In a world where contradictions abound, there are moments of sheer irony that deserve our attention. Just like a fine wine, these instances should be appreciated before they lose their flavor.
This week, we are presented with a particularly rich irony that deserves our contemplation. A lavish goblet of irony has been poured, and it is crucial that we savor it before it spoils.
Gathering in Davos, Switzerland, a plethora of well-meaning individuals descends upon the World Economic Forum. They convene for serious discussions aiming to “improve the state of the world,” as detailed in the programme.
This assurance alone prompts a chuckle due to its lofty vanity. However, the story becomes even more amusing…
“Billionaires and global leaders are flocking to the annual World Economic Forum in Davos, Switzerland, and they are doing so in grand fashion,” reports CNN Money. “An estimated 1,700 private flights are anticipated throughout the week, which is double the usual rate.” Once they arrive and pay the $40,000 entrance fee, they will deliberate on issues like climate change and poverty.
Swiss National Bank Surprise
At Economic Prism, we refrain from judging how individuals choose to spend their fortunes. If flying in private jets and paying exorbitant fees for a summit in the Swiss Alps is your style, then so be it. Our concern lies in the pretense of genuine concern for global warming and poverty that follows such extravagance.
Nevertheless, we view this more as a source of ridicule. It’s a spectacle that demands to be exposed for its utter absurdity—a sentiment we’ve echoed in previous discussions, including our critique of the salvation calls from years past.
Amazingly, just before the convening of these leaders, the Swiss National Bank made a surprising announcement. After repeatedly assuring that they would maintain the Swiss franc’s peg to the euro, they abruptly changed course. The franc surged 41 percent against the euro, triggering pandemonium in financial markets.
“London-based IG reported that it could face losses of up to £30 million owing to the ‘unprecedented surge’ of the Swiss franc,” reported This is Money. “In New York, the share price of foreign exchange broker FXCM plummeted as much as 88 percent to just $1.50 due to the harsh conditions of a bailout by Leucadia National.”
Large hedge funds, particularly those betting against the Swiss franc, are also staring at substantial losses. Michael Platt’s BlueCrest Capital Management reportedly closed a trading book after suffering significant damages. Major banks like Deutsche Bank, Barclays, and Citigroup collectively incurred losses amounting to approximately $400 million (£264 million).
Luckily for the Swiss National Bank, they severed the peg just in time. The following day, the European Central Bank announced plans to create 60 billion euros monthly out of thin air to purchase European sovereign debt. Unsurprisingly, financial markets reacted positively, with the DOW soaring 259 points. Yet, skepticism about these maneuvers persists.
Chasing the Wild Goose
Of greater importance than the financial losses experienced by investment banks is the message conveyed by the Swiss National Bank’s decision. They appear to signal a withdrawal from the farcical global monetary system. This could prompt other central banks to rethink their roles in upholding this monetary charade.
This scheme is clearly in the best interests of the high-minded individuals gathered in Davos. It allows them to amass wealth through inflated asset prices while enabling their governments to borrow and spend without restraint.
Ultimately, however, their attempts to steer the world economy will prove futile. The Swiss National Bank seems aware that such interventions often lead to chaos. Improving economic conditions through political force rarely yields the desired outcomes.
New complexities invariably arise, making a mockery of their efforts. They are metaphorically “chasing the wild goose.” To elaborate, here is a partial list of the World Economic Forum’s ongoing agenda…
…Can we genuinely measure the impact of research? …The ECB’s bond-purchasing dilemma …What explains the decline of trust in NGOs? …Obama’s State of the Union, BOJ inflation, and quantitative easing …Is the abolition of cash necessary? …What is the world’s most pressing need? …Can Davos actually resolve global issues? …QE and central bank sustainability …What is the economic toll of climate change? …Is the world a zero-sum game or a win-win scenario? …What are the best choices for policymakers in 2015? …The evolution of Davos? …How will a rise in US interest rates affect global dynamics? …Four breakthroughs for a world free of poverty …What implications do China’s actions hold for Brazil? …2015: A step towards utopia or a descent into chaos? …And the list goes on and on.
It’s evident that the do-gooders would have done more for the world if they had opted to stay home, where they could at least tidy their surroundings, plant flowers, and tip the paper delivery person.
Best regards,
MN Gordon
for Economic Prism
