Last month's market events reminded us again of the rule:
“That An Honest Person's word is ONLY AS GOOD AS HIS MEANS TO BACK IT, and his commitments should be only understood ON THAT BASES."
Understanding it otherwise is a stupid mistake of the inexperienced. Like the banker that accepts the guarantee of an individual to an amount that is way beyond that person’s current net worth.
To understand OPEC's statement that it will act to stabilize and assure a healthy development of Oil markets, or the Swiss Central bank to stand behind a reasonable parity between the Swiss Franc and the Euro to mean that OPEC will support oil price stability when there is a major STRUCTURAL OVER SUPPLY or UNDERSUPPLY is a mistake of the inexperienced OR TO BELIEVE THAT THE SWISS CENTRAL BANK CAN BAIL OUT THE EURO when it needs a FUNDAMENTAL REALIGNMENT is a similar mistake.
It's like believing that when the world wants gold against its Dollars the U.S. Government can supply it all without a devaluation (US dropping the gold standard after the Vietnam war) or the UK government can Bail out the Poundwhen Markets decided to sell it (when George Surusmade a few billion profit betting against the Pound) .
Those statements when coming from "A CREDIBLE SOURCE" should be understood as within reason and against normal market volatility and NOT when markets need a new price level to solve a chronic economic situation or supply problem. In those circumstances allowing a new price level to work its magical free market solution to solve the problem is the only wise solution.
Example: OPEC deciding to allow higher oil prices to incentivize capital markets to assist in the discovery ofnew supplies that can help bring down oil prices to acceptable levels was the only solution, OPEC DID NOT AND STILL DOES NOT have the means to do that alone, and the same is true of the oversupply in the oil markets today, the only solution for it is to allow lower oil prices to remove excess oil from the market or the Swiss central banks ability to bail the Euro Zone as opposed to allow the EURO to finds its new equilibrium.