5 ms·

Switzerland: First country to have national referendum about Sovereign Money

43 points by mathiasrw 8y ago

garmaine 8y ago
For a website that proclaims the importance of getting the word out, I didn’t see any description of what this “sovereign money” proposal actually is. What is being proposed and why?
- Patient0 8y ago
  This may help with that: https://snb.ch/en/mmr/speeches/id/ref_20180116_tjn https://snb.ch/en/mmr/speeches/id/ref_20180116_tjn
- lucozade 8y ago
  There's a link on that site [0]. Essentially they want just the central bank to be the source of money supply. [0] https://www.vollgeld-initiative.ch/fa/img/English/2015_10_22_Swiss_Sovereign_Money_Initiative_-_five_questions_with_answers.pdf https://www.vollgeld-initiative.ch/fa/img/English/2015_10_22...
Patient0 8y ago
Here's a good explanation of what the sovereign money initiative is (and why it is probably a bad idea) from the chairman of the Swiss central bank: https://snb.ch/en/mmr/speeches/id/ref_20180116_tjn https://snb.ch/en/mmr/speeches/id/ref_20180116_tjn
- cyann 8y ago
  And an FAQ/rebuttal: https://www.vollgeld-initiative.ch/fa/img/English/Clarifications_to_SNBs_FAQ_on_Sovereign_Money.pdf https://www.vollgeld-initiative.ch/fa/img/English/Clarificat...
nickik 8y ago
As somebody from Switzerland I think this is insane. I will vote against it. Honestly, most people who want this dont have a clue about monetary policy.
- another-one-off 8y ago
  I'd liken it to Repblicanism vs Monarchism. The differences between the positions are pretty extreme; to the point where it is hard for normal people to educate themselves. It looks like something I'd be in favour of. Not because I don't understand monetary policy but because I disagree with its goals, methods and outcomes.
  - akhatri_aus 8y ago
    Repblicanism vs Monarchism seems a terrible comparison.
- sedeki 8y ago
  Do you mind elaborating on that statement?
  - nickik 8y ago
    Its the sort of argument that people make when they don't have a clue. This idea that banking and trading demand against banks is the problem is just fundamentally misguided. There are many things we could improve in banking regulation and the way the central bank operates. This however, is just a uninformed populist campaign. Most of the claims on their website are total nonsense based on all known economics. I really hope Switzerland will not vote for this stupid initiative. I will vote against it for sure. That said, the Swiss population has a fairly good track record of shooting down these absurd ideas from the right and the left.
    - deleted 8y ago
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- deleted 8y ago
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perilunar 8y ago
Does "Banks won’t be able to create money for themselves any more" mean the same as ending fractional reserve banking, or am I misunderstanding things?
- digi_owl 8y ago
  Perhaps, but it will be closer to banning bank lending (as it is fundamentally different from lending between individuals). "Fractional reserve" is just a convenient scapegoat, as banks, once the rules and numbers are reviewed, do not lend from reserves. Any time they approve a loan, new money is put into circulation.
  - candiodari 8y ago
    Which means that banks, get to loan money they don't have in the fractional reserve bank system. So banks are levered up like you wouldn't believe, which is a huge weakness of the financial system. And what happens to all the profits from money printing ? Why, that goes to the banks, of course. This proposal seems to simply be to only allow the central bank to lever up, and force Swiss banks to become old-US-style "investment banks". The issue with that is simple: if some banks are allowed to print money (with profits going to the richest, and everyone or "the taxpayer" guaranteeing the loans, of course), and others are not, the banks that are allowed to print money are going to marketshare, profits, ... and counterintuitively, when the economy is expanding, historically even the people they lend to. It is looking more and more like the economy is reconfiguring to the way it worked in the middle ages.
    - nickik 8y ago
      There are no profits from 'printing' money. Those are simply the profits of being a bank. There are lots of regulation we should change about how banks work, but this proposal isn't one of them.
      - jabgrabdthrow 8y ago
        You are rejecting the negative connotation of the word “print” but the fact is that the bank can do a financial operation that would be illegal for a non-bank and which most humans would call printing money, and make a profit
newscracker 8y ago
I have to admit to not understanding this, though I think I know somewhat well about money. Isn't this "sovereign money" the way it is in other countries, where banks either have money deposited by some customers and/or borrowings from a central (government controlled) bank or reserve that controls the total amount of the currency/money? If banks create money on their own for lending, wouldn't that cause an uncontrollable chain reaction on the valuation of the currency, on the ability to control inflation (to some extent) by policy measures like interest rates and other things? Any explanations, or better, links to articles would be helpful.
- admiralg 8y ago
  (please don't hesitate to correct me if I'm wrong) Say there are 3 customers at a single bank. Customer 1 = Investor, has 100 cash and deposits it into a bank account Customer 2 = Borrower, borrows 100 from the bank Customer 3 = Restaurant, provides a service for Borrower. Borrower pays a 100, and Restaurant deposits it to it's bank account. This is how the "sovereign money" travels: Investor -> Borrower -> Restaurant But the customers see the following account balances Investor : 100 Borrower : -100 (owes the bank 100) Restaurant : 100 If now Investor and Restaurant both want to withdraw their money the Bank would be in trouble. The bank only has 100 "sovereign money" on their books. Investor and Restaurant won't care who owes the bank, they want their money. But the solution for this would be easy, Investor must be given the choice if he wants to allow/disallow the bank to loan out his deposit. Similarly how it works with long positions at a brokerage firm.
  - 0x4f3759df 8y ago
    You left out the reserve requirements, wiki has a nice chart on how reserves affect expansion. https://en.wikipedia.org/wiki/File:Fractional-reserve_banking_with_varying_reserve_requirements.gif https://en.wikipedia.org/wiki/File:Fractional-reserve_bankin... I've heard people say that the fractional reserve system causes the boom and bust cycle, because when banks lend money, the create the principal not the interest which leads to a shortfall at some point. Not sure if this is right tho.
jacknews 8y ago
Wow, I really hope they have success. Private money creation through fractional reserve is a real con, and completely unnecessary with modern communications.
teilo 8y ago
I don't see what this will actually change. If the SNB is the sole provider of money, whether electronic or currency, they will inevitably become the sole provider of loans, with the banks serving as brokers for those loans. Net zero game.
- jabgrabdthrow 8y ago
  Personally I am peeved that I can’t individually make fractional reserve loans in genuine fungible currency (costs ~$30m to be a bank), so I’d like to choose a zero-sum point where the rich don’t get richer by default
- hn0 8y ago
  The difference is, at least in theory, that boom-bust cycles from bank-fuelled speculative frenzies could be controlled.

