Swiss-style Monetary Policy
"This is what is called ""weasel words"". They're trying to put some authority into their ad, but since they don't have any - they're putting meaningless words that sound important. Monetary policy is the state/central bank policy to control the supply of the available currency. Cannot think of a way to connect it to private investments." "I'm not sure what is traditionally meant by ""Swiss-style monetary policy"" but lately it has meant the same thing as US monetary policy, or Japanese monetary policy, or Euro monetary policy: PRINT. Look how many Swiss Francs it takes to buy a currency that cannot be printed:  I'm not sure why they would be touting ""Swiss-style monetary policy"".   That hasn't been too stellar lately."
I am just a C student with no hope for grad school, so you are going to have to walk me through this... The ECB (until recently), Japan, and the Swiss have been running QE programs equal to that of the Fed's in 2009 for the last couple of years.  That's an extraordinary amount of money being created... what's more, is that the Swiss are even buying shitloads of American equities with it.    Perhaps my understanding of M2 is flawed, but how would the Swiss national bank buying $63B in equities change M2?  It's not like the fed is printing the money specifically for the transaction.  The amount of QE being pumped into a healthy economy over the last couple years should be concerning, if only because it's unprecedented, especially since some of it is being directly invested into equities.  I don't think there is a viable argument that can truthfully say that it isn't a pretty large variable in the market today.... but I could be wrong.  Also, I've read enough, and heard enough, on how the inflation rate is measured to cultivate a healthy skepticism for the entire metric. The way they choose baskets, while obviously the best possible, is not something that lends itself to precision.    Please be kind to my grammar. The idea behind this move is to avoid or mitigate long-term deflationary pressure and to boost the competitiveness of Swiss exporters. This is primarily a Swiss-based initiative that does not appear likely to have a major impact on the broader Eurozone. However, some pressure will be felt by other currencies as investors look to purchase - ie. this is not a great scenario for other countries wanting to keep their currencies weak. In terms of personal wealth - if you hold Swiss f then you are impacted. However, 1.2 is still very strong (most analysts cite 1.3 as more realistic) so there seems little need for a reaction of any kind at the personal level at this time, although diversity - as ever - is good. It should also be noted that changing the peg is a possibility, and that the 1.3 does seem to be the more realistic level. If you hold large amounts of Swiss f then this might cause you to look at your forex holdings. For the man in the street, probably not an issue. "Correct!  But this is only true when a central bank is involved.  So if there's a single institution that has a territorial monopoly on the production of money (and competing currencies aren't allowed via ""legal tender laws""), then the debt-based money system OP describes isn't actually the system being used.  That's the problem with his post:  he's trying to make it seem like our current system of fiat currencies is somehow natural or emergent.  It's not.  What we have now is the result of a legal monopoly." The Swiss franc has appreciated quite a bit recently against the Euro as the European Central Bank (ECB) continues to print money to buy government bonds issues by Greek, Portugal, Spain and now Italy.  Some euro holders have flocked to the Swiss franc in an effort to preserve the savings from the massive Euro money printing.  This has increased the value of the Swiss franc.  In response, the Swiss National Bank (SNB) has tried to intervene multiple times in the currency market to keep the value of the Swiss franc low.  It does this by printing Swiss francs and using the newly printed francs to buy Euros.  The SNB interventions have failed to suppress the Swiss franc and its value has continued to rise.  The SNB has finally said they will print whatever it takes to maintain a desired peg to the Euro.  This had the desired effect of driving down the value of the franc. Which effect will this have long term for the euro zone? It is now clear that all major central bankers are in a currency devaluation war in which they are all trying to outprint each other.  The SNB was the last central bank to join the printing party.  I think this will lead to major inflation in all currencies as we have not seen the end of money printing.  Will this worsen the European financial crisis or is this not an important factor? I'm not sure this will have much affect on the ongoing European crisis since most of the European government debt is in euros. Should this announcement trigger any actions from common European people concerning their wealth? If a European is concerned with preserving their wealth I would think they would begin to start diverting some of their savings into a harder currency.  Europeans have experienced rapidly depreciating currencies more than people on any other continent.  I would think they would be the most experienced at preserving wealth from central bank shenanigans. It matters to taxpayers and this country because the Federal Reserve's obligations are guaranteed by them.  