The Swiss “Vollgeld” Initiative Revisited

Bloomberg has numerous offices around the world, many of which appear to have quite an independent streak, at least that is our impression. Readers who occasionally watch clips from Bloomberg’s Asia Edition are probably aware of this. One can often see in-depth interviews there with people who espouse views far from the mainstream and who are highly critical of governments and central banking, such as e.g. Dr. Marc Faber or Jim Rogers, to name two prominent ones.

 

logo_vollgeld-initiative_mit_Titel_laengs_2014_05
Logo of the Swiss “Vollgeld Initiative”  – the text reads: “for crisis-proof money: money creation solely through the central bank!”. The supporters of the initiative naively believe that the “profits” such a system would allegedly produce would be to “the sole benefit of citizens”. This naïve statolatry is as amusing as it is pitiable.

 

What must be stressed here is the “in depth” qualification – there is a big difference between e.g. CNBC offering 60 seconds of sound bites from Dr. Faber and a 20 minute interview with presenters who are themselves willing to engage in a bit of critical thinking. We are mentioning this by way of introduction, because Kuzman Iliev and Vladimir Sirkarov of Bloomberg TV in Bulgaria seem to be part of this somewhat more off-the-beaten-path tradition as well.

Recently they have done an interview with our friend Claudio Grass, the CEO of Global Gold in Switzerland on the topic of fractional reserve banking. Readers probably remember that there will soon be a referendum on fractional reserve banking in Switzerland, as the so-called “Vollgeld Initiative” (roughly translatable as “Fully Backed Money Initiative”) has garnered the required number of signatures.

The interesting thing about this initiative is that it is actually not led by free market supporters. On the contrary, the proposal comes from a bunch of socialists in close orbit around Karl Marx. It is therefore not surprising that the Swiss National Bank is far less opposed to the idea than it was to the gold initiative. The latter was painted in the starkest colors and said to be practically opening the doors to Hell, as it would actually have limited the SNB’s interventionist powers somewhat (even if not really by as much as it made out).

 

Warming Up an old Central Planning Idea Loved by Bureaucrats

By contrast to this, the Vollgeld Initiative is a warmed-up version of the so-called “Chicago Plan” originally proposed by the dreadful interventionist Irving Fisher and his colleagues, the forerunners of the Chicago monetarist school. As we have pointed out on a number of occasions in the past, largely thanks to Milton Friedman, the monetarists nowadays “define the borderline of respectable opinion on the political Right” to quote Hans-Hermann Hoppe. In other words, the ideas of the Chicago School represent the absolute maximum of support for the free market still considered acceptable by the establishment.

 

fisher_irvingUS economist Irving Fisher, of “stock prices have reached a permanent plateau” and later “debt deflation theory of the depression” fame. It is difficult to overstate how much harm many of the man’s ideas have done, but this is a topic for another day. He continues to be widely admired, in spite of his pronounced tendency to make spectacularly wrong forecasts.

Photo via yalealumnimagazine.com

 

We agree with many of the views Friedman espoused, but it would be a grave error to overlook his failings. For instance, we decidedly part ways with Friedman on questions of economic method. He was a positivist, and the empirical methods of the natural sciences are simply not suitable to a social science like economics, something that can be shown easily enough. In fact, even in the natural sciences the line between the empirical and conceptual approach appears to become increasingly blurred these days.

Worst of all though, in spite of his well-known support of the free market, Friedman was dedicated to central planning of money (not to mention that he also supported the welfare state and progressive taxation). For reasons we cannot explain, he seemed to think that while the market would be best able to deal with almost everything, money was somehow an exception to the rule. The monetary system required steering by a Soviet of “wise men” (of course, Friedman is also well known for a book he wrote with Anna Schwartz, the topic of which is how the plans of this Soviet totally failed in the 1930s. This book is actually what we would call heaping error upon error – not surprisingly, monetary crank Ben Bernanke is a big fan of it).

 

FriedmanMilton Friedman – known as a supporter of the free market, but one who incongruously favored a centrally planned monetary system (note: finger-wagging alert!)

