Sovereign money in 2018: protecting payments does not settle every credit question

The bank balance sheet was central

The official brochure distinguished central-bank money from book money created by commercial banks. The initiative would reserve money issuance to the Swiss National Bank. Payment accounts would be held outside bank balance sheets and fully covered by SNB funds.

The stated aim was to protect this money against bank failure. This was not simply bank nationalisation: who may create payment money is a different question from bank ownership and daily management.

Rejection prevented the system’s introduction. Analysis therefore concerns proposed rules and contemporary arguments, not a Swiss experiment with measurable outcomes. A campaign forecast remains a forecast, including one made by the SNB.

A safe account and a repaid loan differ

Separating a payment account seeks to protect availability when an intermediary encounters difficulties. Borrowers can still lose income or experience failed investment. Changing the payment medium does not eliminate uncertainty in the activity financed.

Custody of money for payments and the risk of funding a loan must be followed separately. Protecting account holders does not prove that every credit asset is sound. Conversely, observing loan risk does not answer the question of continuous payments.

Security requires the incident, potential loss bearer and protective mechanism to be named. A broad promise of crisis-proof money remains incomplete without explaining loans, investments and institutions during a wider shock.

Banks would need different loan funding

Separating money creation from lending did not mean banning all commercial loans. Banks would need corresponding resources under new rules, rather than creating the same payment money through lending. Availability, maturity and cost would become central.

Supporters saw limits on banking power and greater stability. In his 3 May 2018 speech, Thomas Jordan instead anticipated more expensive or disrupted credit. These were opposing assessments of an unimplemented system, not observed results.

Social credit needs also exceed total volume. Housing, production, asset speculation and routine expenditure serve different purposes. Changing the issuer does not alone determine which projects lenders choose. Investment quality and priorities require their own discussion.

Debt-free money and real resources

Another element proposed issuing new money without a counterpart and allocating it to the Confederation, cantons or population. The brochure distinguished this from payment-account protection. Distributing an issue and defining the status of money held in custody are different functions.

A monetary entry does not instantly create housing, nurses or machinery. It changes the means to demand goods and services while productive capacity remains a constraint. Collective value therefore depends on rules, volume and the relationship with real activity.

The SNB challenged indefinite taxpayer relief and warned of difficulties withdrawing money later. Those objections deserve examination without making the central bank an unquestionable political arbiter. The practical question is how payment money would be reduced if its distribution had become an expected budget resource.

Maturities illustrate the distinction. A payment due immediately and a loan repaid over several years do not create the same liquidity need. Reorganising funding therefore requires an explanation of which resources are available at each horizon. Reform can move that need to another actor without eliminating it. Stability must also be judged by where the need goes and who meets it during a shock. A different balance-sheet presentation alone cannot establish that the resulting vulnerability has disappeared from the system as a whole.

Public control needs several instruments

The SNB highlighted capital and liquidity requirements and the countercyclical buffer. These work differently: absorbing losses, strengthening funding or limiting risk accumulation. Their existence does not make every future crisis impossible, but provides concrete mechanisms for comparison.

The PCP’s 2026 assessment connects payment security, lender responsibility and productive credit priorities. One issuance rule cannot replace all three tasks. The 2018 no vote did not close debate over banking power. It calls for precise functions and risks so demands for public control correspond to understandable institutions.