Making Money: The Swiss Referendum

by Guy Brandon, 6th June 2018

A poll on the 10th June will decide whether Switzerland should change to a ‘sovereign money’ system – effectively abolishing fractional reserve banking.

This Sunday, the Swiss will vote on the ‘Vollgeld’ measure, proposed with the intention of making the banking system safer by preventing commercial banks from creating money. Only the central bank, the Swiss National Bank, would be able to increase the money supply.

Referendums are allowed in Switzerland if just 100,000 signatures are collected for a proposal, meaning that controversial topics and those opposed by most politicians and government can still be decided by a national vote.

The Vollgeld proposal would restrict the money commercial banks lend out to what they have in savings accounts, what they acquire on the international money markets or from the SNB. It would effectively mean the end of fractional reserve banking in Switzerland. Proponents of the changes say that it is the commercial banks’ ability to create money that leads to boom-and-bust credit cycles, including the Global Financial Crisis. Critics – including the SNB’s Governor, Thomas Jordan – say it will lead to a more volatile and possibly even stronger Swiss franc.

The referendum has not received widespread publicity outside of Switzerland. Monetary reform in general receives little attention, despite the fact that it is a major factor in the health of the wider economy. Few people understand the way money is created and curated, partly because the process has become so complex.

‘If you wish to remain the slaves of Bankers and pay the cost of your own slavery, let them continue to create money and control credit.’ – Attributed to Josiah Stamp, director of the Bank of England, by Silas W. Adams in The Legalized Crime of Banking (1958)

The serious and fundamental injustices represented by our current monetary system are explored in our booklet, Crumbling Foundations: A biblical critique of modern money. The Bible warns against centralisation of any power – whether political, technological or financial – and our centralised, debt-based approach powerfully illustrates the reason why. Money can be created at will by the central bank, and monetary policy explicitly targets 2% inflation – eroding the value of savings and meaning that debts, including government debts, are not paid in full. Debt-based money necessarily requires the payment of interest, something else the Bible warns against. This sucks value out of the real economy and into the financial sector, helping drive long-term poverty and entrenching inequality. At the same time, there is moral hazard: banks receive the profits of the money they create out of nothing, but the public is forced to shoulder the costs in the event of a financial crisis, since the payments system is too important to allow to fail.

Thus at a basic level there is a conflict of interests. For the end user (us), money is a means of transacting and saving. For the creators of money (the central and commercial banks), it is a way of acquiring value at our expense. The means by which this is carried out are frequently opaque and undemocratic.

Recent indications are that only a third of Swiss will vote for the Vollgeld measure, but the effect of an agreement for reform would be seismic. It would change banking as we know it in the country and probably further afield, arguably returning it to a more honest, fair and safe system.

 

For more on this topic, see: Crumbling Foundations: A biblical critique of modern money.

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Category: Blogs

June, 2018

Comments (2)

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  1. Stephen de Garis says:

    I am pleased that Guy Brandon has given serious consideration to this forthcoming event in Switzerland. It is for me and I must assume for most voters a complex matter and few in any other country would be asked to vote on such an issue. I do not presume to understand the technical aspects of this very unusual issue. I have tried to understand in order to vote. What is interesting to note is that every part of Swiss government, including the Finance Minister who may be a Christian believer, is against it. Furthermore the Head of the Swiss National Bank is against it. This view had the significant effect of making my decision after hearing him speak. In fact if the Initiative were to succeed, it is this Institution which would have much increased power, but this man who must surely be in a position to know, rejects the concept.
    I do not go along with the statement made by your correspondent that “interest” is wrong per se. In my understanding of Scripture he is wrong to say so. It would be better to condemn the concept of debt and the slavery it brings in almost all modern societies.

  2. Samuel Kullmann says:

    Thank you for that good article.
    Unfortunately, only 24% turned out to say yes in the end, but the initiative had the very positive effect that the whole country learned about the way money is actually being created. Of course, there was a massive campaign of all political parties and the private banks against the proposal.

    I would also say that interest and debt is not wrong per se, however, if debt and interest are created simultaneously with the largest part of money creation, that is truly unjust and burdensome.

    I personally did not find Thomas Jordan (SNB) very convincing. In several interviews he lied about the process of money creation and when a journalist insisted on the truth, he reluctantly admitted that it can also be viewed that way.

    While I have great respect for our finance minister, he had to represent the position of the whole government (not necessarily his own). The arguments of the government didn’t convince me at all, basically it was just said that the financial system works just fine and that there is really nothing to fix.

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