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Fourth echelon

Switzerland’s central bank just lost $52 billion

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The Swiss Franc is getting crushed.

Most banks around the world couldn’t survive losing $50 billion in six months. But most banks don’t print their own money.

The Swiss National Bank, Switzerland’s central bank, announced on Friday that it suffered a first-half loss of 50.1 billion Swiss francs ($52 billion), the vast majority of which was from the decline in value of its holdings of euros. The reason the bank held so many euros was that for several years, the bank maintained a peg against the euro, wherein it would not allow the value of the franc to rise above 1.2 euros, to prevent an expensive Swiss Franc from hurting the Swiss economy.



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 MFWIC    6

Actually, most banks do print their own money.  Its called a mortgage backed security.  They make a loan for some property, deposit that loan into another account created for that loan, list that loan as an asset, and then loan out the the money that they just loaned and re deposited.  Then they bundle it together with other mortgages, sell them off to some sucker at a mutual fund as a security, deposit that money into another new account, and make even more loans off of it.

It can keep on going right up until a bunch of people suddenly stop making their payments, at which point the underpinning loan that created all that new money vanishes, and the bank becomes insolvent overnight, at which point there's either a bailout, where they get the government to rob the people to prop them up, or a bail in, where they get the government to let them rob the people directly to prop them up.

The problem ,of course, is that nobody ever bothered to comprehend that in either case, bailing is a temporary solution that only slows the sinking of the ship down.  If you *stop* bailing, you're right back where you started, and so you get "quantitative easing".

Of course, then you have the problem that QE causes more and more water to be in the ocean, so you have to keep bailing faster and faster, until, eventually, the government is printing out 100 billion dollar bills.

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