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“A lot of people believe that debasing the currency is not a sound economic policy. There is no evidence that a weak currency leads to long-term economic growth.”
That quote came from Ronald-Peter Stoeferle, who is the fund manager for the Liechtenstein-based Incrementum AG. He is talking about Switzerland, which at least superficially has the chance to lead a charge towards monetary sanity. Soon, the Swiss people will get a chance to vote on a referendum to increase the country’s official gold reserves. The referendum has arisen over the combination of real concern over recent global events, the IMF’s never-changing stance on inflationary EU policy and the impact it might have on the euro-pegged Swiss-franc, and a domestic disillusionment with Swiss National Bank (SNB) policy.
The referendum is not going to reach Swiss ballots because the Swiss government has had a change of economic heart — in fact, both government officials and the leaders of the SNB have made public statements condemning the referendum. The campaign for gold-based monetary responsibility was initiated by the Swiss People’s Party in April of last year. It takes 100,000 votes to get a referendum on the ballot in Switzerland, and support seems to be growing for a “Save Switzerland’s Gold!” movement.
Reversing the Swiss Sell-Off — and Setting an Example for All Nations?
Switzerland has long-presented itself as an iconic, romanticized bastion of financial privacy and precious metals understanding. That image has started to change over the past 15 years. In 1999, Switzerland became the last country to abandon the gold standard, when a narrow vote lead to the adoption of a new constitution with fractional-gold reserve policy.
Swiss-based institutions have come under international scrutiny for tax-crimes, but more pressing is the new-millenium policy of the SNB that has lead to the sell-off of nearly half of the country’s gold reserves. Between 2000 and 2008 more than 1,500 tonnes of gold were sold, and the small European nation plunged itself into the kinds of debt that it had responsibly avoided for years.
Chart by Visualizer
It makes a certain sense for the Swiss people to be the first to demand responsibility en masse — after all, they have a history of bucking typical European trends. Even if the referendum is adopted it will not re-establish a traditional gold standard, but it will serve as a glimmer of hope to those who see the pending doom of present central bank policies.
We can all hope that the turning of the tide is in there somewhere.
Understanding the Value of Gold — More Resistant than the Euro and the Dollar
Luzi Stamm, parliamentarian and Swiss People’s Party official, was one of the three representatives who established the movement towards gold. His statements are display both historical wisdom and prescience:
“Gold has shown, again, in the recent economic and financial crisis that it is more resistant that international currencies like the euro and the dollar. History shows that currencies can lose their value or even disappear in a short space of time. But gold represents a physical reality which will keep its value — even over two or three centuries.”
Stamm couldn’t be more correct about fiat government currencies. You might argue that he is even understating the power of gold to store value, which dates back not hundreds of years but thousands.
He continued to emphasize the role that gold has played in his native country, and how it represents a promise of stored value passed on from era to era:
“Gold reserves are our national inheritance, accumulated over decades by generations of Swiss; they cannot be liquidated in this manner without the people deciding.”
The referendum actually has three components: one for a proposed increase of gold reserves equal to 20% of monetary reserves, another that essentially represents an injunction on SNB gold sales, and a third to mandate that all Swiss gold should be held within the country.
Taking Control of Your Own Future with Gold
There are a lot of great reasons to live in the United States, but the Federal Reserve is not one of them. Feckless leadership and poor theory have lead to a century of misguided policy. The Swiss may be the leaders of gold understanding, but you can take steps to secure your own future by following their advice and increasing your own precious metals reserves.