Swiss Franc

Switzerland to vote on banning banks from creating money

Switzerland will hold a referendum to decide whether to ban commercial banks from creating money.

The Swiss federal government confirmed on Thursday that it would hold the plebiscite, after more than 110,000 people signed a petition calling for the central bank to be given sole power to create money in the financial system.

The campaign – led by the Swiss Sovereign Money movement and known as the Vollgeld initiative – is designed to limit financial speculation by requiring private banks to hold 100pc reserves against their deposits.

“Banks won’t be able to create money for themselves any more, they’ll only be able to lend money that they have from savers or other banks,” said the campaign group.


Well that’s kinda Christmassy…

  • Exile1981

    If it passes the value of swiss francs will go way up.

    • luna

      I’m not sure about that. It’s difficult to predict without proper models. I would expect this would increase the cost of borrowing Swiss francs though which could cause interest rates to rise.

      It’s probably not a good thing for Switzerland, though back insolvency (assuming that’s the concern) is potentially worse.

      • Exile1981

        Fractional banking is considered the #1 cause of inflation. So gettingrid of it will decrease inflation but increase interest rates. Bank stocks will go done in value as they will make less profit. i think the positives will out weight the negatives.

        • luna

          You are referring to the Austrian school of thought. The Austrians define inflation in terms of money supply. In other words, inflation is defined as an increase in the aggregate money supply, even if prices stay the same of fall.

          This is not the only definition of inflation. The mainstream defines inflation as a general increase in the prices of consumer goods.

          Based on the first definition, then your supposition is correct by definition. Based on the second definition, you can make a case that money supply affects prices. But keep in mind, it’s just one factor affecting prices. Furthermore, economics is resistant to experimentation, so it is difficult to establish causality.

      • I’ll be honest, I am not sure what would happen but a tightening of credit seems likely. ow damaging that could be is unknown in so isolated a case.

        • luna

          Anyone who claims to know what would happen is either a genius worth billions or a liar.

  • DMB
  • canminuteman

    I support private money creation, but the money that a bank creates should have it’s own name on it, not the central banks. If you look at old Canadian banknotes, some will say “Bank of Montreal”, Bank of Nova Scotia etc. That way people would have a choice of what money they will use. The banks will have a vested interest in their banknotes maintaining their value, if they don’t no one will accept them or use them and they will become useless. On the other hand, the central banks of highly indebte govenrments have a vested interest in their money not retaining its value, so they can inflate away there debts. With no other money in circulation, we have no choice but to use “legal tender”, which the government taxes out of existence via the mechanism of inflation.