Swiss referendum on fractional reserve banking

[psionl0]

A Swiss group, Monetary Modernization, has collected 100,000 signatures calling for an end to fractional reserve banking. This is sufficient to force a referendum on the matter.

It is unclear if the full reserve banking proposal would be limited to transaction accounts or also apply to savings accounts but only the Swiss National Bank would be permitted to create the country's money.

Raffael Wuethrich, a spokesman, said his group would formally hand over the 100,000 notarized signatures to federal administration officials in Berne on Dec. 1. He added it could take as long as five years before the measure goes to voters.

"Banks would no longer be able to create their own money when they extend credit," Wuethrich said, adding such a system would minimize the potential for a banking system collapse as all money would be backed by the Swiss National Bank.

http://uk.reuters.com/article/2015/10/31/uk-swiss-sovereign-money-idUKKCN0SP0FW20151031

 

[The Central Scrutinizer]

I wouldn't bet any money on it passing.

 

[Francesca R]

Banking's not very important to the Swiss economy I'm sure it could just get out of the business and do fine.

 

[psionl0]

I wouldn't bet any money on it passing.

I'm guessing that you wouldn't have bet that 100,000 signatures were possible either.

This pro-cyclical banking system is no longer sacrosanct.

 

[tuco]

From the article:

Critics counter such radical reforms have negative consequences, including putting public money at risk by making the central bank the most important creditor of commercial banks and by increasing potential for political favouritism.

"The central bank would have to evaluate the lending practices of banks and the allocation of credit to different sectors of the economy," wrote researchers from Bank J. Safra Sarasin this week. "Political meddling in the credit allocation process is very likely and often results in directed loans to politically well-connected clients."

Well yes, could we get some analysis on this? Pros and cons, how they weight up in model close to reality. Put something up researcher, numbers and such. Opinions are nice, more so from researcher but still they are opinions.

 

[psionl0]

Well yes, could we get some analysis on this? Pros and cons, how they weight up in model close to reality. Put something up researcher, numbers and such. Opinions are nice, more so from researcher but still they are opinions.

As I pointed out in the OP, we have yet to see the details of what might go to the referendum.

THIS THREAD offers some details about how a full reserve banking system might work.

 

[tuco]

As I pointed out in the OP, we have yet to see the details of what might go to the referendum.

THIS THREAD offers some details about how a full reserve banking system might work.

Very good, will look into it. In general, I am fan of direct democracy and one of the biggest arguments against it, I get to hear, are arguments similar to the one researcher was quoted in OP. It makes sense but it does not have data. The Swiss way is a case study for me or data. And while this topic is lets say more academic than say topic of minarets (is it?) it will be interesting to see how this turns out.

 

[catsmate]

I'm guessing that you wouldn't have bet that 100,000 signatures were possible either.

Then you really don't understand Swiss politics.
For example in 2014 the country had twelve referenda, nine of which were EV based (and two Federal counter-proposals). It's not difficult for a group to propose one, just look at the goldbuggery silliness of that year.

This pro-cyclical banking system is no longer sacrosanct.

 

[psionl0]

Then you The Central Scrutinizer really doesn't understand Swiss politics.

ftfy.

 

[catsmate]

ftfy.

Sigh. Before continuing with your puerile silliness I suggest you look at the ease with which an EV can be carried out in Switzerland; 2014 say, amongst others, the anti-abortion, anti-immigration and goldbug fringes manage this none too difficult feat.
Should "Monetary Modernization" actually go to votation then it will fail.

 

[psionl0]

Should "Monetary Modernization" actually go to votation then it will fail.

According to what I quoted in the OP, that is 5 years from now. That is plenty of time for the public to realize that questioning the wisdom of the existing banking system is not just something that "kooks" do - especially if there is yet another banking crisis or two along the way.

Whether the referendum ultimately passes or fails, the sanctity of the current banking system will continue to be questioned.

 

[The Central Scrutinizer]

I'm guessing that you wouldn't have bet that 100,000 signatures were possible either.

This pro-cyclical banking system is no longer sacrosanct.

You can get 100,000 idiots to sign anything. 90% of the people who signed it don't even understand what they were signing.

