When the European Central Bank put Switzerland into an untenable position they had to act. The rumbling aftermath is                                                                                                             still in progress. Adding fuel to the fire: If Greece votes to exit the ECB-Euro mess with an election January 25, it’s “Katy                                                                                                              Bar the Door.” At that point, all bets are off as a genuine “Minsky Moment” creates an economic religious experience.”-Roger

How ironic the first “Minsky Moment” occurred with bad Russian bonds in 1998.

Now, here they come again as Russian credit, the Ruble currency is rubble and stock markets take a triple hit.

“A Minsky moment is a sudden major collapse of asset values, which is part of the credit cycle or business cycle. Such moments occur because long periods of prosperity and increasing value of investments lead to increasing speculation using borrowed money. Spiraling debt incurred in financing speculative investments leads to cash flow problems for investors.”

“The cash generated by their assets is no longer sufficient to pay off the debt they took on to acquire them. Losses on such speculative assets prompt lenders to call in their loans. This is likely to lead to a collapse of asset values. Meanwhile, the over-indebted investors are forced to sell even their less-speculative positions to make good on their loans. However, at this point, no counterparty can be found to bid at the high asking prices previously quoted. This starts a major sell-off, leading to a sudden and precipitous collapse in market-clearing asset prices, a sharp drop in market liquidity, and a severe demand for cash.” -Wikipedia

Roger: This rolling event is exactly what happened in the Panic of 1907-1908 and during those black days in October, 1929. “A more general meaning is to say that a “Minsky Cycle” features a series of Minsky Moments… in which a period of stability encourages risk taking, which leads to a period of instability, which causes more conservative and risk-averse (de-leveraging) behavior, until stability is restored, continuing the cycle. In this more general view, the Minsky Cycle may apply to a wide range of human activities, beyond investment economics. The term was coined by Paul McCulley of Pimco in 1998 to describe the 1998 Russian Financial Long Term Capital Bond Crisis and was named after economist Hyman Minsky.” -Wikipedia

Swiss Franc Stages Historic Rally as SNB Move Shocks Markets

“The Swiss Franc gained against every currency on earth after the Swiss National Bank’s unexpected decision                                  

to abandon the currency’s cap versus the Euro drove one of the biggest shakeups in foreign-exchange history.”

“The Euro dropped the most against the Franc since the common currency’s 1999 inception as the SNB’s decision boosted speculation the European Central Bank will announce additional stimulus measures when it meets January 22. The Yen rallied and volatility jumped to a more than one-year high as investors sought the safest assets amid the rout. Canada’s dollar, the Russian ruble and other commodity currencies slumped, as oil plunged to an almost six-year low. Roger: The Swiss event, happening just before the ECB’s major central bank meeting puts global bankers in a tough spot. In my view, no matter what they say they are going to step in it big time. Watch for a neutral, bland public statement after this meeting with reality happening behind closed doors being not available for media consumption. One mistake here could ruin everything.

“Quite extraordinary and unheard of,” Axel Merk, president and founder of Palo Alto, California-based Merk Investments, said of the SNB’s move and market reaction to it. “Two-thirds of the banks weren’t quoting the Swiss franc, suggesting big banks have gotten burnt.” Roger: One big hedge fund got wiped out entirely and another had to have its founder step in with $300 million of fresh capital to save the fund.

The Franc appreciated +21% to 99.41 centimes per Euro this week in New York. It jumped as much as +41% to 85.17 centimes, the strongest since the Euro’s 1999 debut, and capping one of the biggest currency moves since the collapse of the Bretton Woods system in 1971. Roger: A big currency trading move in one day is usually considered two points. This one was off the charts. Things are now so expensive in Switzerland both domestic and export economies are in major upsets.

The Yen rallied 0.8 percent to 117.51 against the dollar and reached 115.86, the strongest in a month. Japan’s currency added +3.2 percent to 135.95 per Euro for a third weekly gain. The shared currency slumped +2.3% to $1.1567, the biggest weekly loss since July 2012. JPMorgan Chase & Co.’s index of global currency volatility rose to 11.68% yesterday, the highest since June 2013, up from last year’s low of 5.28%.

All of the more than 170 global currencies tracked by Bloomberg fell at least -13% versus the Franc this week, led by the Belarusian Ruble’s -22% plunge.Roger: This is almost unprecedented for the 170 group. Russia’s Ruble is smashed to a pittance. “Russia’s Ruble paced declines among the dollar’s 31 major peers, dropping -5%, as Brent crude oil slid for an eighth week and reached $45.19 a barrel in London on January 15, a price unseen since March 2009. Russia is the world’s biggest energy exporter. Roger: with Russia’s Ruble turned to rubble, look out for Mr. Putin’s aggression. The naira of Nigeria, which gets 70% of government revenue and almost all export earnings from oil, declined -3.4%, and Canada’s dollar dropped -1%.

“Bank of Canada Governor Stephen Poloz, who will release new economic forecasts next week, said in December the slide in oil, the nation’s biggest export, will cut about a third of a percentage point from growth this year. “It’s all about crude,” Jack Spitz, managing director of foreign exchange at National Bank of Canada, said by phone from Toronto. “A reduction in crude-oil prices will stagnate growth in oil-producing provinces such as Alberta, Newfoundland and likely Saskatchewan. That hits the Canadian economy and the Canadian dollar.” Roger: Our oil bottom is forecast at $40 followed by a rally into fall for $80.

The SNB imposed its limit on the exchange rate as an exodus from euro assets during the region’s debt crisis in 2011 strengthened the franc and raised the prospect of deflation. As well as removing the measure, the SNB said it will push the interest rate on sight deposits to minus 0.75 percent from minus 0.25 percent. The change comes just one week before ECB policy makers meet to discuss introducing new stimulus, including quantitative easing, a move that may add to pressure on the franc against the euro.

 “This is a way for the SNB to regain some control over its exchange rate and its monetary policies, which it had lost with its peg to the Euro,” Anne Van Praagh, managing director of Moody’s Investors Service, said by phone from New York on January 15. “The Swiss economy is significantly stronger than the European economy as a whole, so the peg didn’t make much sense and it exposed the Swiss National Bank to big valuation risks.”

Der Spiegel magazine reported ECB President Mario Draghi briefed German Chancellor Angela Merkel and Finance Minister Wolfgang Schaeuble on a plan for national central banks to buy sovereign bonds issued by their own country. As the ECB looks to add stimulus, the U.S. Federal Reserve is moving toward raising interest rates for the first time since 2006. There’s a 64% chance the Fed will raise its benchmark rate to at least 0.5% by December, futures data compiled by Bloomberg show. At the end of last year, wagers were focused on a September start. Roger: Maybe true, but they avoid increases at all costs.

The Euro has tumbled -6.5% in the past month to lead declines among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar climbed +2%, the Yen added +0.9% and the Swiss Franc jumped +15%.” –Andrea Wong New York 1-17-15 Bloomberg.net