43 points by mathiasrw 8y ago

For a website that proclaims the importance of getting the word out, I didn’t see any description of what this “sovereign money” proposal actually is. What is being proposed and why?

Patient0 8y ago
This may help with that: https://snb.ch/en/mmr/speeches/id/ref_20180116_tjn https://snb.ch/en/mmr/speeches/id/ref_20180116_tjn
lucozade 8y ago
There's a link on that site [0]. Essentially they want just the central bank to be the source of money supply. [0] https://www.vollgeld-initiative.ch/fa/img/English/2015_10_22_Swiss_Sovereign_Money_Initiative_-_five_questions_with_answers.pdf https://www.vollgeld-initiative.ch/fa/img/English/2015_10_22...

Patient0 8y ago

Here's a good explanation of what the sovereign money initiative is (and why it is probably a bad idea) from the chairman of the Swiss central bank: https://snb.ch/en/mmr/speeches/id/ref_20180116_tjn https://snb.ch/en/mmr/speeches/id/ref_20180116_tjn

cyann 8y ago
And an FAQ/rebuttal: https://www.vollgeld-initiative.ch/fa/img/English/Clarifications_to_SNBs_FAQ_on_Sovereign_Money.pdf https://www.vollgeld-initiative.ch/fa/img/English/Clarificat...

nickik 8y ago

As somebody from Switzerland I think this is insane. I will vote against it. Honestly, most people who want this dont have a clue about monetary policy.

another-one-off 8y ago
I'd liken it to Repblicanism vs Monarchism. The differences between the positions are pretty extreme; to the point where it is hard for normal people to educate themselves. It looks like something I'd be in favour of. Not because I don't understand monetary policy but because I disagree with its goals, methods and outcomes.
- akhatri_aus 8y ago
  Repblicanism vs Monarchism seems a terrible comparison.
sedeki 8y ago
Do you mind elaborating on that statement?
- nickik 8y ago
  Its the sort of argument that people make when they don't have a clue. This idea that banking and trading demand against banks is the problem is just fundamentally misguided. There are many things we could improve in banking regulation and the way the central bank operates. This however, is just a uninformed populist campaign. Most of the claims on their website are total nonsense based on all known economics. I really hope Switzerland will not vote for this stupid initiative. I will vote against it for sure. That said, the Swiss population has a fairly good track record of shooting down these absurd ideas from the right and the left.
  - deleted 8y ago
    [deleted]
deleted 8y ago
[deleted]

perilunar 8y ago

Does "Banks won’t be able to create money for themselves any more" mean the same as ending fractional reserve banking, or am I misunderstanding things?

