Sound money - a fundamental pillar of our society

Thomas J. Jordan
Chairman of the Governing Board∗
Swiss National Bank
Uster, 23 November 2014
© Swiss National Bank, Zurich 2014 (speech given in German)

Money is sound when it fulfils its functions as a means of payment and store of value as smoothly and reliably as possible in people's everyday lives. Sound money retains its value and is generally accepted. It also makes an important contribution to social harmony and material prosperity. Sound money is therefore a central pillar of our society. The mandate of monetary policy is to ensure that money remains sound. Consequently, the Swiss National Bank (SNB) bases all of its activities on this mandate.

Since the Uster day in 1830, Swiss monetary history has shown us that the monetary order does not arise from natural causes and is not god-given. It is, rather, a - more or less - useful human invention. Some of the fundamental turning points are the result of an organic learning process. Sometimes it is also necessary to react to upheavals in the international arena with determination, under time pressure. Nevertheless, two invariables are quite clear over the course of Swiss history. First, efforts to ensure sound money in the interests of the population as a whole have always been regarded as a state responsibility. Second, the monetary order and the SNB enjoy widespread fundamental trust, while the culture of stability is well anchored in this country.

In view of the major importance of the monetary order, it is legitimate and necessary that this order be subjected to repeated review. At the same time, however, it should be borne in mind that it is the result of historic development. Even well-meaning interventions may therefore have grave consequences for our country and the entire population. Examples of profound reforms of this kind are the use of private money instead of state money, the return to a gold standard, the introduction of plain money and the adoption of foreign money. From today's perspective, these four reform ideas are unsuited to making our sound money even better.

For over 100 years, the monetary order and the institutions which back sound money have met with widespread acceptance and strong support in the Swiss population. This has made it possible to maintain the basic values of the monetary order and forgo experiments with uncertain outcomes, while at the same time making essential adjustments. This demonstrates a strength of our country, that we review new developments impartially and adapt them to our own situation if we consider them good, linking them organically to tested and tried systems wherever possible.