In Switzerland, there is close co-movement between investment income and current account balances. Historically, surpluses have been the norm for Switzerland. Our current account has recorded almost uninterrupted surpluses since 1960. Although official time series do not extend further back than 1947, unofficial current account estimates show that, even at the beginning of the 20th century, the Swiss were saving more than they invested domestically.4 So, already then, a savings surplus was being invested abroad, laying the foundations for today’s international investment position, which is large by global standards. This took place against the background of an ever-appreciating Swiss franc during the post-World War II period.5 Most of the savings surplus is invested in securities, i.e. portfolio investment, and in production facilities abroad, i.e. direct investment.6 In this way, Switzerland has built up a strong net international investment position, most of which is held by multinational companies and pension funds.7 Let's now turn to income from services. Here, there are two drivers of the current account surplus: cross-border financial services and merchanting. Again, both activities are primarily driven by international financial markets and global demand for raw materials, and are not sensitive to movements in the Swiss franc. I don’t think I need to say much about receipts from cross-border financial services. The importance of the financial sector for our country is well known. Receipts from Swiss banks’ and insurance companies’ foreign customer business flow into the current account. In these cross-border transactions, banks’ financial services are the largest contributor.
In August 2011, in a first step to counter the excessively tight monetary conditions, we announced, almost on a weekly basis, an expansion of the monetary base, initially from CHF 30 billion to CHF 80 billion, then to CHF 120 billion and finally to CHF 200 billion. Even when the monetary base reached close to 40% of GDP, this was ultimately insufficient to halt the appreciation of the franc. As a consequence of these developments, on September 6, 2011, the SNB announced that it was introducing a minimum exchange rate of 1.20 against the euro. Since the announcement, the franc has never traded below this minimum. At the zero lower bound, the minimum exchange rate has become an important monetary policy tool for us. Yet despite the introduction of the minimum exchange rate, Switzerland has experienced almost two years of negative inflation. I just received the latest inflation data this morning: After having been at zero for two months, inflation turned negative again in September. In this context, it is also crucial to note that the introduction of the minimum exchange rate is not a beggar-thy-neighbor policy. It must be remembered that Switzerland has always had a negative goods trade balance with the euro area. The trade balance was negative before the implementation of the minimum exchange rate, and continues to be negative today. Swiss exports in goods have not gained market share in the euro area at the expense of others. Allow me to perform a simple thought experiment with you.