HI!
I joined this community (I’ve been reading the blog posts for a couple of years now) just for this topic. I have been going back and forth on this particular initiative. As a mortgage holder, and someone who has a credit card, I just can’t see clearly how a yes vote will improve things. And it makes me think that in two years when I renegotiate my mortgage, a “yes” win will make things more difficult and expensive.
Right now our accounts are all guaranteed by the Swiss government up to chf100’000 should there be a collapse (much like the FDIC does in the US). And I can deduct all my mortgage and credit card interest on the tax form.
I also learned from watching in my other country what happens when the people who want to burn it all down win. I think we’re headed for another global crisis because of that.
Maybe the Swiss banking system could do with reform, but I don’t think this initiative is the way to do it. And yet, there are whole political parties advocating for a “yes” vote, and most of the organizations who are promoting a “no” vote are the ones who profit the most from the current system. But I still don’t know that we need such a radical change in the banking system here.
I appreciate the discussion y’all have had here. It has helped clarify my thinking enough that I can go vote. (I love e-voting!)
It’s not. The guarantee is from esisuise, a bank law mandated union of banks. Other banks in the system would have to cover the collapse. SNB, the only bank with a power to print money is not in the system, so there’s no 100% guarantee the money to cover collapse will be. There’s also 6B total compensation limit set by law or about 700 Fr per person on average at current population estimate.
The main thing that the vollgeld initiative is trying to achieve is to put an extra check on the system to avoid swiss banks crashing the economy by lending too much and going bankrupt. You might be thinking that looking around you Switzerland seems to be very prosperous and has a large banking sector so why would you want to mess with the goose that lays the golden eggs? The answer is that being a small country with a large banking sector is a risky place to be. Just ask Iceland.
In 2008 Kaupthing, Landsbanki and Glitnir the three largest banks in iceland had assets of more than 11 times the national GDP. When the banks started to fail there was no way that the government could hope to bail out the banks so the system collapsed. With the banking system in paralysis the value of the Icelandic Kroner crashed. Imagine trying to get a loan for your small business in that climate.
Around the same time in another country with an oversize banking sector the full extent of the subprime lending was just becoming apparent. UBS posted losses totalling more than USD 50 billion, and could very easily have collapsed had the Swiss National Bank not agreed to take ownership of USD 60 billion of assets into a “bad bank”. Luckily the scale of the problem was within the ability of government action to save the bank.
If UBS had not been able to create money they probably couldn’t have got themselves in the same kind of mess as the supply of money would be subject to political control. This really comes down to whether you think bureaucrats or bankers are better at spotting systemic risks to the economy. Both of these approaches have downsides.
Swiss government guarantees to individuals don’t mitigate the risk entirely. If the banking system collapses the franc will tumble in value and you’ll lose out as did savers in Iceland.
Looking at the behavior of the various central banks during the last 25 years, believing that any central bank could solve our issues is… utopian, to say the least.
banks generate 7% of our GDP and occupy 3% of our workforce. Does that really qualify as large? Yes they manage astounding quantity of money, mostly from rich foreigners.
We will be ok.
I voted no.
the initiative was rejected 