Taxpayers don't support fully covering Wall Street's bad bets from the Financial Crisis, which is precisely what QE and current monetary policy are aimed at doing. "&gt; AMERICA is growing, Western Europe is stagnant, China and most of East Asia is expanding relatively quickly  So staring into the face of evidence from his own intro context that generally the more active fiscal intervention since the GFC, the better economies have fared, the author proceeds to prognosticate about impending doom for the Chinese if they don't conclusively switch &amp; stick to austerity and ignore growth to focus on hidden inflation monsters. For the US somehow everything comes down to fed monetary policy, despite the fact that 4 years of the fed's alphabet soup programs without any fiscal assistance from congress hasn't kicked the US back into preferred growth and GDP is seeming to slow back down toward recession/stagnation. And finally the eurozone is apparently most plagued by ""overblown public debt"" and government spending somehow ""crowding out"" investment that just wishes it had the chance to invest if those pesky profligate politicians would get out of the way, and maybe the countries should fork over their economic sovereignty to the ECB so they can be structurally reformed (bloodletting/grave robbing).  Just my opinion, this whole article seems like shitty oldschool/backward economic views coming out of academic economics, likely angling to be a ['very serious person' in ECB bureaucratic/advisory politics](http://www.geopolitical-info.com/en/expert/professor-enrico-colombatto). The lack of being able to comprehend &amp; adjust to real world results is just sad." "This is the best tl;dr I could make, [original](http://www.reuters.com/article/us-usa-fed-policy-idUSKBN1A80XA) reduced by 87%. (I'm a bot) ***** &gt; The Fed led the way in tightening monetary policy as the global economy recovered from the 2008 recession but must now determine how plans by other central banks&amp;#039; plans may affect their own policy.  &gt; While a stronger European economy has been welcomed by the Fed, lessening risks to the global economy, a move by major central banks to all tighten monetary policy simultaneously has not been seen for a decade.  &gt; When Fed policymakers meet on July 25-26 they will need to decide a start date for reducing their bond holdings or leave more time to evaluate what Fed Governor Lael Brainard recently cited as a possible &amp;quot;Turning point&amp;quot; in global monetary policy that may affect economic growth.   ***** [**Extended Summary**](http://np.reddit.com/r/autotldr/comments/6peule/federal_reserve_now_faces_prospect_of_global/) | [FAQ](http://np.reddit.com/r/autotldr/comments/31b9fm/faq_autotldr_bot/ ""Version 1.65, ~174973 tl;drs so far."") | [Feedback](http://np.reddit.com/message/compose?to=%23autotldr ""PM's and comments are monitored, constructive feedback is welcome."") | *Top* *keywords*: **Fed**^#1 **rate**^#2 **policy**^#3 **month**^#4 **bond**^#5" Your question contains two different concepts: fractional reserve banking and debt-based money.  When thinking of these two things I think it is important to analyze these items separately before trying to understand how the whole system works. Fractional Reserve Banking As others have pointed out fractional reserve banking is not a ponzi scheme.  It can be fraudulent, however.  If a bank tells all its depositors that they can withdrawal their money at any time (i.e. on demand) and the bank then proceeds to loan out some portion of the depositors' money then the bank has committed fraud since there is no way they could honor the depositors' requests for their money if many of them came for their money at one time.  This is true regardless of what type of money is deposited - dollars, gold, etc..  This is how most modern banks operate. Debt-based money Historically, the Fed would introduce new money by buying US Treasuries.  This means Federal Reserve Notes (FRN) are backed by US Treasuries.  I agree that this seems strange.  Does this mean if I take my FRNs to the Fed I could redeem them for US Treasuries?  But US Treasuries are promises to pay FRNs in the future.  This makes my head hurt.  Reminds me of the definition for recursion: see recursion. Here is an experiment.  What if we wanted to recreate FRNs today and none existed?  The US government would offer a note to pay 100 FRNs in one year and pay 5% interest on the note.  The Fed would print up its first 100 FRNs to buy the note from the US government.  The US government would spend the FRNs.  The first 100 FRNs have now entered into circulation.  At the end of the note's term the Fed should have 105 FRNs since the government agreed to pay 5% interest on the note.  But how is the US government going to pay the interest and principal on the note when only 100 FRNs exist?  I think this is the central point to your question.   I can come up with only two answers: 1) the Fed must purchase some assets that are not debt based 2) the US government must continue to issue debt that is purchased by newly printed FRNs in order to pay back older debt and interest.  This is a ponzi scheme. The record debt levels seem to indicate the ponzi scheme option was chosen. So much spin with you.  Kenyes wrote explicitly about deficit spending, and the repayment of those deficits.  The denomination of the currency, floating or otherwise, is besides the point.  Again, you just want to model away the burden and risk of debt.  