Switzerland prepares to vote on sovereign money

Big news this:

On 10th June 2018 Switzerland will be the first country in the world to have a national referendum on the introduction of Sovereign Money. A referendum result that is as positive as possible in Switzerland will help monetary reformers worldwide to make significant progress. However, our opponents are powerful and will try to scare the Swiss electorate. It is essential for us and the international movements that we prevent a false picture of the Sovereign Money Initiative from becoming established in the public debate.  The surveys conducted have shown that well-informed Swiss voters are clearly in favour of sovereign money. Unfortunately, however, we lack the funding we need to reach all Swiss households. In order to get the most out of this unique opportunity not just for Switzerland but for all other sovereign money movements throughout the world, we urgently need your help. Please donate as much as possible in the coming days so that we can expand the campaign whilst we have time.

The aim of the Swiss Sovereign Money Initiative is to reform the banking and money system to work the way that most people would like, which happens to also be the way that most people believe it already works:

• The Swiss National Bank would be the sole organisation authorised to create money – not only cash and coins, but also the electronic money in our bank accounts.

• The banks would provide all the services as they do now including bank accounts, payment transactions and loans. They just won’t be able to create money anymore. The main advantage of this reform would be a fairer and more stable banking system:

• The harmful build-up of over-indebtedness in the economy would no longer be a necessary byproduct of the system, therefore making banking crises less likely. • Money would no longer ‘disappear’ in a major banking crises (where several large banks go bankrupt).

• Taxpayers would no longer have to bailout banks in the event of a crisis.

• The advantages from money creation would go to the public, rather than to the banks. The government would then decide whether to use additional revenues to lower taxes, pay off the national debt, fund additional infrastructure or services, or pay a dividend directly to all citizens.

• The changes to the banking system will not change the way that banks’ customers will interact with banks or the services they offer . There will be a binding national referendum on the implementation of this Sovereign Money Initiative in Switzerland in the next year or so.

What is sovereign money? Sovereign money is full-value legal tender which is created and brought into circulation by public institutions, typically a central bank, rather than private banks. Currently coins and banknotes are the only forms of sovereign money available to the public. The money in people‘s bank accounts is neither sovereign money nor legal tender.

What is electronic money? It‘s the numbers in bank accounts, also known as „book money“. Currently the money in people‘s bank accounts is not created by the Swiss National Bank, but by private banks when they make loans. This “virtual” money on our bank accounts isn‘t legal tender, it‘s just a promise made by the banks to pay us cash and settle payments on our behalf, when requested. Legally it belongs to the bank, not to the holder of the bank account.

What is a Swiss initiative? Its Switzerland’s system of direct democracy: if 100,000 people sign an official petition for a change to Switzerland’s written constitution, there has to be a binding national referendum on the proposed change.

Modern Monetary Theory writ large. As Western democracies descend into inequality civil wars driven by private banking who is to say it won’t happen?

Only in a direct democracy is such a novel idea possible.

David Llewellyn-Smith
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Comments

  1. We had the war on Terror – which could never be won, now we have the war on inequality – which also cannot be won without violating the very laws of physics that the universe operates upon. But hey, keep flogging that dead horse why don’t you.

  2. Isn’t the whole Crypto debate around a very system that would solve the above? I would not be that keen on a bank having any form of control on the creation of money.

    • drsmithyMEMBER

      Not really. The cryptocurrency peeps like it because both the total number of “coins” (ie: the amount of money) and the creation rate are fixed. Ie: it behaves somewhat like an electronic version of gold.

      • But the decentralized control seems to be a better option than trusting the banks to administer things?

      • drsmithyMEMBER

        Decentralisation cuts both ways. The cryptocurrency people don’t trust _anyone_ to administer things, that’s kind of the point.

        But that defeats the objective of “sovereign money”.

  3. But, but, but… how will banks make billions of dollars of profits, and as we know from the advertising, profitable banks mean a strong economy. Foolish swiss, wanting to weaken their economy. I laugh at those rubes!

  4. drsmithyMEMBER

    Ugh, I miss Switzerland. If I could have my time over I think I’d have tried harder to stay.

    • FINALLY! My time in the sun has come! Bow and tremble before me, mere mortals! Bwahaha!!

  5. We do not have the language to debate ideas such as these. The average Aussie has no clue, what the difference is between direct and representative democracy, for simple reason that after 13 years of school their masters never told them less they decide we actually have an Oligarchy as Plato put it.

    Given the success MB has had with immigration maybe you could offer Mr Stephen Morris a spot on MB to push this if he was interested ?
    Failing that maybe he would like to friend me on Facebook 🙂

      • HadronCollisionMEMBER

        Love SM’s (not to be confused with Reusas favourite poster S&M) posts but the problem with them is after reading, you experience two things
        – total agreement at the sensibility of it all
        – utter black hole uselessness as you know it’ll never ever happen here (ie. in my lifetime)

    • Yep, Rod77. 12 years of schooling and not once were we told how to build a house (perhaps they think a revolt would occur if students knew how illogical the prices are) nor how preferential voting is supposed to work. Instead, they tried to teach us the strange language of Shakespeare and how many electrons orbit a carbon atom.

