news Thursday, January 29, 2015 - 05:30

Chitra Subramaniam| The News Minute| November 25, 2014| 6.00 pm IST

At the end of this month, Switzerland will vote on a proposal to decide whether or not the Swiss National Bank (SNB) should hold a fifth of its some $550 billion assets in gold. 

Now you would wonder why a country fabled to be bathed in hot, cold and air-dried gold and silver would want more of the shiny stuff, but there are any number of conspiracy theories and tales doing the rounds ahead of the vote on the 30th of November. The most interesting one is the theory that many are curious to see what the bank holds in its vaults and the only way to achieve that would be an audit! 

Not everyone is happy though, leading with the man who heads the SNB. In an interview to the influential Swiss German newspaper Neue Zürcher Zeitung (NZZ), Thomas Jordan said combining a set of a minimum gold reserve and a ban on selling gold would lead to problems he described as “fatal.” In other words, what do you do with assets that may never be sold?

Read - Myths, beliefs and superstitions about Vault B of Padmanabha Swamy temple

He is not the only one to be concerned. Over the past few weeks analysts who have compared the vote to that of Scotland seeking separation from United Kingdom (UK) recently have said limiting the country’s domestic financial policy in this way will severely curb its ability to react to changes in the market and keep the country financially stable. 

Proponents of the vote (proposed by the Swiss People’s Party), also known as the SVP, say more gold will give more credibility to the Swiss franc as well as to the SNB’s monetary policy – a position that vote watchers says smacks of ill-advised nationalism about our money and our gold. The bank had held a third of its reserves in gold in the past, but has since disposed most of it. 

In Switzerland’s direct democracy model, 100,000 signatures from people are all it takes to send an issue to the ballot for people to vote. If the vote is a “yes” the central bank would have to increase its gold holdings to 20 percent by buying over 1500 tons of gold over a period of five years. More importantly, the bank will be banned from selling it which means it will be stuck with a lot of gold. Less than ten percent of the SNB’s $550 billion in assets is held in gold. If the SVP wins, the proposal will then be sent to the Swiss parliament for ratification.

On the other side of the Atlantic, there’s glee in some quarters. Presidential candidate and former US senator Ron Paul says if the vote passes, the Alpine nation will embark on a “healthy conversation” with itself about what its national bank should be doing. “The referendum is one more step in the direction of proving that paper money, fiat money, money created by politicians out of thin air to subsidize big government and monetize debt is going to end,” he told the media in the run up to the vote. He told his followers in a separate piece that much like Europe and the European Union (EU), Switzerland is ruled by self-obsessed elites and a yes vote would be a slap on their face. 

All this is grist for the transatlantic war which peaks when Swiss banks are caught red-handed doing something fraudulent and illegal and ebbs when the country’s services are needed as a neutral interlocutor with enemies of Washington or the EU. Preparing to any eventuality, money markets reportedly have secured themselves from high volatility if the vote turns out to be a yes. If you thought the wealth stored in the many vaults of the Padmanabhaswamy temple in India was the subject of discussion and disturbance, think again. Man’s fascination with seeing gold and silver, diamond and emeralds is not just an Ali Baba story – it’s real. 

The vote however, is not expected to pass and dreams on both sides of the Atlantic to return to the gold standard may be just that – a dream, like the seventh vault in the Indian temple.

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