After waiting a couple days and receiving no response, I was beginning to think I might not get a response from David Glasner. This would be, I believe, the first time. It wasn't. In fact, Glasner had 17 comments on his thread and took the time to go through each of them. You can find his response to me if you want to read through.
Jim, You are right, the Swiss central bank is not bound by a fixed exchange rate between its currency and gold, so there is a basic difference between its position, even if the referendum passes, and the Bank of France. The post was mainly intended as a sendup of gold-buggism as a social-psychological phenomenon and only partly as a warning about the policy consequences should the referendum actually pass. However, I suspect that requiring 20% gold cover will make it more costly for Swiss National Bank to maintain a peg against the euro, and will therefore increase the deflationary pressure on the Swiss franc. Tom, Thanks. Don, Thanks. There is a like button by the way, but you are free to keep ignoring it. Andrew, I am not worried about the Swiss balance of payments, and I don’t think anyone else needs to worry about it either, but I take your point about the consequences on the asset portfolio of the central bank. Elsa, Imply? I thought that I was being pretty unequivocal. People don’t have to hold euros. They can use their euros to buy all kinds of assets that are likely to appreciate or generate pecuniary returns that will provide their owners with a much higher return than gold. Same goes for holding sterling or any other currency. Gold, thank God, is not the only inflation hedge. Mike, I don’t say that a central bank should not hold any gold, but gold is certainly not the only asset with the property that its value is not highly correlated with the value of the currency issued by the central bank. Maynard, A gold bug is a gold bug regardless of nationality. elwailly, QE is about the total size of the central banks’s balance sheet. The referendum is not about the size of the balance sheet but about its composition. Shahid, I agree. Benjamin, Well they haven’t voted yet, so don’t assume that they have gone nuts. Mikael, Why do you assume it’s a helicopter drop? They will convert their foreign exchange to gold. They don’t have to increase their outstanding liabilities. Jim, Thanks for the link. Interesting. Scott, As I pointed out in my initial response to Jim, I was mostly responding to gold-buggery as social-psychology, not to the policy implications. However, although you may be right that the Swiss may be able to continue with a reasonable policy even if the referendum passes, I do think that the referendum would increase the risks of deflation in Switzerland, which would not be a good thing.
I was pleased to see that he was mostly upset about "gold-buggery", but also has a legitmate concern about deflation. As far as the monetary policy proposal goes, I've been working through some more bugs that I think I have finally ironed out including making the base money stock responsive to interest rates. I hope to have a full post later this week.
I was pleased to see that he was mostly upset about "gold-buggery", but also has a legitmate concern about deflation.