In the modern world, nations are using Central Banks which create fiat currencies. “Fiat currencies” are simply money that is created out of thin air, & has no intrinsic value except what people assign to it. Most people imagine that money is created by printing, but most is simply created by a tiny computer input, as most money now is simply digital & exists only on a computer. This post is to provide readers with an awareness of the Swiss vote on NOV 30 about whether their currency (Swiss Francs) will be backed by gold or not. The issues concerning this vote will be touched on.
NOV 30TH’S BALLOT INITIATIVE would amend Switzerland’s constitution such that:
• Gold reserves of the SNB (Swiss Nat. Bank) must not be sold;
• Gold reserves of the SNB must be held in Switzerland;
• Gold reserves of the SNB must be ‘significant’ & must not fall below 20%.
As transitional measures:
• Switzerland has 2 yrs to repatriate its gold;
• Switzerland has 5 yrs to phase in the 20% reserve requirement.
SWISS CONCERNS. The Swiss are proud of their nation & its fiscal responsibility. But they have been concerned that the SNB sold 1,550 tons of their stock of 2,590 tons of gold since the late ‘90s at low prices. The SNB has no outside restrictions on what it does, & it works with the Swiss govt. It feels no concern about creating as much Swiss Francs as it wants. The SNB also buys securities denominated in Euros & U.S. dollars…which means these securities are dependent upon the strength of the Euro & the dollar. Gold seems safer to the backers of the initiative. As it exists right now, the Swiss are dependent upon how the ECB and the Fed manipulate the Euro & U.S. dollar. A global financial crisis could destroy all their assets. On the flip side, the govt. says a strong Swiss Franc (backed by gold) will raise the cost of goods exported from Switz. & result in economic hardship. Whether this prediction is accurate is questionable—because at present Switz.’s exports are based on high quality—they are not competing based on price but the value of the quality of their products. For sure, investors would begin switching their fiat currencies into gold-backed Swiss Francs and their value would rise.
CENTRAL BANKS WILL DO WHAT THEY WANT. Even if the Constitutional change passed, there are ways that the SNB could get around the spirit of this Constitutional change; it has already been figured out how the SNB could circumvent its obligations by spinning off assets, as well as dealing with derivatives to undermine the spirit of the law. As it stands right now, the Central Bankers in Switz. & their govt. hate the concept of a gold backed currency and they have a great deal of influence in the mass media. It appears the majority of Swiss are against the new initiative, as they believe it will cause more problems than solve.
FINAL THOUGHTS. This then is the ballot initiative, and some of the issues. To me the vote appears to be a contest between the conservative concerns of the Swiss people vs. the whims of the politicians & bankers who want to continue the lack of restraint to do what they want to do. While I don’t expect the ballot measure to pass, it is noteworthy that the fiscally conservative Swiss don’t like the concept of building their lives on currency speculation & fiat funny money. Meanwhile, anyone can back their money by buying gold & silver while it is still cheap compared to the real value of these funny paper FRN bills or whatever kind of funny money you have. Many are also getting offshore accounts outside the reach of the U.S. govt. & a dollar crash.