Setting monetary policy by popular vote: Full of holes

The last defence against hyperinflation

THE Swiss franc is a volatile currency that is fast becoming worthless. That, at least, is what some members of Switzerland’s right-wing People’s Party (SVP) would have you believe. Thanks to the SVP, Switzerland will vote on November 30th on a radical proposal to boost the central bank’s gold reserves. Bigger reserves, activists argue, will make the Swiss economy more stable and prosperous. In fact the opposite is true.SVP activists forced the referendum by collecting the necessary 100,000 signatures. They are annoyed at the behaviour over the past few years of the Swiss National Bank (SNB), Switzerland’s central bank. In the late 1990s it came to the conclusion that it held far too much gold. Its reserves were worth 25% of annual imports, while Germany’s were worth just 6%. The tumbling gold price at the time also made the hoard seem less sensible. By 2005 the SNB had sold half its gold—1,300 tonnes.The SNB then added insult to injury, by acquiring big reserves of a different sort. When the financial crisis hit, investors flocked to the Swiss franc, which is widely seen as a safe haven. That...



from The Economist: Finance and economics http://ift.tt/1HIqL1T