Switzerland is voting on a radical change to the way banks work this weekend

And you thought you had the most fun weekend plans.

We're still rocking from the one measly referendum we had – Switzerland, on the other hand, are pros, averaging nine a year. They're having one this Sunday, and it's on a pretty radical proposal about money and banks.

What it means: Warning: this gets economics-y. Most banks work by 'fractional reserve banking' – which basically means as long as they still hold a 'fraction' of what people have deposited in their bank as a 'reserve' (geddit), they can make loans totalling way more than they've actually got (with a nice chunk of interest on top).

That works out just fine as long as a) they keep tabs on it all, b) they make sure not to lend loans of money they don't have to people who can't pay it back and c) people don't all come back and ask for their deposits at once.

Sadly, all of the above sometimes goes wrong, and it gets 2008-crash-style ugly. Campaigning groups in Switzerland want a new system, where banks are only allowed to lend out as much as they hold in deposits, what they get from trading stocks and shares (i.e. parts of a business), or what the central bank gives them.

The only people who could 'create' money by making loans with cash they don't have would be the central bank (like the Bank of England over here).

All the big dogs are against it in Switzerland – parliament, banks (obviously), and even the central bank itself. They say it won't solve the problems that cause crashes because people can still act irresponsibly within this new system.

Also – at the moment, central banks observe, among other things, whether people are taking out loans from private banks and change interest rates accordingly: but if they become the place people go to do that, they're not so neutral anymore, and it could all get very political.

It doesn't look like the referendum will pass – latest estimates say 54 per cent against and 34 per cent pro. But it has led to a pretty sophisticated debate in Switzerland about what money is and how banks should work (one which we'd do well to have over here at some point too).

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Reader Comments

  • WhereAreTheVikings

    What a terrible, terrible shame. Western Civilization nurtured capitalism, and now capitalism is destroying it. And these young people seem to welcome the invasion of their homeland. The media and schools have been very efficient in wiping out all traces of blood and soil.

    • prollawalllynotahumanoid

      Capitalism isn’t the problem. It’s corrupt politicians taking bribes and kickbacks from Globalists and the Chinese.

      • WhereAreTheVikings

        Maybe I should have said crony capitalism. Although Italians importing Chinese to make “Italian leather” shoes is not crony capitalism. It is capitalism, pure and simple.

        • prollawalllynotahumanoid

          That would be crony capitalism and globalism combined. They aren’t concerned with the affect their policies have upon their citizens, the health and welfare of their society and culture or their economy. What it isn’t is fair-free trade to further national interests.

          • WhereAreTheVikings

            I’ve always seen them as one and the same, but perhaps they need to be named individually, just to bring home the point.

      • WhereAreTheVikings

        But now that travel is so easy and borders are virtually down through H1bs and the like, theoretically you can’t blame capitalists for the pursuit of cheaper labor, although I do heartily blame them not being more patriotic than that. Perhaps the emerging nationalism will force them to voluntarily do what they should have morally been doing all along, and that is employing business practices that preserve their countries and nationalities. The government should be doing everything it can to encourage that, to the extent that small government should do anything but guard the borders and strictly, drastically, limit immigration.

      • Henry Lam

        It is China with its corrupted mindset affecting the world.

        • prollawalllynotahumanoid

          No it is not. Capitalism is the fairest and least corrupt system of all.

          Socialism and communism is based on authoritarianism, coercion and police intimidation. It has and always will be rife with criminality, bribes and kickbacks.

          Corruption can be anywhere but it is the very basis of socialism and communism.

    • Henry Lam

      The government is too weak. They do not understand the mindset of communists and how they educate their people. Those communist people are only loyal to their country and could be dangerous. The immigration law should only accept those who accepted multiculturalism and taught from a democratic education system. This virus events clearly has shown how stupid to take China as a friend.

      • WhereAreTheVikings

        The government is not too weak. Just weak-minded about some things.

  • Gabi Rodrigues

    For how many days can a country maximum close their borders to foreigners maximum? Like now, with the virus, everyone is using 30 days. Can it be more?