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Swiss will vote on Nov. 30 for gold backed Franc

If the voters of Switzerland do choose to back their currency with gold I promise you that there will be MUCH more interest in the Swiss franc.

A gold backed currency? What a crazy concept. My bet is the market will love it. The banks will hate it, but overall the Swiss people will benefit. So will the non-Swiss who are paying attention now.

Switzerland yet again shows that it is the most sane nation-state on Earth.

(From ETF Daily News)

Later this year, on November 30, the good people of Switzerland will finally get an opportunity to make their voices heard. The Swiss Gold Initiative can be roughly stated in three parts:

1. The halting of all Swiss gold sales

2. The repatriation of all Swiss gold that is held in foreign vaults

3. Resume backing the Swiss Franc with gold, at a minimum level of 20%

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Switzerland devalued the currency

During the Great Depression of 08'-11' the Swiss central bank was forced to devalue the currency.

The way I understand it is that Switzerland has not backed the Franc directly since 1971 and the Bretton Woods default. They have always kept a minimum reserve and they state it publicly to maintain currency stability and faith. Swiss Francs are almost as good as gold and the Swiss will sell you physical gold which is safe from being pillaged.

"One resists the invasion of armies; one does not resist the invasion of ideas" Victor Hugo

DJP333's picture

Gold backed currency BUMP!

This would be momentous and possibly start the movement back to sound monetary policy worldwide. I hope the Swiss people can make this happen. There will definitely be push back from the bankers and the politicians. This is most definitely exciting news.

"It’s not pessimistic, brother, because this is the blues. We are blues people. The blues aren’t pessimistic. We’re prisoners of hope but we tell the truth and the truth is dark. That’s different." ~CW

Go Swiss!

Wouldn't be completely painless - the franc would likely take
a huge jump in value and hamper their ability to export.

Have to be a good thing overall/long term, though.

Wonder how Tina Turner is planning to vote?

tasmlab's picture

Question - Wouldn't savings increase and prices go down nominall

If the currency massively deflated (became more valuable), wouldn't:
- Existing cash on hand become more valuable
- Prices, nominally, for Swiss goods would go down as priced in Francs
- Existing inventories would be devalued compared to the original cost to produce them (in Francs)?

I guess the people with the third, existing inventories, would feel the most pain. But even if they get lower prices in Francs, those francs would still be able to buy more goods/supplies both domestically or internationally.

Wouldn't it be a wash for the transition?

I would debt holders would experience the greatest pain.

(I'm not criticizing, just asking. I truly don't know)

Currently consuming: Morehouse's "Better off free", FDR; Wii U; NEP Football

Yes. The only group that loses in a deflation are the debt

holders because the debts are fixed at a number without respect to current purchasing power.

Inventories won't be devalued in real terms, only on paper. Merchants will still get paid with something of the value they would have received before the transition. (but now that currency will hold its value better, rather than constantly losing it)

I also doubt existing cash-on-hand becomes more valuable, as it will more than likely have to be converted to the same value, but at a lower number on paper. Though as I just noted, what you currently hold in post conversion numbers will hold its real purchasing power better than what you have now.

Yes, but...

I'm not questioning your reasoning/explanation about inventories
& such, samadamscw.

It's oversimplifying, in the short run, anyway, to say that debt holders are
the only losers under deflation.

In the case of the Swiss, a big part of their economy is based on tourism
by foreign visitors. A strong franc is going to have a big impact on Switzerland's
affordability as a destination as well as the competitiveness of its exports.

This was the rationale for the Swiss going into quantitative easing in a big way three years ago:

Not trying to defend fiat currency or anything, but more along the lines of pointing
out how insidious the current system is, in that it penalizes countries (not to mention
companies and individuals) who try to behave responsibly.

I agree on your last point, and yes, it is a simplification, but

I disagree on the point of a 'strong currency being bad.'

There are other benefits in other areas that will more than make up for any short term discrepancies.

And any "strength" or "weakness" in a currency making anything more or less expensive is really short term. The market quickly adjusts the exchange rates so that parity of value resumes.

tasmlab's picture


As for cash on hand, I was thinking that they don't swap old bills for new during the transition, but just honor the old ones the same. If you had to trade them in at the bank (or post office whereever) than they would give you an adjusted amount back. Same with digital bank balances.

Currently consuming: Morehouse's "Better off free", FDR; Wii U; NEP Football

Perhaps. That will be up to how they decide to go about it and

what they consider the biggest logistical hurdles.