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of the Swiss Federal Constitution (SNB 1982, p. 380) said:

Der Bund kann die Einlösungspflicht für Banknoten und andere gleichwertige Geldzeichen nicht aufheben und die Rechtsverbindlichkeit ihrer Annahme nicht aussprechen, ausgenommen in Kriegszeiten oder in Zeiten gestörter Währungsverhältnisse.

This means that the Federal Government is not allowed to abolish the convertibility of banknotes into gold except in times of war and disturbed currency relationships. Switzerland has thus suffered according to the government until the end of the 1990s for more than 50 years from disturbed currency relationships. Obviously the government in this case has been the Swiss sovereign by pretending that a permanent state of emergency existed. This was done by issuing a simple executive order of the Federal Government of June 29, 1954 (SNB 1982, p. 423, Articles 1-2).

It should thus not be surprising first, that the independence of the monetary regime from governments has been much more threatened after the abolishment of the gold standard. I have shown in my book on Monetary Regimes and Inflation (2003) that all 30 hyperinflations except one and that, moreover, most other very high inflations occurred after 1914. And second, related to that, that constitutional and legal safeguards for central bank independence can be much more easily eroded by governments, who as sovereign declare a state of emergency than under an internationally established gold standard. Moreover, it should be recalled that this standard has been often imitated by the countries of the periphery, with the consequence that their inflations and devaluations were kept within much narrower bounds than after 1914.

Given these sobering conclusions let us ask which alternatives may be available to stabilize the monetary and financial system. We have seen that the gold standard and independent central banks have proved their merits for several decades, but fell victim to the sovereign declaring an emergency. It is true that one can strengthen the independence of central banks by turning them into currency boards safeguarded by the constitution. As is well-known, currency boards are only allowed to issue base money by either buying gold or foreign exchange of a stable currency. And such systems have worked well in several countries under difficult conditions, most recently in Esthonia and Bulgaria (for a discussion of earlier cases see Hanke, Jonung and Schuler 1993). But it should be clear that they are also threatened by a demonetization of gold or the abolishment of the independence of the central bank issuing the currency on which they depend, not to speak of a removal of the currency board itself.

Another alternative proposed is the introduction of Free Banking, in which private banks would be allowed to issue banknotes besides creating deposits. Such a system would certainly remove the monetary system a greater distance from the government. And it has worked quite well for several decades in Scotland and also in Switzerland (Nedwed 1993, Selgin 1987, White 1984). But the regime of private banking was based in both cases on gold convertibility and was finally abolished in both countries by sovereign governments. Moreover, already in the 1870s private banks were forced by the Peruvian government to grant it credit in banknotes when it was facing bankruptcy. In exchange for these forced credits they were allowed to suspend the gold convertibility of their banknotes. Finally, it has been argued from a theoretical point of view that there exists still a gap in the theory of free banking, namely that competitive banks can obtain economies of scale by pooling their reserves of high-powered money.... This characteristic of banking would either prompt unregulated banks to merge into one institution, or if diseconomies of scale in other activities worked against this, to centralize their reserve holdings with what would, in effect, become a banker's bank. (Laidler, 1992, p. 197) Finally, instead of the gold standard a more general commodity standard with convertibility of banknotes and demand deposits into this commodity basket at a fixed parity has been proposed as an alternative. But quite apart from the question under which conditions there might be a chance for the introduction of such a system, an international agreement would be necessary for a world-wide acceptance of the same commodity basket. Once reached it might be more difficult for governments to abolish it because they would be isolated internationally, But an extended war or a deep worldwide economic crisis would offer a sufficient pretext for governments even in this case to get rid of the commodity standard by declaring a state of emergency.


Angell, J. W. (1836): The 100 Per Cent Reserve Plan. Quarterly Journal of Economics, vol. 50.

Bernholz, Peter (2003): Monetary Regimes and Inflation. History, Economic and Political Relationships. Cheltenham: Edward Elgar. Paperback edition 2006.

Eucken, Walter (1952): Grundsätze der Wirtschaftspolitik: Ed. by Edith Eucken and K. Paul Hensel. Bern and Tübingen: Francke and J.C.B. Mohr (Paul Siebeck).

Federal Reserve (2010): Federal Reserve statistical release, H.4.1. June 17.

Graham, Benjamin (1937): Storage and Stability. New York and London: McGraw-Hill.

