When the Swiss decided to peg the franc to the Euro in 2011 to stamp the depreciating Euro (against the franc) from derailing the Swiss economy, it had the appearance of striking a currency stability through central bank intervention. That’s just another name for “legitimate sovereign” currency manipulation. SNB President Thomas Jordan said in 2012 that “the bank would defend the peg ‘with the utmost determination.’ He added that Eurozone fiscal challenges have worsened seriously over the past few months, and he fears increasing upward pressure on the franc.” That was tough language. It has to be authoritative and assertive because what is being done is against natural forces of economics.
Tough languages are often used when politicians and banksters initiate actions that are against the forces of nature. These are artificial actions meant to manipulate a (typically financial) situation against its natural course of trajectory. Normally, such an act will be deemed illegal as it causes price distortions in otherwise “perfect market” where price discovery is between legitimate buyers and sellers. They are laced with lies. At about the same period when the financial sector is undergoing a turbulent roller-coaster ride, Mario Draghi announced he would “do ‘whatever it takes’ to save the euro.” Similar tough words were again used.
Back in the Eurozone, rumours had been rumbling that Greece will be shown the Euro door. Germany has implicitly suggested that Greece’s exit from the Eurozone will not have material impact on the solidarity of the grouping. Greece’s economy is small in relation to the bigger members in the Eurozone and indeed may not have material financial impact should Greece exits. Nonetheless, a Greece exit will weigh heavily on the integrity of the Eurozone. The rumours were promptly denied by Merkel who defended with her statement: “I would like Greece to stay in the eurozone, …. My entire work in connection with the euro crisis has been aimed, and is aimed, at strengthening the eurozone as a whole with all its members, so including Greece.” Once again, very strong words coming from the German politician.
Fortunately, by de-pegging the franc to the Euro, the Swiss provided the slumbering world with a much needed wake-up call. It is the harbinger of more imminent financial catastrophes. Words are just words. They can be overturned or denied when they start to hurt. The Swiss has thought through – Better to eat humble pie than to squirm in pain for honour’s sake.
The stronger words are spoken, the more likelihood of strong undercurrents. Consequently, the words of Draghi and Merkel should be treated with many spoonfuls of salt. Bear in mind also that the actions by the European Central Bank (ECB) may have been illegal and Draghi may not be able to stand up to his words. It is still unclear whether it was lawful for the ECB president to make that pledges that he has no power to execute.
Merkel’s comments are quite different. She could be right that Germany has no intention for Greece to exit. But what if Germany exits the Eurozone? In that event, her words and integrity will survive. Could that eventuality happen? Bloombergview has this to say:
Germany’s exit would provide immediate benefits to all the remaining euro-area nations. The currency depreciation would radically improve their trade competitiveness — exactly what many observers have said the weaker nations in the south need most. The euro area’s balance of payments would improve, providing sorely needed funds to service its external debt. The benefits would accrue to the euro area as a whole, as opposed to serial exits at the weak end of the spectrum, which would crush one weak nation after another, with each exit increasing pressure on the next candidate.
Man can never distort forces of nature. You cannot stop an avalanche. Once the snow starts piling up, it will cascade into a monster and engulf everything in its way. Get out of its way before the first trickle of the avalanche appears. When politicians and banksters used tough words in their speeches, beware that reverse psychology is being employed. It is the nature for these people to lie just to protect personal interests. Beware tough talks, they precede calamities (read: “When Leaders Lie”).
Wherefore putting away lying, speak every man truth with his neighbour: for we are members one of another.