In the end, 77% of participating Swiss voters decided against forcing their national bank to be accountable. To put that in perspective, more people voted to accept a restrictive immigration reform that would have limited incoming immigration to less than 0.2% of the total population than voted for increased Swiss gold reserves. Some speculate that the general populace was unable to stomach the new initiative because of one clause that stipulated that the SNB would never sell its 20% holding of gold. Following the release of the referendum’s results, the SNB publicly stated that it was “pleased to hear of the outcome.”
The initiative was proposed by the Swiss People’s Party SVP which is an admitted skeptic of the European Union. The SNB currently holds 8% of its assets in gold, which weighs in at 1,040 tons of gold. The country of Switzerland is already notable among gold bugs for having the world’s highest amount of gold held per capita, outside of the central bank. One Swiss central banker, in a statement obtained by the Wall Street Journal, reminded everyone that the SNB’s gold stock is high compared to other central banks, and that:
The initiative is both unnecessary and dangerous. It is unnecessary because, under the current monetary order, there is no link between price stability and the share of gold in the SNB balance sheet.
Mounting pressure exists from within and without Switzerland that wishes the SNB to lower interest rates to negative levels, a troubling economic move that the European Central Bank (ECB) has already taken. A country’s central bank’s commitment to a gold reserve is something that the world hasn’t seen for decades. One writer on Smaugld explained the long term effects of the Swiss Gold Referendum’s demise:
Because the Save our Swiss Gold initiative was rejected, it means that the SNB can continue their misguided policy of printing Swiss Francs to buy Euro denominated debt in order to support the Franc:Euro peg of 1.2:1. By buying Euro denominated debt, the Swiss in effect have been and will continue to be supporting the deficit spending of the Euro zone.
While price stability and the share of gold in a European central bank’s balance sheet may seem to only have a tenuous correlation at this point, as the ECB suffers more setbacks, more gold initiatives will arise, and not just in Switzerland. Eventually, central banks will consider holding a Bitcoin reserve, just you wait.
What are your thoughts on the Swiss Gold Referendum? Comment below!
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