Hanke, Steve H., Jonung, Lars and Schuler, Kurt (1993): Russian Currency and Finance. A currency board approach to reform. London and New York: Routledge.

Hayek, Friedrich A. (1978): Denationalizing Money. The Argument Refined. London : Institute for Economic Affairs.

Kindleberger, Charles P. (1978): Manias, Panics and Crashes: A History of Financial Crises. New York: Basic Books.

Kornai, Janos (1971): Anti-Equilibrium. Amsterdam and London. North Holland.

Laidler, David (1992): free banking: theory. In: Newman, Peter, Milgate, Murray and Eatwell, John (eds.): The New Palgrave Dictionary of Money and Finance. Vol 2, London: Macmillan, and New York: Stockton.

Lutz, Friedrich A. (1936): Goldwährung und Wirtschaftsordnung. Weltwirtschaftliches Archiv, vol. 41.

Nedwed, Harald (1992): Notenbankenfreiheit. Theoretische Analyse und historische Erfahrungen aus der Schweiz im 19. Jahrhundert. Basler Dissertation. Basel: Druckerei Ganzmann AG.

Schmitt, Carl (1993/1922): Politische Theologie. 6th ed. Berlin: Duncker & Humblot.

Schweizerische Nationalbank, SNB (1982): 75 Jahre Schweizerische Nationalbank. Die Zeit von 1957 bis 1982. Zürich.

Schweizerische Nationalbank, SNB (2010): Bilanz Stammhaus per 31. Dezember 2009.


Selgin, G. (1987): The Theory of Free Banking.Totowa, N.J.: Rowman and Littlefield.

White, L. H. (1984): Free Banking in Britain. Theory, Experience and Debate 1800-1845.

Cambridge: Cambridge University Press.

Freiburger Diskussionspapiere zur Ordnungsökonomik Freiburg Discussion Papers on Constitutional Economics Bernholz, Peter: Politics, Financial Crisis, Central Bank Constitution and Monetary Policy 10/05 Soziale Marktwirtschaft in Deutschland - Entwicklungen und 10/04 Tietmeyer, Hans:

Erfahrungen Vanberg, Viktor J.: Freiheit und Verantwortung: Neurowissenschaftliche Erkenntnisse und 10/03 ordnungsökonomische Folgerungen Vanberg, Viktor J.: Competition among Governments: The State’s Two Roles in a 10/02 Globalized World Berghahn, Volker: Ludwig Erhard, die Freiburger Schule und das ‘Amerikanische 10/01 Jahrhundert’ Dathe, Uwe: Walter Euckens Weg zum Liberalismus (1918-1934) 09/10 Wohlgemuth, Michael: Diagnosen der Moderne: Friedrich A. von Hayek 09/9 Bernhardt, Wolfgang: Wirtschaftsethik auf Abwegen 09/8 Mäding, Heinrich: Raumplanung in der Sozialen Marktwirtschaft: Ein Vortrag 09/7 Koenig, Andreas: Verfassungsgerichte in der Demokratie bei Hayek und Posner 09/6 Berthold, Norbert / Brunner, Alexander: Gibt es ein europäisches Sozialmodell?

09/5 Vanberg, Viktor J.: Liberal Constitutionalism, Constitutional Liberalism and Democracy 09/4 Vanberg, Viktor J.: Consumer Welfare, Total Welfare and Economic Freedom – On the 09/3 Normative Foundations of Competition Policy Goldschmidt, Nils: Liberalismus als Kulturideal. Wilhelm Röpke und die kulturelle 09/2 Ökonomik.

Bernhardt, Wolfgang: Familienunternehmen in Zeiten der Krise – Nachhilfestunden von 09/1 oder für Publikumsgesellschaften?

Borella, Sara: EU-Migrationspolitik. Bremse statt Motor der Liberalisierung.

08/10 Wohlgemuth, Michael: A European Social Model of State-Market Relations: The ethics of 08/9 competition from a „neo-liberal“ perspective.

Vanberg, Viktor J.: Markt und Staat in einer globalisierten Welt: Die ordnungsökonomische Perspektive.

Vanberg, Viktor J.: Rationalität, Regelbefolgung und Emotionen: Zur Ökonomik moralischer Präferenzen. Veröffentlicht in: V. Vanberg: Wettbewerb und Regelordnung, Tübingen: Mohr, 2008, S. 241-268.

