Tag Archives: Switzerland

“Die Vollgeld-Initiative und eine Alternative (The Swiss Sovereign Money Initiative, and an Alternative),” SNB, 2017

In: Thomas Moser, Carlos Lenz, Marcel Savioz and Dirk Niepelt, editorial committee, Monetary Economic Issues Today, Festschrift in Honour of Ernst Baltensperger, Swiss National Bank/Orell Füssli, Zürich, June 2017. PDF of draft.

The sovereign money initiative (Vollgeldinitiative) seeks to gain greater control over the money and credit supply, to increase financial stability and to achieve a fairer distribution of seigniorage income. The initiative’s suggested approach – a ban on active money creation – is inefficient and may even prove ineffective, as it fails to address the core problems. A variant of the initiative, which would allow the public access to electronic central bank money on a voluntary basis, would offer greater benefit at lower cost.

The Swiss Phillips Curve

On VoxEU, Stefan Gerlach reviews the case for tilting Phillips curves in Switzerland.

Previous research had suggested that the Swiss Phillips curve had steepened in the second half of the 20th century. Gerlach estimates a Phillips curve model that includes lagged inflation, an output gap measure, and a measure of import price inflation. His model suggests several structural breaks:

The first structural break occurs in 1936-37. The estimated Phillips curves indicate that inflation became much more inertial, as evidenced by the fact that the parameter on lagged inflation more than doubled.

The second break occurs in 1970-71 … While the sensitivity of inflation to the output gap essentially doubles, other parameters are broadly unchanged. This impies that the Phillips curve steepened sharply in the 1970s.

The third break occurs in 1993-94 … The parameter on the output gap falls to zero and becomes insignificant. The parameter on lagged inflation also falls sharply and loses significance. This implies that between 1994 and 2015 inflation in Switzerland was insensitive to the output gap and displayed little persistence, and seems to have fluctuated only in response to changes in import prices.

Tax Evasion and Wealth Inequality

The Economist reports about a study by Annette Alstadsæter, Niels Johannesen and Gabriel Zucman who matched leaked information from Swiss banks and Panamanian shell companies with Scandinavian wealth records. Their findings:

  • Tax evasion is progressive. The average / top 1% / top 0.01% Scandinavian household paid 3% / 10% / 30% fewer taxes than it should.
  • Accordingly, estimates of wealth inequality (based on tax data) likely underestimate the degree of inequality.

UBS Business Solutions AG

In the NZZ, Hansueli Schöchli reports about further steps by UBS, the Swiss bank, to prepare for the next financial crisis. In the future, a legally independent service unit—UBS Business Solutions AG—provides other business units with critical internal services, including payments, trading systems as well as legal services. A “Master Service Agreement” specifies that the service unit remains operative even if other business units fail.

Die UBS vollzieht nun einen weiteren Schritt. Sie überträgt dieser Tage die konzerninternen Dienstleistungen für das Schweizer Geschäft in die rechtlich selbständige Dienstleistungseinheit UBS Business Solutions AG. Übertragen werden damit im Inland rund 8000 Mitarbeiter. Weltweit soll diese Service-Einheit bis Ende Jahr etwa 18 000 Beschäftigte umfassen. Zu den betroffenen internen Dienstleistungen zählen unter anderem Informatik, Zahlungsverkehr, Handelssysteme, Risikomanagement, Rechtsdienst, Personal und Marketing. Hauptzweck der Übung: Auch wenn Teile des Konzerns in den Konkurs schlittern, sollen kritische Dienstleistungen weiterhin sichergestellt sein. «Dies ist eine Lehre aus der Pleite von Lehman», sagt Markus Ronner, Chef Notfallplanung bei der UBS.