Photo via mises.ca

 

In a nutshell, the Chicago plan is all about centralizing the monetary system even further. While we are in perfect agreement with scholars like Murray Rothbard, Hans-Hermann Hoppe, Guido Huelsmann, Jesus Huerta de Soto, Joseph Salerno and many others that fractional reserve banking is essentially fraudulent – it represents a multi-pronged violation of property rights that flies into the face of legal traditions since antiquity – we still think it is less harmful than reserving  money creation powers exclusively to a central planning agency.

It is possible to show both theoretically and empirically that a free banking system that tolerates fractional reserve banking does a lot less economic harm than a banking cartel led by a “lender of last resort” with de facto unlimited money creation abilities. As we mentioned above, we are not surprised that the SNB calls the “Vollgeld” initiative “interesting” and offers at best token resistance to it. Since it promises to increase the powers of the monetary bureaucracy, one can hardly expect said bureaucracy to oppose it.

 

swiss-national-bank-with-caption_largeThe imposing building housing Switzerland’s monetary central planning agency.

Photo credit: Blitzkoenig

 

Here is the video of the interview Bloomberg TV Bulgaria did with Claudio Grass on the Swiss initiative. Even though eight minutes is not really enough to fully do the topic justice, Claudio does get the most important points across. To their credit, Messrs. Iliev and Sirkanov happily refrain from interrupting his train of thought with silly and loaded questions. This is a refreshing contrast to what one often sees elsewhere when controversial ideas are discussed in the mainstream media, where presenters often behave as if they thought their main job consisted of assassinating all messengers critical of the system.

 

Claudio Grass on Bloomberg TV Bulgaria on fractional reserve banking and the Swiss Vollgeld Initiative

 


 

Emigrate While You Can... Learn More

 
 

 
 

Dear Readers!

It is that time of the year again – our semi-annual funding drive begins today. Give us a little hand in offsetting the costs of running this blog, as advertising revenue alone is insufficient. You can help us reach our modest funding goal by donating either via paypal or bitcoin. Those of you who have made a ton of money based on some of the things we have said in these pages (we actually made a few good calls lately!), please feel free to up your donations accordingly (we are sorry if you have followed one of our bad calls. This is of course your own fault). Other than that, we can only repeat that donations to this site are apt to secure many benefits. These range from sound sleep, to children including you in their songs, to the potential of obtaining privileges in the afterlife (the latter cannot be guaranteed, but it seems highly likely). As always, we are greatly honored by your readership and hope that our special mixture of entertainment and education is adding a little value to your life!

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

One Response to “Fractional Reserve Banking – an Interview with Claudio Grass”

