Crises and their aftermaths generally mark a high season for reformers. That is just as true for the financial and debt crisis, which still hasn’t entirely played out yet. The latest ruse on Switzerland’s political agenda is the «Vollgeld-Initiative» ((Full Reserve Banking, or 100 per cent Money, Initiative, ed)) from a group propagating «Monetäre Modernisierung» (Monetary Modernisation). Their plan promises nothing less than a future without financial crises and inflation. To reach that aim, all that’s necessary is for the Swiss National Bank to ladle out money.

Avenir Suisse’s fourth «Avenir Standpunkte» publication gets to grips with this more than 80 year old idea. Authors Jörg Baumberger (emeritus professor at the University of St. Gallen) and Rudolf Walser (senior consultant at Avenir Suisse), two monetary policy experts, focus on the problems of moving from today’s monetary system to such an alternative and analyse the consequences for the financial sector if the initiative were implemented. Their conclusions leave no room for doubt. Such a reform would bring far more risks than opportunities. And it would be virtually irreversible. Instead of a reform that touches the very fundamentals of the monetary system, they call instead for phased and measured steps to improve stability, including, for example, higher capital standards for banks.