Thomas Jacob on the New Swiss Gold Franc, Why the EU Is a Bad Idea and Why an IMF Managed Currency Would Be Tragic
The Daily Bell is pleased to present this exclusive interview with Thomas Jacob (left) .
Introduction: Mr. Jacob studied economics at Zurich University and spent a year as an exchange student in Indianapolis. Afterward, Mr. Jacob attended Swissair pilot school and spent 15 years as an airline pilot flying the DC10, DC9, B747 and A320. During his time as a pilot, Mr. Jacob had time to “indulge extensively” in his interests in free-market economics, libertarianism and people worldwide. As he says, “It all began with Ayn Rand.” Thomas Jacob attended several Mises University courses and many ISIL conferences during this time of intensive study of Austrian economics, all of which led to his introduction of the idea of the Swiss gold franc. Since 2002, he has worked as a financial consultant and coach in Switzerland.
Daily Bell: Please tell us about your idea for a gold franc.
Thomas Jacob: Gladly. The idea is the result of my interest in free market economics and especially my conviction that a commodity money is the most effective way to curb government involvement in the economy. The idea is simply to re-introduce an additional gold-coin currency in Switzerland on the constitutional level.
Daily Bell: Is this similar to the idea of a silver libertad being pursued in Mexico?
Thomas Jacob: The similarity is that it is a legal parallel currency and a commodity money. The difference is that the Swiss gold franc will be a privately issued money. The government’s role is limited to defining the appearance and the gold content of the coins and to protecting honest business practices.
Daily Bell: Where are you with your program?
Thomas Jacob: Dr. Ulrich Schlüer from the biggest party of Switzerland, the SVP [Ed.: Swiss People’s Party aka Democratic Union of the Centre], introduced a parliamentary initiative on March 8 – incidentally, the same day the Utah parliament [legislature] passed their gold law.
At the same time a group of dedicated politicians and economists, including I, have founded the gold franc association to coordinate the activities to help realize the idea on a non-partisan basis.
Daily Bell: What are the next steps?
Thomas Jacob: The appropriate commission will discuss the proposal probably in the winter session. They will either accept and work on it or it goes directly to the parliamentary floor. Should they also unexpectedly have no interest, we will start a popular initiative. With 100,000 signatures the voters can vote on it directly, independent of whether the politicians like it or not.
Daily Bell: Are you hopeful?
Thomas Jacob: No, I am confident. The time is right; the issue simple. We are talking about freedom of choice in monetary matters, something that cannot be opposed in good faith. It is not primarily about attacking today’s monetary system, but giving people the freedom of choice. If today’s monetary system remains as good as today’s authorities claim it is, they shouldn’t worry – if it isn’t, we, the people, shouldn’t be forced to use it.
Daily Bell: Give us some background. Where were you born and raised?
Thomas Jacob: I was born in Zurich and grew up in Schaffhausen (30 miles north, near Germany and the Rhine Falls). I spent one high school year in Indianapolis and have lived in Zurich ever since.
Daily Bell: What is Zurich like? Give us your impressions.
Thomas Jacob: With the weather not living up to the global warming promises, this rainy summer makes it a bit harder to be all praises for Zurich. I love it. You can find almost everything in Zurich, one of the positive aspects of the 30-plus percentage of foreigners from all over the world. It is clean enough to go swimming in the river running straight through the city. It is wealthy enough that we are doing well despite the wasteful socialistic government. Complaining at our standard of living has a touch of decadence to it.
Daily Bell: You were a pilot for 15 years. What was that like?
Thomas Jacob: Great. It was my boyhood dream. I always say today are the good old times of tomorrow but the times I had as a pilot won’t come back for two simple reasons: on the one hand the airplanes in the ‘80s didn’t have the range for direct flights and there were fewer flights, so going, for example, to Beijing and back took 12 days with three stopovers for the crew. I had tons of time to study cultures, people and economics. On the other hand, Swissair was the only privately owned airline in Europe. We had competitive working conditions but with the competition being state-owned bureaucracies we did very well.
Daily Bell: Why did you retire?
Thomas Jacob: After 15 years even piloting becomes routine. The folding up of Swissair at the end of 2001 gave me a reason to reevaluate my future.
Daily Bell: You went into financial consulting in 2002. Why?
Thomas Jacob: It combined my interests in finances and in people and offered a challenge pretty much opposite to that of a pilot.
Daily Bell: What is the financial environment in Switzerland like now?
