Switzerland can put the financial system in check and it will not be with cryptocurrencies

In less than a month, he decides in a referendum if he forbids commercial banks to create money

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Understand that the money that we deposit in the bank does not work like the bank of the house and that the bankers do not have our savings kept in a box waiting for us to come back for them. It is one of the most complicated financial concepts to understand for those who begin to become familiar with the bowels of the financial world

Discover that although the central banks are in charge of minting coins and bills, our bank can use our deposit of 1 00 physical euros to give credits for a value of up to 10 times injecting all that money into the economy scares more than one.

One of the most complicated referendums in Swiss history

These and similar financial concepts should dominate the Swiss before June 10, although for the time being polls say that 78% of Swiss citizens are not aware of how money is created. Despite this, in less than a month they will have to face one of the most complicated referendums, at least technically, of their democratic history . They have to decide if they support the introduction of what is called sovereign money.

That is, while in the East and the West the financial world seems to only have eyes for the cryptocurrencies and their revolution, the Swiss can cause a more powerful earthquake if they prohibit commercial banks the ability to multiply the money as they have done so far and leave that power exclusively to the Swiss central bank.Now the National Bank of Switzerland (BNS) represents only about 10% of the country’s monetary supply , while the other 90% is in the hands of commercial banks such as UBS or Credit Suisse, among others .

Scattered coinsWith this decision they would convert the Swiss monetary policy regulator into the only body with the capacity to create physical and electronic money and the decision of how and when new money is introduced into the economy would be left to the Swiss Government. In case the proposal goes ahead, the Swiss country would end what is known as fractional banking.

The origin of this query dates back to 2011, when the Modernizing Money Association (MoMo) was founded to make people aware of the aberration that banks can create unlimited money.

Although it has the support of organizations in the United Kingdom , they chose Switzerland as a battlefield. There it is easier to change the constitution , provided that more than 100,000 signatures can be collected in less than 18 months. They started in 2014 to promote what is known as the Vollgeld Initiative and in December 2015 they delivered 111,000 signatures to the Swiss Government to request consultation.

Vollgeld Initiative

The Vollgeld Initiative seeks to limit the activity of commercial banks in the world of loans to avoid crises like the one that occurred in 2008 and funding bubbles . They want to prevent huge amounts of fictitious money from roaming the world economy. Or at least, for the Swiss.

Thus, governments would never again have to rescue financial institutions . “The sovereign money in a bank account is completely safe because it is backed by the issuance of that same amount by the Central Bank,” they explain in their documentation.

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In search of some finances at the service of the real economy

In this way, they continue, “the financial industry will once again serve society and the real economy. Money and banking systems will no longer be involved in complexity, but will be transparent and understandable. ”

The decision that the Swiss must make on June 10 is not only complicated because many citizens must get up to speed on what exactly they should decide, it is also because it can significantly cut the credit in the country and because, if approved , could create a precedent dangers the rest of the world’s economies.

Fear of global contagion

As voting day approaches, the country’s financial institutions are reinforcing their opposition to the measure. The Federal Council, the parliaments and the Swiss National Bank (SNB) have opposed, as is also against the Association of Swiss Bankers . Tomas Jordan, president of the SNB, has told the Swiss press that “this initiative creates unrealistic expectations and that its application would have serious consequences for Switzerland”,

Among other things, it would reduce the volume of credit in the country and make it considerably more expensive. But the main focus of uncertainty what impact it would have on the rest of countries.

49% are against, but there is 16% undecided

Advocates assure that the change should not be noticed among classic customers and savers, and that at the technical level it would be similar to the process that already concentrated in the central banks the exclusivity of the creation of physical money.

For now, surveys give an advantage to those who defend the current system of fractional reserve, with 49% of respondents who opt for the ‘no’, 35% for the ‘yes’ and 16% who do not they are clear or do not have an opinion about it.