Daily "Everything Is Screwy" Reminder

The Swiss government wants people to stop using the Swiss franc:

Yes, you read that right: if you want to lend Swiss francs or make a deposit in the next year, you must pay for that privilege, or so the Libor market implies. The normal assumptions of finance have been turned upside down; call it Alice in Wonderland economics. ...

What makes the Swiss situation so remarkable, however, is that it affects not just ultra-short rates. On Friday, futures markets predicted negative rates until 2013 (and minus 8 basis points next summer). This is unprecedented.

There is a huge surplus of demand for safe assets over supply. The Swiss government is not able or not willing to supply any more francs without getting something for it, because currency appreciation is killing their exporters and driving imbalances that could be painful to unwind. So maybe, just maybe, a much larger country with a much greater ability and capacity for the production of safe, liquid assets should do more to stabilize the international financial system.

In other words, the US should be much more in debt than it is.

ht: TC

Trivia Time (E.U. Currency Arbitrage Edition)

Q. What does this quote refer to:

“A hundred years have passed,” the article noted, and “we Italians still have to put up with the same old filth.”

Is it:

a. Caricatures of Italians as mafioso in American pop culture.

b. Poor inspection of canned tomatos by the Italian government leading to an outbreak of salmonella.

c. Swiss xenophobia.

d. Corruption in the Italian parliament.

If you answered "c.", congratulations. Apparently a far-right Swiss party has been running explicitly racist ads that portray (Italian) rats nibbling on Swiss cheese. The rats represent legal Italian immigrants who work in Switzerland, which borders Italy to the north. It seems that this stems in part from the fact that Switzerland has ratified labor accords with the E.U., but has no adopted the Euro:

The global financial crisis has accentuated tensions here, especially since border workers began moving from jobs in sectors like construction, factory work or domestic help to jobs in areas that the Swiss hold sacred, like banking. ...

In the past, Mr. Rusconi said, “you had to beg Swiss graduates” to work in advanced service sectors like banking, insurance or financial services. “Now you have qualified people speaking four languages who are unemployed” because of competition from equally qualified Italians, who work for less money because exchange rates favor the Swiss currency. Claudio Pozzetti, a representative of the Italian trade union C.G.I.L. for border workers said this claim was untrue.

“And we have to fork out unemployment insurance to these young Swiss, so the damage is twice as great,” Mr. Rusconi said.

Nice little bit of currency arbitrage for Italian workers: Italians work for Swiss francs (which have recently strengthened relative to the Euro, prompting attempted devaluation), convert those to Euros, and pocket the difference. Swiss workers face increased competition, which flattens wages and increases unemployment. Swiss employers save money by hiring Italians. Add it up and you get vicious racism from the largest party in the Swiss Federal Assembly. Great.

You know Europe's in bad shape when even meek Switzerland is all messed up.

UPDATE: A commenter reminds me that the SPP has a tradition of being vicious racists, which I knew but had somehow forgotten about. Previous installments have especially focused on Muslims. Remember the minaret ban? See here and here and here for previous examples.