Swiss gold vote threatens foundations of global currency system

[webfact]

OVERDRIVE
Swiss gold vote threatens foundations of global currency system
Thanong Khanthong

Next month Switzerland will vote in the so-called "Save our Swiss Gold" referendum.

BANGKOK: -- Like last month's vote on Scottish independence, where the United Kingdom's future was at stake, the Swiss referendum to reinstate the Swiss franc as a sound currency will have far-reaching implications not only for the gold market but also the global financial system as a whole.

Fortunately for the UK, the Scots caved in at the last minute, voting to keep Scotland within the union. Otherwise, the UK as we know it would have fallen apart. But the outcome of the November 30 Swiss referendum on gold remains uncertain with just a month to go.

Luzi Stamm, an MP from the Swiss People's Party, has garnered the 100,000 signatures required to launch a national referendum on a proposal to return soundness to the Swiss franc through securing adequate gold reserves for the central bank. The motions of the gold initiative are threefold:

The gold of the Swiss National Bank must be stored physically in Switzerland.

2. The Swiss National Bank does not have the right to sell its gold reserves.

3. The Swiss National Bank must hold at least 20 per cent of its total assets in gold.

So, what's the big deal then?

Well, in 2000, the Swiss National Bank (SNB) held about 2,600 tonnes of gold in its reserves. This represented about 8 per cent of total global central bank gold reserves. It is no surprise that the Swiss franc was then one of the most stable currencies in the world. Many countries held the Swiss franc in their reserves due to the strong backing from the Swiss central bank's huge gold hoard.

But the situation gradually changed. In 1992, Switzerland joined the International Monetary Fund, whose job is to promote the fiat currency system under which the US dollar serves as the world's reserve currency. Under the IMF, gold has been sidelined from the components of its members' monetary policy. In 1996, the Swiss federal government started a legislative process to amend the monetary policy clause in the constitution. This would effectively de-link the Swiss franc from gold. It came into effect in 2000, after which the Swiss National Bank immediately joined the Washington Agreement on Gold Sales. All of these developments have given Swiss officials the green light to unload gold from its reserves under the pretext that in the era of fiat money, the precious metal no longer serves much purpose as a central bank reserve. Paper money is good enough.

As a result, since 1993 the SNB has been the biggest seller of gold, shedding almost 1,600 tonnes. The average price was $300-$500 per ounce.

In 1999 gold made up 43 per cent of the Swiss National Bank's reserves. This figure has fallen dramatically, to 18 per cent in 2009 and 7.6 per cent today. With gold flying out of the door, the SNB has gone to work on its printing press. Since 2009, the bank has expanded its balance sheet fivefold. It's common knowledge that increasing the money supply creates inflation and erodes the value of the currency involved.

In response, the Swiss Gold Initiative seeks to end this monetary policy abuse of central bankers and the encroachment of politicians in the formulation of monetary policy. If the Swiss vote no in the referendum, then business will go on as usual. But they vote yes, it will trigger an avalanche in the gold market. That's because in order to keep 20 per cent of gold in its reserves, it the Swiss National Bank will have to purchase 1,700 tonnes of the precious metal. This would amount to about 70 per cent of the world's total annual gold production. The price of gold would rise significantly in anticipation of the demand from Switzerland. Other countries might then follow suit by shifting their money policy from the fiat-based to the gold-based system. Paper currencies without any asset backing will be at risk of losing trust.

Egon von Greyerz, a respected Swiss gold fund manager and a campaigner for a "yes" vote in the referendum, said: "Let's first say that the government is against it. So, they are in the 'No' camp and so is the Swiss National Bank. They are not supposed to campaign officially in these kinds of referendums, but they still are making clear statements that it is dangerous for the Swiss National Bank to lose its powers to ... manipulate the market. So, the 'No' camp are afraid they will lose the power to print money, and manipulation of markets is going to be taken away from the Swiss National Bank."

