The Swiss Magic Money Tree

The Swiss hold regular referendums on lots of unlikely subjects as we know. Well there is one coming up in June on money.

They are voting on a so-called Sovereign Money system where it will be put to them that all new money in the state be created by the Central Bank. This is basically the same idea as that of Positive Money, which I’ve been rather critical of on these pages, as insisting that money creation is undertaken by an unelected bureaucratic body, when money destruction would be the realm of the elected legislature is not, I like to think, how democracy should work. Additionally the legislature would have to consider tax (or money destruction) as revenue, thereby unnecessarily and artificially limiting government expenditure.

But, although the change may not be sensible, the referendum at least acknowledges that money is created now by the central bank and is in no way limited. The Central Bank is never going to be short of money – the referendum is just to decide whether they should create it all rather than doing it together with private banks.

Surely this is a golden opportunity for our own opposition parties to talk about money. If even the staid and sensible Swiss know that there is a Magic Money Tree, why, I think they’d be entitled to wonder, doesn’t our Prime Minister?

Comments

  1. Graham -

    I’m not sure why you are happy for private banks to “create money” (through debits & credits) since they operate simply to make a profit, regardless of the public good, but are unhappy for the Central Bank, (which is surely independent only in theory) or perhaps a National Bank to do so, if the imperative was to operate for the public good.

    1. Peter May -

      Because I think it’s monolithic and likely to limit the money supply. Certainly I agree the current banks are rogues at best, but if we create local not for profit banks and/or cooperative banks we’ll have more banks and not all looking for the main chance. The rogue banks should also be prevented from lending into financial markets. So, in effect, I’d ‘impose’ more public good on the rogue banks.
      But perhaps most important is if you allow a Central Bank committee to do all the money creation off its own bat – and that IS the current Positive Money idea, then you are subjecting the legislature to the bankers’ control (as I suggest in the piece.)

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