Vanberg, Viktor J.: Die Ethik der Wettbewerbsordnung und die Versuchungen der 08/6 Sozialen Marktwirtschaft Wohlgemuth, Michael: Europäische Ordnungspolitik 08/5 Löwisch, Manfred: Staatlicher Mindestlohn rechtlich gesehen – Zu den gesetzgeberischen 08/4 Anstrengungen in Sachen Mindestlohn Ott, Notburga: Wie sichert man die Zukunft der Familie?

08/3 Vanberg, Viktor J.: Schumpeter and Mises as ‘Austrian Economists’ 08/2 Vanberg, Viktor J.: The ‘Science-as-Market’ Analogy: A Constitutional Economics 08/1 Perspective.

Wohlgemuth, Michael: Learning through Institutional Competition. Veröffentlicht in: A.

07/9 Bergh und R. Höijer (Hg.). Institutional Competition, Cheltenham: Edward Elgar, 2008, S. 67-89.

Zweynert, Joachim: Die Entstehung ordnungsökonomischer Paradigmen – theoriegeschichtliche Betrachtungen.

Körner, Heiko: Soziale Marktwirtschaft. Versuch einer pragmatischen Begründung.

07/7 Vanberg, Viktor J.: Rational Choice, Preferences over Actions and Rule-Following 07/6 Behavior.

Vanberg, Viktor J.: Privatrechtsgesellschaft und ökonomische Theorie. Veröffentlicht in: K.

07/5 Riesenhuber (Hg.) Privatrechtsgesellschaft – Entwicklung, Stand und Verfassung des Privatrechts, Tübingen: Mohr Siebeck, 2008, S. 131-162.

Goldschmidt, Nils / Rauchenschwandtner, Hermann: The Philosophy of Social Market 07/4 Economy: Michel Foucault’s Analysis of Ordoliberalism.

Fuest, Clemens: Sind unsere sozialen Sicherungssysteme generationengerecht?

07/3 Pelikan, Pavel: Public Choice with Unequally Rational Individuals.

07/2 Voßwinkel, Jan: Die (Un-)Ordnung des deutschen Föderalismus. Überlegungen zu einer 07/1 konstitutionenökonomischen Analyse.

Schmidt, André: Wie ökonomisch ist der „more economic approach“? Einige kritische 06/10 Anmerkungen aus ordnungsökonomischer Sicht.

Vanberg, Viktor J.: Individual Liberty and Political Institutions: On the Complementarity of 06/9 Liberalism and Democracy. Veröffentlicht in: Journal of Institutional Economics, Vol.

4, Nr. 2, 2008, S. 139-161.

Goldschmidt, Nils: Ein „sozial temperierter Kapitalismus“? – Götz Briefs und die 06/8 Begründung einer sozialethisch fundierten Theorie von Markt und Gesellschaft.

Veröffentlicht in: Freiburger Universitätsblätter 42, Heft 173, 2006, S. 59-77.

Wohlgemuth, Michael / Brandi, Clara: Strategies of Flexible Integration and Enlargement 06/7 of the European Union. A Club-theoretical and Constitutional Economics Perspective.

Veröffentlicht in: Varwick, J. / Lang. K.O. (Eds.): European Neighbourhood Policy, Opladen: Budrich, 2007, S. 159-180.

Vanberg, Viktor J.: Corporate Social Responsibility and the “Game of Catallaxy”: The 06/6 Perspective of Constitutional Economics. Veröffentlicht in: Constitutional Political Economy, Vol. 18, 2007, S. 199-222.

Pelikan, Pavel: Markets vs. Government when Rationality is Unequally Bounded: Some 06/5 Consequences of Cognitive Inequalities for Theory and Policy.

Goldschmidt, Nils: Kann oder soll es Sektoren geben, die dem Markt entzogen werden 06/4 und gibt es in dieser Frage einen (unüberbrückbaren) Hiatus zwischen ‚sozialethischer’ und ‚ökonomischer’ Perspektive? Veröffentlicht in: D. Aufderheide, M. Dabrowski (Hrsg.): Markt und Wettbewerb in der Sozialwirtschaft. Wirtschaftsethische Perspektiven für den Pflegesektor, Berlin: Duncker & Humblot 2007, S. 53Marx, Reinhard: Wirtschaftsliberalismus und Katholische Soziallehre.

06/3 Vanberg, Viktor J.: Democracy, Citizen Sovereignty and Constitutional Economics.

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