http://globaleconomicanalysis.blogspot.com/2011/08/swiss-central-bank-ponders-temporary.html
Back to the Swiss Franc: A currency peg is much riskier, because the defense is not in relation to its own currency as it is with interest rates. Moreover, one might expect wild swings and an immediate snap-back once the peg is removed. Thus "temporary" might mean for as long as the Euro crisis continues, and that might be a very long "temporary".
Finally, note the relative size of Switzerland vs. all the Eurozone countries. Buying "unlimited" Euros could rapidly get out of hand.
China goes through the same setup to maintain its "widening" peg to the US dollar. However, China does not allow much external trade of the Yuan.
The above discussion does not answer the bluff question, but it does state what the parameters of the defense must be. All things considered, I do believe it is a bluff.
Back to the Swiss Franc: A currency peg is much riskier, because the defense is not in relation to its own currency as it is with interest rates. Moreover, one might expect wild swings and an immediate snap-back once the peg is removed. Thus "temporary" might mean for as long as the Euro crisis continues, and that might be a very long "temporary".
Finally, note the relative size of Switzerland vs. all the Eurozone countries. Buying "unlimited" Euros could rapidly get out of hand.
China goes through the same setup to maintain its "widening" peg to the US dollar. However, China does not allow much external trade of the Yuan.
The above discussion does not answer the bluff question, but it does state what the parameters of the defense must be. All things considered, I do believe it is a bluff.
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