In last week's Swiss gold referendum, roughly 78% voted against expanding central bank gold reserves to 20% of central bank assets from the current 7%, as Forbes reports. The vote is a blow to the movement to “Save Our Swiss Gold” that had the hopes of moving Switzerland back toward a gold standard which the country left in 1999.
Thus, 78% of the Swiss electorate says that public confidence in central bankers is solid. That's a big reversal from the height of the recent bull market in gold peaking in 2011-2012, says the analyst of BullionVault.
Moreover, last Sunday's result suggests that central bankers face serious trouble - the kind of trouble they're unlikely to beat. By the time the general public rumble they're failure, gold will very likely be making headlines for rising, rather than drawing mockery, once more.
The thing is the failed Swiss gold initiative, in demanding 20% of assets be
held in gold, would have curbed the SNB's ability to print money to
devalue the Franc.
So its resounding defeat says people now find QE
perfectly acceptable, and that points to a deepening deflationary
psychology.
Because with QE winning on Sunday, voters who've bought the line that
QE helps defeat deflation and economic depression must think that's what
is about to hit them. So as the example of Japan shows, ever-more QE
cash is needed to boost asset prices and try to stoke inflation.
Yet once that policy finally succeeds, then today's confidence in central-bank policy will look badly misplaced. Because a nice, gentle uptick in inflation is not what will follow.
Central banks failed to predict or control the financial collapse of
2008. They're now failing to get inflation of 2.0% per year, their
standard "target" rate. The longer this goes on, the more
"unconventional" QE they will apply.
What makes anyone think the central banks understand what they're doing or will get ahead of the outcome?
As it is, the Swiss National Bank still has plenty of gold. Its 1,040 tonnes work out to a huge 129 grams for every man, woman and child in the country. That's a heavier gold-weighting than any other nation on earth according to our maths here at BullionVault today.
On the other hand, the Swiss population might be grateful for such large per
capita gold reserves. Because thanks to Switzerland's QE
policy creating Francs to sell for Euro and Dollar assets, depressing
the value of CHF on the currency market to try and boost exports and
prices, the central bank's total assets per head are also the largest
in the world right now.
Worth fully $62,800 per head of population, the SNB's per capita
assets, as our new chart shows, are more than 15 times what China's
People Bank holds per head eight times what the Eurozone central banks
hold and over 3 times more than even the Bank of Japan's QE-crazed
balancesheet.
Swiss voters seem perfectly happy with this. Or rather, they're oblivious. Quantitative easing is just fine. Because deflation is starting to set like concrete. Sure, a handful of Swiss citizens did choose to buy gold ahead of the vote. Some analysts consider they were right to buy gold because the Swiss gold vote was sure to fail.
"No" leaves Swiss gold
reserves slipping down the world table of national holdings as other
countries buy more. It also leaves the Swiss National Bank's
money-printing QE scheme to continue unfettered actively seeking to
devalue the Franc as the SNB flirts with the new absurdity of negative
interest rates. If that sounds similar to your own currency's outlook, you might want
to buy gold for your own personal reserves too.
