New Swiss Initiative Would Ban Fractional Reserve Banking

[Smaulgld]

A Swiss group, the Swiss Association for Monetary Modernization (SAMM) has gained the necessary signatures to force a ballot initiative, the Swiss Sovereign Money Initiative (SSMI), to change the Swiss constitution to outlaw fractional reserve banking in Switzerland.


https://smaulgld.com/swiss-sovereign-money-initiative/

 

[Origanalist]

They're just asking for a good bombing.

 

[John X]

This sort of hyper regulation and interference with free markets cannot possibly work.

 

[Occam's Banana]

They're just asking for a good bombing.

Yeah, well, who isn't ... ?

Doin' right ain't got no end.

 

[r3volution 3.0]

There's nothing wrong with fractional reserve banking.

The problem is central banking, especially with irredeemable paper money.

 

[dusman]

Pretty sad when Switzerland sounds more and more like the American I want vs. the America we get.

 

[Smaulgld]

They're just asking for a good bombing.

Had a similar reaction. But if you think about it - the proposal grants total control to the Swiss central bank -a bankers' ultimate dream-no competition
In the US it would mean the Fed -and its too big to fail shareholders would hold that exclusive power

 

[Smaulgld]

This sort of hyper regulation and interference with free markets cannot possibly work.

yes, while it attacks what some think is a fraudulent practice (fractional reserve banking) it grants the national bank the sole monopoly to create money

 

[Zippyjuan]

to change the Swiss constitution to outlaw fractional reserve banking in Switzerland.

Initiative does not get rid of fractional reserve banking.
http://www.worldeconomicsassociation.org/newsletterarticles/momo/

The aim is to give a governmental monetary authority the exclusive power to create money, both cash and current account holdings. Commercial banks would be prohibited from creating account money and restricted to give loans from money they have previously borrowed from customers.

Loaning out a percentage of deposits is by definition a fractional reserve banking system. US banks are already restricted to giving loans from money they have previously borrowed from customers (deposits).

Nor does it replace a central bank- as the first line there says.

The aim is to give a governmental monetary authority the exclusive power to create money, both cash and current account holdings

The sovereign money concept aims to establish a sovereign public authority with total control over the money supply, both cash and electronic money on current account holdings. This monetary authority would represent a fourth separate and largely independent section of the state besides the legislature, the executive and the judiciary. The monetary authority would be bound by law to expand the money supply according to the growth potential of the real economy. The money created by the monetary authority would be transferred to the Treasury and would come into circulation by public spending; thus, it would benefit the public purse and contribute to the reduction of national debt.

It also wants the government to decide who gets loans- based on "social priorities" and not fiscal reasons.

However, commercial banks decide which customers are granted loans and which investments are made according to their interest in maximizing their own profits. Whether an investment is socially desirable is not the decisive criterion for commercial banks. This way, investments serving the common good but not being profitable enough are not supported by the banking system and have to be financed by government spending that depends on tax revenues and public debt creation. Instead of financing long-term investments in the interest of society as a whole, commercial banks with their credit business support short-term financial speculation and over the last two decades have actually established a gigantic global casino beyond any public control.

Another problem that needs to be resolved in a sovereign money system is how to secure the independence of the monetary authority. Since governments generally seek to increase public revenue in order to enlarge their scope of action, they would be tempted to put pressure on the monetary authority to issue more money than the potential of the real economy and the principle of sustainable development in a given situation allow. In the same way as the independence of the judiciary is guaranteed today, the monetary authority’s independence from short-sighted political interests could be secured by an adequate institutional arrangement, which simultaneously warranted transparency in monetary decision-making and democratic accountability of those who rule the monetary system. The leaders of the monetary authority could be elected by the Parliament. A central aim of the sovereign money concept, after all, is to restore democratic control over the monetary system.

The leaders of the US Federal Reserve are nominated by the president and approved by Congress.

The overall proposal sounds an awful lot like the US Federal Reserve system.

 

[Smaulgld]

"Nor does it replace a central bank- as the first line there says."

no one said it did, indeed the article states that it hands sole power to the central bank to create money

 

[Smaulgld]

"The overall proposal sounds an awful lot like the US Federal Reserve system."

In some yes it does except the Fed has shareholders that are themselves creators of money, where as the SNB is not owned by private banks

 

[Origanalist]

"The overall proposal sounds an awful lot like the US Federal Reserve system."

In some yes it does except the Fed has shareholders that are themselves creators of money, where as the SNB is not owned by private banks

So the the Swiss are heading towards a US style banking system? Isn't that like saying communism hasn't worked because they just did a couple things wrong?

