 You may have heard about the Swiss referendum to end fractional reserve lending by Swiss commercial banks. It's really a fascinating development for Austrians and libertarians, and it's another example of how average Swiss people can use referenda to force both their central legislature and the 26 Swiss cantons to consider their proposals, merely by gathering 100,000 signatures within an 18 month period. So here to help us understand this from a Swiss perspective is Claudio Gras, a good friend of the Mises Institute, a principal at the Swiss company Global Gold, and a Roth Bardien with a great understanding of money and banking issues. But because the Volgeld Initiative may be new to you, a bit of background is in order. The referendum, which is popularly known as the Volgeld Initiative, would require banks to hold 100% reserves against their deposits. So in other words, commercial banks would become in effect money warehouses, albeit in this case holding both physical and electronic currency. And this is something many libertarians and Austrians have long favored. But while the initiative sounds like a positive step toward ending the expansionary pressures of a now almost entirely fiat Swiss franc, and a happy development for libertarians who consider fractional reserve banking fraudulent, the reality it turns out is more complicated. Austrian economists simply say, end central banking and let the market decide, treat money as a commodity. The Volgeld Initiative says, however, let the central bank decide absolutely. This is the philosophy of the Swiss sovereign money movement that's actually behind Volgeld, which is a loose coalition of anti-capitalist and anti-banking groups that certainly don't want money to operate as a market commodity. On the contrary, the sovereign money movement wants to give the Swiss national bank in conjunction with the Swiss government absolute monopoly control over money creation. Many they argue it is so important that it has to be issued and run only by the sovereign, which is a curious term in a country that is fully rejected monarchs at least since its federal constitution of 1848. So it evidences perhaps the same kind of loyalist fervor for centralized state control that European subjects once showed for their kings and queens. In this sense, the Swiss sovereign money movement has an American cousin known of course as Greenbackers, a phenomenon I discuss during the interview with Claudio. Now Greenbackers in the US also want sovereign control over money, but through Congress directly rather than through a central bank. In fact, they got their start by having the Union government pay for its civil war military buildup by issuing unbacked currency. Now modern day Greenbackers, including former Congressman Dennis Kucinich and his monetary policy fellow traveler Bernie Sanders are anti-capitalist and populist. And to be fair they correctly see that the confluence between central banks and commercial banks is an unjust enrichment scheme. But as economist Bob Murphy explains their solution, which is open political control over money by a central legislative body, is actually deeply flawed. Now the Vogel initiative comes on the heels of another referendum that the Swiss held back in 2014 that would have required the Swiss central bank to hold 20% of its bank reserves in physical gold. Like that this is a referendum that ultimately failed under heavy media pressure that was urging voters not to interfere with the Swiss national bank's so-called independence. And these are of course the same arguments we hear about Fed independence here in the US by opponents of say Ron Paul's audit the Fed bill. But still it's fascinating that the Swiss have enough interest in monetary policy to even hold these votes and it's almost unimaginable to think that the general public in most western countries or in America could intelligently debate monetary policies and hold a national referendum on an issue like this. So kudos to Switzerland and the Swiss people for even venturing to hold this referendum and stay tuned for a great interview with Claudio Groth. Well let me ask you about the Vogel initiative. First and foremost it sounds like the sufficient signatures have been garnered that this is moving forward. We don't have a date yet for the vote. Tell us about some of the people behind this initiative the Swiss sovereign money movement. You know I can also tell you a little bit more first about the political process you know what's happening what's happening right now. Okay I mean they have you know this team of Vogels they basically gathered in 18 months more than 100,000 signatories which are necessary to hand in an official initiative. That seems like a small amount I mean what's the Swiss population. We are roughly 8 million people. Yeah okay I was going to say 6 but 8 million people so that's a pretty 100,000 is a pretty small threshold. That's true but at the end of the day you also have to go out on the street and you have to gather all these. You got to do it. Absolutely. Yeah. So and I think this is a fair limit you know I mean we even had politicians they of course they want to increase that number you know they are some they don't like it. Because it really keeps them under control and so it's great stuff I mean right now you know the initiative basically it will be discussed in the federal council you know in our executive board basically we have these seven presidents