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George Dorgan
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(Page updated after end of EUR/CHF peg)
In Switzerland the ordinary people have started several initiatives to protect their savings against the establishment. After the first gold referendum failed in November 2014, a new gold initiative is trying to introduce a gold-backed Swiss currency, as a parallel currency or investment vehicle.

With the end of the EUR/CHF peg and the apparent risks caused by the SNB, some voices, like the Austrian economist Keith Weiner, see a Swiss franc collapse. Different groups want to introduce parallel currencies in addition to the Swiss franc. CHF is based on fractional reserve banking and, according to the critics, its quantity, the money supply, is increasing too rapidly.

A sound money initiative (German “Vollgeld”) wants to abolish fractional reserve banking, while the “gold franc initiative” desires a gold-backed currency. Already now, the so-called WIR money (“Our Money”), currency code CHW, is a local currency created during the Great Depression to overcome shortages in lending. “WIR money” allows borrowing and lending directly among people with a single intermediary the WIR bank. In today’s world it is used mostly for real estate. It is fully backed by commodities, like real estate. By law, parallel currencies, like WIR money, are not legal tenders. Due to a lack of convertibility into foreign currency, WIR money trades at a slight discount to the Swiss franc. This, however, might change when the SNB goes further into negative equity and/or blows up the money supply.
In the following we will compare the two gold initiatives.

1) Save our Swiss Gold and 2) The Gold Franc.

Symbol of “Save our Swiss Gold” initiative

1) The initiative “Save our Swiss Gold” lost in November 2014

The Swiss People’s Party wanted to “Save Swiss Gold” and give more credibility to the SNB’s monetary policy and the Swiss Franc. The initiative would have require that the SNB:

• Does not sell anymore of it’s gold reserves.
• Must not let gold reserves fall below 20%.
• Must hold all gold reserves in Switzerland.

After the government voted against the original initiative, the SVP collected the 100k signatures needed to hold a referendum.

If the vote was “yes” the SNB would have had:

• 2 years to repatriate it’s gold reserves.
• 5 years to reach the 20% reserve leve.l

This would mean that Switzerland would have had to buy around 1500 tons of gold over 5 years.

Did you know that

The following is about the less known initiative “the gold franc”, that has been postponed to avoid conflicts with “Save Our Gold”.

2) Referendum initiative “The Gold Franc”, a gold-backed Swiss currency

Symbol of “The Gold Franc” Initiative

After the Swiss economic commission rejected the idea of a gold franc, the gold franc association took the way of the referendum initiative. The initiative will be started after the “Save our Swiss Gold” referendum. Its aim is also to weaken the strong Swiss franc a bit. This would be possible if investors who want to preserve their wealth preferred the parallel currency, the gold franc. The initiative wants to establish the gold franc as legal tender.

Here the presentation from http://www.goldfranc.org/.

The Gold Franc: A gold coin currency

About George Dorgan

George Dorgan (penname) predicted the end of the EUR/CHF peg at the CFA Society and at many occasions on SeekingAlpha.com and on this blog. Several Swiss and international financial advisors support the site. These firms aim to deliver independent advice from the often misleading mainstream of banks and asset managers. George is FinTech entrepreneur, financial author and alternative economist. He speak seven languages fluently.

My articlesMy siteAbout meMy books
Follow on:LinkedINTwitterSeeking AlphaCFA SocietyEconomicBlogs