Every trader and financier has heard about this currency, but not everyone knows how reliable the Swiss franc is, which is so highly quoted all over the world. He is rightfully considered the epitome of economic stability and confidence. The Swiss franc is widely used in international settlements. It has come a long way from a simple coin to a full-fledged medium of exchange with a crystal clear reputation among the largest investors. To understand the reasons for such a large-scale success, it is worth taking a closer look at the history of the development of this currency. I will tell you whether the Swiss franc should be considered a reliable stronghold, I will study in detail the appearance of bills and coins, and also analyze the forecasts for the future regarding this means of payment.
How steel was tempered and the Swiss franc developed
We will have to turn to the history of the Middle Ages. It was then (XIII century) that the Act of the Swiss Confederation was concluded - a pact of three Helvetian states: Uri, Nidwalden (aka Unterwalden) and Schwyz.
After that, the territory only expanded. According to historical data, at the end of 1353, the newly baked Confederation included Zug, Lucerne, Glarus, Bern and Zurich. In 1481 Solothurn and Friborg were added to the list. Then, in 1501, they were joined by Schaffhausen and the notorious Basel. Appenzell was the last to enter the ranks (1513).
At that time, the Swiss state was distinguished by a rather complex and multistage structure. This can be noticed even now, because on the territory of such a small country as many as four languages are actively used - Italian, French, Romansh and, of course, German. This isolation also arose due to economic reasons. Even then, in the Confederation it was possible to pay with about 860 types of means of payment. After all, each canton had an official right to mint individual coins. And this variety lasted for several centuries. Coins differed in denomination and metal from which they were made. It is quite logical that this seriously impeded trade and other economic relations in the territory of old Switzerland.
Younger brother of the modern franc
A little later, in 1798, the Helvetic Republic was formed. The event is associated with the capture of the territory of the Confederation by France. The monetary chaos reigning at that time was strongly disliked by the authorities of the victorious state. It was France that decided to introduce a single currency, based on the Berne thaler. You can see how this coin looked in the photos below.
Its smaller unit was the batzen. One thaler contained exactly 10 pieces of such small coins, each of which had another 10 centimes in it. You can take a look at batzen in the following photo.
It was decided to call the new currency the Helvetian franc. It was he who became the progenitor or younger brother of his much more successful contemporary. Here it is, in the next photo.
The Helvetian franc was minted from silver. The weight of one coin was 6,75 g of the precious metal. Also, a certain rate was fixed behind it in relation to the French currency. One Swiss franc, the history of which has many significant moments, was equated to 1,5 French.
However, this money, specifically in this form, existed for a relatively short time. Their era was limited to the period from 1798 to 1803. Ascended the throne, Napoleon Bonaparte returned everything to its place. However, not only the old federation was revived, but also the previously reigning financial anarchy, which, of course, did not affect the economy in the best way. Quite imperceptibly, the number of coins in circulation from 800 turned into 8000. Banknotes were added to them, which only complicated the situation. All this orgy lasted until the first half of the XNUMXth century.
The beginning of economic recovery
In 1819, a currency called the old Swiss franc was introduced. However, it cannot be called a full-fledged means of payment of that time. This coin was considered a reference, but in reality it was never minted. However, with the help of the old Swiss franc, it was possible to convert all monetary diversity and reach uniform prices for goods. Without introducing a conversion factor, it was almost impossible to understand how much to pay for a particular thing / service.
The reason for the accomplishment of all subsequent "economic revolutions" was the outbreak of the war.
An armed clash took place between the Catholic and Protestant cantons. It forced the authorities to unite the state and strengthen internal interconnection. As a result, in 1850, the Swiss franc appeared - the currency that everyone now knows. Only the federal government could issue a coin, which excluded the return to use of the former confusion and vacillation. The exchange rate remained the same as that of the Helvetian counterpart - 1 to 1,5. The Swiss franc operated simultaneously with the French and was closely associated with it.
The formation of the Latin Monetary Union and its impact on the newly minted coin
Studying the history of the development of the Swiss franc, one cannot but delve into another event, no less important in its significance. In 1865, a monetary union was concluded between Italy, France, Luxembourg, Switzerland and Belgium. Each of the members of this community tied their money to the Swiss franc. Their rate was 1: 1. However, the circulation of national currencies in each state was preserved. At the same time, the parity of precious metals - silver and gold - was established. 1 currency unit was equated to 4,5 g and 0,29032 g, respectively. The 5 franc coin contained 22,5 grams of silver.
In addition to this very useful innovation, another one was adopted, according to which each state set a spending limit for each citizen - no more than 6 francs. The mechanism is somewhat trivial, but in those days it turned out to be an excellent counteraction to the current inflation. Officially, the Latin Monetary Union existed until 1927. The main reasons for its collapse were numerous wars and counterfeiting of coins. His visual cartography is shown in the photo below.
It should be noted that the pegging of each national currency to the franc contributed to the disappearance of the need for the Swiss to mint coins on the territory of their country.