Thomas Jacob: The economy is strong and so is the financial sector. I see a special challenge in the uncertainty about future rules and regulations and their enforcement. A friend of mine, Robert Nef, coined the term “vorauseilender Gehorsam”, which means the Swiss authorities tend to implement and enforce national and international rules and regulations not only to the letter but ahead of time, and over-complying.
Daily Bell: What is the political situation like?
Thomas Jacob: Pressing issues are our relation with the EU, financial themes and immigration. Party politics is pretty much divided into SVP and the rest. The SVP has often been the first one to pick up issues that the people worried about and politics ignored, and has had unprecedented success to become the largest party ever, with currently about 30 percent of the votes. The main losers were the parties in the middle, which had drifted to the left and toward the EU during the ‘90s. They seem to have an anti-SVP reflex in most issues. The parliamentary elections this fall will be interesting: if the SVP keeps winning votes will the middle parties ally with the left or move back to the right? This will be decisive for the general heading of Swiss politics in the next years.
Daily Bell: Are you a fan of the European Union?
Thomas Jacob: No. Power corrupts, and centralization always means more power. I am a federalist, ideally down to every individual.
Daily Bell: Is Switzerland growing closer to the EU? Should it?
Thomas Jacob: Polls show 80 percent oppose joining the EU. The majority of the politicians and almost all bureaucrats want to move closer and eventually join the EU but they have to move carefully today. There is always the threat that the voters will rebel, and with our direct democratic system we can vote on any and every issue if the politicians overdo it.
Daily Bell: Why is a gold franc needed?
Thomas Jacob: Why not? Freedom of choice is always beneficial. There are many potentially great advantages and the worst that can happen is ignorance, that is – nothing.
Then there is the issue of the future of today’s monetary system. I have my personal thoughts on that but I want to stress that there is no need to agree with me on this to support the creation of a gold franc. There is, for example, the moral issue of the fractional reserve system, which means some people create money “out of thin air,” and the general public pays via inflation. Then there is the “pretense of knowledge” that Hayek talked about: there is simply no way the authorities can know all they need to know to make decisions for the whole economy.
Last but not least, there is another question I haven’t been able to answer: if the monetary authorities want positive inflation, this means that the money supply must grow faster than goods and services – and this monetary growth is, in today’s system, all backed by an equivalent amount of debt. But whom can you impose an ever increasing amount of debt onto? Isn’t that an insane idea? As far as the road to change, I like what Hans Sennholz said in a 1984 speech at the Mises Institute: “Only in freedom, only through a parallel standard, can there ever be a just monetary reform.”
Daily Bell: What would the gold franc do?
Thomas Jacob: An easily understandable and useable commodity coin-money would give people a “sensual experience” with real money. People who feel and possess gold francs immediately and intuitively understand the difference between “real” and “fiat” money. For them the monetary world would never be the same again.
On the practical level, gold franc coins could be produced as a bimetallic coin, starting with as little as 0.1 grams of gold in the center. This coin would cost about $5 and give many people access to gold for the first time. This will open up huge new markets for gold in and outside Switzerland. The legal protection from taxes makes gold francs attractive for life insurance companies, pension funds, etc. By one estimate the additional demand for gold in Switzerland alone will raise the gold price by 11 percent.
Daily Bell: What will it force other countries to do?
Thomas Jacob: Depending on the developments in Switzerland, I can imagine different scenarios. They are all positive but it is too early to speculate on specifics.
Daily Bell: What gave you the idea?
Thomas Jacob: To be honest, the “healthy currency” group of some SVP parliamentarians. Their concern then was the safeguarding of the remaining gold in our national bank, which I think is a nice idea but doesn’t address the issue at heart. Originally, I wanted to use this remaining gold as the base for a parallel gold franc currency. After the huge losses the national bank incurred last year this became increasingly utopian, and I concentrated on today’s proposal.
Daily Bell: Are you an Austrian – someone who believes in Misesian Human Action?
Thomas Jacob: Absolutely. But since this is a political proposal it could be distracting to get into these discussions.
Daily Bell: What is your position on silver?
Thomas Jacob: Once the gold franc is introduced I expect it to be easy to do the same for silver and eventually “separate money from the state.”
Daily Bell: Is there a new world order or a financial elite determined to create one?
Thomas Jacob: I follow your discussions with much interest and sympathy but I simply don’t know.
Daily Bell: Would the gold franc have an impact on globalization? If so, in what way?
