So there’s been a lot of talk doing the rounds about the reasons for the SNB’s continued – and failing – intervention in the Swiss franc, and speculation that part of the reason is to help bail out idiot Eastern European borrowers who’ve taken out CHF- and EUR-denominated loans.
This has been going on for years. People have been strapping on currency risk, and every single time it’s promptly blown up in their faces.
Here’s three articles that cover twenty years of “this time will be different”:
Sydney Morning Herald, 27 Oct 1989: Restaurateur loses Swiss franc loan case
A Melbourne businessman who lost $336,510 in a loan in Swiss francs lost a claim against the National Australia Bank yesterday…
New York Times, 17 Dec 1997: Indonesia’s Troubles Aren’t Over
Indonesian companies have at least $65 billion in foreign debt, according to the government, about $34 billion of which must be repaid or rolled over with the agreement of lenders within the next 12 months.
S&P said that a “substantial portion” of the corporate and commercial customers of major Indonesian banks had foreign-currency borrowings that were unhedged or underhedged.
Bloomberg, 13 Oct 2008: Icelanders Sink Under Foreign-Currency Loans as Krona Sinks
Like thousands of Icelanders, Karlsson borrowed in foreign currencies to get a cheaper loan as the benchmark domestic interest rate soared to 15.5 percent this year. With trading in the krona virtually suspended after it plunged against the euro, dollar and yen, debtors now face skyrocketing bills.