When we intervene in the foreign exchange market, we exchange new Swiss francs for foreign currency instead of giving them away. The creation of money in the context of foreign exchange market interventions is thus not ‘debt-free’. Economic order  Another problem is that the Swiss sovereign money initiative is etatist and imposes an unnecessary burden of responsibility on the SNB and disempowers the private sector. This does not fit in with the Swiss concept of the state and runs counter to proven principles of economic order. In order to achieve its aims, the initiative also does not shy away from providing for the possibility of general restrictions in economic freedom. This is clearly set out in the second sentence of the proposed article in the constitution. Adoption of the initiative would impose additional tasks on the SNB. The SNB today has the clear and appropriate mandate to ensure price stability and has a large degree of flexibility in fulfilling it. Under the sovereign money system, the SNB would have to assume tasks which far exceed this mandate. The initiative imposes two additional tasks on the SNB: first, making ‘debt-free’ payments and, second, guaranteeing the supply of credit to the Swiss economy. The latter is problematic because it could lead to a conflict of interest between price stability and credit supply. Above all though, it means that the SNB would have to decide precisely who should receive the loans.
Just how difficult that would be – and how far sovereign money would complicate our work – can be illustrated by taking the example of our monetary policy during the last financial crisis. Over a very short space of time, we created a vast amount of money; initially to ensure liquidity in the banking system, and thereafter to counter the massive upward pressure on the Swiss franc. This led to a significant expansion of our balance sheet. How would we have proceeded in a sovereign money system? We would probably not have reacted so decisively given the difficulty of reducing liquidity once it has been created in a sovereign money system, which can therefore lead to higher inflation further down the line. A weaker monetary policy reaction would have exacerbated the negative consequences of the crisis for the real economy. Quite apart from that, it is doubtful whether we would even have been able, in a sovereign money system, to react as we did because the initiative limits the number of tools we would 2  As regards the SNB’s shift from monetary targeting to interest rate targeting, cf. Meyer, Hans, On monetary policy in the new year, speech held at the University of St. Gallen, St. Gallen, 20 January 2000. Page 6/8  have available. Interventions in the foreign exchange market, which have played a central role in combating the overvaluation of the Swiss franc, would not actually be allowed under a sovereign money system.