To do so, we have to take as our basis the development of its purchasing power. It thus makes sense to measure the value of money using a basket of goods and services that is as representative as possible of consumer spending, as Switzerland does with the consumer price index. 1 The value of money thus depends on the transaction prices of goods and services, and its development over time can be measured using the price of the basket. Central bank money and bank deposits Having looked at what constitutes sound money, let us now turn to the two types of money that are circulating in parallel in the current monetary system and that can be exchanged for  1  In its monetary policy strategy, the SNB equates price stability with a rise in the Swiss consumer price index of less than 2% a year. Deflation – i.e. a sustained decrease in the price level – also breaches the objective of price stability. With this definition, the SNB takes into account the fact that it cannot steer inflation precisely and that the consumer price index tends to overstate inflation slightly. Page 3/8  each other: central bank money and bank deposits, that is to say book money of banks. 2 In Switzerland, central bank money comprises the banknotes issued by the SNB and the sight deposits held at the SNB by financial market participants, primarily banks.
This would result in monetary policy no longer being centred on price stability and thus on sound money. 11 Switzerland has been able to manage the additional debt well thus far thanks to the fact that its public finances were in good order when the crisis hit. That said, the coronavirus crisis has fuelled aspirations here, too. There have been mounting calls for the SNB to make massive additional profit distributions. However, there are two things to bear in mind here. On the one hand, the size of any distribution depends on the earnings potential of our investments. And on the other hand, a central bank’s equity must be sufficiently high to cover the risks in its balance sheet. 12 Ladies and gentlemen, a monetary system has to take account of the changing needs of the economy and society over time, and the evolving environment in which it exists. However, it is also important to note that it is an order that has developed over the course of history and any ill-considered interventions could entail serious consequences for our country and the population as a whole. Swiss monetary history has been characterised by a wide range of changes, but the desire for sound money has been a constant throughout. Today’s paper money system with central bank money and banks’ book money has stood the test of time.