Switzerland dismissed a proposal to radically change the way banks lend money, a victory for the financial establishment, including Swiss National Bank President Thomas Jordan.
Vollgeld, as the plan is known in German, was the latest in a string of national ballots over the past few years that critics argued were reckless and would make Switzerland unattractive for businesses.
Jordan became one of its most prominent critics, saying that it amounted to a “dangerous experiment.”
The sovereign money initiative would have ended the centuries-old system of fractional reserve banking by allowing only the central bank to create money and requiring checking accounts to be fully backed by assets that are a direct claim on the monetary authority.
Three-quarters of voters rejected it.
“The Swiss are known to be cautious people, especially in the realm of finance,” said Michael Hermann, a political scientist who heads Zurich-based research institute Sotomo.
As Vollgeld meant entirely uncharted territory, voters rejected it, given that “uncertainty is always poison for stability,” Hermann said.
The Swiss franc was down 0.4 percent to 1.16324 per euro at 9:24am yesterday as demand for haven assets eased and Italian bonds surged. That followed Italian Minister of Finance Giovanni Tria’s signal of commitment to the euro in a weekend interview.
Plebiscites and referendums are a feature of Switzerland’s political system, with votes on a variety of topics taking place several times a year.
Examples include a 2014 immigration vote that threatened to cancel a set of economically vital treaties with the EU, a proposal for universal basic income, a requirement that the central bank hold 20 percent of its asset in gold and a plan to tie the pay of corporate executives to their least-paid underlings. The latter three failed.
“There were various company headquarters of firms in America or England that asked their Swiss subsidiaries: ‘What exactly are they doing in Switzerland? How is this going to continue?’ Because this isn’t the first initiative,” said Ruedi Noser, a member of parliament for the Swiss Free Democratic Party.
“Switzerland would’ve been the only country in the entire world that would’ve gone for this experiment and global business doesn’t want a location where one is experimenting,” Noser said.
While polls had suggested that a rejection was likely, supporters mustering the 100,000 signatures necessary to put it on the ballot is testament to the distaste about the financial industry still palpable a decade after the financial crisis.
Although the crises was sparked by the collapse in 2007 of Lehman Brothers, Switzerland did not escape and was in 2008 forced to bail out UBS Group AG, its biggest bank.
Proponents of Vollgeld have said that by putting the central bank solely in charge of steering the amount of money in the economy, there would be more safeguards to prevent the kind of asset price bubbles that caused the 2008 financial crisis.
The movement, whose genesis can be traced back to the Chicago Plan of reforms after the Great Depression, has gained the most prominence in Switzerland, thanks to its direct democracy, but it has also found favor in other countries.
The UK’s Positive Money group said that the failed plebiscite constituted “the beginning of a global conversation about whether control of money creation should be in private or public hands.”
The London Metal Exchange (LME) discovered bags of stones instead of the nickel that underpinned a handful of its contracts at a warehouse in Rotterdam, the Netherlands, in a revelation that would deliver another blow to confidence in the embattled exchange. The amount of metal represents just 0.14 percent of live nickel inventories on the LME, worth about US$1.3 million at current prices, so the immediate effect on the metals markets is limited. However, the shock announcement has much wider implications. In an industry riddled with scandals, the LME’s contracts are viewed as unquestionably safe. The news that even a few of
Oil on Friday posted its worst weekly loss since the early months of the COVID-19 pandemic as banking turmoil poisoned investor sentiment. West Texas Intermediate for April delivery dropped 2.36 percent to US$66.74 per barrel, falling 12.96 percent for the week, the largest drop in almost three years. Brent crude for May delivery fell 2.32 percent to US$72.97, posting a weekly loss of 11.85 percent. The failure of Silicon Valley Bank and troubles at Credit Suisse Group AG drove investors from risk assets, with oil-options covering accelerating the sell-off. “Crude action this week reminded many of how quickly the commodity can be decimated by
Singapore pushed New York off the top spot for the strongest growth in residential rents in the final quarter of last year, fueled by a supply crunch and strong demand. The city-state saw annual rents jump 28 percent in the quarter from a year earlier, Knight Frank said in a report. New York followed with 19 percent growth, while London and Toronto took the third and fourth spots, a survey of prime residential rents across 10 cities showed. Singapore’s soaring rents — driven partly due to a lack of supply of new housing during the COVID-19 pandemic — have been a source of
US-based mobile chip designer Qualcomm Inc yesterday opened a manufacturing engineering and testing center in Hsinchu, expanding its presence in Taiwan. Qualcomm also expects to accelerate its purchases in Taiwan, which already rose to NT$240 billion (US$7.9 billion) last year, up from NT$90 billion five years earlier, and should hit NT$300 billion next year. The center is to provide services for the supply chain in the semiconductor industry, Roawen Chen (陳若文), senior vice president and chief supply chain and operations officer of Qualcomm, said at the facility’s inauguration ceremony. It is Qualcomm’s largest and most advanced engineering testing center outside of the company’s
RSS