and they must then within one year come up with their message to the parliament and you know within this message they can say yes or no to the initiative or they can also come up with a counter proposal. And then afterwards you know the initiative needs to be discussed within the parliament within the next two and a half years and then the parliament has to vote for against it before it is brought in front of the people and then usually the decision you know you know usually within the next 10 months then they have to conduct the national poll and the decision by the parliament that's an I think it's an important one it has no binding character and it only acts as a recommendation for the Swiss people. It's a long process. You know that's the beauty of Switzerland you know everything takes time. Well so tell me about the groups behind this I suspect that it's not a it's not a libertarian movement per se. Well no not at all I mean I met some of those people because last year I had I was invited at the panel where we discussed you know the gold initiative or is this the full gelt or the full gelt initiative. And so I also met you know the guy who founded the committee. His name is Hans Rudi Weber. So he's a retired teacher and he has some you know intellectual in his teams from the University of St. Gauland which is a private university in Switzerland which seems to be a kind of nest when it comes to that topic. So I mean you know also the people I mean most of their campaigners for example they all have a professional background in social occupations you know of all sorts I mean we are talking about pedagogues coaches teachers psychologists actors journalists you know we have government employees of course local singers and some political politicians from left wing parties. So overall you know I believe it's a fair statement to say that most of them are statist and some are even inspired by communism so so that's that's the people behind them. I mean their motivation their main motivation was really to destroy the fractional service banking so that you know banned the banks to create money especially even though what happened in the past few years when it comes to the banks and its fraudulent activities. I mean that's what they have seen and they just thought you know we have to end it you know and that has been definitely their main motivation and what can be said to a certain extent is you know that they even share some with you know same the same sorrows and fears that we also have but the only difference is that they don't realize that the biggest criminal in the history of mankind has been the state and it's ruling apparatus so they are looking for a solution on the wrong side so instead of choosing a decentralization and privatization they are in favor of more centralization and nationalization so I think that's a fair description. So it's really kind of a left-wing anti-bank anti-capitalism outlook. I think that's a fair statement. But you know here in the U.S. we have people known as Greenbackers which is a civil war term but there's also a modern usage of that and I think Bernie Sanders has flirted with Greenbackism and a Greenbacker is basically someone who says well you know we want to do away with the central bank and let Congress control the supply of money. Now it sounds like the Volgald initiative they want to leave this with the Swiss National Bank but they also want the Swiss legislature to be involved in decisions about how new money is introduced. Would you say that's correct. Yeah I mean it's you know I mean they only want you know that the Swiss National Bank has the license to print and so it's an absolute centralization of power and as we all know you know power corrupts and absolute power corrupts absolutely and of course you know it's yeah I mean they are so crazy crazy enough to believe that you know few people on the top of the National Bank basically can steer and monitor you know the whole economy which is I think a complete nonsense. Well so when you look at the banks themselves okay and is certainly in Austrian and libertarian circles there's a huge ongoing debate about whether fractional reserve banking is inherently fraudulent or whether it's a legitimate market practice or would be in a system with let's say you know gold-backed money. So apart from this whole debate over fractional reserve from a purely libertarian standpoint wouldn't a lot of people see this as a good thing because now we have banks or we would have Swiss banks initially act essentially acting as warehouses and giving you a warehouse receipt for holding your money and charging you for the privilege of me we've already seen negative interest rates on bonds in Europe here we would presumably have bank fees. In other words there's a lot of libertarians who say well this is what banks should be they should be money warehouses not money creators. I think you know we have to distinguish of course when it comes to the banking system because we also need banks and as you're saying when the problem today we have is that basically you know when we deposit banks on with UBS or Credit Suisse they basically can use that money you know to create additional currency and that's of course you know so they created out of thin air and they can charge you know an interest rate for it and so on and they can decide who gets it so and then at the same time I mean I have some money deposited on the bank account and I