All the money they had in circulation was produced in Strasbourg and Paris. Later, minting began to be carried out already at the Bensky Mint, but this happened already in the process of the Franco-Prussian military conflict. Then it was decided to form the Swiss National Bank.
1945 was marked by the accession of the state to the Bretton Woods system. At the same time, the exchange rate was set against the US dollar. For 1 unit of American currency they gave 4,30521 Swiss francs. The parity of gold has also been updated. Now for the franc it was 0,203125 g.
Dark Spot on Currency Reputation
The Swiss franc was not the only upsides. The history of the development of this means of payment also includes a very unpleasant event that had a negative impact on the authority of the currency. Such important and serious aspects as both world wars cannot be neglected. The First Franc did not suffer much. But the Second has greatly shaken the reputation of both the currency and the state itself.
It's all about the neutral position that Switzerland took at that time.
As the inhabitants of this European country themselves say, then gold was repeatedly purchased from the Third Reich. And it was this procedure that was allegedly considered a manifestation of neutrality. However, maintaining a wartime Germany economy, albeit in such an innocent way, meant that the Reich had sufficient funds to carry out its campaign. It was then that a lot of criticism was expressed to the Swiss government from the heads of other states, who actively rebuffed the aggressor. Someone even tried to promote the idea of isolating the country in terms of international economic ties.
But the high-profile problem that arose was solved in a very traditional way for wealthy states. The allies of the Washington Agreement soon received financial support from Switzerland. The balance of the countries that were defending against the Hitlerite coalition was already supported by reliable and very stable Swiss francs. Banknotes a total of 250 million francs went to support the hostilities. In principle, the conflict is considered completely settled, however, to this day, hostility towards this country persists.
During the Cold War, the Swiss franc was able to strengthen its position in the international market.
It was then that the currency became a real alternative to the US dollar. The Bretton Woods system has collapsed. However, the Swiss authorities were no longer going to allow any rampant in the domestic economic system. Tight control and adequate monetary policy first allowed the franc to remain stable, and then strengthened the exchange rate.
Swiss National Bank as issuer of CHF
It is an organization whose main task is to act in the interests of the state's economy, subject to full respect for the rights specified in the constitution. The Swiss National Bank (SNB or SNB) is recognized as the central bank in the country. It began its activity in 1907. The bank became a joint-stock company much later - in 1994. Today, most of it is owned by the cantons and other credit organizations in Switzerland. The bank has two offices at its disposal, one of which is located in Zurich and the other in Bern.
The main bodies of the NSS are:
- Bank Council, consisting of 11 members;
- General Meeting of Shareholders;
- The bank's board is also the executive body of SNB.
Each component is endowed with special rights and opportunities. But it is the Board that makes the most important strategic decisions regarding the state economy and monetary policy. It also accepts the level of the bank's interest rates. The photo below shows the office located in Bern.
Something interesting about the Swiss franc
The official currency designation according to ISO 4217 is CHF. The abbreviation stands for Confederatio Helvetica Frank. Sometimes the franc is depicted as symbols SFr и Fr... In addition to them, there is also a personal graphic designation - ₣... It looks like a capital letter f with a horizontal bar at the bottom (see figure below).
Origin of the currency name
The word "franc" has unambiguously French roots. To date, only the Swiss currency has such a name in the list of European currencies. However, on another continent, francs are also called means of payment of other states. These are Rwanda, Comoros, Djibouti, Burundi, Democratic Republic of Congo, Guinea.
The Swiss franc is also used by Liechtenstein. It is a tiny enclave between the issuing country and Italy. Currency circulates in the exclaves Campione d'Italia and Büsingen am Hochrain. However, there it is not national, unlike the euro.
Design of banknotes and coins
The Swiss currency is considered one of the most modern due to its appearance. Some numismatists, for example, even consider these bills to be real works of applied art. The banknotes do look very attractive and bright. A distinctive feature of the Swiss franc is that it is printed vertically on the banknote, and not horizontally, as is the case with most other national currency units.
The sizes of bills differ depending on their denomination. The larger it is, the larger the banknote. This is also part of the original design. They contain inscriptions in four foreign languages: Italian, German, Romansh and French.
Eighth currency series
On April 30.04.2021, 8, the 1994th series ended its circulation period. The Swiss franc issued between 1996-XNUMX has been recalled. These banknotes have lost their status as an official means of payment and are not accepted anywhere else. Their samples are shown in the photo below.
If you somehow still have cash francs from this issue series on hand, then the only way to get rid of them is to use them in the post offices and cash desks of the Swiss Railways. But there are also limitations. This can only be done until October 2021. The post office and railways are government organizations, which is why they received the right to extended acceptance of such banknotes. But commercial companies such as banks found themselves in a rather difficult situation.
The procedure for recalling banknotes of the 8th series caused a great stir among citizens. This provoked the formation of long queues at the branches of credit institutions, where people were in a hurry to exchange their cash for a new 9th series. In addition, a flurry of calls from anxious people fell upon the banks. However, in fact, everything is not so scary. The withdrawn from circulation banknotes can be exchanged for an unlimited period of time. Most recently, it was still 20 years old, but now this framework has been canceled in order to make the process as painless as possible for the Swiss.