Ein globales «Master Service Agreement» regelt die Service-Lieferungen gegenüber gut 130 UBS-Gesellschaften. Nebst Preisen und Qualitätserfordernissen ist dabei auch geregelt, dass die Service-Einheit im Fall des Konkurses eines Konzernteils ihre Dienstleistungen gegen Bezahlung noch mindestens zwei Jahre lang weiterführen muss. Wenn interne Kunden zahlungsunfähig werden, muss die Service-Gesellschaft genügend Liquidität haben, um in einer Übergangszeit ihre Dienste aufrechterhalten zu können; die Rede ist von sechs Monaten als Referenzmarke.

Effects of Climate Change for Switzerland

In the NZZ, Christian Speicher summarizes expected consequences of climate change for Switzerland by 2050–2060.

  • Mean temperatures exceed the 1980–2009 average by 1.6–2.9 degrees Celsius.
  • The temperature increase is more pronounced in Summer than in Winter. But ski resorts below 2000m are no longer competitive.
  • Less precipitation in Summer, maybe more in Winter.
  • More extreme weather events.
  • Increased need for water storage and conservation.

 

Fintech Regulation in Switzerland: Open Questions

In the NZZ, Jürg Müller reports about the developing regulatory framework for fintechs in Switzerland. A proposal by the federal finance department drew—reasonable—criticism by various lobbies and industry associations, including the CFA Society Switzerland.

Die CFA Society Switzerland will das systemrelevante Bankensystem von anderen Finanzdienstleistern trennen. Dafür sei eine präzisere Bankendefinition nötig, als sie heute vorgenommen werde. Nur Banken sollen demnach dem Bankengesetz unterstehen. Finanzdienstleister, die kein traditionelles Bankengeschäft betreiben und keine Liquiditätsrisiken eingehen, sollen einem anderen Regulierungsmodell unterstehen. Dabei sollen je nach Tätigkeit unterschiedliche funktionale Lizenzen zum Zuge kommen – dieser letzte Punkt wird von vielen Vernehmlassungsteilnehmern ebenfalls eingefordert.

Schliesslich identifiziert die CFA Society Switzerland auch zentrale Fintech-Themen, die in der Vernehmlassung aussen vor gelassen wurden. Eine dieser Lücken sei der direkte Zugang zur Schweizerischen Nationalbank (SNB). Aus heutiger Sicht sei nicht ersichtlich, weshalb nur Banken elektronisches Zentralbankgeld halten dürften. Auf Anfrage wollte die SNB zu dieser Forderung keine Stellung nehmen. Andere Zentralbanken wie die Bank of England zeigen sich solchen Ideen gegenüber derweil aufgeschlossen. Auch einzelne Schweizer Ökonomen wie beispielsweise Dirk Niepelt stehen allgemein zugänglichem elektronischem Notenbankgeld positiv gegenüber.

Link to my article mentioned above.

Social Insurance in Switzerland

Information from the Swiss Federal Social Insurance Office on the social insurance system in Switzerland:

  • Brief Overview: HTML. Longer overview: PDF.
  • Social Insurance Accounts with links to data, in German (Schweizerische Sozialversicherungsstatistik): PDF.
  • Pocket statistics, in English: PDF. In German: PDF.

Does the Swiss Agricultural Sector Add Value?

In December 2016, the Swiss Federal Council concluded that in international comparison, government support for the Swiss agricultural sector is very high. But critics point out that the government report might understate the social cost of government support. In a separate study the lobby group `Vision Landwirtschaft’ had presented estimates according to which the Swiss agricultural sector adds negative value, on the order of 1 billion CHF per year.

NZZ reports by Désirée Föry: February 9, 2017 and April 2, 2017.

On the Performance of Swiss Portfolio Managers

In the NZZ, Michael Schaefer reports on a study about the performance of Swiss portfolio managers in 2016.

  • The median portfolio returns in all investment strategies except those not investing in stocks fell short of the corresponding benchmark returns.
  • Only a fifth of the portfolios generated returns in excess of their benchmark.
  • These numbers do not yet account for management fees.
  • No portfolio manager generated high returns across all strategies.
  • But some managers consistently generate high returns in certain strategies.

