Wednesday, December 30, 2015

New Swiss referendum on money creation

The following story is interesting on so many levels, it's hard to know where to start.  So in no particular order:
1) The Swiss are extremely interested in banking and how it is organized.  Never forget that John Calvin, the guy who "legalized" usury for Christians was operating out of Geneva when he did it.  As a result, there are lots of banks and bankers in Switzerland and every Swiss person I have ever met had sturdy opinions on the subject.  However, any time I mentioned some of the monetary theories proposed by the frontier nation-builders, they were dismissed as "cowboy capitalism."  Yes the Swiss can also be very sanctimonious about banking.

2) Now that even the Bank of England admits that virtually all of the money that is created is done by private financial institutions, many people who have never understood this absolute refutation of the basic banking myths are in a state of shock.  And it looks like some Swiss citizens have organized a referendum to force their banks to practice lending as they were taught as children.  As someone who has understood that banks create money since 13, I cannot even remember what it was like to believe the basic banking lie so I find this Swiss response absolutely adorable.

3)  The chance of this referendum succeeding is zero.  If banks can no longer create money, their business model is roughly as profitable as a pizza parlor's.  Banks actually understand this so there will probably be few holds barred in their crusade to prevent this referendum from passing.
And while this crusade to "purify" Swiss banking practices is interesting on a sociological level, the monetary beliefs of the activists are far more primitive than say, the folks who organized the Greenbacks the USA used to fight the Civil War.  I heard much more interesting monetary discussions in church basements in the 1950s and 60s than anything being proposed in this referendum.  Just remember, in large areas of this country, monetary policy was the #1 political topic for almost a century.  Turns out a lot of us in USA were just as interested in banking practices as these Swiss.

Switzerland to hold referendum on banning private banks from creating money

© Dado Ruvic / Reuters, 25 Dec, 2015

A radical initiative to strip private banks of their power to “create money” and make it exclusively a central bank privilege has gathered enough support for the Swiss government to announce a referendum on the issue. A vote in favor may result in a return to 100 percent reserve banking.

“Banks won’t be able to create money for themselves anymore, they’ll only be able to lend money that they have from savers or other banks, or even, if necessary, money that the Swiss National Bank has provided them,” the campaign said in a statement on their petition website.

As soon the petition concerning changes to the Swiss banking system had received more than 100,000 valid signatures, the Swiss government confirmed it would hold the referendum, according to the Telegraph. The date when the country will vote to decide whether private banks should be keep their power of creating money has not yet been set.

The move comes as part of the Swiss Sovereign Money Initiative (known as the Vollgeld-Initiative in German) that seeks to put an end to financial speculations. The group is concerned with the current state of affairs in traditional fractional reserve banking, where real coins, banknotes and central bank liabilities account for only a minor part of money in circulation, while most of it exists as electronic cash created by private banks.

“Most people believe that the money they have in their bank accounts is real money... This is wrong! Money in a bank account is… a promise the bank makes to provide money, but it is not itself legal tender,” they group explains in their statement.

The initiative claims that it strives to change the system so that it complies with the Swiss Constitution, guaranteeing safety and avoiding such phenomena as finance bubbles and empty money.

If the change is introduced, Swiss banks would have to look for a workaround to continue providing their clients with the usual set of services.

This won’t be a first referendum on monetary policy in the recent history of Switzerland. The Swiss voted against a law that would increase country’s gold reserves from 7 percent to 20 percent back in 2014, despite early polls showing increasing support for the initiative. more


  1. "even the Bank of England admits that virtually all of the money that is created is done by private financial institutions"

    This is myth that relies one defines money 'creation'. For the US, Congress creates money when it spends and Congress created the FRBS. A quick look at FRED data will show that the total of federal spending over history exceeds credit outstanding by a wide margin, something like $80T vs $46T.

    So based on an accounting of the source of funds in private bank accounts the claim is inaccurate. It's myth that has been perpetuated over centuries.

    The myth is based on the outcome of accounting that ignores the source of funds, only what 'remains', and what remains ignores the role of taxes, which accrue against all spending but is only accounted for against government spending in the National Accounts.

