# 11 / 2016

The Empty Promises of the «Sovereign Money Initiative»

Switzerland is to be the location of a major economic experiment: the aim of the «Sovereign Money Initiative» is to radically reform the monetary system. In future, only the Swiss National Bank is to be allowed to bring money into circulation, while commercial banks may only grant credits that are secured via savings accounts. Sovereign money is not secured via deposits. The initiators also want to prevent efforts to resort to other currencies, if necessary through stringent regulation.

Executive summary

The aim of the «Sovereign Money Initiative» is to introduce a monetary system in Switzerland in which the Swiss National Bank (SNB) has absolute and direct control over the money supply. This would prohibit commercial banks from creating money through lending. They would only be allowed to grant loans that are fully secured via savings accounts. This represents a radical reform of the existing system which would introduce a system that has not been trialled anywhere in the world to date. The initiators want to bring about secure payment transactions, reduce the occurrence of financial bubbles and prevent bank runs. But in their proposal they consistently ignore the associated drawbacks: on the one hand, the money brought directly into circulation by the SNB would not be secured via shares, bonds, or gold, and on the other hand numerous regulations would be required in order to halt efforts to resort to other currencies or create Swiss francs abroad. The initiative also promises an extremely generous annual profit distribution to the government and the population. The proposal thus represents a threat to the autonomy of the SNB’s monetary policy.

Positions of economiesuisse

  • Money created from nothing is not secured by collateral or securities: it is essentially «empty money» rather than full money.
  • Payment transactions would become more expensive: small clients would have to foot the bill.
  • Efforts to resort to other currencies or create Swiss francs abroad would have to be suppressed through the introduction of countless new regulations.
  • The proposal promises a very generous annual profit distribution by the Swiss National Bank (SNB) to the federal government, the cantons and the general population: this represents a threat to the SNB’s autonomy.
  • The initiative is irresponsible: while it would prevent bank runs on sight deposits, it would also jeopardise price stability and could give rise to a currency crisis.
  • economiesuisse firmly rejects the initiative, which is a high-risk experiment.