A Pound to a Penny
In the two-match Referendum debate televised between combative Alex Salmond and soporific Alistair Darling, prior to Scotland selling its birthright for a second time in its history, readers will recall Salmond refused to rise to Darling’s vexatious question, “What currency will you use?”.
Laying aside any Plan B (he actually said he had three plans), like a general mounted on his war horse meeting his opposite number mid-field before the battle to exchange a riposte and a scowl, Salmond wasn’t going to disclose it to an invader. That, it transpired, was an error of judgment.
Darling had activated a deep seated fear in us, independence would make us poorer. And in tandem, the then Chancellor of the Exchequer, slimy Etonian, George Osborne, refused Scotland use of the Pound Sterling. The pair of political hit men performed with aplomb.
The hostile move, endorsed by lickspittle, ground scuttling party politicians, remains a perfect example of England’s power and political duplicity.
A separate currency is natural
Money is that strange token, a faith, a belief that the piece of paper or coin you hand over will secure goods in exchange. Eons ago we got by with shells and beads and the same belief in their agreed worth.
‘Scotland Be Brave’ ran the legend on the Referendum poster, and duly inspired … we collapsed in fear. To accept responsibility assumes boldness in decision making.
We are a wealthy nation. I suggest Scotland should state its intention to decouple from sterling, immediately on independence signed and sealed – and expect about two years to see a smooth transition of all powers from Westminster stranglehold but a month for ATMs to switch over to our Smackeroonies – rather than as proposed now, petitioning for a continuation of our subservient role in an asymmetrical sterling union. (See NOTES.)
Why not use the Euro?
If you stand back, well back from Farage and his racist refugees, English Euro-sceptics do have an argument of sorts against the Eurozone, only for all the wrong reasons. Contrary to the ludicrous straight banana lies of Brexteers, the EU is a place of democratic practice, but some of its decision making ought to be made more public.
The one institution screaming out for radical reform is the EU Central Bank. It is a repository for the most brutal theories of the Chicago School of Economics, almost all discredited since the death of its hallowed messiah, Milton Freidman. While populated by Chicago School luminaries, the EU Central Bank is unable to throw off its ideological straight jacket, its governing maxim, loan to a nation’s banks, never invest in the nation. The nation is expected to accept artificial austerity so that the banks recover, able to pay the EU Central Bank interest at high rates. The money goes from bank to bank, and back again gathering interest, never landing in our account.
The answer is a radical reorganisation of the EU Central Bank and probably following it, the Bundesbank. In them lie the economic diktas of our EU states national policies. The difference between the Bank of England and the EU Central Bank is obvious: the Bank of England must follow Westminster instruction. It may become antagonistic to Scottish libertarian economic reforms Westminster didn’t like. England has always imposed its rule by force. Safer to dump the Pound Sterling and not use the Euro.
English patriots look at it this way. The Euro’s great weakness, according to their view, is there is no single nation-state to back up the Euro in times of trouble (correct), and no European institutions can or should develop to play that role (wrong).
One step at a time
Let’s take this logic a step further. England’s governing isolationists claim no single currency can serve the interests of a multi-national state. But wait! The United Kingdom is a multi-national state. That being so, indisputably so, then Scotland should issue its own currency forthwith, or forever relinquish its pretence of being a bona fide nation.
If England’s Brexiteers are right about the Eurozone, then we have a moral duty to make Scotland independent of London. The only reply a Brexiteer has to that is the one full of cellulite: Scotland needs England. We are better informed now; we know it is the reverse, England needs Scotland.
What are the arguments in favour?
There are formidable economic arguments in favour of a nation having its own currency. First and foremost Scotland already has its own banknotes. Scotland invented and printed the first paper notes, their existence hugely beneficial for an independent state.
Presently, our three Scottish banks issue Scottish pounds under an agreement with the Bank of England which limits the quantity of printed money. I hope they do become ours again free of their bail out.
Upon independence, and to keep everybody happy we can avoid major financial upheavals, the Scottish government can commit to maintaining (say, for two years) the same rules of quantity supply. (See NOTE below.)
However, “control of the three banks’ note issues should be transferred to a Scottish Central Bank which commits to maintaining a currency board that allows for a seamless transition to a free-floating Scottish pound within a couple of years.” (SNP policy is to found a People’s Bank. Call it, our Central Bank.)
I place that last paragraph in italics because that is the view of at least three eminent economists who have studied Scotland’s situation: Richard Murphy, Yanis Varoufakis, and David McWilliams, an Englishman, an Irishman and a Greek!
So, outpourings of imminent catastrophe, people throwing themselves off the top of buildings, or castle ramparts it being Scotland, we won’t have bank closures as the Scottish notes are already in circulation, no ATM disruption, no re-writing of short and medium term contracts and no fear of bank runs.
Don’t take my word, economists are agreed, and when experts are agreed, the opposite point of view cannot be held to be true.