Greyerz added, "It's too early to call it, but I would say we stand a very good chance. I am firmly in the 'Yes' camp, and I am a great believer in this fight for sound money."

Source: http://www.nationmultimedia.com/opinion/Swiss-gold-vote-threatens-foundations-of-global-cu-30246618.html


-- The Nation 2014-10-31

[Seastallion]

Off to the gold shop this morning. Won't hurt to have a few baht sitting under the mattress.

[terryp]

the 'No' camp are afraid they will lose the power to print money, and manipulation of markets is going to be taken away from the Swiss National Bank."

thats it in a nutshell..same with ALL fiat currencies..not worth the paper they are printed on (in real values of exchange).......gold is being hit hard to wipe out smaller mines ..but for the real story look at China their gold holdings are now well on line to passing the US (approx 320 million oz.....if the US actually has any, as they wont allow any physical inspections ?)

If you can sit on your gold investments IMHO its only going to make huge gains in the years ahead...

[RustBucket]

The UK would not have fallen apart. Scotland would have fallen apart.

What the hell would a Thai know about the 6th largest economy in the world and the fastest growing in the EU by a country mile????

Brit haters, don't bother trying to educate me. This was all about politics and votes and nothing to do with the economy.

[iancnx]

I agree. When the US $ finally implodes (and it will when China decides the time is right) then gold becomes King once more. Hold gold and ditch dollars is my call. If only I had some spare pennies.

[Seastallion]

What the hell would a Thai know about the 6th largest economy in the world and the fastest growing in the EU by a country mile????

I could say what the hell would an arrogant Brit know about a Thai.

You presume there are no educated Thais?

Wrong. There are many. And many of them are better educated and smarter than you, I'd dare say.

[rickirs]

"lose the power to print money"

Not having the ability to issue "fiat money" is an economic disaster for any country that relies on GDP growth, ie., growth in all business sectors such as agriculture, wholesale, retail, export, services, etc. Why? Because a gold based economy stagnates the economy by limiting credit to the extent of actual gold reserves. That was the reason for the US to go off the gold standard - finance growth. Unless a country continuously adds to its gold reserves, albeit at an ever increasing cost due to demand, it will have limited access to credit and the ability to expand its economy. A simple example to this situation is someone who cannot borrow to purchase a house, a business that cannot get credit to get it through hard times without resorting to a "rainy day" cash fund, a business that needs capital to expand markets, etc. Everything is cash basis.

So for a SMALL country like Switzerland whose economy is primarily (70+%) a long-established financial services business not requiring any significant expansion, there is little need for significant borrowing capacity. Government spending is fairly fixed (34% of the economy) with a stagnant wealthy populuation base with NO PUBLILC DEBT and supported by low tax rates . For most of the rest of the world, this is not the same situation. Switzerland's GDP growth rate of 1-2% is not sufficient for developing countries, for developed countries looking for global business expansion, and for countries experiencing high immigration and birth rates.

So I don't see a "yes" vote having any significant effect on the global curreny system other than creating a massive windfall for the gold sector. And ironically, with a substantial increase in the value of gold caused by Swiss demand, countries already holding gold reserves will realize a quick one-time increase in value that can further fuel their borrowing capacity.

[daveAustin]

Fortunately for the UK, the Scots caved in at the last minute, voting to keep Scotland within the union. Otherwise, the UK as we know it would have fallen apart.

What a bunch of misinterpreted, sensationalist drivel! This guy doesn't know what he's talking about and should stick to topics closer to home, like how face and corruption damages Southeast Asian nations. Fortunately for the UK? Um, no, fortunately for the jocks. 'UK as we know it would have fallen apart' lol. The only thing that would have happened would be the loss of one member of the UK, and a minority one at that which takes out more than it puts in.

On the Swiss gold, well we all know where that came from and it involves a certain fascist group and a huge number of people from a place we call Israel today.

