Positive Money: Will Switzerland be the first country in the world to introduce a Sovereign Money System?

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In June 2018 Switzerland will hold a referendum on its national constitution. The proposal, known as the Vollgeld Initiative (VGI), would transform the Swiss money and banking system, putting an end to private banks’ ability to create money.

Positive Money researcher, Matt Lyons, joined a group of global experts in Switzerland earlier this month to find out what they think about the vote. Matt reports back on the event below.


On 5th February 2018, the Gottlieb Duttweiler Institute (GDI) hosted the ‘Our Money, Our Banks, Our Country’ conference to debate the referendum. The structure of the day included presentations from global experts, a panel on the current system, a panel focussed on VGI, and a final panel with all speakers engaged in a fierce debate moderated by Economist and expert on monetary policy, Uli Kortsch. With around 300 total attendees, the event was a mixture of local students, international academics, bankers, lawyers and the Swiss voting public.

The day began with an introduction from the CEO of the GDI and an acknowledgement of the common ground in the room: an acknowledgement that the current monetary system is broken.

Global Outlook and the case for reform

“The world economy is on a debt treadmill and this turns financial fragility into a permanent feature of our economies”

Martin Wolf, Chief Economics Commentator at the Financial Times, kicked the day off by discussing the powerful aftermath of the 2008 crisis, the lost decade of growth and the gloomy GDP forecasts for the next 5 years.

Growing concern about the possible interactions of rising inflation, higher interest rates, high leverage and elevated asset prices – for all of which the debt-driven monetary system is a big factor – is strengthening the case for reform. Fundamentally, a highly-leveraged banking system that bears credit quality, interest rate and maturity risks is a source of systemic instability. Further opening discussions questioned the current monetary system. Presentations touched on the source of money creation, policy responses such as QE and negative interest rates, banking instability, the reasons behind the exponential increase in debt levels, and the feasibility of system change.

With the scene set to discuss monetary reform, the rest of the day centred on the Swiss referendum. Those on the programme Representing Vote ‘Yes’ were Sergio Rossi from the University of Fribourg, Katharina Serafimova from the University of Zurich, and Positive Money advisory board member, Joseph Huber. Also voting ‘Yes’ were respected economists, Richard Werner, Larry Kotlikoff, and William White.

The current system isn’t working

Serafimova drew parallels between the current financial system and environmental degradation, and between hierarchy and the concentration of wealth. She argued that the VGI offers an opportunity to bring sustainability back into the financial system. “Big banks equal speculative lending, small banks equal productive lending,” Richard Werner said, proposing a movement towards smaller banks and citing examples in German and China where green investment is much higher.

Kotlikoff stressed that the likelihood of future crises has not diminished due to the systemic risks posed by high debt levels and the opaque nature of large banking organisations. Despite supporting the VGI, Kotlikoff advocated a more radical system change to turn banks into mutual funds, stating: “if banks can’t gamble, they can’t fail”. White echoed other speakers’ concerns that the underlying system is deeply unstable and was sceptical that regulation would be able to improve transparency. White found the VGI presented the radical change necessary but warned that resistance would be strong.

A more stable and equitable future

Huber presented the benefits of a movement towards a Sovereign Money System: greater financial stability and a considerable one-off profit (known as ‘conversion seigniorage’) Switzerland would receive from issuing the supply of new Sovereign Money to replace the old bank credit-based money.

Those representing Vote ‘No’ were: Economics editor, Jürg Müller, Ruedi Noser, a Member of the Council of States, Switzerland, and Aleksander Berentson from the University of Basel. Noser asked “what is the problem that this referendum will solve?” – the answer he took to be a reduced risk of bubbles. However, the detail of the VGI itself suggests that this might not be achieved. Noser also feared that the reforms would place “too much trust in the hands of politicians.”

The ‘No’ camp also asked what would happen to the Swiss Franc. The VGI proposes a 2-year implementation period, which Berentson argued would lead to currency speculation and damage the economy. Berenston argues that the Franc exchange rate would strengthen, causing exports to drop, which would prompt businesses to switch currency, and the Franc to collapse.

The heat was turned up for the final debate. When the debate was opened to the floor, tensions ran high. An audience member claimed that the Vote ‘No’ camp do not understand the initiative. After 15 minutes of fierce debate Berentson, exasperated, stated: “we will not be an international experiment.” Before the debate was out the VGI had been conflated with ‘paternalism’, ‘communism’ and those who don’t understand how the system works.’

Change is coming

As it stands currently, the initiative has little chance of succeeding. However, the conference itself was evidence of how far the argument has progressed in recent years, with numerous examples given of how things have changed, post-crash. With unanimous agreement that the current system is broken, even among those against the VGI, there is clear appetite for change.

The audience was asked to vote at the start and end of the day whether they would vote ‘Yes’ or ‘No’ in favour of article 99. The day started with around 52% for and ended with 58%. Regardless of the result of the referendum, excitement for monetary reform is growing fast.

More information about the conference, speakers and the GDI can be found here

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