      The high school market should be deregulated and geniuses like James Dyson should be allowed to have their own curriculums.

  6. seasoningcycle

    It’s interesting to see such a proposition get even that far. I can only imagine the campaign Swiss bankers have in store.

    I don’t quite get how consolidating private credit creation into the hands of a very powerful “independent” government bureaucracy is necessarily going to be any less problematic.

    Bank bail outs may be avoided to be sure, but surely that can be addressed via macroprudential measure via a more independent bank regulator with a clear mandate ?

    How is a central bank supposed to properly anticipate the capacity of an economy in aggregate to determine credit creation ?

    • Pfh007MEMBER

      How do the private banks do it?

      Answer: They dont.

      The RBA seeks to manipulate the cost of credit to increase or decrease demand for it.

      What has that got to do with the capacity of the economy?

      What has been the result of the current approach?

      Look around.

      • seasoningcycle

        Yes, clearly – but why do you think a central bank would do any better in deciding how much can be doled out without over-egging it or strangling the economy ?

        Banks at least (in theory) have a touch-point with borrowers and can (in theory) assess their financial capacity to take on debt.

        Why swap one ideological poison for another ?

        The happy medium is surely better regulated banks. You can strangle private debt creation through higher capital requirements and making bankers eat their own equity.

      • It would be much simpler to justvremove the privileges/status of private bank credit creation and have the government run a directly financed (without usury) deficit / surplus that is non inflationery.

        That is not rocket science at least far less than having the RBA try to control inflation with demand for private bank credit creation voodoo.

        Then we can leave private investment companies to the business of raising funds and making them available to borrowers.

        The government could play in that space if it chose but at least would not have the farce we have now where the public money system is hanging off the backside of private bank lending.

        Breaking up the state / corporate public money cartel will at the very least allow for proper accountability.

      • seasoningcycle

        But we already do have private investment companies raising money to lend to … wait for it …

        Housing ! (and its associated population Ponzi side-lines … childcare, retail office space, etc, etc)

        What changes ?

      • Those private investment companies are not banks. Which means they can neither create nor destroy money.

        In addition they do not operate with an effective subsidy nor guarantee.

        What they raise and extend to borrowers depends on attracting actual investors and actual borrowers.

        If that is still not good enough they can be regulated.

        But the critical point is that they have not created the bloated inplicitly taxpayer guaranteed bubble created by the abuse of the privilege extended to the private banks.

        Their market share of residential lending makes that crystal clear.

    • Super Phoenix

      It is indeed pleasing to see once again that the Swiss are light years ahead of us.

      Now, time to get back to the Australian reality.

  7. DominicMEMBER

    Modern Monetary Theory. Lol. Has been de-bunked a thousand times but the believers still persist!

    Sovereign Money = money-supply controlled by the State
    Sound Money = money-supply out of the hands of both the State and the Banks. What could be sweeter?

    Ya can’t beat ‘sound money’ but with Govt and Big Business the biggest losers you know what the chances are …

    • drsmithyMEMBER

      “Sound money” = money-supply is solely in the hands of the wealthy, which is no different to having it solely in the hands of the banks.

      • Pfh007MEMBER

        More to the point Sovereign Money has nothing to do with MMT.

        HnH seems a bit confused in this area. Just as well we can clear things up.

        As we know most MMT folks are very comfortable with the current role of private banks in our monetary system even if they do want the regulation to be a bit proactive to reduce unproductive asset pumping credit creation.

      • oo7….

        Please provide any evidence to support your beliefs.

        Contra to your statements MMT is about law and such a sovereign priori.

      • Pfh007MEMBER

        Evidence?

        You would not know evidence if it bit you on your Putin.

        Anyway what are you complaining about.

        As a dedicated Private Bank Apologist and fanatic hater of democratic control of public money AND long term MMT spruiker you should have embraced the distinction I drew between Sovereign Money and MMT.

      • Hudson is pro mmt.

        You have to prove that MMT is not reality oo7 vs your pure rhetorical method embellished with emotive rhetorical pleas.

      • Pfh007MEMBER

        Sorry Pouchy Putin,

        I dont have to disprove your half baked assertions and your op-ed as evidence malarky.

        Everyone can read what Hudson has to say about private bank apologists.

      • DominicMEMBER

        More f*cktardery from smithy. For a fellow who comments so often on a finance/economics blog you sure know little about either.

