Manfred Wiebogen President ACI, The Financial Markets Association
Manfred Wiebogen President ACI, The Financial Markets Association

Playing Sovereign Poker

The power of the free market and in particular its ability to speculate responsibly, has heightened the awareness of Western and Eastern politicians in both developed and lesser-developed countries causing them to ask, ‘What is wrong with the entire system’, ‘Why were years of accumulated sovereign debts discovered so late? And ‘Where were the rating agencies and accountable authorities during those years? On the other side of the spectrum but adding to the instability of the global financial market, were hoarded foreign exchange reserves. This instability has spread to the next asset class of commodities, causing, a never before seen, run on gold. It has also revealed that trust that has been placed in other financial safe-havens such as the Swiss currency is misleading.

A new order The world’s financial system needs a new order! While the USD and EUR are still dominating currency reserves, daily trading volumes and open market trading, it has become clear that currencies like the Swiss Franc, British Pound or Japanese Yen can no longer fill the gap or assist in an international transfer and stabilizing role for a number of reasons. It is now an established fact that the world’s cash flows, reserves, and fund volumes to name but a few, have became far too big.   The following example recently occurred which illustrates the final limitation of currency power: At the beginning of September, the Swiss National Bank had to establish a EURCHF floor at 1.20 to protect it’s local economy and avoid a breakdown of it’s domestic industry and production.  At the same time world news papers and other media are reporting and speculating daily upon the possible break down of the Euro! (Which begs me to ask, Who are the real speculators?) The...continued

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