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • Gold Price Skyrockets in India after Currency Ban – Part III
      When Money Dies In part-I of the dispatch we talked about what happened during the first two days after Indian Prime Minister, Narendra Modi banned Rs 500 and Rs 1000 banknotes, comprising of 88% of the monetary value of cash in circulation. In part-II, we talked about the scenes, chaos, desperation, and massive loss of productive capacity that this ban had led to over the next few days.   Indian prime minister Narendra Modi – another finger-wagger, as can be seen in this...
  • Gold Price Skyrockets in India after Currency Ban – Part IV
      A Market Gripped by Fear The Indian Prime Minister announced on 8th November 2016 that Rs 500 and Rs 1,000 banknotes would no longer be legal tender. Linked are Part-I, Part-II and Part-III updates on the rapidly encroaching police state. The economic and social mess that Modi has created is unprecedented. It will go down in history as an epitome of naivety and arrogance due to Modi’s self-centered desire to increase tax-collection at any cost.   Indian jewelry...
  • A Note on Gold and India – What is Driving the Gold Price?
      Hidden Motives It is well-known that India's government wants to coerce its population into “modernizing” its financial behavior and abandoning its traditions. The recent ban on large-denomination banknotes was not only meant to fight corruption.   Obviously, this very bad Indian has way too much cash. Just look at him, he looks suspicious! Photo via thenewsminute.com   In fact, as our friend Jayant Bhandari has pointed out, fresh avenues for corruption ...
  • Gold Price Skyrockets in India after Currency Ban – Part V
      A Brief Recap India's Prime Minister announced on 8th November 2016 that Rs 500 and Rs 1,000 banknotes will no longer be legal tender. Linked are Part-I, Part-II, Part-III, and Part-IV, which provide updates on the rapidly encroaching police state Expect a continuation of new social engineering notifications, each sabotaging wealth-creation, confiscating people’s wealth, and tyrannizing those who refuse to be a part of the herd, in the process destroying the very backbone of the...
  • Attaining Self-Destruct Velocity
      Bad Monday Some Monday mornings are better than others.  Others are worse than some.  For one Amazon employee, this past Monday morning was particularly bad. No doubt, the poor fellow would have been better off he’d called in sick to work.  Such a simple decision would have saved him from extreme agony.  But, unfortunately, he showed up at Amazon’s Seattle headquarters and put on a public and painful display of madness.   Good-bye cruel world! On this our planet,...
  • All Aboard! Trump’s Express Train to the Future
      Free Money! BALTIMORE – Last week, the Dow punched up above 19,000 – a new all-time record. And on Monday, the Dow, the S&P 500, the Nasdaq, and the small-cap Russell 2000 each hit new all-time highs. The last time that happened was on the last day of December 1999.   Ironically, two events that were almost universally expected to trigger large stock market declines were followed by quite rapid and strong gains. Would the market have fallen if Hillary Clinton had won...
  • India's Currency Debacle – An Interview with Jayant Bhandari
      A Major Crisis Last week Jayant Bhandari related the story of the overnight ban of certain banknotes in India under cover of “stamping out corruption” (see Gold Price Skyrockets In India after Currency Ban Part 1 and Part 2 for the details).   Banned 500 rupee banknotes   The problem is inter alia that the sudden ban of these banknotes has hit the Indian economy quite hard, given that 97% of all transactions in the country are cash-based. Not only that, it has...
  • Will the Swamp Swallow Trump?
      Permanently Skewed TRUMP HOTEL, New York – Trump’s rambling army – professionals, amateurs, camp followers, and profiteers – is marching south, down the I-95 corridor. There, on the banks of the Potomac, it will fight its next big battle.   Lieutenants in Trump's army: Bannon, Flynn & Sessions Photo credit: Drew Angerer / AFP   Here at the Diary, we do not like to get involved in politics. But this is a special time in the history of our planet – a...
  • There Are Two Types of Credit — One of Them Leads to Booms and Busts
      Stumped by the Bust In the slump of a cycle, businesses that were thriving begin to experience difficulties or go under. They do so not because of firm-specific entrepreneurial errors but rather in tandem with whole sectors of the economy. People who were wealthy yesterday have become poor today. Factories that were busy yesterday are shut down today, and workers are out of jobs.   What has caused the bust? The modern-day economic orthodoxy continues to be unable to provide...
  • Gold Bull Market Remains Intact – Long Term Fundamentals Outweigh Short Term Market Gyrations
      A Strong First Half of the Year, Followed by Another Retreat In early 2016 gold had a big bull run. The precious metal rose close to 25% this year, pushed higher in a summer rally that peaked on July 10th. Gold experienced a bumpy ride over the remainder of the summer though, as investors became increasingly concerned about a potential rate hike by the Federal Reserve. Uncertainty returned to gold market and has intensified further since then.   Initially, gold rallied sharply...
  • Too Early for “Inflation Bets”?
      The Trump Trade After 35 years of waiting... so many false signals... so often deceived... so often disappointed... bond bears gathered on rooftops as though awaiting the Second Coming. Many times, investors have said to themselves, “This is it! This is the end of the Great Bull Market in Bonds!”   The long bond's long cycle – red rectangles indicate when the post 1980 bull market was held to be “over” or “over for sure” or “100% over”, etc.  We have...
  • US True Money Supply Growth Jumps, Part 1: A Shift in Liabilities
      A Very Odd Growth Spurt in the True Money Supply The growth rates of various “Austrian” measures of the US money supply (such as TMS-2 and money AMS) have accelerated significantly in recent months.  That is quite surprising, as the Fed hasn't been engaged in QE for quite some time and year-on-year growth in commercial bank credit has actually slowed down rather than accelerating of late. The only exception to this is mortgage lending growth - at least until recently. Growth in...

Austrian Theory and Investment

Support Acting Man

Own physical gold and silver outside a bank

Archive

j9TJzzN

350x200

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com