        Smithy, blog comments sections are full of supermarket clerks who have an opinion on stuff they have no clue about. Perhaps you can make yourself available to a researcher who is keen to delve further into this phenomenon. Please publish your contact details here:

      • Not an apologist for the results of neoliberalism oo7, of which, banks are a subset of and not the driving agency.

        You see there is a cornucopia of wildly inaccurate econometrics and suppositions about humans which set the whole thing rolling – at the behest of special interests. Some seem to think fiddling around with moeny will sort out the aforementioned. I disagree because the same sorts will still be dominate and pushing their economic voodoo.

        I would also note that outside banking you don’t have much to say, actually nothing, which I find curious as corruption is not just a banking problem.

      • drsmithyMEMBER

        More f*cktardery from smithy. For a fellow who comments so often on a finance/economics blog you sure know little about either.

        Uh huh. So in a “sound money” system – by which I assume you mean some variation of a gold standard – who does control the supply of money?

      • Pfh007MEMBER

        Putin on the Hop,

        “…I would also note that outside banking you don’t have much to say…”

        Here you go!

        https://theglass-pyramid.com/2018/04/23/parramatta-to-epping-metro-time-for-action/

        Plenty more on a range of topics that your boring neoliberal archeology cut and pastes never touch on.

        But i have enjoyed you putting the boot into Hudson and the Greeks and sticking up for the EU and Euro and as always running interference for your private banking buddies.

        I was worried that Putin would mess with the wiring that makes you sooooooo predictable.

    • “Has been de-bunked a thousand times …”

      I’ve seen it been queried, argued against, and condescendingly dismissed but I’ve yet to see it actually be successfully debunked. The MMT folks, as I understand them, are saying that this is already how our money system works. That bit has held up against all I’ve seen thrown at it. The other parts, that is the policies that can therefore be pursued by acknowledging it and leveraging it to the communities advantage, is where there appears to grounds for discussion. Perhaps not all of their proposals necessarily follow from the observations. Or, are even desired. I guess that is why economics isn’t a science and why it should always be referred to as political economy.

      • MMT is a description of fiat money as used by ‘autonomous monetary sovereigns'[.] e.g. taxes do not pay for federal expenditure i.e. you can’t tax what has not been issued as the first order of acts. Banks don’t even issue FRN, they issue private credit nominated in FRN, as much as equities are denoted in FRN. As such, those that have issues with banks issuing private credit would also have to share the same for C-corp equity or what transpires in the shadow sector.

        Even Hudson himself agrees with MMT, caveat, he distinguishes between what he calls vulgar MMT and the MMT he promotes.

        The completely absurd bit about this all is most of this was understood pre neoliberalism. It was only with the advent of mobs like the Chicago school and monetarist pushing an ideological agenda that things started to go south. Thats not even mentioning the advent of a bunch of wonky econometrics used to judge the whole thing that had zero attachment to reality e.g. proceeds the creation of monies private or public.

        H&H I have to ask if you even understand what direct democracy means, how its administrated and its ideological roots e.g. will it have paper ballots hand counted by local citizens in an open and transparent manner or via tech or some sort of administrative management. I would pose the same question as far is the administration of sovereign money issuance goes – which mob gets the job and are they accountable to democratic forces.

        In ending I would proffer that money is the end result of many forces and not the leading agency of such.

      • Pfh007MEMBER

        Oh Goody.

        Skippy finally concedes that Hudson is not fully sold on MMT.

        “…Even Hudson himself agrees with MMT, caveat, he distinguishes between what he calls vulgar MMT and the MMT he promotes….”

        Please oh please a link to Hudson discussing vulgar MMT……i must have missed that. I gather the vulgar bit is the private bank excuse making that some MMT supporters like you peddle.

        While you are busy have a read of this.

        http://michael-hudson.com/2018/04/bronze-age-redux/

        Not much joy for a determined private bank apologist like you.

        Enjoying your buddies getting a grilling at the Royal Commission?

      • Hudson did an NC post 007 and its in the comments. That said the whole thing is not set in proverbial stone [theological]. I even asked Hudson in comments about sound vs functional finance and he passed.

        I’ll state that Hudson’s use of esoterica is not a compelling argument at on set, religious theology has no warrant as there is no means to prove T or F. Hell half the problems stem from this avenue of deductive wankery.

      • As far as the banking thing goes I supported a Pecora Commission style event years ago, archives here and at NC will support that, as well as a Swedish style solution if need be.

        Contra to your waffling over the years.

      • DominicMEMBER

        footsore, to emphasise: there is no alternate ‘monetary theory’ worthy of consideration. The bottom line is this:

        Money is a ‘good’ like any other in the economy. Yes, it may be a means of exchange — but so are sea shells (if a counter-party deems it to be so). ‘Money’ (in whatever form) is subject to precisely the same economic principles as any other good that is traded in the economy. No special rules apply to the way money is treated.

