"10 Takeaways From Lagarde’s Swipe at the Swiss National Bank"

As with the U.S. Fed maintaining emergency low levels in the face of 5% GDP growth, record corporate profits etc. you have to wonder what the SNB is seeing that made them take a step that put them in the same category as Finance Ministers: Liars
From Real Time Economics:

At least 10 lessons can be gleaned from International Monetary Fund Managing Director Christine Lagarde’s thinly veiled criticism (on CNBC) of the Swiss National Bank’s action Thursday:

1. It wasn’t just a shock for markets.  2. It  also irked her. “This was a bit of a surprise…I find it a bit surprising that he did not contact me, but you know, we’ll check on that.”

3. Swiss central bank chief Thomas Jordan may not have warned European Central Bank chief Mario Draghi and others about the move, either: “I would hope that it was communicated with other colleagues from central banks. I’m not sure it was.”

4. The move hasn’t been endorsed by the IMF: “I’m going to reserve judgment on the pertinence of that move because we have not discussed it with governor Jordan and I would certainly want to understand exactly where he was coming from.”

5. Expect more exchange-rate volatility ahead, particularly if central banks fudge communication strategies that are now almost as important as policy moves: “Clearly what is needed is cooperation, collaboration, communication.”...MORE

And from Marginal Revolution:
Why did the Swiss break the peg of the franc? 

Paul Krugman writes:

Two things to bear in mind. First, having in effect thrown away its credibility – in today’s world, the crucial credibility central banks need involves, not willingness to take away the punch bowl, but willingness to keep pushing liquor on an abstemious crowd – it’s hard to see how the SNB can get it back. Second, there will be spillovers: the SNB’s wimp-out will make life harder for monetary policy in other countries, because it will leave markets skeptical about whether other supposed commitments to keep up unconventional policy will similarly prove time-limited.

Brad DeLong and Scott Sumner agree the Swiss move was a bad idea. We’re all in accord on the economics (more or less), but I am more interested in a different question. The Swiss central bank, had it continued the peg, probably would have had a balance sheet larger than Swiss gdp. But does this matter? Should anyone care? Or does that make them “too big a guy on the block”?

I see two views of the world running around in these discussions, but not always articulated as such:

1. Bureaucrats, which includes central bankers, are not so much budget maximizers as hoarders of institutional capital. They hoard institutional capital when they should be spending it down, in the interests of the broader polity. So this is a public choice problem, rather than a matter of macroeconomic ignorance. When it comes to macroeconomics, we need institutional reforms which induce them or maybe even require them to spend down this capital, come what may for their personal levels of political influence....MORE