    Further, dollars are swapped for bonds in the deficit-funding process which are merely another form of savings account…dollars that pay interest…but are not counted as 'money', while dollars in savings accounts are.

    So the data on which the myth is based is skewed, and the claim (myth) is highly misleading.

    But it does serve the purpose of perpetuating the idea that banks are the source of our money, of which we are reminded constantly.

  2. should have written "taxes…accrue against all INCOME…" not spending.

  3. Even if a majority could agree on how money should be created (by who, in what amounts, when, where, why, and how, etc) we would still be left to argue its role. Should money be limited or regulated in any way? Could a majority agree on that? And if a majority could agree, to what extent then by who, in what amounts, when, where, why, and how should money be limited, regulated or controlled? And if a majority could agree on that, who then could a majority agree shall enforce those agreements, in what way, when, where, why, and how?

    When it comes to money there is no end to the conversation. No other subject so totally mesmerizes and dominates most human thoughts, needs, and aspirations. What used to be “Bare Necessities” of life (food, water, shelter, and group support) are now “Bare Minimums” of money needed to get by. At what point in human history this happened, I don’t know? It might have happened before I was born in 1941, but if it did I didn’t notice it until the 1980’s when the “Trickle Down Theory” of life became strangely popular, somehow, and took hold. (My oldest son was born in 1977, his brother in 1979, and only then did money start to become an issue or a problem in my life.)

    Today, over at the “Web of Debt” blog by Ellen Brown, she introduces a new term (new to me) called “Bail-in.” She titled her posting, “A Crisis Worse than ISIS? Bail-Ins Begin!” She starts out by saying, “While the mainstream media focuses on ISIS extremists, a threat that has gone virtually unreported is that [our] life savings could be wiped out in a massive “derivatives collapse!” Bank “bail-ins” have begun in Europe, and the infrastructure is in place in the US [for the same].”

    I don’t know anything about bank “bail-ins,” but if bank “bail-outs” in 2008-2009 weren’t enough to get us riled up, bank “bail-ins” might do the trick? (God knows there’s got to be something that will get to us eventually unless we all really are just a bunch of mindless and fearful sheep or cattle or whatever?) Ellen goes on to say, “At the end of November, ‘an Italian pensioner hanged himself’ after his entire €100,000 savings were confiscated in a bank ‘rescue’ scheme. He left a suicide note blaming the bank where he had been a customer for 50 years and had invested in bank-issued bonds. But he might better have blamed the EU and the G20’s Financial Stability Board, which have imposed an ‘Orderly Resolution’ regime that keeps insolvent banks afloat by confiscating the savings of investors and depositors. Some 130,000 shareholders and junior bond holders suffered losses in the ‘rescue.’”

    Having survived a tour of duty in Vietnam, I must say that when it comes to fighting against what banks and money can buy these days (except for maybe ISIS) hanging our self might be our only salvation. We certainly don’t hang together anymore about anything except what money can buy. (I was drafted, one of the last that money didn’t have to buy to go to war, which is why some say we lost the war in Vietnam, “not enough volunteers.”) But money knows it must pay its volunteers well. So it does. “There shall be no more just causes on earth that aren’t funded and endowed by the generous support of sponsors, foundations, benefactors...and by viewers, listeners, readers and guilt-ridden folks like you, thank you. You know who you are and you know you don’t stand a chance on your own or with others, because you are no longer allowed to gather or communicate in large numbers, because it’s just too dangerous. “Go home. Go shopping. Go hang yourself,” says the MASH announcer. “That is all.”

    MASH: “Mobile Army Surgical Hospital” in Korea, now known as a “Modern Army Serving Heaven,” a “Multi-Agency Safeguarding Hubris,” and/or a “Microsoft Agent Selling Help.” Also, the name of a bar in Tel Aviv, “More Alcohol Served Here,” in keeping with the “spirit” of the original MASH movie and television show (and no doubt in keeping with the reality of MASH units in Korea, Vietnam, and you name it). Is that really all?