrants, which will make it politically acceptable. Worked in the U.K. last time around, and Switzerland is increasingly xenophobic, particularly the older generation, who hold the power and the votes.

You mean the country that has by far the highest immigrants : citizens ratio in whole Europe? Nationalism is rising on whole continent for quite some time, Swiss expect others to respect their rules and way of life. If that's a mountain too tall to climb for some then they struggle.

Swiss are type of general population that when given choice if to have 4 weeks of fully paid vacation or 6, they vote for 4 due to negative impact on employers. Given similar voting freedom to british population gave us brexit. I wouldn't compare them if I were you

The more one believes oneself or one’s countrymen to be immune to such forces, the more likely said forces are to prevail.

Presumably most of CS’s deposits and other liabilities are not denominated in Swiss franks.

Not really - they'd need to print $200B - which is 1/4th of GDP.

That would match what the US printed during the pandemic ($5.2T) adjusted to the size of the economy. You would expect to get similar devaluation of the currency.

And for what?

Credit Suisse has been one of the worst banks in the world for a decade.

They only employ 26k people in Switzerland (0.5% of the workforce).

> And for what?

The definition of a "systemic" bank is one that, should it fall, could take the world's entire financial system down with it.

So the "for what" would be: to prevent the world's entire financial system from crumbling.

Should one systemic bank fall and make all the other systemic ones fall like dominoes then it's definitely not unthinkable that there'd be logistics issues and very likely famine in some places and probably civil war in several countries. Politicians may not care much: but they care about getting re-elected. And the whole system crumbling and famine and civil war means politicians not getting re-elected.

I mean... Take a small player like SVB: it's not even on the list of systemic banks. A measly $177 bn AuM: that's literally one order of magnitude smaller than Crédit Suisse.

And yet everybody was whining and crying for SVB deposits to be saved and the goverment came to the rescue.

If they don't bail it out, we will have Financial Crisis 2.0. Just the magnitude of derivatives portfolio of CS is enough to accomplish that. Panic ensues. Contagion will engulf other big banks, starting with DB. Will DB be allowed to fail too?

But if they do bail out, then other national banks will have to quickly bail out their banks, too. Almost every bank in the world will have to be bailed out.

Neither option is good.

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