# Gold Standard - Swiss Votes



## buaya (Jan 7, 2011)

Any comments on the vote?

http://www.zerohedge.com/news/2014-1...s-quo-showdown


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## james4beach (Nov 15, 2012)

You didn't paste that link correctly. I did a google news search for Switzerland gold standard and not many matches came up.

Basically I can't find any solid media coverage of this, if it happened. I found these:

http://qz.com/291591/it-seems-nuts-but-the-swiss-may-go-back-to-a-gold-standard/
http://www.businessspectator.com.au...lobal-news/are-swiss-going-back-gold-standard


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## james4beach (Nov 15, 2012)

This is VERY interesting. English language media is apparently not covering this story at all. A Swiss-focused news search found plenty of reputable sources. There are in German, so use google translator

Faber (who's well known globally) in a discussion about the initiative.
http://www.blick.ch/news/politik/bo...-nationalbank-in-fesseln-legen-id3254437.html

Contrary to the initiative, calling it Dangerous, harmful, absurd:
http://www.blick.ch/news/wirtschaft...ive-nuetzt-nur-den-spekulanten-id3250377.html

A good summary of the vote from Switzerland's top news daily paper:
http://www.20min.ch/finance/news/story/Das-muessen-Sie-ueber-die-Gold-Initiative-wissen-30364272

Good coverage from WSJ (in German)
http://www.wsj.de/nachrichten/SB11186790908283423711204580259840441028082


Some interesting things I learned. Apparently Switzerland already has the greater per capita gold reserves (at the central bank). The vote is to boost it to 20% of central bank assets. Apparently all of Switzerland's foreign gold is in England and Canada. Personally I think it's a great idea but can only dream that Canada would do something similar, but we're too closely linked to the US Federal Reserve and there's no way it would ever happen here.

In what I read, I also can't find any solid arguments against the initiative. The "no" arguments are very weak. This should be instructive for small investors like us, too, because it really drives home the point of why gold is a good holding to have.

*First "no" argument: approving the gold reserve increase only helps speculators*
My response: everything central banks do right now only helps financial speculators, particularly in fiat and bonds -- so that's not a valid critique. The central banks of the last few years have directly fed bond speculators. Face it, either way speculators are in the game. Not to mention all the equity speculators that have been riding this wave of central banks, since the CBs actually purchase stocks now driving up the stock indices.

*Second "no" argument: gold is too volatile a thing to put on your balance sheet*
My response: central banks previously loaded up with bonds of bankrupt countries (like Spanish bonds whose yields went from 3% to 15%), mortgage securities and derivatives, all of which are tremendously more volatile. Not to mention all the fiat currencies which are volatile too. The EUR has moved 20% in the last few years. The Japanese yen has moved a whopping 40% (or maybe 50%) against the US dollar. And they're saying _gold_ is too volatile to put on the central bank balance sheet? Total silliness.


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## Rysto (Nov 22, 2010)

Specifying that 20% of the banks assets must be gold is completely arbitrary and I see absolutely no reason for it. You're basically reducing the size of the central bank's balance sheet by 20% (because an asset that you can't sell isn't really an asset at all).

These types of decisions need to be made by the experts at the central bank, not imposed upon them through the political process. Pushing politics into the central bank's decisions is a recipe for economic disaster.


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## james4beach (Nov 15, 2012)

Right, we need the "experts" who buy junk bonds and mortgage derivatives for the central bank -- putting absolute crap on the balance sheet -- to use their "expertise" to make these decisions. Riiiight.

Newsflash: those central bank guys do some of the craziest things, even by the standards of older central bankers. They buy stocks and stock futures now, too. Lots of things that central banks have never done historically. Some of these central bank balance sheets are cesspools of junk credit and other exotic instruments.


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## fatcat (Nov 11, 2009)

the swiss national bank and swiss government are swinging hot and heavy against this referendum
it will almost certainly fail
of course, in the meantime, it is getting all the gold bugs hot and lathered under the collar


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## bayview (Nov 6, 2011)

Since the news came out more than a month ago, gold has headed south and broke critical support while the goldbugs hope and pray for a sustainable reversal. Agreed with FatCat, the referendum unlikely to succeed. Otherwise it will mess up the CHF peg to the Euro.


