Sound Money

The bedrock of Liberty

Swiss Vollgeld initiative could end Fractional Reserve Banking

The idea of what the Swiss call Vollgeld (translation is “full money”) was first outlined in a 2012 paper from the International Monetary Fund. Iceland is also considering this, but Iceland is tiny compared to Switzerland. This research note look at Iceland as one of the alternative Fintech Capitals, which is # 84 on the Global Financial Centers (GFC) index and tiny in GDP terms. So any move they make can be dismissed as irrelevant by the banking industry. 

However if Switzerland makes the move it cannot be dismissed as a blip. Zurich alone ranks # 7 in GFC and Geneva ranks # 13. Switzerland is a global leader in Wealth Management. 

Vollgeld would be a totally radical move that would hurt traditional banking in Switzerland in the short term, but it could vault Switzerland into a leadership position longer term. If Switzerland does it, other centers will have to follow. This is a case of disrupt before you are disrupted. Together with the move by Xapo from Silicon Valley to Switzerland and the growing crypto expertise in Zug, this could put Switzerland on the Fintech map. 

How the people will vote is obviously unknown. 

Most bankers will warn of bad results, but one can see a populist case forming as

citizens are fed up with bailing out banks and that Vollgeld eliminates systemic risk.

 Will a referendum pass and when? 

In Switzerland’s direct democracy, a referendum can be held if a motion gains 100,000 signatures within 18 months of launching. 

What will be the implications if it passes? 

This will move Banking to a utility direct revenue model. Banks will charge directly to store (custody) your assets whether they be cash or securities or gold or bitcoin or anything else. 

There will be zero systemic risk and no need for taxpayer bailouts or government insurance schemes.

DYI:  I’d be very surprised if this passes or if the Swiss even obtain the necessary 100,000 signatures to put this on the ballot.  All of the major intelligence services the likes of MI-6 [England] CIA [U.S.] Mossad [Israel] will be out in force [they work for the elite bankers] to make sure this doesn’t see the light of day.  Banks are able to gin up debt out of thin air at zero cost and then lend those Dollars, Francs, Pounds, etc. at prevailing interest rates.  Of course the 800 pound gorilla in the room is Swiss Intelligence and where they stand on this issue.  Unless the Swiss bankers have something up their sleeve that I’m not aware of this legislation will go nowhere.

Ending fractional lending would be a hard fought victory for liberty reducing significantly the booms and most importantly the subsequent busts.  Without the ability to gin up money out of thin air governments would have to rein in their deficit spending as bankers being the biggest purchasers of their debt would have to rely upon their respective citizens to provide funds.  A far more difficult and limiting scenario the fast majority of politicians would cringed as they would now be required to make the hard decisions – and suffer the political consequences – by balancing the budget either through tax increases, reduced spending or some combination.  

Sound money is the bedrock of liberty.  The solution is simple abolish the Federal Reserve thus ending their ability to debase the currency; end fractional lending reducing boom/busts; require by constitutional amendment a balanced budget and national debt reduction.  This would end inflation dead cold either in asset prices or consumer prices.  Plus there would be a subtle deflationary effect as the currency itself gains purchasing power back into the hands of everyday citizen at the expense of the elites.

DYI