“Kosten eines Vollgeld-Systems sind hoch (Costly Sovereign Money),” Die Volkswirtschaft, 2016

Die Volkswirtschaft 1–2 2017, December 21, 2016. HTML, PDF.

Banning inside money creation would be unnecessary, insufficient, not enforceable, and besides the point. The way forward is to grant everyone access to central bank reserves and let investors choose between reserves and deposits.

Switzerland’s New Immigration Law

In the Guardian, Jon Henley reports about Switzerland’s new immigration law. The Swiss parliament rejected quotas on EU workers, contrary to what a 2014 referendum demanded. Instead, the new law requires that residents be given priority in new job vacancies.

[C]ross-border commuters to Swiss jobs, plus EU residents in Switzerland, will be able to register with a Swiss job centre and get the same treatment as Swiss citizens.

Immigration Tax

In the NZZ, George Sheldon questions the efficiency and usefulness of taxes levied on immigrants. He argues that firms rather than immigrants would likely end up paying and that a tax levied at the firm level would thus be more efficient. Moreover, he points out that an immigration tax might reduce incentives to emigrate.

Tax Evasion in a (the) New World

In the FT, Vanessa Houlder reports about the tax evasion business. The new regulatory environment has led to portfolio adjustments and new types of behavior, and it exposes vast differences in enforcement across countries:

  • Diamonds in vaults rather than financial assets.
  • Trusts in South Dakota rather than anonymous bank accounts.
  • Moving to a different country rather than just shifting assets.
  • FATCA versus the Common Reporting Standard.

The article also links to an article by Kara Scannell and Vanessa Houlder earlier in the year entitled “US tax havens: The new Switzerland.” That article includes the following quotes:

I think the US is already the world’s largest offshore centre. It has done a real good job disabling competition from Swiss banks.

In a world where it’s very hard to hide ownership or hide assets sometimes the easiest place [is one] no one would normally think of, which is the US.

In Switzerland, the “Elites” Represent Voters

In a post on DeFacto, Michael Hermann argues that in Switzerland the conflict between voters and “political elites” actually has receded. According to Hermann, popular votes helped clarify where voters disagreed with parliamentarians, and this led policy makers to adjust. The figures illustrate how over time, votes in the two chambers of parliament converged towards outcomes in popular votes. Campaigns supported by the right-wing SVP party may have contributed to these developments.

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Swiss Government Recommends Rejection of “Vollgeldinitiative”

The Swiss Federal Council requests that

Parliament recommend to the people and the cantons rejection of the popular initiative “For crisis-resistant money: end fractional-reserve banking (Vollgeld initiative)”, without a counterproposal.

The Federal Council doubts that ending fractional-reserve banking would strengthen financial stability. It sees major risks for the Swiss National Bank’s credibility and for financial intermediation.

Grounding

15 years ago, Swissair stopped operating. Many of the fleet’s airplanes were grounded at Zurich airport. Staff and passengers could not understand the world, official Switzerland was in a state of shock, and public perceptions of UBS management which was considered to have acted in treacherous ways, started their long descend.

The movie: Grounding. Werner Enz looks back in the NZZ.

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World War I Turned the Swiss Franc Into a Strong Currency

In Die Volkswirtschaft, Ernst Baltensperger and Peter Kugler summarize the history of the Swiss Franc since the mid 19th century:

  • After 1973, the Swiss Franc has been strong. Swiss Franc yields have been lower than what uncovered interest parity would suggest.
  • Before 1914, the Swiss Franc was weak in the sense that it enjoyed only limited credibility. In periods with fixed exchange rates, Swiss Franc yields typically exceeded yields in French Franc or Sterling.
  • Throughout the 20th century, the Swiss Franc appreciated by more than what inflation differentials would suggest, potentially reflecting the Balassa-Samuelson effect.