believe I have access to it at any time and the banks is using it you know to create additional credit and this is of course this has an inflationary effect because you always when you create more more money for the same amount of goods I mean the prices will rise I mean that's you know I mean you're just increasing the money supplied I think that's that's the big problem I believe you know we should have banks you know like where you can deposit your money and you know the banks keep it safe and maybe they can even help you in doing you know bank transactions and all that stuff but then you definitely have to pay a fee for it but you know for sure that the money is yours and they are not allowed to to lean it out and so on and of course you can at the same time you can also have a different bank you know which basically can say if you deposit your money you know we can and you would lean it out to the economy and then you got you know an interest rate which is a kind of you know the risk premium basically and then but then you know for sure that you don't have access you know to your own money for let's say when the contract goes it's blocked for six months it will be at disposal you know for for another company where the bank is landing money to I mean then you don't have you know this double or triple or quadruple amount of money floating into into the economy so and then of course you know when it comes to the minimum I mean maybe you know even we have to leave it up to the to the free markets I think they will find the best solution you know if you have a bank which we know that they only have I don't know a backing of 40% or 50% maybe then you get you know higher risk premium or you know if the if the bank goes bust and then you know I mean that you're going to lose lose your money but you before you decided yourself that you are willing to hand it over to that particular bank and and because you received a much bigger interest rate or risk premium that the bank were able to work with it so I think you know we need we need we need banks competing with each other and they should have different models and we should leave it up you know to the market and then I'm sure you know that the best money and the best banks are going to survive if they don't have a lender of last resort which is bailing them out at any time if they if they are in trouble or so well here's what's so great about having a country of 8 million people you can actually have a referendum and talk about fraction reserve banking if we held a vote on something like this in the US I think we would be astonished by how few people could sort of intelligently discuss or consider the subject matter I'm do you think most Swiss really understand this and you know we there's parallels we'd recently had a vote on on what percentage of gold reserves the Swiss National Bank would have to hold for example no I think you know I think I mean the whole idea of this positive money or you know what is called a sovereign money and I think it's it's it's pretty nonsense so and then it's also a bit complicated that they come up with you know strange arguments so that they could even you know utilize the proceeds from money creation so that for example when I went to bank when you create 1000 franc note that the printing cost only 30 cents and so that they basically earn you know 990 point 70 Swiss francs when they when they print the 1000 note they can basically use that that difference and distribute it into the economy and to the people back to the people and so on I mean it's completely weird but at the end of the day and that I think that's the beauty of Switzerland is that we we can debate about that and it also shows I mean it really we had last year we had this gold initiative referendum and now we have this fall galt initiative and it clearly shows that the people are unhappy unhappy with the actual system and so they are trying to find you know new solutions to come up with new suggestions which I believe is good because it opens up the discussion and the debate and I also believe you know even now for us you know for us in economics and so on I mean there will be a debate taking place in the future and then it's up to us that we can also contribute positively you know by yeah explaining you know how we see that the monetary system is working how an economy is working why do we need interest rates where does money come from you know why should money be a hard asset a real asset and I think that that helps you know the people then understanding what's going on so overall overall I believe you know even if it's a nonsense idea I don't see I don't see you know I don't see any chance that it's going to succeed but I like to see you know the public debates and discussions we're gonna have absolutely no I think we have a parallel in America I'd like to see Bernie Sanders talking openly about democratic socialism I think I would much rather see that than have the issue obscured or or or have the issue discussed in an dishonest way so I would much rather have it discussed openly let me ask this to Swiss people still like to use cash in their day-to-day lives there used to be a stereotype of the typical German that he really tried to use cash we're in America for quite some time maybe maybe not as much as the Swedes but in America we've been mostly cashless for for quite some time at least in the non underground economy yeah well you know I just