Thomas Jacob: The gold franc is the name for a weight of gold and therefore immediately a world money. It will have practical and psychological impacts; just where and how much I don’t know yet.
Daily Bell: Why did Switzerland give up the gold link?
Thomas Jacob: It is even hard to define just when “give up” took place. Fact is the Swiss people have always clung to gold much more than the politicians and still do. In 1948, for example, the voting public forced the authorities by way of a referendum to get gold-backing of the Swiss franc back into the constitution. In the ‘90s it was the national bank and politicians who wanted to get rid of the gold. The constitutional change this required was sold to the people as part of a complete overhaul of the constitution “with purely formal changes.” Even one of the responsible federal councils admitted later that this was probably misleading, to put it mildly. The initiative to safeguard the remaining gold and get a minimum of 20 percent of gold backing into the constitution should get launched any day now. It promises to be popular and put the issue of gold and money onto the media and political agendas.
Daily Bell: What is Switzerland’s future without a gold franc?
Thomas Jacob: Worse than with one. After all, we are talking about freedom of choice, which is always beneficial.
Daily Bell: Have the Swiss forgotten about sound money?
Thomas Jacob: Not the Swiss people. Sometimes it seems some politicians and monetary authorities have.
Daily Bell: Has the banking community?
Thomas Jacob: They play the game according to the rules as best they can, I suppose.
Daily Bell: Is Credit Suisse a Swiss firm or a globalist one?
Thomas Jacob: By what standard? Turnover, profit, owners, laws they abide by? The answers would probably differ.
Daily Bell: Does Switzerland need to focus more on private banking?
Thomas Jacob: I like private banking for the accountability it (used to) mean. I don’t know what Switzerland should do.
Daily Bell: Is the dollar reserve system failing? We think it is virtually dead.
Thomas Jacob: I can follow your arguments but really don’t know.
Daily Bell: Do you think the world will end up with a basket currency and an IMF central bank?
Thomas Jacob: Conceivable and tragic.
Daily Bell: Are the IMF and World Bank a good idea?
Thomas Jacob: They are the ultimate political centralization short of a world government. Centralization means power and power corrupts.
Daily Bell: Should Switzerland stick to itself or try to become more and more an international country?
Thomas Jacob: Economically international, politically independent. Goods should move freely and without restrictions, the gold franc of course being part of it.
Daily Bell: Where do you go from here?
Thomas Jacob: On vacation for one week.
Daily Bell: Any other comments you wish to make?
Thomas Jacob: The speed of the political process depends on public pressure, in this case on publicity and the means to threaten the politicians with an immediate and efficient popular initiative. For those readers interested in becoming part of this historic project, we can gladly supply them with our “investors plan.”
Fun questions. Thanks and congratulations!
Daily Bell: Thanks for speaking to us. Good luck.
We thank Thomas Jacob for sharing his "inside" views of Switzerland. And we wish him and his associates well in their attempt to introduce a new competing gold currency into the Swiss market. We do not doubt that it would be incredibly popular, both within and outside of Switzerland.
Ideally, we would rather have monetary systems that had no government involvement at all and a true free-banking environment.
In reality, though, why would politicians who are incapable of restricting their desire to make never ending promises, and who require an inflatable currency in order to facilitate the illusion, ever permit an "honesty check" to enter into legal existence? The answer is that they do not want such a restrictive monetary system because they are in the business of creating entitlement and war-driven monetary inflation and do so in the service of an international banking cartel who control the world's central banks and its money supply.
So as much as we wish things were different, they are not. People in general still want to believe in the false welfare dreams being peddled by politicians and are willing to sell short their freedoms and liberties in the process. Until a market imposed wakeup call is delivered, one that seems to be imminently approaching, we do not see much hope in the status quo changing with respect to Western governemnts permitting private money issuance and competition.
In the future, it is possible. But not until the Internet Reformation has run its course and even then, only if the general public are willing to live within their means – and construct a decentralized republic that respects the rights of an individual to live their lives the way they see fit.
We agree with Jacob that the EU is a failed concept. We also agree that an IMF managed global currency is also a toxic recipe. In fact, we believe the current monetary crises are providing ample ammunition for the gloablist enterprise to use its chaotic nature as a springboard to implementing such a global monetary system. Undoubtedly they will try and are in fact already working diligently to bring that into being.