Turning to the issue of public debt and we win top prize. Scotland does not have a public debt. The UK has debt, and it alone must shoulder it in the event of independence. To be precise, it might take a little if we use it as a negotiating hand. Then again, we could rent Rosyth Docks for (say) £5 billion a year for five years tops, (as Greenland has done with its US air force base), then it’s bye bye Trident.
By suggesting we keep the Pound Sterling, albeit for a limited time, we are dealing the best hand to London as a bargaining chip for securing the continuation of a lopsided currency union. Our own currency minimises the amount of UK debt we care to accept.
The Bank of England always favours England
Any thought of the bank of England as Scotland’s bank of last resort, a kind of legal guardian, is dangerous. The current governor made plain sharing sterling can happen, but if you have a tyrannical Westminster – an historical fact for over 400 years! – it matters not a jot what the governor thinks.
A shared Bank of England will always favour tuned to the needs of southern England and the City of London; it operates as a perpetual drag on Scottish growth; it poses a permanent threat to the solvency of the Scottish government.
Scotland can never secure sovereignty within the sterling zone because a shared central bank will always force Edinburgh to dance to the tunes of the City and of England’s agenda. Let us dump the hideous Barnett Formula in which mafia thugs take most of our earnings and leave us just enough to keep the shop open so we pay up again next month.
Staying in the EU does not mean forced to use the Euro, ergo, using our own currency is the solution. Best of all, the EU does not control interest rates. As Mrs Thatcher said: “Those who control interest rates control the political!” We must control our own rates.
Be brave, be bold
Scotland is not a basket case. It never was, and it never need be. It has no humanitarian crisis. By exiting the sterling zone, Scotland stands to gain nationhood without suffering any of the catastrophic economic costs.
We can reject malicious unionist prejudices with confidence. We can do it because we have never been subsumed into England fully, neither culturally, economically, geographically or spiritually, though England has tried its damnest to have us become North England. Ties to an annual English ‘allowance’ we cannot reform the Bank of England, nor can we eradicate colonial manipulation while in an unequal union, but we can reform Scotland.
I shall end quoting Yanis Varoufakis as we look to a healthier union with Europe: “An independent Scotland, with its own currency guaranteeing autonomy from Euro-sceptic England, can help an emerging alliance of peripheral European countries establish a new Eurozone architecture; perhaps even one that Edinburgh may want to join….” to which I add, first we must dump England and its bank, and without the EU we can forget reinstating independence.
Using our own currency is as natural as using your own toothbrush, only a lot healthier.
Taking their future in their hands, grassroots activists attending SNP Conference on 27th of April, 2019, rejected the softly-softly, over-cautious timetable proposed by the SNP leadership and instead voted to install Scotland’s own currency at the first opportunity after independence.
The Bank of England issues £1 million notes (Giants) and £100 million notes (Titans) which are held somewhere on its Threadneedle Street premises permanently. The three Scottish pound issuers are, simultaneously, authorised to print Scottish pounds of the same face value.
The economists’ view of Scotland’s wealth: https://wp.me/p4fd9j-niV
What you write makes perfect sense, GB, but at the moment I am of the opinion that discussing a future currency is putting the horse before the cart. Wings’ article from the 25th shows that most of the Scottish population want to remain in Sterling (rightly or wrongly) so, for right now, lets just remain within Sterling. We need to win our independence before we have a hope of designing the sort of Scotland we want to live in.
Hugh – without our own currency we make ourselves vulnerable to an antagonistic English government and we diminish our negotiating hand. Believe me, who ever is there next time will be hostile. Currency is just one subject we ought to have been pushing these last two years, but Sturgeon is too reluctant to face our opponents head-on. We have to acknowledge she has limitations.
Also Hugh, I suggest that we haven’t yet had the debate about currency. Once we do it will become the favoured option imo.
Fascinating little footer about the ‘Giants’ and ‘Titans’.
I’m imagining Navid’s face if somebody went in to pay for 20 Bensons with that! 😂
Great article and I’m especially pleased to see that Yanis Varoufakis gets a couple of honourable mentions.
In my opinion, he’s one of , if not the most most important European Thinkers of the 21st Century.
I agree about Varoufakis, Max. In a way, the lack of boldness by his Greek party released him to do good for the rest of us.
Indeed, GB. Such a shame that Greece continues to suffer, but as you say, Europe is now starting to learn from his expertise. I’ve not studied Portugal’s politics fully, but it appears that it’s PM is taking note of some of his thinking from Varoufakis and trying to improve the lives of his people.
Wonder if we can expect ‘Regime change’ in Lisbon before long..?
I’ll keep my eye on Portugal!
Worth watching the DIEM25 movement across Europe which is very much driven by Varoufakis and his ways of thinking.
It’s a broad consensus movement but firmly left of centre.
I have my membership, and am not expecting to be rejected because I’m a Christian. 🙂
Part of me wants a new beginning for Scotland with a new Scottish currency.
Another part of needs to look at the books and the social position as well.
