Hello Everyone,
i am following the LVMI since a few month but not being an economist, i wonder if someone in the forums would help me to shortly clarify the present situation in switzerland.
i am swiss and French citizen and since the fall of the Euro currency of course the Swiss Francs is getting stronger now the Swiss Governement keep saying that it is bad for the Economy, that workers have to work longer hours and will be paid less, they appeal to our "nationalism" not to buy in Euro countries etc..
but i don't understand why having a strong Currency is bad for the country ? i think that switzerland is in the position that Germany was before the Euro with the Deutsch Mark .
but i am a bit confused can someone explain to me if it is really bad for the Swiss citizens or not ?
A strong currency means that you can by more stuff from abroad. It also means that you will export less because not as many foreigners can afford to buy swiss goods anymore.
So, if you have an economy that is somewhat dependent on exports, it is best you have a 'weak' currency.
A strong currency means that you can by more stuff from abroad. It also means that you will export less because not as many foreigners can afford to buy swiss goods anymore. So, if you have an economy that is somewhat dependent on exports, it is best you have a 'weak' currency.
If you want lower real profits, higher input costs, and a poorer population, then sure, having a weak currency is great.
What Consumariat isn't telling you is that currency debasement is a de facto temporary subsidy for export industries at the expense of everyone else in the economy. In the end any benefit from currency debasement is eroded through higher domestic prices, lower real wages, and inflation.
EU-CHF Exchange Rate
"All men having power ought to be distrusted to a certain degree." -James Madison
"If government were efficient, it would cease to exist."
What Rcder said. A weak currency effectively subsidize exporters on the backs of all other holders of the currency. Another way to say it is that weakening a currency subsidizes acquisition of the currency by any interested party. On the surface, it may appear that this will benefit the local economy by causing a boom in exports and tourism but the fact is that the foreign buyers and foreign tourists were themselves subsidized when they exchanged their currency to acquire the local currency by the favorable exchange rate that the currency weakening created. This subsidy came at the expense of all current holders of the local currency. By weakening the Franc, the Swiss government certainly gives foreigners an incentive to exchange their currency for Francs in order to buy the "cheap Swiss goods" but, in so doing, the Swiss government is effectively transferring wealth from all current holders of Francs to prospective buyers of Francs. Competitive devaluation is an economic absurdity of the highest magnitude.
Clayton -
thank you all very much for your help !
so in short the State is going to spend/subsidize more of taxmoney while appealing to my nationalism to buy goods
made in Switzerland .
anyway the EU just released the news that they will for the 2nd time Bailout Greece so i expect the Euro at least to Fall to 1:1 with the Swiss Francs