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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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  • RW

    Your right to a degree. You mentioned “the wandering Jew”.

    I elaborate that the Jewish people, historically have tended to migrate almost exclusively to locations that are economically and culturally vibrant already. I would speculate that Jews have thrived in these places and have often improved the bounds of their economies and knowledge base.

    You can also ask; how many massive entertainment conglomerates, Nobel winners or billionaires has Isreal developed? If Jews are so capable, why isn’t Tel Aviv the Rome of our time?

    Jews are successful because they value education, maintain a strong social cohesive, they actively monitor and have a good sense for Zeitgeist wherever they are and they carefully choose the places they settle and congregate themselves heavily in these choice locations.

    But most importantly (haulocaust increased the importance of this aspect), they actually designed their culture for success. They not only attend Harvard, they use what they learned to better the group as a whole. With as much, they studied intricate networking systems, adapted to it and in many cases improved upon them. (See how Japan acquired Aegis warships and made them better).

    Of course there is nothing wrong with any of this. It’s when you elaborately gain disproportionate power in any society where you would stand out, you must take care when attempting to make a society better (Civil Rights movement) and rewriting that society all together (mass immigration). Ask blacks in China, Mexico, Philippines or India how much opportunity they have? Go to businesses owned by their American diaspora and see how many blacks they hire. Go to Silicon Valley and see how many East or South Asian tech workers wish they could work with more black people. California might work as a state, but as a nation, I think your rolling the nuclear dice here. I hope we can succeed as a tolerant pluralistic superpower but at this stage in human societal development, it’s a pipe dream.

    And if Jews really are the icon for success, they would see that fundamental human successes happen over generations. Just look at the rest of the planet? Are we ready?