Scotland is a major producer of fresh food products and a lot of it, at the moment, goes to England for repackaging or onward processing. Not talking about re-exportation like Salmon via Heathrow.
So a lot of Scotland’s land, could be much more after removal of grouse moors, is effectively exporting in £stg.
If Scotland jumps ship we cannot replace overnight that market which would still buy in £stg.
I suspect the £stg will tank after Brexit and we start keeping the oil revenues here.
It would take a few years to change our customer base to the EU and we would need a new infrastructure for that.
We wouldaalso need to process much more of our own foodstuffs into higher value products for World sales.
Prestwick was saved by Scotgov for that purpose of exporting fresh sea food, meat products, electronics and medicines to Europe and beyond.
We would need at least 2 all year ports to carry trucks and cargo direct to Euro hubs.
3/5 years for that to be put in place .
So keeping the £stg market during that place may be necessary.
Ideally a 2 currency model would be a good idea but hopeless to put in place. Scotland is not like Cuba or China.
So to sum up, keep £stg short term then go where we chose, £Scots free floating or tied to Euro.
If tied to Euro where will be expanding lots of our other exports, it make sense to align, say like Denmark, to the Euro and accept it as a de facto local currency, as it is in N Ireland. Denmark and Switzerland.
GB, I agree. I want an independent Scotland to have its own currency and I totally agree that the SNP have not done enough (anything?) in the last 4 years to push forward the arguments in favour of independence.
But, Ronster, I suggest that we need to face the fact that the currency argument was one of the things that lost us the referendum in 2014 and if we make the mistake of trying to win that particular argument again we will probably lose the whole damn thing again.
The general public are simply not educated enough in economics to understand these matters or interested enough to get informed. I’m barely aware of the details though I’ve been reading around them since 2013…
Did we all see the recent BBC documentary on IndyRef1? One of the key lessons we need to learn from that was that the establishment realised they didn’t know what made Scots tick so they came up here and created a number of focus groups and found out that the people in the middle of the debate (the soft Nos) were scared about the financial implications of Independence so that is exactly where the No campaign focused its attention.
We need to have a similar understanding of our people if we are to succeed.
Wings had this poll conducted which gives a good insight into what people think and the Yes campaign & SNP need to heed that and not paint a complicated picture, even if it is more accurate. Keep It Simple, Stupid. We need a message that speaks to the persuadable 20-25% of the population, not one that appeals to the 45% who are already Yes and we need to not waste time on the 30% who are dyed in the wool Unionists.
I am 100% in favour of a Scottish currency soonest, I think they should mint a balance sheet only currency and issue bonds in it immediately after a Yes vote. Like the Ecu was to the Euro. For two years I was paid in Ecus, it converted just fine, if costly, to sterling.
However I think two years to free floating is ambitious in the extreme. For a start the Scottish Central Bank will need to accumulate a fighting fund of foreign currency reserves derived from export sales to defend it from the George Soroses of the world (nothing against him, except he has form in this area, simply trying to make money). Two years returns will not be enough to garner enough funds.
We should peg against a suitable basket of currencies including the Norwegian Krone (small northern European country with oil) and the Danish Krone as well and sterling amongst others. Best modern economic thinking is a basket is better than one.
How long that should last is a balancing act but I would expect 4-5 years minimum.
I am also in no way afraid of a Scottish Currency. I grew up in New Zealand with the NZ$ when it was trading at $2.50 to $3.00 to the £. The Kiwi is stronger than that and sterling is weaker but the point is NZ did just fine. We took the humble Chinese gooseberry, rebranded it as the kiwifruit and created a global market (selling cultivars and agritech to other countries to help supply that market in mass terms), we sold sand to the Arabs (titanomagnetite ironsand to the Saudis) and bartered butter for Lada cars with a foreign currency strapped Soviet Union.
Currently a large proportion of the car on the road in NZ are second hand Japanese imports. Rules in Japan mean they are still in pretty good nick when they become too expensive to run in Japan (they maintain a home market for new cars this way). They drive on the left and some NZ car dealers saw a source of quality cars. Used to be you could spot them as they had plugs either side of the bonnet where the mirrors used to be but they have adopted Western mirrors since then. But their origins have to be declared now.
Car manufacturers test new cars in NZ because the roads are hard on them simply due to the topography. The condom manufacturers do so as well because Kiwis are apparently adventurous in that respect and give them a wider range of tests than elsewhere.
I offer these as examples of what independent countries can be. Scotland can of course have different ambitions. But we used to be a great mercantile nation trading deep into the Baltic with the Hanseatic League and doing brisk business with the Low Countries. We can be that again. Much of the mercantile instinct in NZ is Scottish in origin with leavening of Dutch and Chinese influences (there are Old Settler Chinese families from the earliest times). Maori are not averse to trade either.
A good read, very informative, Muscle Guy. 🙂
There is much about NZ that I admire and it offers some very useful templates for a re-born Scotland.