No Way to Escape for the Swiss National Bank

by Andreas Hoffmann and Gunther Schnabl

It came as a surprise to many: the Swiss National Bank announced an exchange rate target. Accordingly, the Swiss franc will be held above the level of 1.20 francs per euro. Switzerland gives up a part of its sovereignty, when the ECB makes bad press in buying trash-rated euro area government bonds to support unsustainable national budgets.

But, particularly in an environment of global excess liquidity originating in too-easy monetary policies in major advanced economies, small open economies have incentives to stabilize exchange rates. Continue reading

Can Government Create Jobs?

by Young Back Choi

Modern politicians of all strips promise to create jobs; in this time of economic downturn, the promises of job-creation are with growing urgency. But can government create jobs?

If by jobs one means any scheme by which people are paid money wages, the answer is, of course, “yes”. But there are real jobs that create value and there are phony jobs that destroy value. Government-created jobs are largely value-destroying phony jobs. Continue reading