The Risk of Success

Switzerland has a problem – they’ve been so incredibly successful at financial risk controls while the rest of Europe falters, that the Swiss Franc now costs too much for most Swiss to afford their own country’s products!  The Swiss Franc is now so expensive compared to the Euro and the US Dollar that Swiss exports are out of reach for foreigners and the Swiss themselves find much better bargains by crossing the border to any one of their Euro-denominated neighbors.  According to this NPR article, Swiss shopping centers are empty and the Swiss now regularly go shopping in foreign countries.

The Swiss Frank has appreciated to uncomfortable levels

These Swiss Francs are among my favorite cufflinks. After traveling on business visiting a client, I have the shiniest coins in my pocket made into cufflinks.

I’ll admit that I have a thing for the Swiss.  I’ve been to Switzerland many times – always on business – and I’ve enjoyed every trip.  There’s something special about doing business with the Swiss.  I feel like they’re more transparent, even while keeping things very secret.  They ask probing questions to which they expect straightforward answers.  If they like your answers, they do business with you.  If they don’t like the answers, they’ll let you know that pretty clearly.  You’re not left guessing “did we make a good impression?”  You’ll know by the time you’ve left the meeting.  If you’re good at what you do, you have a shot of earning their business.  If not, forget it.

I enjoy wearing things from Switzerland to remind me of the beauty of the place.  I don’t mean the beauty of the mountains or the lakes or the delicious food or the quaint chalets or the cheese or the watches.  I mean the beauty in the way they do things.  Their trains really do run on time and their banks really are as sophisticated as you think.  There’s a reason that the world’s wealthiest people keep their money in Switzerland – because it’s safe!  Today, the Swiss unemployment is about 3%.

So with gold at an all-time high and many predicting a bubble in that market, it seems that traders looking for a safe haven have turned to the Swiss Franc.  Worldwide demand for the Franc has driven its value skyward.  From 2004 through early 2010, 1 CHF got you between about 0.60 € and 0.65 €.  Today, that same Franc gets you 0.86 €.  The result of the world loving the Swiss? Swiss goods cost more abroad (bad news for the Swiss economy) and the Swiss Franc in each citizen’s pocket has more buying power abroad (also bad news for the Swiss economy).  Unlike in the Unites States, no matter where your are in Switzerland, the farthest you’d have to travel to get to a foreign country, all of which use the Euro, is about 50 miles.  I had some fun with Google Earth trying to manually determine where in Switzerland is farthest from all border crossings and I came up with Thun, between Bern and Interlaken. So the Swiss can save a lot of money by shopping about an hour away – in a foreign country – rather than shopping for Swiss goods.  All this spells trouble ahead for this amazing nation of just 7 million people.

Those who are fans of an equilibrium model of economics will remind us that the worldwide craze for Swiss Franc will ultimately result in a decrease in the Swiss economy which will in turn naturally lower the value of the currency, so the Franc will return to historical norms.  Unfortunately, on its way back to ‘equilibrium’ this impeccably managed economy is dealt  a one-two punch.  It seems that in this economic battle, neutrality is not an option for the Swiss.  Despite keeping their currency when many others joined the Euro, despite keeping their finances in good order during the past 10 years, this nation cannot escape being affected by the poor choices of its neighbors.  Still, my cufflinks aren’t for sale.

One Response to The Risk of Success

  1. Pingback: The Risk of Success | Revolusionline

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