Given how significant the monetary system is, it is only right and proper that the associated developments are also the subject of regular public debate. With this conference dedicated exclusively to the issue of sound money, you are making an important contribution in this regard. Sound money is a fragile accomplishment, and is thus essentially always at threat. However, against the backdrop of the global financial crisis, concerns that our good money could turn bad have increased markedly across broad sections of society in recent years. On the one hand, this is understandable. Central banks’ crisis management has led to an extraordinary expansion in money supply and interest rates are at record lows – in the past, these phenomena have often been indications of imminent inflation and thus currency depreciation. On the other hand, it is a demonstrable fact that the value of money has never been as stable as it has been in the past 20 years (cf. chart 1). Viewed from this perspective, central banks’ expansionary monetary policies have simply satisfied the enormous demand for central bank money. The strength of this demand is actually testament to a high level of trust in central banks. The fact that inflation has been held in check for so long may also explain the increasing popularity of ideas from an entirely different perspective. The proponents of modern monetary theory would like to see central banks being put at the service of state financing.
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.