 

[Zippyjuan]

"The overall proposal sounds an awful lot like the US Federal Reserve system."

In some yes it does except the Fed has shareholders that are themselves creators of money, where as the SNB is not owned by private banks

The Fed is not owned by private banks. And banks cannot "create money". Loans are required to not exceed a certain percentage of deposits.

 

[Origanalist]

The Fed is not owned by private banks.

No, no, of course not.

 

[DamianTV]

There's nothing wrong with fractional reserve banking.

The problem is central banking, especially with irredeemable paper money.

I respectfully disagree, there is everything wrong with fractional reserve banking. Those with the power to count money that isnt there is the power to legally counterfeit. This is the conversion of Debt to Wealth, which only enables those with the printing power to benefit. For those at the bottom, it is a means of theft by value as opposed to theft by quantity.

Both fractional reserve and central banking are key control concepts to bankers where both need to be in place in order to utterly destroy a society. Funny how many different ways one can invent to wreck a nation instead of creating long term sustainable solutions, long term meaning hundreds of years, not hundreds of days.

 

[r3volution 3.0]

I respectfully disagree, there is everything wrong with fractional reserve banking. Those with the power to count money that isnt there is the power to legally counterfeit. This is the conversion of Debt to Wealth, which only enables those with the printing power to benefit. For those at the bottom, it is a means of theft by value as opposed to theft by quantity.

Both fractional reserve and central banking are key control concepts to bankers where both need to be in place in order to utterly destroy a society. Funny how many different ways one can invent to wreck a nation instead of creating long term sustainable solutions, long term meaning hundreds of years, not hundreds of days.

Fractional reserve banks can only increase the supply of fiduciary media by (a) lowering their reserve ratios, or (b) acquiring more base money. In a free banking situation, where there are no laws restricting competition between banks, no deposit insurance or "lender of last resort" insulating them from the effects of their poor decisions, and where the base money is gold, there is a limit to how low banks' reserve ratios can go, and there is no way for banks to obtain more base money except very gradually through newly-mined gold entering the system. In other words, in a free banking situation, there's a strict limit to the ability of fractional reserve banks to expand the money supply. The whole problem is government interference in the banking system, not fractional reserve banking.

 

[Madison320]

Fractional reserve banks can only increase the supply of fiduciary media by (a) lowering their reserve ratios, or (b) acquiring more base money. In a free banking situation, where there are no laws restricting competition between banks, no deposit insurance or "lender of last resort" insulating them from the effects of their poor decisions, and where the base money is gold, there is a limit to how low banks' reserve ratios can go, and there is no way for banks to obtain more base money except very gradually through newly-mined gold entering the system. In other words, in a free banking situation, there's a strict limit to the ability of fractional reserve banks to expand the money supply. The whole problem is government interference in the banking system, not fractional reserve banking.

I agree, as long as the banks are honest about their reserve ratios. Otherwise they should be prosecuted for fraud.

 

[r3volution 3.0]

I agree, as long as the banks are honest about their reserve ratios. Otherwise they should be prosecuted for fraud.

What do you mean exactly?

In a free banking situation, banks choose their own reserve ratios, on the basis of their own tolerance for risk.

If a bank overextends itself, and defaults on its liabilities to its depositors, that's not fraud, just stupidity.

...and it goes bankrupt, its assets get bought up by a more competent competitor, and the problem solves itself, as in any other industry.

 

[DamianTV]

What do you mean exactly?

In a free banking situation, banks choose their own reserve ratios, on the basis of their own tolerance for risk.

If a bank overextends itself, and defaults on its liabilities to its depositors, that's not fraud, just stupidity.

...and it goes bankrupt, its assets get bought up by a more competent competitor, and the problem solves itself, as in any other industry.

Devils Advocate post: In that case, I choose a 0.1% backing against my loans with an 85% interest rate. Yeah, that will work out very well for me, and fuck all my customers! I love it!

Give a man a gun and he can rob a bank. Give a man a bank and he can rob the world.

Fractional Reserve is one of the foundational points that enable the theft of value of currency (not money) and is the source of inflation. Just print up money as debt is introduced attached to each loan that borrows money into existence.

 

[r3volution 3.0]

Devils Advocate post: In that case, I choose a 0.1% backing against my loans with an 85% interest rate. Yeah, that will work out very well for me, and fuck all my customers!

If a bank charges too high an interest rate, it will lose its customers to a competing bank.

If a bank maintains too few reserves, it's vulnerable to a bank run.