        This is why central banks setting interest rates (the cost of money) is so contentious: there is no fundamental difference between the Govt setting up an agency to ‘set’ the price of fruit and vege on a periodic basis than there is on the RBA setting the price of credit.

      • Super Phoenix

        +1 Dominic

        The primary purpose of the central banks setting interest rates centrally is to keep the masses working on a rat wheel and not let them relax – aka, don’t let them live but don’t kill them either.

        After all, if you do not artificially engineer perpetual inflation there would be no incentive for the population to “invest” what you have. It would be too easy for the population to slack off and sit on their cash piles with the safe knowledge that the prices of tomorrow won’t be any higher.

        No, we can’t have that. Or who is going to pay for the costs of essential services like the RBA?

      • Super Phoenix.

        Central banks are run by economists beholding to specific ideas about money. During the neoliberal period we had monetarists and now quasi monetarists, so if some have complaints about how CBs are run on might focus on that and not just lump everything together and then say CBs did it all.

        For example I really don’t see a connection between say Rubinomics or the Powell memo and central banks. Not to mention that many view Milton’s natural rate as a quasi gold standard. Really can’t see the purpose of equating all ills on banks considering what has transpired during the neoliberal period. Seems a rather crude simplification of a very large and dynamic problem set. Especially when some might want to use it to advance some ideological agenda.

    • Cheers,
      The lighthouse piece looks interesting.
      I’ll get to it this weekend.

  8. BubbleyMEMBER

    Nobody wants to be part of the Euro any more and I dont blame the Swiss for wanting to have an separate currency. They have a well regarded banking industry that is getting dragged down with the rest of the continent.

    It will be interesting to see what happens with it on the international money markets as it will probably be a safe haven currency. Could be a good time to be Swiss.

      • The Swiss don’t do much except engage in being a pipe line for wealth management – tax haven thingy and truism.

        That game is rapidly changing globally, see recent Oz moves on about 106 individuals or China’s treatment on unfettered flows. So I really don’t get the well regulated aspect. As far as T-bills go I would probably look a distribution of ownership and how that might effect duration.

      • BubbleyMEMBER

        Ahh, I see it now. The difference is between my “well regarded” and your well regulated.
        The Swiss reputation for safety and neutrality could be extraordinarily valuable in uncertain times.

        You make some very interesting points, well worthy of consideration.

      • The Swiss have no such reputation, outside antiquated historical perspectives of some. Sadly time move apace and things don’t hold in perpetuity, sorta like hording wealth and expecting it will always be there regardless of circumstances.

        Not to mention capital is not steady state.

    • Stephen Morris

      The EU imperialists loathe Switzerland both for its fierce independence and for its democracy which shows up their own pseudo-democratic institutions.

      They are biding their time waiting to crush it. Given that Switzerland is tiny and must operate democratically, while they are huge and can act without regard for their subject peoples, I suspect that eventually the imperialists will win.

      The contribution of the finance industry to Swiss GDP (about 11%, some argue much lower) is not much different from Australia’s

      https://www.swissinfo.ch/eng/business/by-the-numbers_is-switzerland-really-the-country-of-bankers-/40473658

      But then Australia has a protected finance industry, propped up by policies such as compulsory defined-contribution superannuation.

      • You have to be kidding Morris.

        Firstly the EU are not imperialists, the U.S. precedes such, albeit Neoliberalism has taken root, that’s not to say England is not a predecessor any more than the U.S.

        Secondly its a trade pact constructed around contracts, hence the ultras in England having a tanty not getting their way. Just who is going to want to do business with these types of ideological wing nuts that A. are not good contractual partners, B. when they do have a dumby spat can’t muster the expertise to hash out a proper deal, but engage in all kinds of wonky ideological propaganda in lieu of.

      • Sorry Morris but are you aware that Hudson opined that his book Super Imperialism was used as a road map contra to its original thrust.

      • Pfh007MEMBER

        Putin’s Pouch

        “….Firstly the EU are not imperialists,….”

        Is this part of your Putin Did It standup routine.

        What part of the European Union dont you understand?

        Oh that’s right I forgot how much you enjoyed the Greeks being crushed by the Troika.

        Teach those Greeks to behave and understand the joys of club EU and that true device of liberty the Euro.

      • Are you completely devoid of facts and only respond in emotive pleas.

        Greece had epic levels of corruption before entering the EU. The elites in Greece forwarded going into the EU via help from free market machinations through derivatives supplied by GS, thereby extenuating credit risk to meet the treaty requirements. Taxes in Greece were a joke and nepotism was rank, so much for market anything.

        Anywho the issue in this tread is Hudson’s Super Imperialism and how that reflects on the claim about the EU being Imperialistic in contrast.

    • Super Phoenix

      What? The Swiss already have CHF. They knew better than joining the Euro in the first place.

      • And that has what relevance to claims about well regulated banking, contra to everything the opposite.