The President of the Swiss National Bank (SNB), Thomas Jordan, has spoken out in a newspaper interview against an upcoming public vote on increasing the institution’s gold reserves, citing a “fundamental flaw” in the initiative.
Jordan told the Neue Zürcher Zeitung newspaper that the SNB’s balance is dynamic and not static. In times of crisis they expand reserves and then reduce them later.
The combination of a set minimum gold reserve and a ban on selling the gold, as is called for by the gold initiative, would mean that the gold share of the bank’s balance would continually rise until at some point, the SNB’s reserves would be “made up almost entirely of gold”.
This, Jordan said, would lead to problems for the central bank. In the long term it would be more difficult to sustain price stability and there would also be difficulties responding to incidents. Overall, this would make the national bank “unstable”.
He went on to say that it would in fact be “fatal” for Switzerland to put restrictions on its own financial policy in this way, limiting its ability to react to changes in the markets and keep the country financially stable.
Looking at the overall costs of implementing the initiative, should it get the go-ahead from voters later in November, Jordan said that with the SNB’s total assets currently at CHF520 billion ($540 billion) and a gold stock valued at CHF35-37 billion, they would be looking at buying gold to the sum of CHF70 billion.