[daveAustin]

What the hell would a Thai know about the 6th largest economy in the world and the fastest growing in the EU by a country mile????

I could say what the hell would an arrogant Brit know about a Thai.

You presume there are no educated Thais?

Wrong. There are many. And many of them are better educated and smarter than you, I'd dare say.

I don't see the presumption that there are no educated Thais in the post you are quoting, only your somewhat belittling assumption of such. But he is on the right track as most Thais rarely have a clue of what is happening outside their borders and Mr Khanthong is so far off kilter regards his remarks about the UK nearly falling apart that it is just laughable.

[dennisrobertpell]

Take a look at history.. 99% of the worlds fiat currency's have collapsed bringing hardship to most of the people.Gold and silver have been used as real

money for nearly 5000 years and has never been worthless.The debt in the world today is so big it can never be repaid..

My choice...gold and silver in my hands and not in banks or bullion dealers..

[Seastallion]

In wonder under what pretext the US will than shift the global war on terrorism to Switzerland...

That's just silly, as you know. However, your point is valid, ie that the US will indeed do something drastic. I'm not an economist, so any speculation on my part can probably be pulled apart. I accept that.

My timid guess is that Iran might be the route. Oil, Iranian borse, multiple ME issues.

I would love to hear Herr Naam's thoughts on the entire thing.

[Timebandit]

The UK would not have fallen apart. Scotland would have fallen apart.

What the hell would a Thai know about the 6th largest economy in the world and the fastest growing in the EU by a country mile????

Brit haters, don't bother trying to educate me. This was all about politics and votes and nothing to do with the economy.

[Timebandit]

Switzerland is not part of the European Union.

[thailiketoo]

When you go in the mall the gold price is around 18,500 baht. It has been close to there for a while now. If there was a change on the horizon the price would have changed. The people who own the gold stores are more clued in than the story writer.

[ubonjoe]

Off topic posts made to derail the topic have been removed .

[mania]

When you go in the mall the gold price is around 18,500 baht. It has been close to there for a while now. If there was a change on the horizon the price would have changed. The people who own the gold stores are more clued in than the story writer.

The gold store owners do not determine price although your right that gold has hovered between 1200-1250/oz in USD for awhile now.

But gold price at stores here is exactly the same as World Spot Price since that is what determines the price

Of course you need to calculate that 2.07 Baht of gold = 1 troy ounce & also convert the currency

But you will find once converted to your currency/weight units, that gold is priced the same or very very close all over the world

[thailiketoo]

When you go in the mall the gold price is around 18,500 baht. It has been close to there for a while now. If there was a change on the horizon the price would have changed. The people who own the gold stores are more clued in than the story writer.

The gold store owners do not determine price although your right that gold has hovered between 1200-1250/oz in USD for awhile now.

But gold price at stores here is exactly the same as World Spot Price since that is what determines the price

Of course you need to calculate that 2.07 Baht of gold = 1 troy ounce & also convert the currency

But you will find once converted to your currency/weight units, that gold is priced the same or very very close all over the world

I agree with you. I only meant one can check for any world problems by checking the price of gold at the gold shops. Also I've noticed when the price is going up they don't want to sell the bars very much.

[Timebandit]

This may encourage China to make their announcement sooner than later. With China, Russia, India and Switzerland (half the World) scrambling to buying physical gold at suppressed ETF rates how long will our Zimbabwa Dollars last as king currency. The petrodollar is now circling the drain.The manipulators are running out of ammunition and when the people holding ETF's go to the redemption window the house of cards will collapse. There will be blood in the streets and precious metals will get you through this. Thailand has some gold and at the reset they could declare the baht to be 5% backed and avoid much anguish.

[thailiketoo]

This may encourage China to make their announcement sooner than later. With China, Russia, India and Switzerland (half the World) scrambling to buying physical gold at suppressed ETF rates how long will our Zimbabwa Dollars last as king currency. The petrodollar is now circling the drain.The manipulators are running out of ammunition and when the people holding ETF's go to the redemption window the house of cards will collapse. There will be blood in the streets and precious metals will get you through this. Thailand has some gold and at the reset they could declare the baht to be 5% backed and avoid much anguish.

