• Politics

Two proposals about money

31.07.2018 – Jürg Müller

One concerned sovereign money, the other gambling. One was rejected, the other approved. The Swiss people do not want the National Bank to be solely responsible for creating money. But they approved the new Federal Act on Gambling.

The debate all over the country and in the media was certainly interesting, but it was also very taxing. Many people would have gained a better understanding of how our monetary system works. However, the economic and monetary policy arguments failed to persuade the majority to switch to a sovereign money system. The sovereign money initiative was rejected on 10 June by 75.7 % of the electorate and every canton. The initiative’s authors wanted to make the National Bank solely responsible for issuing not just banknotes and coins – which make up the smallest proportion of money – but all forms of money. Today, electronic money and book money are created by commercial banks through the issuing of credit. The group behind the initiative wanted to prevent them from doing so in future.

They argued that sovereign money would provide a more secure financial system. Sovereign money would have been withdrawn from the lending cycle. The banks would no longer have had customer deposits on their balance sheets and would only have been allowed to manage them. This would have been “real money” and not part of bankruptcy assets in the event of a banking crisis. Loans could only have been issued with money specially made available by savers, other banks and the National Bank.

Opponents contended that this was a dangerous experiment for the Swiss financial centre, was unprecedented worldwide and would have incalculable consequences. The creation of money by the banks is already limited by tightened regulations and provisions on equity capital and minimum reserves, while customer deposits are also protected up to 100,000 Swiss francs. The Federal Council, Parliament, industry, the banks and all the major political parties rejected the popular initiative. The initiative’s authors, various economists and political activists, lacked prominent figureheads and were politically hard to pin down. Some left-wing politicians showed a degree of sympathy for the issue. But even SP National Councillor and economics expert Susanne Leutenegger Oberholzer welcomed the outcome as she believed the sovereign money initiative would have been the wrong solution to a genuine issue – the need to make the financial system more secure.

Foreign online casinos blocked

The debate on the new Gambling Act took on an incredible dynamic. The law’s central point was the legalisation of online casino games – though only Swiss operators would receive licences, whereas those abroad would be blocked. Youth parties from right across the political spectrum called the referendum against the bill and started an intense debate about the fundamental principle of blocking content on the internet. The youth parties were supported by the FDP, the Greens, the Green Liberals and the BDP, who also joined the no campaign.

Those opposed to the law argued that it was tantamount to internet censorship. They warned of the dangers of blocking in other areas. Switzerland would obstruct the path to the digital future. Supporters asserted that this was a special case that would not set a precedent for further online restrictions. It was a matter of allowing old-age and survivors’ insurance, cultural societies and sports clubs to continue benefiting from casino gambling. Opening it up to non-Swiss operators on the internet would have seen some of the money go abroad. Most of the electorate were clearly won over by these arguments. Many people also took exception to the fact that the referendum was supported by a 500,000 Swiss franc contribution from foreign gambling operators.