digi_owl 8y ago
Perhaps, but it will be closer to banning bank lending (as it is fundamentally different from lending between individuals). "Fractional reserve" is just a convenient scapegoat, as banks, once the rules and numbers are reviewed, do not lend from reserves. Any time they approve a loan, new money is put into circulation.
- candiodari 8y ago
  Which means that banks, get to loan money they don't have in the fractional reserve bank system. So banks are levered up like you wouldn't believe, which is a huge weakness of the financial system. And what happens to all the profits from money printing ? Why, that goes to the banks, of course. This proposal seems to simply be to only allow the central bank to lever up, and force Swiss banks to become old-US-style "investment banks". The issue with that is simple: if some banks are allowed to print money (with profits going to the richest, and everyone or "the taxpayer" guaranteeing the loans, of course), and others are not, the banks that are allowed to print money are going to marketshare, profits, ... and counterintuitively, when the economy is expanding, historically even the people they lend to. It is looking more and more like the economy is reconfiguring to the way it worked in the middle ages.
  - nickik 8y ago
    There are no profits from 'printing' money. Those are simply the profits of being a bank. There are lots of regulation we should change about how banks work, but this proposal isn't one of them.
    - jabgrabdthrow 8y ago
      You are rejecting the negative connotation of the word “print” but the fact is that the bank can do a financial operation that would be illegal for a non-bank and which most humans would call printing money, and make a profit

newscracker 8y ago

I have to admit to not understanding this, though I think I know somewhat well about money. Isn't this "sovereign money" the way it is in other countries, where banks either have money deposited by some customers and/or borrowings from a central (government controlled) bank or reserve that controls the total amount of the currency/money? If banks create money on their own for lending, wouldn't that cause an uncontrollable chain reaction on the valuation of the currency, on the ability to control inflation (to some extent) by policy measures like interest rates and other things? Any explanations, or better, links to articles would be helpful.

admiralg 8y ago
(please don't hesitate to correct me if I'm wrong) Say there are 3 customers at a single bank. Customer 1 = Investor, has 100 cash and deposits it into a bank account Customer 2 = Borrower, borrows 100 from the bank Customer 3 = Restaurant, provides a service for Borrower. Borrower pays a 100, and Restaurant deposits it to it's bank account. This is how the "sovereign money" travels: Investor -> Borrower -> Restaurant But the customers see the following account balances Investor : 100 Borrower : -100 (owes the bank 100) Restaurant : 100 If now Investor and Restaurant both want to withdraw their money the Bank would be in trouble. The bank only has 100 "sovereign money" on their books. Investor and Restaurant won't care who owes the bank, they want their money. But the solution for this would be easy, Investor must be given the choice if he wants to allow/disallow the bank to loan out his deposit. Similarly how it works with long positions at a brokerage firm.
- 0x4f3759df 8y ago
  You left out the reserve requirements, wiki has a nice chart on how reserves affect expansion. https://en.wikipedia.org/wiki/File:Fractional-reserve_banking_with_varying_reserve_requirements.gif https://en.wikipedia.org/wiki/File:Fractional-reserve_bankin... I've heard people say that the fractional reserve system causes the boom and bust cycle, because when banks lend money, the create the principal not the interest which leads to a shortfall at some point. Not sure if this is right tho.

jacknews 8y ago

Wow, I really hope they have success. Private money creation through fractional reserve is a real con, and completely unnecessary with modern communications.

teilo 8y ago

I don't see what this will actually change. If the SNB is the sole provider of money, whether electronic or currency, they will inevitably become the sole provider of loans, with the banks serving as brokers for those loans. Net zero game.

jabgrabdthrow 8y ago
Personally I am peeved that I can’t individually make fractional reserve loans in genuine fungible currency (costs ~$30m to be a bank), so I’d like to choose a zero-sum point where the rich don’t get richer by default
hn0 8y ago
The difference is, at least in theory, that boom-bust cycles from bank-fuelled speculative frenzies could be controlled.