sovereign money

Swiss referendum would change how banks create money

Schweizer Franken
What're you looking at? Source: DPA

Outside, Lake Zurich glistens peacefully in the sunshine, but it isn’t nearly as idyllic in the oldest think tank in Switzerland. The Gottlieb Duttweiler Institute is hosting a conference called “Our Money, our Banks, our Country.” What began as a polite exchange of arguments ends in a heated debate. “The sovereign money initiative is a complete mess,” said Basel economist Aleksander Berentsen. “You don’t know what you’re talking about,” replied a spectator.

In Switzerland, money is always dead serious.

The spat stems from a June 10 referendum that will ask the Swiss if they would like to reform their monetary system and become a guinea pig in a radical economic experiment: Can a monetary system function if only the central bank alone creates money? The referendum would allow only the country’s central bank to create money and outlaw a basic pillar of global banking: lending money based on the cash deposited in their coffers. As things stand today, the project has little chance of succeeding in what is arguably the world’s banking capital.

At the conference on Lake Zurich last week, Katharina Serafimova supported the referendum, known as the sovereign money initiative. “The sovereign money system would lead us to a sustainable society once again,” said Ms. Serafimova, a lecturer at the Institute for Banking and Finance at the University of Zurich. Opponents of sovereign money, on the other hand, warn against a collapse of the financial system. The initiative is “one of the most damaging initiatives we have ever had to vote on,” said economist Berentsen.

As the first country to vote on such a monetary system, the country is attracting global attention – even the Deutsche Bundesbank, Germany’s central bank, has included the topic in a Wednesday conference on cash. In essence, it is a question that even economists have been neglecting for a long time: How do we make our money? They don’t mean coins and bills. They mean the electronic tender that changes hands much more quickly, and in much larger sums.

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