Swiss ‘vollgeld’ referendum seems to have been as much a fraud as Brexit

I understand that Positive Money’s (PoMo) replacement book on ‘Modernising Money’ has been cancelled and that they are refocussing in favour of research and shorter campaigns such as that which endeavours to stop further sell-off of the Royal Bank of Scotland and others like the report as to how and why the Bank of England should go green.

Though this should still get people to think about money, my personal view is that Positive Money should still have a basic, clear view of how fiat money works. Isn’t that what their name is all about? Now they seem to be giving prominence to the New Economics Foundation’s ‘Where does Money Come From?’ although their review says the book is often muddled! (Pots and kettles come immediately to mind.)

Having said all that there is an article regarding PoMo’s ‘Sovereign Money’ from the post-mortem on the Swiss ‘Vollgeld’ (literal translation ‘full money’ – so I think we may suggest that it means, in English parlance, ‘full reserve banking’ of the type that Positive Money used to suggest) referendum of a year ago:

In the build-up to this poll, the Swiss National Bank (SNB) tailored their statements on credit creation based on their audience: when speaking to the public, the SNB chose to promulgate an outdated “loanable funds” model of money creation, while it adopted an endogenous theory of credit creation when speaking to market participants. This served to mollify both audiences, reassuring them of the ability and sophistication of the SNB…

At the SNB annual General Shareholders Meeting in April 2018, Governor Thomas Jordan was verbally confronted by two members of the audience who demanded Jordan explain how money is created – Jordan’s understanding of credit, they argued, was flawed and antiquated. Faced with this line of questioning, Jordan rebutted that banks use sight deposits from other customers to create loans and credit. The audience members pushed back in disagreement, but Jordan did not waver…..

However, only months earlier, Governor Jordan told a different story in a speech delivered to the Zürich Macroeconomics Association. Facing an audience of economists and market professionals, Jordan had embraced a portrayal of money creation that is more modern but starkly opposed to the more folk-theoretical, or “textbook” view. Jordan described how “deposits at commercial banks” are created: In the present-day financial system, when a bank creates a loan, “an individual bank increases deposits in the banking system and hence also the overall money supply.” This is the antithesis of the folk theory offered to the public, presenting a glaring contradiction.

The article mentions with unsurprising disapproval this duplicity. And indeed there is apparently an ongoing legal case about this basic point by the proponents of the Vollgeld initiative.

Shades, I fear, of Brexit. But also indicative of the ignorance and divisiveness of the issue itself.

But, going back to Positive Money, the Vollgeld supporters are, I understand, on record as saying that money could be both spent and lent by a Central Bank. So I’m forced to presume that unless they wanted the government to be subservient to the Central Bank, then, in fact that means that the government creates money by instructing the Central Bank to create it into existence and there is a free reign for the Central Bank to allow money creation for every request from a private bank.

What does this mean?

It means that actually this was a referendum on basic MMT with the exception that private banks have no free reign to lend money – they have to gain approval from the Central Bank.

That is basically, I’d suggest, government instructed, Central Bank direction.

That is just what I would argue that we now need.

If that is the case then it is pretty disastrous that the Swiss electorate, on a fairly low referendum turnout of about a third, were also clearly and blatantly misinformed on something we all find quite difficult to comprehend, but which, once clearly understood, I’d submit that no one could consider to be anything other than entirely sensible.

No wonder there is a legal challenge.