An article by York Runne, published in finews.ch on July 27, 2021
Lucerne-based private banker Karl Reichmuth sees digitization as well as blockchain technology as a viable way to counter the exuberant sovereign debt and the growing gap between currencies and the real economy, as he writes in his latest book.
With the advent of cryptocurrency and the opportunities that blockchain technology offers in banking or transactions and contracts, the financial industry, central banks and policymakers are facing new challenges.
In a book entitled “Neue Währungen in Sicht” (New Currencies in Sight), Lucerne-based private banker Karl Reichmuth, as editor, has invited a number of experts and entrepreneurs to speak and offers an overview of the state of the discussion.
Reichmuth sees digitization and blockchain technology as a possible way to counter the emerging threats in global monetary systems. He sees the flood of money and credit from central banks, excessive national debt and the growing gap between currencies and the real economy as the biggest threats.
“The over-indebtedness of states at the expense of future generations or today’s wealthy increasingly makes many fellow citizens realize the growing dangers. These have arisen in the current monetary system as a result of the power of the monetary monopoly in the hands of the states or their central banks,” Reichmuth explained at the request of finews.ch.
Counterweight to crisis threats
Digitalization, especially blockchain technology, could become the saving force thanks to its high settlement security. “This can provide a counterweight to the threats of crisis that can hardly be stopped,” Reichmuth added.
The private banker draws parallels to past currency crises, recalling the 1923 currency reform following hyper-inflation in Germany or that of 1948. Savers and wealthy people would always have lost almost the entire intrinsic value of their assets.
Those who had invested in real assets became wealthy again within a short period of time. “A Switzerland with its direct democracy and other parliamentary democracies are thus endangering their most important asset, the broad savings community.”
Only covered parallel currencies are alternatives
With a view to security and value stability, the separation of wheat from chaff will only slowly become apparent in the supply of parallel currencies. That is the case with all innovations, he said. However, self-determination requires the individual’s own responsibility. By offering parallel currencies, he gets a choice. “In my view, only backed parallel currencies are viable alternatives to government money,” the private banker added.
Central banks and policymakers would have to face up to the issue. “Pandora’s box is open.” Digitalization brings clear volume advantages for payment transactions, and so far most parallel currencies only cover this area.
“The more the so-called private valet, i.e. the bank in your pocket, comes up via the cell phone, the more likely store-of-value tokens will also become fungible, and thus usable for daily exchange needs at the bakery, butcher, supermarket, etc.” That’s why Switzerland has done well to position crypto regulations close to its tried-and-true securities law, he said.
Private banker of the old type
Karl Reichmuth can justifiably be called a bedrock in the Swiss banking industry. Including his apprenticeship, he worked as a banker for more than 65 years, around 50 of them in leading positions at major and cantonal banks, and 22 of them as a private banker. He is the founder of Reichmuth & Co Privatbankiers and of RealUnit Switzerland.
Prior to the present book, he has already published three papers: “Indexing Money,” “The RealUnit – On the Source of Monetary Stability,” and “Way Out of the Financial Crisis – Reuniting Decision and Liability.”
The publication’s list of authors reads like a Who’s Who of the Swiss crypto scene. Contributions will come from Vahan P. Roth, co-founder of RealUnit Switzerland, CVVC founder Mathias Ruch, Domenic Parli, founder of Finemetal and Finetoken, Mathias Imbach, head of Sygnum Bank, to Prince Michael von und zu Liechtenstein, among others.
“New Currencies in Sight,” Publisher Karl Reichmuth, Ringier Axel Springer Switzerland, 2021, 45.00 Swiss francs (ISBN 978-3-03875-385-8).