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Money reform needs money – and activists

by on July 10, 2013

Money reform needs money. In May, the annual general meeting of the Swiss Association for Monetary Modernisation (MoMo) decided to launch its initiative* to ensure that only the central bank can create money. However, this rather small association of roughly 200 members lacks the resources to get such an ambitious project underway in the near future.

But the time is ripe: More and more people are realising that the ongoing crisis of finance and banking also endangers their savings. Numbers on a bank account are not legal tender, but money that the banks themselves create, and which they must convert into central-bank money on demand. In a legal sense, it is not money, but the promise thereof, backed by a minimum reserve of 2.5%** If a bank goes belly-up, it can theoretically only meet a fraction of its obligations.

This is what MoMo’s Plain Money Initiative is setting out to change.***

It demands that banks are prevented from creating their own money. Until now, they do so every time they grant a loan.° They do not pass on money from savers, but write a number into the debtor’s account. We repeat: this isn’t actually money, only the promise thereof. In practice, such promises have been as good as the real thing. All electronic transactions are done with this [theoretical money], and not even [governments] bat an eyelid.

The Swiss Plain Money Initiative wants all money to come from the central bank,°° including electronic money. This would mean that savers’ deposits no longer become an asset of the banks, and savings are ironclad in the case of a collapse, unless clients explicitly ask for their money to be used for loans.

This mother of all changeovers is not to be taken lightly. He who aims for the Achilles heel of banking power°°° should better establish a solid footing, both financially and personel-wise. The board of MoMo, for its part, is quite pessimistic about launching the signature-collecting phase of the initiative next spring as planned. However, it is stepping up its search for activists and supporters. Might that include some of our readers?

[The text above was translated from Geldreform braucht Geld, which appeared in Zeitpunkt 126 Juli/Aug 2013. page 35, in German
Zeitpunkt
is the magazine “for intelligent optimists and constructive sceptics”, and has been going strong for 22 years…despite (or because of?) the fact that it lets subscribers set their own subscription fees…fancy that!!]

Translator’s notes:

* An initiative is a direct-democratic tool, by which the people can directly influence laws and policy, in this case via an amendment to the Swiss constitution.

** 2.5% is the reserve rate in Switzerland. USA has a rate of 10%, and the UK has none at all!

*** Plain Money is also known as Sovereign Money, because it is created by the sovereign, i.e. usProf. Dr. Joseph Huber coined the German term “Vollgeld”.
There are certain similarities to “100% Money”, known from the Chicago Plan, recently revisited by none other than the IMF! (google wp12202)
In Irving Fisher’s day, three-quarters of economics professors supported Chicago Plan. Now, you can count them on one hand, and even they are all emeriti.

° Don’t believe it? See Do banks really create money?

°° Please note, however, that the Initiative doesn’t exclude alternative currencies, such as WIR-bank, which has been going strong for decades, used primarily in transactions between local SMEs. Alternative currencies are not mentioned here, because the Initiative concerns Switzerland’s main currency, the money we pay our taxes with.

°°° The translator would prefer “He who aims at the Achilles heel of illegitimate banking power.” because contrary to popular belief, banks also indulge in legitimate activities. In fact, the Plain Money Initiative would strengthen that power, because it would resolve the paradox of interest.

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