Switzerland: The Land of the Rich & Home of the Bank?

welcome to Switzerland an extremely beautiful landlocked country in the heart of Europe this picturesque nation is home to one of the most advanced economies in the world when ignoring micro nations like Monaco Liechtenstein Switzerland is one of only two countries in the world that has a nominal GDP above 80 thousand US dollars per capita and I'm sure you'll only need one guess as to what other nation takes the list yep that's right the channels old favorite Norway Switzerland is a little bit different though other wealthy nations like Norway were typically blessed by a treasure trove of natural resources Switzerland did not have this he was also lacking a lot of other key ingredients that contribute heavily to most successful nations it did not have open access to an ocean for international trade it did not have a particularly competitive cheap labour market it did not have terrain that made building productive infrastructure particularly easy and it didn't even have a population that could agree on what language to speak so what was it secret then how did this nation obtain such tremendous wealth while seemingly being at such a huge disadvantage well the first place most people look is Switzerland's banking system Swiss banks have an almost folklore level of mystique around them as the home of banking for the world's more questionable billionaires this was typify din popular culture movies like wolf of Wall Street and the girl with the Dragon Tattoo where Swiss banks were seen as an end destination to keep any ill-gotten gains safe from the repercussions of your devious actions as with most legendary tales there is an element of truth to this and with all good European legends it traces its roots back hundreds of years in 1713 the Great Council of Geneva outlawed the disclosure of information about European upper classes and their financials this was great news for two reason 1 kings queens lords and ladies were pretty keen to find a safe place to store their gold around this time in Europe and the banks of Switzerland were not Protestant which suited the mostly Catholic European Royals just fine this served the country very very well and while other European powers sought glory through Empire and conquest Switzerland prospered under a system of neutrality and Industry which was probably a good plan because you know the whole naval colonial power thing probably wouldn't have been a fantastic idea because you know no ocean because this neutrality and secrecy has served the country so we'll over hundreds of years it has become a bit of a cornerstone of the nation in the same way that the USA has the second amendment to protect the rights of its citizens to bear arms against a potentially oppressive tyrannical government Switzerland has the right to hide financial information from a potentially snoopy fraud investigation whether you are for or against either of these two ideologies they have been equally as recognized and influential to their respective home countries and despite of changing consensus they are unlikely to go anywhere anytime soon Swiss banking services have truly capitalized on this today these privacy laws in conjunction with very favorable taxation laws means Switzerland is an ideal home for some of the old money delete of the world today as a result of this Switzerland is home to some pretty crazy stuff your local bank probably still has safety deposit boxes these boxes are safe enough to hold your family heirlooms but the world's elite requires something a little more extravagant for their treasures scattered around the Swiss Alps are undisclosed bank bunkers that are inaccessible by Road or foot and can only be reached by helicopters these are the mother of all Bank safety deposit boxes that offer their level of security and secrecy that the members of the Illuminati need to store their priceless art or piles of gold or the recipe to the seven secret herbs and spices this whole banking deal has certainly helped Switzerland today Switzerland is home to two of some of the largest banking groups in the world in UBS and Credit Suisse both of these companies operate offices all over the globe and pull in huge profits to a relatively small country this is all great but banking is more or less just a happy little side effect of the bigger economic philosophy of Switzerland China has manufacturing Norway has oil the United States has a huge domestic market and Switzerland has confidence if there is one thing to know about business in Switzerland it is that people have confidence in it we have looked at the economy of the Democratic Republic of the Congo before this is by most measurements the poorest country in the world but on paper it should probably be richer than Switzerland just by virtue of its natural resources the thing is as we found out in that video because of the political instability in the nation nobody has confidence in it so nobody wants to invest in it which means all the natural resource wealth in the world is worthless to them on the flip side Switzerland is mostly the opposite it doesn't really have natural resources but because of centuries of careful control by a very stable government that promoted neutrality people see it as the world's ultimate safe house going back to banking Switzerland has typically been criticized a store of ill-gotten gains for crooks around the world but in reality since the early 90s the background checks that one needs to do to get into a Swiss bank really heavily limits this kind of activity sure there has