Switzerland is a country comprised on a citizenry who have a long tradition of using gold and silver as a store of value. They are perhaps the most steeped population in the world when it comes to understanding the true nature of central banking, the pitfalls of central planning, and the problems associated with an unrestrained monetary unit.
For those who would like to read one of the finest books ever written on this topic, we highly recomment Ferdinand Lips "Gold Wars: The Battle Against Sound Money As Seen From A Swiss Perspective."
Gold Wars deals with gold's history, and especially the abandonment of gold-as-money under the modern welfare/warfare state. It shows how governments, fearing the affinity of free people for gold, fight it, thereby helping to destroy countries and the gold-mining industry.
We wish Thomas Jacob well in his attempt to try and institute a competing gold Swiss franc. Perhaps the move, should it be successful, will be a beacon of inspiration for other countries populations whose faith in their domestic fiat currency systems is rapidly eroding.
Posted by Thomas Molitor on 08/14/11 09:33 AM
Joe: Define "neo-lib." I assume Clinton is a member. Are your extending the betrayal of the American right (the Old Right/Taft/Nock/Mencken) and the New Right represented by Buckley and Goldwater as an analogy to the early threads that led to neo-cons such as William f Buckley, William Kristol, and Norman Podhoretz?
Posted by Joe on 08/14/11 09:05 AM
The DB ought to write a piece regarding the widespread leftist opinion that neo-liberalism is the cause of the 2008 financial crisis. Details should be given to show how neo-liberalism or de-regulation of financial markets did not produce a free market rather it was a different regulated market serving financiers.
Posted by tsunami on 08/14/11 09:01 AM
In my opinion the whole key to this issue in Switzerland is their political system.
If they were dealing with the same or similar systems we have in Canada and the US there would be hope of it ever getting to first base.
The very thing that gave us some strenth in the past when we had more honest people in power is the very thing that will bring us down today.
Unlesss we change our political system (not going to happen) we have no hope ergo we have no hope.
Hope is not a strategy
Posted by Thomas Molitor on 08/14/11 08:41 AM
"The government's role is limited to defining the appearance and the gold content of the coins and to protecting honest business practices."
Why couldn't the free market be the guardian of the same activities rather than the government?
Posted by Dave Jr on 08/14/11 08:06 AM
It makes sense, if the PE/central banks were to allow a gold backed currency now. If governments were to be reformed, downsized, but their so called debt to the central banks, who have been the heaviest buyers of treasuries, can be enforced; then repayment by taxation could be a large flow of "real" money to the PE/central banks. Could they be so bold?
Posted by Dave Jr on 08/14/11 07:16 AM
"..there is another question I haven't been able to answer: if the monetary authorities want positive inflation, this means that the money supply must grow faster than goods and services - and this monetary growth is, in today's system, all backed by an equivalent amount of debt. But whom can you impose an ever increasing amount of debt onto? Isn't that an insane idea?"
A government or a central bank alone could not pull off a fractional reserve system. It would be too easy for people to see the fraud. For example, if an entity creates a pile of money, and then says I'm going to borrow it. Borrow it from whom? And pay back whom? It isn't going to be paid back because it doesn't represent anything but a decree from the creating entity. An order to perform is bad enough, but who is going to perform in a repayment?
It takes two entities working in tandem to pull off the razzle dazzle. Mugsy and Bugsy I like to call them. In the US, Bugsy takes collateral from the private sector and writes notes (FRNs) against them. If the notes are repaid, collateral is released and the notes should be retired as they have matured. But no, Bugsy lends them to Mugsy who spends them in the private sector. Mugsy says he owes but he can never repay on that loan because there was no collateral put up or anything coming back. Mugsy has to keep taking more from Bugsy to appear as if he is repaying the old. This system requires Mugsy to "borrow" an ever increasing amount of (void) notes from Bugsy. The system requires inflation.
Today, the system in the US has out paced the private sector. Now Mugsy and Bugsy are whipping up ways to print these null and void notes, and with various song and dances, have them appear to be valid. Well, even with the private sector involved they were not valid. Without a strong private sector to steal from, the veil is getting thin, and the people are catching on.
Posted by alexsemen on 08/14/11 07:05 AM
Swiss is the last Mohican.
here is no way to escape, there no place to hide !
But I like the people like this mr. Jacobs and you DB !
Recently I was in East -Europe most of them EU members. Discouraging and catastrophically . The Enemy implement with the light speed all they want and we are taling bout as World Government.
