The Correct View on the Swiss National Bank's Removal of Foreign Exchange Controls

Joseph Salerno puts things in perspective in a follow up to a Scott Sumner dissing of the Swiss National Bank move to pull the plug on its support of the euro:

Regarding Sumner's claim  that abolishing the price ceiling on the CHF will somehow overvalue the currency and ravage the export-dependent Swiss economy, nothing could be further from the truth.  First, price controls of any kind, but especially those on currencies, misallocate resources, distort economic calculation and thus the pattern of international trade, and reduce national and global prosperity.  Second, the inevitable pain that will attend the short-run adjustments of the Swiss economy to currency appreciation pales in comparison to the long-run economic destruction that would have been wreaked on the Swiss economy by inflation imported from the Euro area had the peg remained in place in the face of the massive QE program just announced  by the ECB.  Third the Swiss economy is extremely flexible and will be able to adjust to the appreciation of its currency.  Leonid Beshidsky points out that, as the EU stagnated, Swiss exporters increased their exports to the U.S., their second largest trading partner.  In November 2014, Swiss exports to the U.S. increased by 10%, the fourth consecutive double-digit monthly increase.  Meanwhile exports to the EU fell by 2% in November 2014. The Swiss will also be looking to expand exports to China.