03/31/2017 - The Roundtable Insight – Yra Harris & Uli Kortsch On How Switzerland Is Performing Financial Alchemy

FRA is joined by Yra Harris and Uli Kortsch in discussing the impact of Switzerland on the Eurozone, along with the upcoming elections and the global debt.

Yra Harris is a recognized Trader with over 40 years of experience, with broad expertise in the cash currency markets. He has a proven track record of successful trading through a combination of technical work and fundamental analysis of global trends; historically based analysis on global hot money flows. He is recognized by peers as an authority on foreign currency. In addition, he has specific measurable achievements with the Chicago Mercantile Exchange (CME). Yra Harris is a Registered Commodity Trading Advisor, Registered Floor Broker and a Registered Pool Operator. He is a regular guest analysis on Currency & Global Interest Markets on Bloomberg and CNBC.

Uli Kortsch is the Founder of both the Monetary Trust Initiative (MTI) and Global Partners Investments (GPI).  Currently most of his time is spent on MTI whose mission is to bring transparency and authentic principles to our monetary system. As President of Global Partners Investments and other ventures, he has worked in over 50 countries, written a bill for Congress, and conferred with approximately 15 national presidents, ministers of finance, and ministers of commerce.  He has served on numerous corporate boards with both for-profit and not-for-profit organizations.


The Swiss print a lot of Swiss Francs as a means of intervening in the markets. They exchange those for primarily Euros, some Dollars, Yen, etc. They’re busy accumulating a massive equity portfolio along with their foreign exchange reserves. They hold $2B of Apple stock because their policy of intervention is to try and keep the Swiss Franc from appreciating too much. Back in January 15 2015, they let the peg to the euro go and we saw a giant move up in the Swiss Franc. The world sits back and lets the Swiss central bank actively be a currency interventionist, but the Swiss are smart enough to understand that they don’t want to just hold everybody else’s currency; they are buying real assets through their process of intervention.

The Swiss Franc represents the frugality of the global investment system as investors are willing to buy Swiss assets with negative yields out over 10 years. There’s a tie-in with potentially increasing its gold reserves. If you’re buying all those equities, you might as well start adding to your gold reserves.


The Swiss referendum on gold last year was to increase their gold holdings. They were selling gold and the referendum was to stop selling and repatriate the gold. The amount of paper gold out there out there is about a hundred times the amount of real gold, so what is really out there? No one really knows.

Switzerland is an island, surrounded by the Eurozone. Switzerland is an island of monetary stability. They’re trying to weaken their currency through the increase in reserves and purchase of various assets.

Italy is in very bad shape. If they were to use GAAP accounting for their banks, the country would instantly go bankrupt. France isn’t that much further behind, and we know where Greece is. About 40% of the Swiss National Bank (SNB) is owned by private individuals, so it’s a different system. The Fed is owned by its member banks and it’s impossible to go bankrupt; they can have negative equity and no one cares. But if the Swiss central bank were to go bankrupt that’s a different story. We are coming up against a global recession, our debt levels are again greater than they were in 2007 before the last recession, and this time we do not have the fallback position of the emerging markets like we did then. Plus the political problems, the shaking that is occurring is very substantial. When the debt levels again reach the point where we have another recession, what is going to be the fallback this time, other than more debt?

If we do go into that global recession, the overhang of debt is greater than it was in 2007-2008.

One of the arguments we get against the ‘evil of debt’ is that it’s owed to somebody. It’s not owed to anybody, it’s created by the banks because almost all of our money today is electronic. The money is created by the banks through debt. If we go back in history, nations inflated their way out of debt. The scenario doesn’t change. The central banks have turned the world upside-down and we’re not even close to understanding what right-side up is.


“The market can remain irrational longer than you can remain solvent.” – Keynes

This is at least the second longest running time between recessions since WW2. The question is whether or not the next recession will be deep enough that some of these abnormal situations fall apart, or will it take another recession past that. We have both political and market pressures, and if you talk China and Russia we have military pressures. The Russians are going to have the biggest Eastern European military exercise this September; a power play verses all the small nations immediately around there.

We have three aspects: a very unbalanced market, a very fragile political situation especially in Europe, and now very recently a military aspect.

One of the things Trump had right is the role of NATO in the world. It’s served its purpose for a long time. Just because we get into this mindset, we don’t have to see it to its illogical end and Trump is right in wanting to roll back Pax Americana. It’s served its time and you don’t have to serve out your Imperial desires until you go broke like Britain. People are up in arms about NATO but it’s the same people who were up in arms about the One China policy. The world is changing dramatically and Trump isn’t wrong to address these things.

Based on the political uncertainty, markets are not pricing correctly. The real risk factor is in these markets.


The probability of the ECB doing a full guarantee is virtually zero unless there was a split in the Eurozone between the north and the south. The probability of a Eurozone country leaving he euro monetary union is ~70%.

Even though Britain is invoking Article 50, it’s a two year process now. So much could happen in the next two years in Europe. Italy is in severe trouble. The only ones who can guarantee a European bond are the Germans, so the Brits are going to get a two year window and a lot of things can go topsy-turvy. If there’s one threat of it, they’ll come begging the Brits to come back because they’ll need them, and the British will be able to make the greatest deal ever where they’ll be able to get back their sovereignty for financial assurance.

The political system in France is weighted against Marine Le Pen and the odds of her winning are low, but then the issue becomes the German elections. Germans are not used to borrowing to finance asset purchases, but when you’re running negative real interest rates, the real yields are negative yields and you’ve got to protect yourself. Otherwise it’s the ultimate form of financial repression to bail out the rest of Europe, and that’s what this election in Germany may hinge on.

If it breaks up north/south and the north takes the Euro, the SNB will make a fortune. If the southern nations wind up with the Euro, everyone else goes about recreating a synthetic Deutschmark – that would be the most interesting outcome of all.


Uli: There’s about a 30-40% probably that there’s going to be a serious crash by the end of the year. The problem is that we’re all on a tipping point. The system’s kind of like a plateau. 20 years ago the plateau was very wide. It’s become narrower and narrower and now it’s like a mountaintop. What would get us to fall off the edge of the cliff? The plateau is narrow, so initiating action becomes more and more likely to move us off one of these points, because it doesn’t take much.

Yra: There’s a huge amount of debt that plagues the global system, which is why the Border Adjustment Tax discussion is crazy. If you had a 20% appreciation of the Dollar, that would be the spark to ignite a terrible situation.

A huge amount of debt is Dollar financed. It makes the sub-prime situation ridiculous. Where will the world get their Dollars from, if the U.S. does not run a deficit?

The Trump people are talking tax reform, not tax cuts. It’s revenue neutral, which means there’s going to be winners and losers. If there’s really good winners it’ll be the middle class. That’s why Trump won. The cost of Britain leaving is just a soundbite. How are they going to force the Brits to pay? They’re already leaving. There’ll be no settlement of that debt ever.

Abstract by: Annie Zhou <a2zhou@ryerson.ca>

LINK HERE to the podcast

Disclaimer: The views or opinions expressed in this blog post may or may not be representative of the views or opinions of the Financial Repression Authority.