Series 9 banknotes design
Now I will tell you in more detail about those banknotes that are now circulating in Switzerland. I'll start with 10 francs. The obverse features female hands holding a conductor's baton, a globe facing the Pacific Ocean, and a kaleidoscope-like pattern. It was this banknote that received the status of the Banknote of the Year in 2017. It is assigned by IBNS - International Banknote Society. This fact alone speaks of the Swiss franc as an excellent example of artistic value. You can take a look at the obverse of this bill in the next photo.
The reverse includes an image of the Lötschberg base tunnel as well as part of the clockwork. This symbolizes the accuracy and precision of the functioning of the entire organization.
Go ahead. The 20 franc banknote is also decorated with human wrists. But this time, a boy's hand is captured on a paper canvas in a deep tangerine red, holding a prism with a light beam refracting through it. The obverse also has a kaleidoscope pattern.
The reverse side shows a large screen in Piazza Grande during the open film festival, butterflies and a holographic coating shimmering in different colors.
The obverse of the 50 Swiss franc bill is decorated with an image of a hand holding a dandelion blown in the wind. There is also a schematic representation of the globe with the indicated directions of air flows.
The reverse of the same banknote is decorated with the tops of the Alps with curves of heights applied to them. A paraglider is drawn against the deep green background of the banknote depicting glacial peaks.
The series continues. Now in front of you is a banknote of 100 Swiss francs (obverse). It already has a blue tint, and the image is folded into a pair of hands, which has collected a handful of crystal clear water. This time the globe shows the direction of cyclones and anticyclones.
The reverse is marked by a mountain river in Valais. As you can see below, all the details are written with exceptional precision.
Next in line is 200 francs. The background is now brown and the picture shows a hand showing three directions in space - X, Y and Z.
The reverse of the bill has a very original image. This is an actual map of the collision of particles that pass through the LHC detector located in Geneva.
The parade closes with a 1000 Swiss franc note. Here you can see a friendly handshake and a globe with alphabet symbols. The background color is lilac.
The reverse of the bill bears the image of the Federal Assembly in Bern in which the speech is being delivered.
Separately, it is worth touching on the topic of the protective properties of the Swiss currency. They have 18 security elements. These include tanning paint, glowing blotches, watermarks and an angular effect. Because of this, counterfeiting such bills is extremely problematic and very expensive. This is how the state fights counterfeiters.
As you know, Switzerland is a country that does not recognize any form of counterfeiting. This also applies to the issue of money. For example, the 7th series did not go into circulation. The bank simply created a backup version of the bills to protect itself and citizens from massive fraud. Moreover, this amusing fact surfaced only at the time of the release of the 8th episode. Therefore, the previous line of banknotes in everyday life is called ghostly.
A little about coins
It was on them that it was built history. Swiss frank underwent several changes until it began to look the way it is now. At the moment, coins of the following denominations are used in circulation:
- 5 centimes;
- 10 centimes;
- 20 centimes;
- 50 centimes (0,5 francs);
- 1 franc;
- 2 francs;
- 5 francs.
Coins of lesser denominations have different names. It depends on the citizen of which state will talk about them. For example, the word Rappen (Rp.) Is used in German. In Italian it is centesimo (ct.). In the Romance language, there is the concept of rap (rp.). In France they will tell you about centime (c.).
Swiss Franc on Forex
This currency is in the top 5 most important assets forex market... It is combined with the yen, the US dollar, the British pound and the euro to form pairs of specialties. Traders commonly refer to this currency as “Swiss”. In this case, the issuing state is recognized as one of the safest and most reliable countries in the world. And this is very important for the stability of the currency. It has a high coefficient of investor confidence.
For many years, the Swiss franc, which has a history of both ups and downs, has enjoyed the status of a kind of safe haven in the currency world. It is there that investments find their haven, which want to protect them from the harmful effects of the economic crisis.
When the market starts to fever, the lion's share of capital flows smoothly to developed markets. This is due primarily to uncertainty. Experienced investors prefer investments in the economy of the United States and Switzerland, as these countries are considered the most calm, prosperous and stable. But countries such as the Czech Republic and Brazil cannot boast of such a thing. These states have the status of marginalized, so capital starts to flow from there in the first place during a crisis. The US dollar, Japanese yen and Swiss franc are considered to be good means for financial investments at all times.
What the future holds for the franc
The Swiss currency is loved and respected by the largest investors around the world. Her reputation is strong and indestructible.
Despite all the serenity, the Swiss central bank is pursuing a rather risky monetary policy. I cannot give good examples of negative interest rates or regular overvaluation of the exchange rate positively affecting the financial condition of the state. But with all this, the franc rarely failed. So is it worth investing in this currency? Will the Swiss franc be able to remain the leader of the world markets for a long period of time? Time will tell.