It was pointed out to me (twice) yesterday that my post on the Swiss franc drama got a bit self-involved. And to be honest – I already suspected that. But sometimes, I get to the end of a post, and the thought that goes through my head is you win some, you lose some, and then there are days when you lose everyone.

But I think that the Swiss franc story is interesting enough that it deserves another go. And this time, I’m going to try a drinking game.

To start, I give you the great gin equivalence:



In case the handwriting is a bit small, in my gin story:

  • The US Dollar (USD) would be Tanqueray
  • The Euro (EUR) would be Gordons
  • And the Swiss Franc (CHF) would be something artisanal and fruity, with floral notes and an amber finish.

Let’s Have A Kiki

So back in the mid-noughties, the world was having a Gin party. All three producers were there pouring drinks (the barmen are the Central Banks), and there were waiters dashing around with trays offering to open up a tab for almost anyone (the FX traders).

Everyone was having almost too good of a time. The music was raving, the drinks were iced and the tonic was slimline.

But then the music stopped, and someone threw up in the middle of the dancefloor. Suddenly, all the lightweights realise that they too were ready to throw up, and the collective vomming started.

This got the Tanqueray barman (Ben Bernanke) all concerned about getting everyone back to a good-time good-feeling space. So he announced that he was going to be producing a lot more gin. And he would do it by watering down the alcohol content.

At the same time, real questions were being asked about the quality of the Gordons, and whether it was causing alcohol-poisoning. It seemed that some of the producers had been a bit lax about what they were throwing in there – so the Gordons QC team went in to overhaul the production process.

And what happened while all this was happening? Well most of the not-so-lightweights told the waiters to bring them the artisanal gin, please. I mean – that Swiss stuff had always been sexy. But it just got sexier.

Thanks this website
Thanks this website

The problem: we’re talking about a very small player trying to deal with a lot of heavy-drinkers – heavy-drinkers who were not really in it for the taste so much as they were in it for the alcohol content.

And this was very upsetting for the diehard purists (the Swiss citizens), who had been committed to the artisanal gin from the start, but were starting to find their drink of choice more difficult to come by.

So the Artisanal Barman said to the partygoers:

We don’t like this new state of affairs.

We are changing our recipe.

We are going to fix our alcohol content to be, at most, equal to that of Gordons Gin. 

And we’re going to do that by watering down our Artisanal gin each time you come for a refill.

And mostly, this kept everyone happy. Because:

  1. The Tanqueray fans were left kind of ambivalent between the Gordons and the Artisanal Gin.
  2. The Gordons fans knew that they weren’t really getting anything better by changing drinks, unless they were in it for the taste.
  3. The Diehard Artisanal purists got to drink their favoured drink, even if slightly less potent than it used to be. That said, there were a number of purists that began to protest quite vigorously to cap the alcohol content by holding referendums. But they were in the minority, and their protests didn’t really amount to anything.

Then The Tanqueray Barman Stopped Watering Down The Tanqueray

By this point, Ben Bernanke had retired, and his successor, Janet Yellen, had taken over at the cocktail bar. And she decided that the party had built up enough momentum on her side of the room – so she was happy to bring the dilution program to an end.

While this was happening, the Gordons barman (Mario Draghi) was coming under growing pressure to do things differently. Mainly because fixing an old recipe wasn’t really getting the party started. The drinks just weren’t flowing freely enough for the lightweights to rejoin the festivities (and as all socialites know – what’s the point of going to be seen at a party when there’s no one there to actually see you?). So the general suspicion is that he’s just about to engage in his own brand of watering-down. After all, it seemed to work for Ben and Janet. But it’s not clear that the collective Gordons team will be down with it. So it’s still just a rumour.

The waiters (still being the FX traders) know all of this, but they continue to open tabs for anyone that wants to order drinks. After all, this is a story about Gordons and Tanqueray – and the Artisanal barman is really just committed to his diehard purists.

But Then

The Artisanal barman (Thomas Jordan) suddenly grabbed the microphone, and tells everyone that he’s stopping the watering down process immediately.

At that point, everyone rushed to get their orders in (causing the value of artisanal gin to go up relative to the value of Tanqueray and Gordons).

And then the waiters started trying to collect on their open orders, only to realise that customers don’t really settle tabs that suddenly went up in cost by 20%*. Those customers simply find a different waiter on the other side of the room.
*The small print in the tab opening process sounds a lot like: “Hey garçon! I’d like to get a bottle of Gordons. I’ve got this bottle of Artisanal gin to swap for it. Go and swap your own artisanal gin for a bottle of Gordons, and I’ll swap it when you get back. I’ll also put 2% of the Artisanal gin in this tumbler as a general deposit. If I disappear in the interim, you can keep the tumbler, and sell the Gordons bottle to recover your losses. Only, when the announcement came, the waiters were suddenly left with more Gordons than Artisanal Gin. And this is especially unhelpful when they actually borrowed a bottle of Artisanal Gin from another customer, who’s now demanding the full new value back…

So amidst this flurry of new orders, there are all these waiters going bankrupt because they were over-exposed to the Artisanal gin (in the wrong way).

This runs the risk of ruining a good party, because:

  1. It makes the whole Gordons thing look a bit suspect (what does Thomas Jordan know that we don’t?)
  2. The diehard purists are once more struggling to get a drink
  3. And what is a party without waiters?

And the real problem is: once a party starts to die, it’s really hard to get it going again. And this is the kind of shock that can properly kill a vibe – especially when that vibe is so fragile to begin with.

The General Explanation

No one really knows why the Artisanal Barman did what he did (yet). But if we were going to speculate, some facts:

  1. Artisanal gin brewers can’t make nearly as much gin as a large producer like a Gordons or a Tanqueray.
  2. Which means that, if the artisanal guy wants to keep pace with a large producer on a shot-for-shot basis, he’ll have no choice but to water down his gin at an ever-increasing rate. Especially if that large producer (ie. Gordons) starts to engage in its own watering down process.
  3. And because he starts off with less actual gin, in almost no time at all he’s down to producing bottles of water that are only “gin” because it says so on the label.
  4. Once people realise that, then his gin suddenly has no value at all as a party drink, and he goes out of business.
  5. So basically, he has two options:
    1. Stop watering the gin down, and let the diehard purists drink less often; or
    2. Continue, and let them drink water with their tonic water.

Only Option B is not an option.

This is a party, after all.

Rolling Alpha posts opinions on finance, economics, and the corporate life in general. Follow me on Twitter @RollingAlpha, and on Facebook at