The Scottish Currency Group, of which I am a member and which is run by Dr Tim Rideout, has issued a new publication entitled 'How do we get the Scottish Pound':
The dates are, of course, indicative.
The plausibility is not.
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Yes, it is a plan. However it would get into the category of a can opener assumption. This is the idea that you can design a can on the basis that someone will come along with a can opener in time to make the can work.
When I am convinced that the SNP hierarchy is interested in the real nuts and bolts of independence, initiatives like this will have a chance of working.
My cynicism is underlined by the debates proposed for the forthcoming SNP conference, which according to a MSP (quoted in the FT) as concentrating on “motherhood and apple pie”.
They refused to allow the Scottish Reserve Bank resolution. We are working the branches to send it back to Nov Conference and hoping we can get 100 branches to lodge it (which is over half).
Tim, I’m appalled that the Reserve Bank resolution was taken off the agenda for the conference. I’m not a member of SNP or any other political party, so I have no voice in the matter, but it seems outrageous that the resolution can be swept aside without discussion when it was already passed by members’ votes at an earlier conference. To an outsider (but advocate of Scottish Independence for 50 years) like me, this smells of the SNP’s inner core’s slavish belief in The Growth Commission’s misguided proposals for a post-indy Scottish economy.
Unless we have our own fiat currency, I will have a very real problem voting in any future independence referendum: while I support independence, how can I vote for an outcome that will hobble the nation’s (and my grandchildren’s) future prospects, as sterlingisation will undoubtedly do? There is another problem lurking behind all of this: the UK Gov must be loving the division of public opinion within the independence movement as Alba seeks to take votes from the SNP. It’s the UK’s classic ‘divide and rule’ without having to lift a finger! These divisions could impair the pro-Indy vote in any referendum and will certainly impair the post-referendum negotiations with the UK Gov. The reality is that the SNP is the only party in Scotland with the political clout, internal structure and experience to conduct these negotiations, and they’re unlikely to want Alba playing any role in them, so like them or not, SNP look like the only realistic medium for effecting an independence settlement.
The 2014 referendum was largely lost by the SNP’s flawed proposals for the economy and I fear that there’s still economic naivety in SNP’s inner core. Good luck, Tim, with your resolution for the November conference and I hope the party management can be persuaded that it represents not a matter of opinion, but of national survival if independence comes to pass.
I agree with you Ken
Good luck to Dr Tim I say.
Had a tear in my eye reading that Richard
Let’s hope it happens for my grandchildren’s sake
Elizabeth I & II in attendance – good luck with that!
Plus zimmer! 🙂 Look out for the Hogmanay Story in the Sunday National at the end of December (they have asked to use my Yessay) in which the now ex-Secretary of State for Scotland ends up with no memory of the Independence Night festivities at the Esplanade after succumbing to an excess of the VIP hospitality.
With the current performance of the English economy the exchange rate would very likely be even more in Scotland’s favour.
I assume a pedantic historian added that detail. It is presumably correct that Her Majesty is Elizabeth 2 of England but Elizabeth 1 of Scotland.
Yes – it was Elizabeth I of England’s successor, James VI of Scotland who amalgamated the crowns of the two countries by becoming James I of England in 1603, although full political union did not happen until the act of union in 1707.
Where is the Highland cow? Apart from that, looks great.
“Scottish currency stands at £1.12” ?
Which way around is this S£=UK£1.12 or UK£= S£1.12 ?
“More or less unchanged against the dollar or euro”
It is going to be 12% more or 12% less with these currencies too. But this is all just guesswork at the moment. I would expect something like a 20% drop for the Scottish Pound making it UK£ = S£1.20 But if I could correctly predict currency movements I’d be a lot richer than I am!
My expectation is that a post-Brexit sterling continues its 100 year pattern of decline so sinks against all currencies including the S£. So I am leaving the S£ unchanged and predicting a continuous slow erosion of sterling. We would not want the S£ to rise against the Euro, Dollar etc. Back when my mum went to Switzerland in 1947 you got 25 SFr to £1, today it is about one to one. I don’t think it would be good to pin ourselves to sterling unless somebody thinks we need a devaluation against everything else.
