In doing so, I shall reference the popular initiative “Save our Swiss gold” (also known as the “gold initiative”), on which the Swiss electorate will be voting on 30 November. After I have spoken to you, Sébastien Kraenzlin will outline some of the latest money market developments. The SNB’s currency reserves – an overview The SNB’s currency reserves currently stand at more than CHF 500 billion – 80% of gross domestic product (Switzerland’s annual economic output). With a share of some CHF 460 billion, foreign exchange makes up around 90% of our currency reserves. Since autumn 2012, the size of the SNB’s currency reserves has principally been determined by financial market valuations and by interest and dividend income. Given how large our portfolio of currency reserves is, fluctuations in value have a much greater impact today than they did in the past, as has once again become clear this year. The SNB reported a profit of CHF 28.5 billion for the first three quarters of this year. I should emphasise at this stage that our investment policy is always subordinated to monetary policy; it can only be understood in this context. Since September 2011, our monetary policy has been dominated by the minimum exchange rate of CHF 1.20 against the euro. With interest rates close to zero, the minimum exchange rate is the key instrument we are deploying to avoid an undesirable tightening of monetary conditions. The SNB will continue to enforce the minimum exchange rate with the utmost determination.
As I already said, we have the whole day to discuss these tricky issues thanks to our speakers who are not only prominent but also open and humble; I noticed and appreciated these qualities in their recent speeches exploring the new territory we are in. Instead, let me conclude on the limits of the scope for action by CBs. Indeed, I prefer to stress that central banks cannot be the only game in town and, more precisely, that monetary and macro-prudential policies are not conducted in a vacuum. Structural problems require structural answers; in particular, only structural reforms can raise potential growth; aggregate demand policies cannot provide a substitute. What they can do –and it’s precious— is to help better manage time. Speaking of managing time, I think mine is up now and I shall give the floor to Christian who can give us all the benefit of his experience and wisdom. Short bibliography: R. Baldwin, C. Teulings, 2014: Secular Stagnation: Facts, Causes and Cures, CEPR Press; in particular, Chapter 8 by O. Blanchard et al., Chapter 9 by R. Caballero and E. Farhi, Chapter 11 by R. Koo. BIS Annual Report, 2014: “Debt and Financial Cycle” (Chapter IV). O. Blanchard, E. Cerutti and L. Summers, 2015:“Inflation and Activity – Two Explorations and their Monetary Policy Implications”, IMF Working Paper No 15/230.