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## dogcom (May 23, 2009)

Gold is more of a item to weigh a currency against and it is trusted for that reason. Fiat currencies have always failed so having lots of fiat saved could mean almost nothing of value in the future. So no matter what price gold goes down to it will reverse unless they find a way to mine a huge amount of it easily.


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## Eder (Feb 16, 2011)

Fiat currencies are the only reason there is enough liquidity in the world to actually manufacture and consume. I don't understand why every solution to the planet's problems involve regressing to the stone age...shallow thinking imo.


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## dogcom (May 23, 2009)

I didn't write the history of every fiat currency in history failing it is just a fact. 

Ask people in countries where the CIA disrupts and the US bombs to keep them using the US dollar if they think it is shallow thinking. Sure liquidity is good but not when it creates booms and busts all over the world. We haven't seen the pushback yet when the world has had enough of money printing with no value behind it and we must live with the hangover.

Or when the world finds out that what they thought they owned in the futures market isn't there for delivery like they thought it was and are no longer happy to settle in paper and we go to bid only. The manipulation and the derivatives market shenanigans when it is discovered will cause shock and panic throught the world.


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## sags (May 15, 2010)

The information is already out there.......but people either aren't paying attention or believe there isn't anything they can do about it anyways.

Rolling Stone published a long article on the how J.P. Morgan knowingly and deliberately packaged subprime mortgages together and sold them. It was so well known within the firm that they had a "no email" policy to hide their tracks. An insider came forward at great risk to herself, and quickly saw her reputation tarnished and was threatened with legal action for the purpose of driving her into bankruptcy.

Although knowing the extent of the criminal fraud.........they were let off with a fine and no admission of wrongdoing on their part.

The truth comes out......and it still doesn't matter. 

First they deny.........then they label the people as "conspiracy nuts" then they bury the people in legal problems.

The rich and powerful are in league with the government.........who direct the activities of the regulators.

It is all one small happy family........with hundreds of billions of dollars being siphoned on into a few pockets.

Billions of dollars in US notes..........disappear from an airport tarmac in Iraq..........oh well............

Trillions of dollars lost in the derivatives debacle....jobs lost....homes lost.....retirements lost.....and the banks create new ones.

People go to jail for stealing a loaf of bread...........but those who steal billions of dollars pay a fine.

Capitalism has been irretrievably corrupted. Money makes the rules as they go.


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## HaroldCrump (Jun 10, 2009)

fatcat said:


> the swiss national bank and swiss government are swinging hot and heavy against this referendum


Nobody likes competition.
A money supply backed by (or leveraged upon) gold is competition to the central banks unlimited ability to expand the money supply.
That is why the central bank doesn't like it.
The Swiss central bank has been trying desperately since 2011 to cheapen the currency, but have not succeeded.

Governments don't like this idea because of obvious reasons - it restricts their ability to engage in social programs, job creation programs, and other sorts of welfare-driven spending.

Alan Greenspan, of all people, once said that a gold-backed currency will never work in welfare states, which is what most countries are these days.



> of course, in the meantime, it is getting all the gold bugs hot and lathered under the collar


There is no reason to get excited over this.
Even if the vote passes, the amount of gold that the Swiss central bank will have to buy is a miniscule fraction of what the Russians and the Chinese are buying on a monthly basis.

The Swiss bank will probably stagger their buys over several months.
I don't think it will have any long-lasting impact on gold prices, at least not as measured in USD$ or CAD$.


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## dogcom (May 23, 2009)

I think the excitement comes from the fact that a people despite high odds against exercise their rights and stick it to the man or the elites if you will. The bigger problem would be if other European countries or their citizens start to demand the same rights if the referendum was successful.


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## HaroldCrump (Jun 10, 2009)

dogcom, I don't think the general population in EU countries will be in favor of gold-backed currencies.
They want a generous welfare state i.e. a carte blanche ability of their governments to finance the debt via their central bank.

If you think about it...the current ECB based model is already like a pseudo gold standard for most of these countries (except Germany, which controls the ECB).
In a way, countries like France, Portugal, Spain, Italy, Greece, etc. are already living under conditions similar to a gold standard.
They don't like it one bit.

Note that both Spain & Italy have enough gold at this time to go back to their old currencies (Lira, etc.) and partially back it with gold - similar to what the Swiss are voting on.
In fact, Italy has the largest sovereign gold reserves among all European countries - I believe larger than Germany as well.

