Added to this, public finances are in good shape as far as debt is concerned, which reduces the political pressure on the SNB. The value of bank deposits in Switzerland is stable because the value of its central bank money is stable, because the banks are operating prudently, and because the regulation of the banking system is centred on stability. The strong capital base and high liquidity of the banks in Switzerland increase the resilience of the system in times of crisis and promote confidence among depositors. Both of these factors contribute to bank deposits retaining their value. Current monetary policy and the role of central bank balance sheets Our findings are therefore rather reassuring. In Switzerland, central bank money and bank deposits are essentially sound money. However, there is no guarantee that this will always be the case. Or, to put it in somewhat more pointed terms: will the expansionary monetary policy that the SNB has been following for some years jeopardise the solidity of the Swiss franc in the future? Issuing too much central bank money can indeed undermine the foundations of sound money, especially if the money is created to solve political or structural problems. However, the unprecedented expansion in the monetary base in recent years does not pose a particular threat to the stability of the Swiss franc’s value.
This meant that, for example, the differences in the risk premia applied to the various issuers of government debt disappeared. It was thought – and this was a widely held viewpoint – that membership of the Monetary Union would reduce the risk linked to current account deficits, because they could be financed within the Union in light of the free movement of capital. This approach, which would be proven to be mistaken with the crisis, led, among other things, to the risk associated with our economy’s growing external debt not being properly estimated. As regards demographic growth, the population rose by around 5,000,000 between 2000 and 2007, an unprecedented increase in such a short period since population series have existed in Spain, i.e. since the mid-18th century. Almost 90% of this population increase was attributable to net immigrant inflows, most of whom adults, which fuelled the growth of the real estate sector by means of both a permanent increase in the demand for housing and, on the supply side, by providing the labour that helped the construction sector expand.