WOW! Two huge news stories within 24 hours. First, Russia decided to shut off the gas pipeline to southern Europe, next the Swiss dropped their 1.20 floor peg to the euro. The first story is absolutely huge but has been completely overshadowed by the Swiss. In my opinion, the Russian move is part of the “war” chess game, the move by the Swiss is your beginning to multiple resets leading into a complete economic and financial reset!
Let me start with Russia. They had already tightened the gas spigot to southern Europe by some 60%. This is gas which travels through the Ukraine. As of yesterday, it has been reported the flow has completely stopped. Why now you ask? Well, several “timing” reasons come to mind. First and most obvious is “it’s cold outside” as Europe is in the middle of winter. Playing the gas card now has maximum impact. Secondly and most importantly, Europe is in the process of deciding whether or not to go along with the more severe economic and financial sanctions concocted by Washington. As a side note, as if it was not very important on its own, France must decide whether or not they will deliver the 2nd Mistral warship contracted with Russia.
Shutting the gas off at this moment is Vladimir Putin telling Europe, “you are either with us or against us, make your decision and make it NOW!”. I had a very astute friend describe the situation as follows, “This move by Russia makes perfect economic sense, because Russia or anybody should NEVER reward bad behavior, and to acquiescence is always a reward. I guess that the Western government leaderships never got that memo”. He added, “the second shoe to drop will be Russia requiring payment for oil in yuan”. Also very astute but stops short of the ultimate “killer”, Mr. Putin could simply require payment in gold. This would blow the doors off of the entire Western financial system as they have already divested 100 year’s worth of gold reserves!
The second tactical nuke to hit Europe was the Swiss National Bank breaking the floor peg of 1.20 to the euro. Within minutes, the euro dropped to parity and then some. The Swiss also lowered their “negative interest rates” to -.75% from -.25% in an effort NOT to attract capital.