Lets say you owe the bank a round million dollars for your house, car and all of your debts. If the world currencies tank and we have rampant inflation. You now owe the bank 1 billion dollars.

Do you see why this can't happen?

[BlueSkyCowboy]

"lose the power to print money"

Not having the ability to issue "fiat money" is an economic disaster for any country that relies on GDP growth, ie., growth in all business sectors such as agriculture, wholesale, retail, export, services, etc. Why? Because a gold based economy stagnates the economy by limiting credit to the extent of actual gold reserves. That was the reason for the US to go off the gold standard - finance growth. Unless a country continuously adds to its gold reserves, albeit at an ever increasing cost due to demand, it will have limited access to credit and the ability to expand its economy. A simple example to this situation is someone who cannot borrow to purchase a house, a business that cannot get credit to get it through hard times without resorting to a "rainy day" cash fund, a business that needs capital to expand markets, etc. Everything is cash basis.

So for a SMALL country like Switzerland whose economy is primarily (70+%) a long-established financial services business not requiring any significant expansion, there is little need for significant borrowing capacity. Government spending is fairly fixed (34% of the economy) with a stagnant wealthy populuation base with NO PUBLILC DEBT and supported by low tax rates . For most of the rest of the world, this is not the same situation. Switzerland's GDP growth rate of 1-2% is not sufficient for developing countries, for developed countries looking for global business expansion, and for countries experiencing high immigration and birth rates.

So I don't see a "yes" vote having any significant effect on the global curreny system other than creating a massive windfall for the gold sector. And ironically, with a substantial increase in the value of gold caused by Swiss demand, countries already holding gold reserves will realize a quick one-time increase in value that can further fuel their borrowing capacity.

My question is as follows. How would a reader have the picture and the answer since the "studied people" have no clue what they are doing??

[BlueSkyCowboy]

The reason Nixon took the US off the gold standard was simply because the US could no longer pay for the war in Vietnam. My other question is, why do the US not want to show the gold that belongs to the Germans? it is not there in NY in the vaults of Chase Bank or the Federal Reserve and Ft. Knox is a fraud

[Timebandit]

Google " Thai Gold Price" and save to you favorites. There is no need to go to a gold store. Also go to "Kitco" to check the manipulated spot price and look at the charts. You can either believe there is a rapidly approaching reset and stack gold or you can believe in endless credit in Zimbabwa dollars. No need to argue.

[cooked]

Fortunately for the UK, the Scots caved in at the last minute, voting to keep Scotland within the union. Otherwise, the UK as we know it would have fallen apart.

What a bunch of misinterpreted, sensationalist drivel! This guy doesn't know what he's talking about and should stick to topics closer to home, like how face and corruption damages Southeast Asian nations. Fortunately for the UK? Um, no, fortunately for the jocks. 'UK as we know it would have fallen apart' lol. The only thing that would have happened would be the loss of one member of the UK, and a minority one at that which takes out more than it puts in.

On the Swiss gold, well we all know where that came from and it involves a certain fascist group and a huge number of people from a place we call Israel today.

The usual knee jerk, uninformed and jealous reaction when the word Switzerland comes onto Thaivisa. Do some reading. Here's a quote

Switzerland had to choose between keeping up it's trade and financial relations with it's neighbours on a normal pre-war level OR complete surrender and collaboration. There was absolutely no chance for a third way.

Switzerland, unlike Austria, chose as much independence as possible for a small country under the conditions dictated by the great powers.