saw a slide from a friend of financing from acting man you know Switzerland is the country where the people are stocking the biggest you know the biggest amount of paper notes of cash so so we all by far number one so this means you know people the Swiss people heard about you know cashless society they see what's going on around them so what they were doing basically they were you know they really negative interest rates of course that's another topic so they are just you know taking cash out and they store it somewhere and so that's the first reaction which is I think you know it's quite a smart one it just shows you know that people love cash and they they don't trust you know the government that they don't want to have a completely you know cashless society and on the other side when I talk to Swiss people about cashless society and so on so far I mean you know I mean the majority by far I mean a huge majority they are pro-cash and even if they use you know electronic you know credit cards and so on during the day from time to time they don't want to give up cash you know that's cash really is is part of the Swiss culture and and they what they don't want to give up you know what yeah what what the state is basically planning we have lots of gold in Switzerland and the good stuff is you know I mean the people the Swiss people they they see how you know governments act in Germany and in France and and and and you know the way I see it is really you know that the Eurozone can turn quite fastly into a totalitarian zone you know where we're gonna have martial law not only in France for a few months I mean they need a few attacks they need a few terror attacks and and then I think the whole Eurozone is going to change within a very short period of time and I even had you know I had discussions with people in Germany company owner entrepreneurs and I always ask them what are you doing I mean do you have a plan B and and all of them they had the plan B so I mean they even especially the people in the north I mean in Germany they they see what's going on they see what the government is doing to them and they also understand that it's that it's not possible you know to finance welfare state with open borders and and we still have you know militia army and we have these debates in the parliament you know people Swiss people basically want to have more military at the borders so this will be you know this is a discussion which is going on right now of course now because of winter time you know the the refugee streams went down a bit but I mean they are there and with with the actual policy of bombing the Middle East back to the Stone Ages you know what is the normal reaction you know more people will come and so this is not this is just the beginning what we are seeing and yeah so I really know my feelings that we really go back to the Dark Ages I mean that's at least possible scenario we're gonna have religious war so it's and I mean it's yeah horrible stupid it's so stupid yeah yeah well people like to think of history as as pure forward progress when in fact sometimes it goes sideways or even backwards for a couple hundred years right yeah so it's certainly possible okay so in the US there is this image of the Fed that it's somehow independent from Congress independent from the president independent from the political process now we know it it that's not true but the Fed touts its independence in Switzerland is there the same perspective that the Swiss National Bank is is completely independent of the legislature and that it won't just do the legislatures bidding absolutely the same it's the same over here but I mean at the moment you know I mean for example and you look at the balance sheet of the Swiss National Bank I mean they have printed 400 trillion 400 billions in the last since 2008 450 something like that so you know at the same time we had a vote that you know the Swiss people were saying we don't want to add more debt you know we had the debt break so of course but in the in the background of course and that the asset bay just printed money like crazy but I think you know it just shows I mean if we're gonna have this full gelt you know then in the future I mean you don't need to you don't need to bring in front of the people a tax hike or something yeah because yeah then they have money the free money direct access so why why bother the people you know and inflation is is yet a toxic the toxic tax which most people don't understand so I mean therefore it's likely that they just do the same you know and and steal even more from the people through great inflation well of course in the US taxes have really become a non-issue in elections I mean if Sanders wanted to come along and start imposing some 90% tax on rich people of course they would they would scream and cry but but in effect I mean who cares if Hillary saying 35 and Ted Cruz is saying 32% you know who cares because the Fed just papers over these deficits and everyone's praising Obama yeah for for turning you know for instead of spending one trillion more each year than the government takes in the taxes he's spending you know 500 billion and this is touted as some huge success so taxes have really become well I should say tax rates have really become a non-issue in the US and I think that shows you the power of central banks absolutely yeah happy new year Claudia it's great talking thanks thank you very much same to you take care