been plenty of fishy business over the decades but this kind of activity has now moved to newer more hip tax havens like the Cayman Islands who have the same kind of laws around financial privacy and taxation but do not subject their clients to the same kind of scrutiny about the origins of their funds Swiss banks are popular these days simply because they are seen as the ultimate safe zone for cash cash in the bank should be the safest type of asset one could have but for the world's super-rich relatively safe is not enough the idea of a bank like Lehman Brothers going insolvent and wiping out their cash holdings is truly terrifying sure to the average person bank deposits are insured by the government but in most countries this caps out at a certain dollar figure well below what your average global billionaire wants to keep in cash because of the inherent confidence people haven't Swiss banks though people wanting to make large deposits are drawn to these banks above all else these banks are so popular for large cash accounts that even a negative interest rate has not deterred these holding accounts Switzerland has one of the lowest central bank interest rates in the world at negative 0.75 percent meaning that depositors are literally paying interest to banks to hold their money for them but again people are happy to do this because they know as long as they have cash in a Swiss bank pretty much nothing is ever going to happen to it global market collapse your cash will be safe get sued in your home country your cash will be safe get brought up on fraud charges in your home countries no worries your cash will be safe this confidence is so tangible that even the banks of banks of banks use Switzerland as their bank that's right the Bank for International Settlements headquarters in Basel Switzerland is the financial institution that acts as a central agent do all of the world's central banks who in turn act as the central monetary authority to all the banks in their respective home countries the confidence in Switzerland does extend beyond banking though while it might be the first thing that most people think of when they think of Switzerland apart from maybe chocolate the financial services industry only represents about 12% of the GDP of Switzerland confidence is key for all manner of things in an economy though Switzerland is a popular tourist destination in part because people have confidence in the safety of the nation Switzerland is home to a disproportionate amount of the world's pharmaceutical companies because people need confidence in their medicine and medical equipment and people have confidence in Switzerland Switzerland is the world leader in high-end watch manufacturing a highly lucrative export industry for Switzerland and a hugely valuating one at that for a few cents worth of stainless steel swiss manufacturers like Rolex Breguet patek philippe and no demise pj can produce watches that cost tens of thousands of dollars while it is likely other country like china could produce a watch to the same exact technical specifications it wouldn't demand the same price premium because people don't have the same confidence in chinese products on a larger scale this has also made Switzerland the headquarters of many international businesses because International companies have confidence operating in Switzerland it sounds like such an intangible thing confidence economists love to pretend that economics is all about hard data analysis and right or wrong policies and robust modeling although in reality economics is a social science it is not the study of money it is the study of how groups of people interact with things of value it is important that amongst islm graphs nominal GDP figures and return on equity calculations where you remember that all of this means nothing if economic participants don't have confidence in the system switzerland is so rich today not because it struck oil or because it was a harbor for nazi gold or even because of a particular inspired budget policies by the government switzerland is rich today because it inspires confidence in all of those who look to do business with it hi guys i hope you enjoyed the latest video i just wanted to say a huge thank you to anybody who has subscribed to the channel we have recently passed 100,000 subscribers which is unbelievable for these little videos that i kind of expected nobody brought my mother to watch it's really fantastic to see that so many people are interested and commenting actively and having these really great discussions about you know pretty interesting topics as always i do my very best to reply to any serious questions in the comment section all references are in the video description and i will be hanging out on the discord server linked in the video description for the next hour after this video goes live to talk directly to anybody that wants to come and have a chat thanks guys bye

Channel: Economics Explained

Views: 465,699

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Keywords: the economy of switzerland, the economics of switzerland, the economy of switzerland explained, the economics of switzerland explained, switzerland economics explained, economics explained switzerland, switzerland economy explained, switzerland economy, switzerland economy economics explained, economics, switzerland economics, how switzerland economy works, how the swiss economy works, swiss economics, swiss economy explained, swiss economics explained, economics explained

Id: -627kxtzyak

Length: 10min 16sec (616 seconds)

Published: Thu Oct 17 2019