It's never worked, and it never will. "Currencies that are pegged or fixed require that foreign currencies are held by the central issuer at a proportional amount. This is analogous to having a portfolio of currencies that the central bank issues shares from - in the form of its own currency. We will continue with this analogy, if the central bank says these ""shares"" are worth $1, but the underlying components of the portfolio are worth $0.80 and decreasing, then it is expensive for the central bank to maintain its peg, and eventually they will have to disregard the peg as people start questioning the central bank's solvency. (People will know the $1 they hold is not really worth what the central bank says it is, because of the price changes people experience in buying goods and services, especially when it comes to imports. Shadow economies will also trade using a currency more reflective of labor, which happens no matter what the government's punishments are for doing so). Swiss National Bank (central bank) did this in early 2015, as it experienced volatility in the Euro which it had previously been trying to keep it's currency pegged to. It became too expensive for it to keep this peg on its own. The central bank can devalue its currency by adjusting the proportions of the reserve, such as selling a lot of foreign currency X, buying more of currency Y. They can and do take losses doing this. (Swiss National Bank is maintaining a large loss) They can also flood their economy with more of their currency, diluting the value of each individual 1 dollar equivalent. This is done by issuing bonds or monetizing goods and services from the private sector in exchange for bonds. People colloquially call this ""printing money"" but it is a misnomer in this day and age where printers are not relevant tools. The good and service goes onto the central bank's balance book, and the company/entity that provided the service now has a bond on its book which can be immediately sold to someone else for cash (another reading is that the bond is as good as cash). The bond didn't previously exist until the central bank said it did, and central banks can infinitely exchange goods and services for bonds. Bond monetization (also called Quantitative Easing) is practiced by the Federal Reserve in the United States, Bank of Japan, European Central Bank and now the Central Bank of the Republic of China" "Buying physical gold: bad idea; you take on liquidity risk.  Putting all your money in a German bank account: bad idea; you still do not escape Euro risk.  Putting all your money in USD: bad idea; we have terrible, terrible fiscal problems here at home and they're invisible right now because we're in an election year.  The only artificially ""cheap"" thing that is well-managed in your part of the world is the Swiss Franc (CHF).  They push it down artificially, but no government has the power to fight a market forever.  They'll eventually run out of options and have to let the CHF rise in value." I beg to differ: Israel has an incredibly well managed central bank, and the usury market is wonderfully competitive.  It's a shame Stanley Fischer has retired.  His management is the case study in central bank management. Rates are low because inflation is low.  The nominal rate is irrelevant to return because a 2% nominal return with 1% inflation is superior to a 5% nominal return with 9% inflation. A well-funded budget is the best first step, so now a tweak is necessary: excess capital beyond budgeting should be moved quickly to internationally diversified equities after funding, discounted and adjusted, longer term budgets. Credit will not pay the rate necessary for long term investment.  Higher variance is the price to pay for higher returns. This is a good point.  The problem is that we still use the central bank and interest rates to try to control the economy.  This is the part that has failed.  I would suggest adjusting government spending based on the economic situation (down in good times, up in bad times).  I do believe this would prevent recessions but it has never been tried.  only in desperate times like the japanese recession and our great depression does this get tried and in both times has been effective.  This is the difference between monetary and fiscal policy. "Yes sir, I'm working on compiling your ""precise evidence,"" and I'll have it printed and bound for you on the double.  In the meantime, you can look here as a starting point and try to find the part where the Fed has allowed interest rates to adjust freely, and maybe you can learn why rates are artificial:    http://en.wikipedia.org/wiki/Federal_Reserve_responses_to_the_subprime_crisis  As for ""cahoots"" and independent banks and whatever other off-topic nonsense you're babbling about, there was nothing said about cahoots or independent banks.  The interest rates paid for and to US banks are affected by the monetary policy of the Fed.  There is no collusion, or ""cahoots,"" required for them to follow a common policy of artificially-low interest rates, which was the point of the earlier post." They will not open an account if you come in wanting to open an account for a third party. Your sister will have to do it herself. Assuming she has a SSN and credit history to verify her identity, she'll easily be able to do it online, and use whatever address she wants to send mail to (she can have separate mailing and residence addresses). There are also Israeli institutions who provide investment accounts to Israelis with ability to trade in the US. That might be easier for her than having an account in the US and filing tax returns in Israel every year. Unless she evades taxes in Israel, that is...