 

[psionl0]

You can get 100,000 idiots to sign anything.

You say that now .....

 

[tuco]

I think it was more like 63.72%, idiots.

 

[Puppycow]

This pro-cyclical banking system is no longer sacrosanct.

You actually think this would be a good idea?

https://en.wikipedia.org/wiki/Economy_of_Switzerland#Banking

In 2003, the financial sector comprised an estimated 11.6% of Switzerland's GDP and employed approximately 196,000 people (136,000 of whom work in the banking sector); this represents about 5.6% of the total Swiss workforce.[32]

Currently an estimated 28 percent of all funds held outside the country of origin (sometimes called "offshore" funds) are kept in Switzerland.[35] In 2009 Swiss banks managed 5.4 trillion Swiss Francs.[36]

I wonder what implications this reform would have for the Swiss banks. I don't really pretend to know as I'm not an expert in these matters. I'm guessing that the banks themselves will be against the idea though.

Another question would be: is there a middle ground? Perhaps a 20% reserve requirement, which would be much stricter than the current international standard of 8% under the Basel III accord? 30%? Why jump suddenly to 100%

BTW, where do people and businesses who need loans get loans under such a regime? Other than from, say, foreign banks. Would the interest rates on these loans be reasonable? Again, I don't claim to be an expert, so I'm asking.

 

[psionl0]

You actually think this would be a good idea?

https://en.wikipedia.org/wiki/Economy_of_Switzerland#Banking



I wonder what implications this reform would have for the Swiss banks. I don't really pretend to know as I'm not an expert in these matters.

Full reserve banking could only make the Swiss Franc more stable. It is possible that the SNB might have to print more Francs to keep up with the currency wars but that doesn't seem like a negative to me.

I'm guessing that the banks themselves will be against the idea though.

Obviously! In the 1930s a full reserve proposal known as the Chicago Plan (https://en.wikipedia.org/wiki/Chicago_plan) was suggested as a way out of the Great Depression. This proposal was supported by prominent economists of the time including Milton Friedman. Needless to say, the banks opposed the plan and they won out in the end.

Another question would be: is there a middle ground? Perhaps a 20% reserve requirement, which would be much stricter than the current international standard of 8% under the Basel III accord? 30%? Why jump suddenly to 100%

BTW, where do people and businesses who need loans get loans under such a regime? Other than from, say, foreign banks. Would the interest rates on these loans be reasonable? Again, I don't claim to be an expert, so I'm asking.

Again, the details are still up in the air but full reserve proposals (eg see http://positivemoney.org/our-proposals/) generally intend full reserve to apply to checkable deposits (transaction accounts) only. Money deposited into savings accounts (eg term deposits or NOW accounts) could still be lent out.

In the most extreme proposal (full reserve on all types of accounts) the banks would have to borrow from the SNB to make loans. Of course, the banks wouldn't offer interest bearing accounts if they couldn't profit from them.

 

[catsmate]

You can get 100,000 idiots to sign anything. 90% of the people who signed it don't even understand what they were signing.

You say that now .....

Take a look at some of the previous EV initiated referenda. This lunacy is in good company.

Full reserve banking could only make the Swiss Franc more stable.

Evidence?

Obviously! In the 1930s a full reserve proposal known as the Chicago Plan (https://en.wikipedia.org/wiki/Chicago_plan) was suggested as a way out of the Great Depression. This proposal was supported by prominent economists of the time including Milton Friedman. Needless to say, the banks opposed the plan and they won out in the end.

With good reason, there are several critiques of Soddy's ideas; I suggest you study them.

Again, the details are still up in the air

Yeh! Let's replace our banking system with....something.

 

[Sceptic-PK]

Of course, the banks wouldn't offer interest bearing accounts if they couldn't profit from them.

No, banks wouldn't offer any accounts if they couldn't profit from them.

 

[catsmate]

No, banks wouldn't offer any accounts if they couldn't profit from them.

Exactly.

 

[psionl0]

With good reason, there are several critiques of Soddy's ideas; I suggest you study them.

Who's "Soddy" and why do I care?

Yeh! Let's replace our banking system with....something.

That's a pathetic argument. I prefer to see the detail before I form an opinion about it.