They have always had the ability to back their currency with gold (partially) even before entering the EU common currency.
But they didn't do it...for obvious reasons.


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## dogcom (May 23, 2009)

Staying on the gold standard and the discipline that comes with it would have been good before they went so far down the garden path if you will. Now things are such a mess it is tough to do anything as you mentioned with the forced austerity in countries like Greece and so on.


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## HaroldCrump (Jun 10, 2009)

But they joined the Euro _precisely _for this reason i.e. to have a strong currency to borrow against & finance their domestic welfare debt.
Greece has already had a referendum on leaving the Euro, and the people rejected it.
I believe Ireland also voted to stay within the Euro currency.

The people in these countries want the Euro - they are not going to leave.
If Greece hasn't left after whatever has transpired in the last 4 years, it is pretty much certain that _no one _will leave the EU _no matter what_.

Any move to back the Euro by the gold holdings of the ECB or the member countries will be voted down.
Within 2 months, the tiny state of Lithuania will be joining the Euro too.

Every govt. in between Iceland to Ukraine want to borrow cheap and spend lavishly.
Not that different from people, really.


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## dogcom (May 23, 2009)

Very true, nobody wants to do without their wants, even if it means more debt, that is a reality.


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## james4beach (Nov 15, 2012)

HaroldCrump said:


> Every govt. in between Iceland to Ukraine want to borrow cheap and spend lavishly.


And it will be their demise. There are a few people in Switzerland who are actually trying to protect their country and wealth, and I applaud them for it. _These_ are the people actually looking out for their future and their children's future. I wish Canada would do the same, instead of joining the "race to the bottom" in sovereign wealth.

Europe has been rapidly losing its wealth in the last 20 years, and is now on the brink of another financial crisis. Their system is riddled with bad personal debts, bad government debts, high unemployment and no production.

Europe and Japan are going the same direction: they cling to this assinine concept that only if they devalue their currency enough, prosperity will return. They use temporary financial tricky: Spanish bond yields drop (ECB buys it up), the Nikkei shoots higher (BoJ buys it up) and they all celebrate the miracle of central banks and money printing.

This illusion of stability and wealth-by-stimulus won't last forever. The fundamentals are horrible.


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## james4beach (Nov 15, 2012)

Here's something timely, when discussing the condition of Europe.
Past US Treasury head Geithner talking candidly about Europe's financial crisis

This gives insight into what was really going on in Europe during the '08 crisis (in case you weren't aware). Europe was disintegrating and leaders had no idea what to do. Some countries were ganging up on others (for instance, trying to get rid of the Italian prime minister during the crisis). Furthermore, some of the grand claims of the ECB are revealed here by Geithner to be *nothing but bluffs*.

Nothing has changed in Europe since then. It's a total disaster over there, as is the ECB.


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## HaroldCrump (Jun 10, 2009)

Well, Timmy Geithner can sure talk.
His ex boss' firm - Goldman Sachs - colluded with corrupt Greek govt. officials to facilitate its entry into the Euro.
They cooked the books, lied about true deficits, hid all unfunded liabilities, etc.

Kinda similar to what GS did with the liar loan & NINJA mortgages just a few years prior to that.

Secondly, both Timmy & Hank Paulson orchestrated the collapse of Lehman Brothers, while just a couple of months ago they had engineered the bailout of Bear Stearns and Merrill Lynch.
Literally 2 days after they allowed Lehman Bros. to fail, they engineered the bailout of AIG, which was effectively a bailout of Hank's ex firm - Goldman Sachs, since AIG was GS' primary counter-party.
There is ample evidence that a lot of that had to do with the personal animosity & rivalry between Hank and Dick Fuld (the then Lehman CEO).

It is kinda coy of Timmy to now write a book (rather, _memoirs_) about all that corruption, graft, and crony capitalism.
He should be in jail.


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## james4beach (Nov 15, 2012)

See Harold, this is why I have so little trust in the financial system and why I keep my money out of markets as much as I can.

These guys are _all_ crooks. Turbo Timmy and "Hank" are both real pieces of work. They spend a career running scams, stealing from public entities, and destabilizing capital markets, then they become government figures and pretend they're serving the country's interests.


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