[Timebandit]

Nixon's government had a bank run to redeem treasuries for gold. At the head of the line was France. The U.S. refusal to return Germany's gold in front of the whole World was very revealing. Anyone who still believes there is gold in the US is a fool. That gold was sold years ago to suppress the gold price. When they ran out of gold they invented paper gold ( ETF's) in order to continue their dollar protection scheme. Let's hope that Canada and UK can return Swiss gold or that might be the catalyst for

another financial crisis.

[finnomick]

When you go in the mall the gold price is around 18,500 baht. It has been close to there for a while now. If there was a change on the horizon the price would have changed. The people who own the gold stores are more clued in than the story writer.

The gold store owners do not determine price although your right that gold has hovered between 1200-1250/oz in USD for awhile now.

But gold price at stores here is exactly the same as World Spot Price since that is what determines the price

Of course you need to calculate that 2.07 Baht of gold = 1 troy ounce & also convert the currency

But you will find once converted to your currency/weight units, that gold is priced the same or very very close all over the world

Have you checked the price of gold today yet ? Down 550 baht per baht since the open of business yesterday...and it's only 1:00pm now

[Acharn]

Take a look at history.. 99% of the worlds fiat currency's have collapsed bringing hardship to most of the people.Gold and silver have been used as real

money for nearly 5000 years and has never been worthless.The debt in the world today is so big it can never be repaid..

My choice...gold and silver in my hands and not in banks or bullion dealers..

Err... Would you mind naming some? I suppose you might be thinking of the German Mark in 1923-4, but that was actually supposed to be backed by gold. Problem was the French and English took all the gold and the Germans had no choice but to continue using the currency. Or maybe the Greenback Dollar after the American Civil War? That didn't actually collapse. Then there's the Zimbabwe. That doesn't seem to be 99% of the world's fiat currency, which, by the way, is the currency of all major countries since the 1930s. Oh, and good luck with taking your bar of bullion or your Krugerrand down to the 7-11 and buying a six-pack of Singha.

[Acharn]

When you go in the mall the gold price is around 18,500 baht. It has been close to there for a while now. If there was a change on the horizon the price would have changed. The people who own the gold stores are more clued in than the story writer.

The gold store owners do not determine price although your right that gold has hovered between 1200-1250/oz in USD for awhile now.

But gold price at stores here is exactly the same as World Spot Price since that is what determines the price

Of course you need to calculate that 2.07 Baht of gold = 1 troy ounce & also convert the currency

But you will find once converted to your currency/weight units, that gold is priced the same or very very close all over the world

Have you checked the price of gold today yet ? Down 550 baht per baht since the open of business yesterday...and it's only 1:00pm now

I'm too lazy to go look it up, but I recall that a couple of years ago it was ฿22,500. People misunderstand what money is. Money is what we use to buy things. Money doesn't buy things because it is valuable itself, it is valuable because we can use it to buy things.

[bangkapi]

My friend in Bangkok put a couple hundred thousand US dollars into gold back in 2012 when it was 24,200 per baht.

He is down about $50K, but not sweating it. He bought it only as an insurance policy and preservation of wealth.

Things are getting weird all over the world these days and it is good to hold some gold or silver.

[thailiketoo]

My friend in Bangkok put a couple hundred thousand US dollars into gold back in 2012 when it was 24,200 per baht.

He is down about $50K, but not sweating it. He bought it only as an insurance policy and preservation of wealth.

Things are getting weird all over the world these days and it is good to hold some gold or silver.

Yet the gold price has slipped; it fell to a three-week low on Thursday. Holdings in exchange-traded funds backed by physical gold have also continued to slide.

http://www.ft.com/intl/cms/s/0/deaa723c-5f82-11e4-986c-00144feabdc0.html#axzz3HhJ2dHDZ

[lovetotravel]

Off to the gold shop this morning. Won't hurt to have a few baht sitting under the mattress.

Good think you didn't buy it yesterday before the crash. And looks like more's to come:

http://www.bloomberg.com/news/2014-10-30/low-inflation-means-societe-generale-eyes-gold-at-1-000.html