The Save our Swiss Gold Battle Heats Up

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We warned that as November 30 approached the anti Save Our Swiss Gold rhetoric would heat up.

On November 30, 2014, the Swiss will go to the ballot to vote on a referendum, sponsored by the Swiss People’s Party (SVP) – Save Our Swiss Gold that would require the Swiss National Bank (SNB) to:

◾ hold at least 20% of its reserves in gold;

◾ repatriate of all of its gold currently held outside its borders; and

◾ ban selling any of its gold.

A populist referendum like Save our Swiss Gold strikes fear in the hearts of spendthrift politicians and central bankers whose freewheeling money printing follies would be curtailed by such a referendum.

In Save our Swiss Gold – The Battle Ahead, we noted as November 30th approached, there would be banker and media attacks on the initiative, attacks on the promoters/supporters of the initiative, attacks on the Swiss people and attacks on gold.

Attacks on the Save Our Swiss Gold Initiative

We warned:

If Save Our Swiss Gold passes, the SNB would have to sell billions worth of Euro assets that they bought in recent years to support the 1.2 Swiss Franc to Euro peg in order to buy gold. Such an action would have a negative impact on the Euro. As such, … expect statements from central banks regarding the “danger” that Save Our Swiss Gold presents to the entire global monetary system.

And here are some of the responses from the SNB:

Disaster!

Thomas Jordan the chairman of the SNB, complained that passage of Save our Swiss Gold would make it harder for the SNB to “do its job”.

“The initiative is not in Switzerland’s interest because it wants to fundamentally change the rules of our monetary policy,” said Thomas Jordan. “It would be disastrous if Switzerland limited its own capabilities to react to disorder and maintain the stability of its currency.” and would “restrict central bank’s ability to respond to disturbances”

In essence Thomas Jordan is saying when central banks create imbalances by manipulating the currency markets they won’t be able to correct those imbalances (further muck things up) if they are restricted by having to maintain 20% of their reserves in gold.

Swiss Bank Whines of Loss of Credibility and Profits

Credibility

The SNB argues that Save our Swiss Gold would not only impede the SNB from “doing its job” of implementing monetary policy, but also might result in the SNB losing credibiity.

Of course, restraining the SNB from conducting reckless monetary policy that involves printing Swiss Francs out of thin air to buy Euros to maintain the Franc Euro peg at 1.2. is precisely the purpose of the Save Our Swiss Gold initiative. It’s a feature of the Save our Swiss Gold proposal, not a bug!

Perhaps the SNB’s credibility would be enhanced if it conducted monetary policy in a more prudent fashion, restrained by a gold reserve requirement.

Profits

The SNB also argues that Save our Swiss Gold could reduce the SNB’s annual profits that it distributes to Switzerland’s cantonal governments.

Fritz Zurbruegg, SNB board member warns “The higher the gold content, the smaller the income from interest or dividends,” he said.

This is a disingenous argument, since the misguided goal of European banks is to reduce interest rates to zero or have them negative if possible, in order to boost inflaton and economic growth. If the Save our Swiss Gold initiative were to pass, the loss in interest payments to the Swiss cantons would almost certainly be de minimus.

Attacks on Save Our Swiss Gold Supporters

We wrote:

Expect the propaganda to be ratcheted up as November 30th approaches and to hear the terms “right-wing,” “far right” and “racist” bandied about in the main stream media when discussing Save Our Swiss Gold, its sponsors and supporters. …expect the SVP to be labelled “financial terrorists”

“Right Wing”

Here is how Reuters described the Save our Swiss Gold initiative in a November 6, 2014 article: The “Save our Swiss gold” proposal, spearheaded by the right-wing Swiss People’s Party (SVP)”

“Splinter Group”

While falling short of calling the Save Our Swiss Gold proponents “terrorists”, Bloomberg described organizers of the initiative as part of a “splinter” group:

“They may be a splinter group of Swiss politics, but they’re a persistent bunch.”

The word “splinter” is often used by Bloomberg and other media outlets when describing terrorists, as in these stories:

Bloomberg: Pakistan Holds Border Ceremony After 55 Killed in Bombing; November 3, 2014

“Of the three groups that have claimed responsibility, all three are splinters of the Pakistani Taliban…

McClatchy Washington Bureau: Think Helping to Fight ISIS Will Get You Off Terrorist List? Think Again; November 4, 2014

“Though Americans are most familiar with the Arab and Muslim factions on the list, the roster is diverse and truly global, including the Japanese religious cult behind a deadly chemical attack on the Tokyo subway and two separate splinter groups from the old Irish Republican Army, or IRA.”

Attacks on the Swiss People

Guns, Gold, Chocolate and Cuckoo Clocks

In Save our Swiss Gold – Guns, Gold and Cuckoo Clocks we wrote wrote:

As November 30th draws closer, expect to see main stream media stories about the quirkiness of the Swiss portraying them as a nation of gun toting, cuckoo clock (actually a German invention) and chocolate making people.

Chocolate

The Wall Street Journal obliged our chocolate prediction with their recent story “Swiss Gold Initiative Would Interfere With SNB Currency Policy”

The story features a large photo of a fake gold bar filled with chocolates being opened by Lukas Reimann, member of the “Save Our Swiss Gold” committee, who used the bar as a prop to make his point at a news conference in Bern, Switzerland.

Rather than focusing on the arguments of Lukas Reinman (the quirky Swiss guy with the box of chocolate in his hands) in favor of Save our Swiss Gold, the story contained many of the same talking points as the Reuters article re the dangers of imposing restrictions on the SNB’s abiity to “do its job.”

Attacks on Gold

We wrote:

A declining gold price would help take the wind out of the sails of the Save Our Swiss Gold initiative. A declining gold price sends a message that a shiny metal whose price is declining is not worth screwing up the entire monetary system over and validates the SNB’s decision to have sold it. Central banks will do whatever in their power to ensure that the price of gold remains suppressed as November 30 approaches.

Gold Price July – November

Save Our Swiss Gold Pay Pal Account Frozen

The day we published Save Our Swiss Gold – The Battle Ahead, we learned that the pay pal account set up to receive donations in support of the Save Our Swiss Gold initiative had been frozen.

“Clearly the powers that be did not want the campaign to receive this money,” said Egon von Greyerz Managing Partner of Matterhorn Asset Management AG & GoldSwitzerland and supporter of the Save Our Swiss Gold initiative.

Will The Save our Swiss Gold Initiative Pass?

Initial polls show that the Save Our Swiss Gold initiative has a chance of passing.

Reuters writes regarding the prospect that Save our Swiss Gold might pass: “The initiative has sent jitters through both the gold and currency markets.”

For many gold holders, the Save our Swiss Gold intiative has not sent “jitters”, rather tentative paroxysms of joy in anticipations that it might pass.

If it does, it just might make the Swiss National Bank and other central banks go: