The Swiss government has announced that it will hold a referendum on whether to spruce up its laws forbidding private banks from issuing money after the widespread use of electronic banking has allowed the original proscription to be bypassed.
The referendum—sparked by a popular movement in Switzerland known as the “Vollgeld Initiative” (the “real money initiative”)—will be held after a petition demanding the move attracted over 100,000 signatures. In terms of the Swiss constitution, any public petition which attracts that number or more signatories must be put to the vote and, if passed, enacted into law.
If passed, the proposed legal amendment will specifically grant sole power to create money in the financial system to the state-owned central bank, and will ban commercial banks from creating money.
This will, the campaign group said, limit financial speculation by requiring private banks to hold 100 percent reserves to guarantee all their deposits. In effect, this will outlaw what is known as “fractional banking” through which banks “loan” out more money than they actually have by only holding a tiny portion of the money they claim to have in circulation.
“Banks won’t be able to create money for themselves anymore, they’ll only be able to lend money that they have from savers or other banks,” the campaign group says on its website.
Although an 1891 law grants the state bank the sole right to issue money, the advent of electronic banking in particular has allowed all banks to bypass this law. Most people with deposits never actually see the cash they have in the bank, and accept the electronic printout or online figures as an accurate representation of the cash they hold in the bank.
Very few banks however actually have that amount of cash as represented in these figures on hand, using the “fractional banking” scam to cover this shortfall—and always hoping that all the depositors will never simultaneously ask for their cash. When that has occasionally happened in the past, it has led to what is known as a “run on the banks” and the subsequent closure of the banks in question after they are unable to give every depositor their full cash deposit back.
The referendum proposed as the “Sovereign Money Act” would give the Swiss National Bank a monopoly on physical and electronic money creation, “while the decision concerning how new money is introduced into the economy would reside with the government.”
According to the campaign group, over 90 percent of the money in circulation in Switzerland now exists in the form “electronic” cash created by private banks, rather than the central bank.
“Due to the emergence of electronic payment transactions, banks have regained the opportunity to create their own money. The decision taken by the people in 1891 has fallen into oblivion.”
* The government of Iceland—the scene of a banking collapse caused by an extended fractional banking swindle—is currently also investigating the possibility of formally abolishing the creation of “electronic money” and a specific end to the fractional banking system.