The people there is so confused and poor that they will accept anything from the Bog Brother and Power that Be. They believe that the actual system will save them, and that for sure !
Internet has no impact whatsoever. as long as 65- 80% they have it the Internet.
They want to be slave as long as the Master and Owner( Corporatism) let them to have a slice of bred everyday !
Idealism, freedom, self determination, independency at personal level , decency self esteem …. Forget it !! That means nothing for them . Nothing at all !
Slavery it is with apriority accepted, it was the best training what it was the so called Communism and Socialism. That was of course also the meaning of such scam as it was the meaning op October Revolution and Stalin experiment . Even the countries that wanted to make a real Socialism were beaten with the gigantic force from the Moscow ( Bolsheviks) that are now the libertarians of the New World Order.
Could you follow me!?
The same experiment is continuing at this moment ! You knows what I talking about !
Posted by borisc on 08/14/11 06:47 AM
it does not take too much to understand that we already have the global tax collections, it is called OIL. So, it is practically inconsequential event if there is a global government or not. Besides this information as to who collects the money, Utilities, UN, or oil companies does not help me any in my trading. I need to see where securities move and could not care less why. Yes, it is a nice exercise to think NWO, NWC( new world currency) and NWG(new world gov) , but if I really stretch my market approach, I do not see any of them as entities in the future. 1) they already exist in one form or another and two, my dollar forecast tells me that US is still the king and there are many more currencies in our future. These are enough for me to conclude that it is waste of time to think various forms of things to come. Just tell what various securities will do and we will make money. Is not this what most of us want( tacitly or explicitly) out of everyday life?
Posted by Col on 08/14/11 06:28 AM
Doesn't matter what any of us think "should" happen, what I think "will" happen is that a Global Central Bank will be formed, imposing a Tariff (Tax) on every Western & Developing National Government based on each Gov's GDP, this "Fund" will be used to buy junk Bonds & used to manipulate Stock Markets Such as the EU's whenever a "crisis" emerges, doesn't matter though, this added Tax Pressure on each Country will just impact each Nations Economy & standard of living even more, till it all just finally blows out.
Posted by Mountainview on 08/14/11 06:16 AM
Switzerland is a small country and shouldn't go for a Gold link alone. The biggest beneficiary of globalisation and more and more reluctant buyer of US Treasuries, China, should be convinced to join the idea as well. Together with other Asian surplus countries and the OPEC, a worldwide movement in favour of a Gold pegged reserve currency could be promoted!
I fully agree with the critics on Hildebrand. He knows Bernanke from his Princeton days and can't be expected to produce creative ideas.
Posted by austrianstudent on 08/14/11 06:00 AM
Won't Gresham's law apply if the Gold franc runs parallel with the fiat franc? if it is the case, why bother, might as well buy gold bullion, no?
Secondly, Mr Hildebrand has booked a seaview cabin on the Titanic by thinking of pegging the CHF to the Euro and Mr Jacob is trying to create a gold franc? Looks very quixotic to me.
Posted by borisc on 08/14/11 05:40 AM
I am not sure , about the political implications of what is discussed above, but I have my own MARKET derived thoughts. I look at money to figure politics not the other way around( to late to trade that way(:- , at least, at worst one is lead to wrong conclusions by watching politic(ian)s ).
I think Swiss Frank has few moons to be stronger and craps out or , at least starts to crap out and then then the gold will be the king again for many more moons( cannot give the dates as that would be unfair to subscribers).
At that time, which is approaching, the SWISS Frank will be forgotten as the GOLDe currency and its real place will be found after a good collapse for many years to come. Considering that I think that Dollar will be the king again, first it will be Gold, then it will be Gold and Dollar and then it will be only Dollar sitting at the top of the world. This will take years to play out, but , it shows me that. NEW WORLD CURRENCY is bunk. It will not happen. USA economy, will recover by external or internal forces( such as 500 dollar oil) and USA corporations will be dominant again , even as US economy may not look that great for the rest of the decade. This all bodes, ill, I think, to all kinds of fear mongering that dollar will go to zero and etc. I must admit though that the last bout of Dollar selling ( SELL AMERICA EVENT we call it ) has already been in force for last few weeks and has some time to run. After that the Euro currencies will be weaker, progressively, against Dollar( surprisingly enough) British Pound, which I hated since 2007 and is hated by all at this time, will come to life and will gain over SWISSY and EURO as well, not as much as Dollar but decent gains.