New Swiss Gold Initiative Getting Attention When Parallel Currencies Might Challenge Swiss Franc

(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.

 

goldinitiative

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

that the SNB has sold one ton of gold per day during five years ?

that 1550 tons of the people’s assets in form of gold had been sold for cheapest prices (between 300 and 500 US$)

when the concerned minister was asked where the SNB gold currently is stored, he answered in parliament: “Where this gold exactly is stored, I cannot say, because I do not know, because I do not need to know and because I do not want to know”

 
Read more about the Swiss Gold Referendum “Save our Swiss Gold” and the referendum results.


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

Goldfranken

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

The Problem

The Swiss Franc has lost roughly 90% of its value during the last century. It’s future is uncertain and not only depending on the Swiss National Bank’s strategy, but also on the developments in the international monetary system and in particular on European and American politics.

The Idea

The existing monetary system is based on the principle of paper money. This means that Dollars, Euros and even Swiss Francs can be printed without limits and this could lead to the partial or total loss of purchading power of all savings and pensions. Gold cannot be printed and has been used for thousands of years as a medium of exchange, as a hedge and as a nest egg. Goldcoins are the precursor and the origin of paper money and the ideal hedge aganist the uncertainties in today’s financial system.

The Proposal

A new amendment to the Swiss constitution creates the legal foundation to introduce constitutionally protected private gold coins.

Article 99bis (new)

Swiss Gold Coins

1. The Federal government shall define the rules for the issuance of a set of quickly and easily tradable gold coins with a solid, clearly recognizable gold content starting at 0.1 grams.

2. The issuance of the coins (production, coinage, placing on the market) is provided by Swiss companies. The coins bear a unified symbol of Swiss origin, indicate the gold content in grams and a freely desighed identification of the issuer.

3. The issuance, acquisition and trading of the gold coins are tax and duty free.

Three Advantages

Simple

Buying and selling of gold becomes easier and cheaper.
Today the popular Swiss gold coins “Vreneli” cost around Fr. 250.- and need expert advice. The smallest gold coins will cost around Fr. 5.- and be available via vending machines. Gold coins will become as common and as familiar as Dollars and Euros today.

Practical

Small denominations make possible new uses.
Coins of different size will be available, with the smallest containing as little as 0.1g gold in the form of a “Gold Core Coin”. This makes gold suitable for savings- and pension plans, in life insurance products and for marketing purposes. Last but not least the Gold Coins can supplement and partially replace the Swiss Franc in it’s function as a save haven currency and thus ease the upward pressure on the exchange rate.

Safe

The gold coins are protected by the Swiss Constitution.
The private production and issuance of gold coins is illegal in Switzerland and the tax free status for gold as an investment is only regulated in an ordinance, which can be changed at any time. The new constitutional article will eliminate these disadvantages and maybe even become a model that other countries will want to follow.

We have learned on several occasions that the Swiss sometimes like to punish investors. One example is the collapse of the former airline Swissair, when stock holders and even foreign public sectors, like the Belgian state, lost. Or it might be the end of the EUR/CHF peg when FX traders got punished.
Some crazy people think that the Swiss could punish SNB stock holders and the let their central bank default including the fiat currency CHF. To preserve stability they could transfer CHF deposits into a new better currency – certainly with a certain “Cyprus-style” hair-cut. The Swiss could simply introduce one or several new currencies that are not based on fractional reserve banking. But for us, this strange idea seems to be a bit far-fetched, at least for now…

 

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.
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Permanent link to this article: https://snbchf.com/swissgold/referendum/swiss-gold-referendum-initiatives-save-our-swiss-gold-franc/

2 comments

  1. OliverCorneau

    Here is one of the best articles on why the Swiss should be voting “yes”:

    goldsilverworlds.com/physical-market/the-swiss-referendum-on-gold-whats-missing-from-the-debate/

  2. GeorgeDorgan

    Hi Oliver,
    I have already given the answer to the EU trade balance here:
    https://snbchf.com/chf/swiss-trade-surplus-balance/

    and the answers about gold price volatility here.
    https://snbchf.com/gold/swiss-gold-location-gold-initiative/

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