23 November 2014

Update on Swiss Gold Initiative

The Swiss Gold vote is coming up at the end of the month and the latest polls are showing the “no” vote is in the lead. Last month, 20 Minuten, Switzerland’s biggest daily newspaper, conducted an online survey that produced 13,000 responses. 45% to 39% said they would support the “Save Our Gold” Initiative.

Now about a months later, according to Reuters, support among Swiss voters for the initiative has slid to 38%, falling well short of the majority needed. (Source: Reuters 11/19/2014). So what has changed in just a month for the Swiss people to now be against having the Swiss National Banks hold 20% of their reserves in Gold?

As expected, both the Swiss National Bank (SNB) and the Government have come out in opposition of the initiative. So the campaign has been under way for well over a month to strike fear into the Swiss people about the economic consequences of a “yes” vote.

Loss of Control

According to the Reuters article, supporters of the initiative say that it would support a stable Swiss Franc, while the Government and SNB say that a “yes” vote would increase unemployment and risk recession.

The SNB set the Euro minimum exchange rate cap of 1.20 a few years ago to prevent the Franc from appreciating too much. A strong currency would potentially slow exports and therefore risk economic slowdown.

So those opposing the proposal fear that the SNB would have trouble defending the Swiss currency in foreign exchange markets. In a recent Bloomberg article, Swiss National Bank Governing Board Member Fritz Zurbruegg said “The SNB will continue to enforce the minimum exchange rate with the utmost determination.” (Source: Bloomberg 11/21/2014)

It used to be that a strong currency was a sign of a strong nation. If the SNB allowed the Swiss Franc to strengthen the likely result would be a significant increase in capital coming into Switzerland. While there would no doubt be a transition phase the investment in Switzerland would ultimately offset any decline in exports. 

Strong Support for Gold

With the propaganda machine running at full speed it looks like a long shot for the initiative to pass. However, we’ll see what happens in the next 10 days or so. Even if the proposal does not go through it looks as though there is a strong contingent that will vote “yes”. 

This is a good sign for the Gold market that more and more people understand the benefits of returning to a financial system based on sound money. The unfortunate thing is that it will probably take a major currency crisis for any meaningful reform to happen.

But then again, who knows maybe the Swiss will vote “yes” and send a shockwave through the Western financial system.

Author: celticgold.eu

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