false stability in Switzerland???

Finance, Taxes, Banking, Insurance and Retirement
1
Hello, we've all been reading about global inflation, etc., etc. but there was hardly anything changing in Switzerland. I was thinking that it's good news. However, I'm now in Cracow Poland, I'm "shocked" how expensive it became since 2019. It's still cheap and worth the money, but mind you, it used to be dirty cheap, now it's like 50% what we pay for things in Zurich. I meant to say, that I've just realized that CHF is not keeping strong, it's falling rapidly towards other currencies, so yeah, it perhaps won't fall back to 3 chf per eur, but its real value is going that way...

2
Seems that way all over, goods costing more than money is worth. But do you think we may be heading for a major „correction“ on the value of money?

3
exactly, that's my thought. We've seen CHF stable strong for quite long but it seems just false view, the prices all around are rising

4

Data seems to indicate otherwise…
however the price inflation in CH is also a simple case of profiteering by the state sanctioned duopoly…
https://www.swissinfo.ch/eng/inflati…ilers/48701196

5
Why would you expect Poland or any of the other poorer members of the EU to remain in that state? They are part of one of the wealthiest markets in the world so of course their standard of living, salaries, costs are going to converge, that is part of the motivation for joining for heavens sake! That plus the EU’s very deliberate policy of developing and growing those parts of the Union through the structural fund.

And by the same token who could Switzerland or any of the more advanced economies out pace the underdeveloped parts of the same single market.

6
That's somewhat my feeling, the old "western" economies are frozen whilst the rest of the world is developing, sure I need to check that against more markets than a single eastern europe country

7

Poland is currently stagnating at -0.3% GDP growth, while the Eurozone overall grew at 0.6% for the same period. Overall you're right that a mature, developed economy will grow slower than a developing one, this is economics 101.

8
They are not frozen, but they can’t grow faster than the overall growth rate for any length of time, since they are the ones driving the growth rate. Where as the less developed economies have room to catch up. If you want to live in a faster growing economy you will have to move.

9

Perhaps some insight can be found here
https://www.ubs.com/global/en/wealth…/insights.html

https://www.ubs.com/global/en/wealth…ActivityStream

10
Portugal = 6.7% 2022. Things are roaring here!

11

Well, it's a developing country!

12
The franc is at 1.14 X the USD right now. That's pretty high by historical standards, and the highest in a decade. That's especially important when you think about energy priced in dollars.

It's also at 1.042 X the EUR. I believe the highest it's ever been. Very important considering the imports from the eurozone.

The strength of the currency "should" help protect against imported price inflation, but of course we do also see some inflation here. It was a bit of a shock when the SNB brought the short term interest rate back above zero, and now it stands at 1.75%.

I'd argue the biggest threat to the economy is the challenge to exporters, but there was also a lot of worry when the SNB took away the CHF:EUR currency peg back in 2015, but exporters seemed to deal with it better than expected.

Of course any cash is "trash" in the long-term and we all need to invest in order to have a return higher than inflation, but the CHF is one of the least "trash" currencies of the World...

13
Like the 3 Baltic states, Poland has a cumulative inflation of 40-50% over the last 3-4 years.

What do you expect that to be caused by other than actual product and services price increases?

14

Swiss industry has proved itself to be remarkably resilient. The big issue is the banking sector. At the moment, it is mainly the Swiss tax payer that is meeting the bills caused by the behaviour of the banks. That may not be possible in the future:
https://edition.cnn.com/2023/03/23/i…and/index.html

15
At the moment the bill is footed mainly by a segment of the bond holders, not the tax payers. The only indirect way in which the Swiss taxpayer is impacted is if her/his pension fund had AT1 bonds.

There's a potential risk if the courts side with the plaintiffs (the AT1 bondholders currently suing FINMA) in which case the bondholders will need to be compensated and then it will be the tax payer indeed. However, this is not the case currently

16
As I understand it, the state has funded guarantees. This costs money in the short-time, even if the banks are supposed to pay it back in the long-term.

Anyone with their eyes open in the last twenty years would have realised that UBS and Credit Suisse were involved in dodgy business practices and as such their bonds were to be avoided, whatever the credit ratings were.

The problem for the swiss government is:

The finance sector is critical to the swiss economy .

The state does not have enough money to bail-out the banks if they really go belly up

17

What do you mean by "funded guarantees"? The "shaving" of the bonds was done at the expense of the bondholders (and hence the lawsuits), not at the expense of the taxpayers. It was different last time with UBS, this is correct, but precisely because of this, the strategy this time is different. Remains to be seen if the court challenge will hold. Hopefully not as I have 0 sympathy for the AT1 bondholders who knew exactly what level of risk they're into.

18
Portugal did not benefit from the boom prior to 2007 and then ended up as one of the "PIGS", so it got punished on top of everything else. So yes it has a lot of catching up to do.

The only economy that does not follow the normal trajectory is Ireland, it has a strange two tiered economy that can't be replicated in other countries at this stage, so you just have to leave it out.

19
At the moment no more so than any other European state, but going forward we should require UBS to spin off it's International divisions, stick very tightly to ECB policies and practices of quietly leaving the risk stuff in London for the UK taxpayer to fund it.

20
Don’t you mean “PIIGS” Jim?