@ Tim
You probably wouldn’t want the Scottish pound to be too high on the forex markets when it came to joining the euro or having to peg against the euro as a precondition of EU entry. The countries which do relatively well in the eurozone are using a currency which is too cheap for their economy. Scotland wouldn’t want to have to rely on a capital inflow UK style. This would be frowned on in the EU, in any case, as it could lead to breaches of the SGP rules.
If you expect a Scottish pound to be worth more than a UK pound after independence it would be better to at least peg it to the UK pound until making the switch to pegging to the euro. In addition you would alleviate the natural concerns of many over making a currency switch.
Jim
Scotland should never, ever join the euro and there is no reason for it to do so or peg. That would be economic madness. And Sweden proves it is not necessary.
Richard
But would the EU want to offer the same deal to an independent Scotland as they did to Sweden, Denmark and the UK? Anthony Salamone, of the LSE, suggests not when he writes:
“As an obligation of membership, Scotland would have to make a good faith commitment to join the euro”
It’s not just the currency of use that could be a sticking point. Would Scotland be required to follow the same fiscal rules as if they were in the eurozone in any interim period? This could be even more difficult than using the euro itself especially if the support of the ECB was much more limited.
The EU will probably move to reel in Denmark and Sweden and not repeat the same offer to new applicants. At the same time Poland and others will be required to set a timetable for their adoption of the euro. The EU Federalists will no doubt be arguing that countries cannot be allowed to have an “a la carte” approach to EU membership.
https://blogs.lse.ac.uk/europpblog/2020/02/05/what-would-it-take-for-scotland-to-rejoin-the-eu-as-an-independent-state/
Sweden made such a commitment
It is still saying it will honour it one day
Scotland can do the same
This is a non issue in other words but worth debating further
Let’s deal in realpolitik
No Waverley either
There’s lots of detail to be filled in around this timetable, but a few broad points come to mind:
– will this proposal be put to the Scottish people as part of the referendum briefing?
– assuming something like a 60/40 vote in favour, the 40% may well decide to stick with £GBP and move accounts to non Scottish sort codes. What happens to people who don’t take up the offer of a S£ denominated account?
= assuming that the £S is worth £GBP 1.12 (not entirely clear from the document) but is stable against the Euro & $US then the assumption behind this seems to be that the £GBP as fallen by 12%?
I am not quite sure how that exchange differential works, I admit
The fact that there will be a new currency is a key part of what is required by Independence. You can’t be independent while using somebody else’s currency.
Anyone can keep a sterling account if they wish to do so and they are free to change as much or as little of their cash as they prefer. Banks will have to divide, so for example Santander UK Plc will split off a new Santander (Scotland) Plc. All sterling accounts will remain in Santander UK Plc. Our new S£ accounts will be opened with Santander (Scotland) Plc. Nobody needs to move any sterling as the banks will do it for you. Sterling can not exist other than in a bank connected to a reserve account at the BoE and the UK payments system. That will not be true for Santander (Scotland) so it can’t hold any sterling accounts. It could have a representation (mirror) of your sterling account as it could treat Santander (UK) as a correspondent bank in which case it would look like your account was at Santander (Scotland) but the transactions would actually be taking place in Santander (UK).
This takes a bit of getting your head around but this is exactly how the USA was recently able to freeze the $9 billion reserves of the Afghan National Bank. They can’t be in Kabul and have to be in a correspondent bank in New York, in this case probably in a central bank reserve account at the New York Fed. The BoE Euro reserves are not in London, they are in the BoE central bank reserve account at the ECB in Frankfurt.
I am assuming sterling continues a 100 year falling trend especially given Brexit and the departure of Scotland. However £1.12 is just illustrative and the only thing you can say with reasonable certainty is this guess will be wrong.
On a boat sailing so comment will be limited. Some questions…
Banks currently hold asets and liabilities denominated in GBP. By and large, the option to convert to SCP lies with the ‘other side’. How will they manage that risk?
If there is a rush to sell SCP at the 1 to 1 peg, where will Reserve Bank get GBP? Not saying there will be but there could be selling pressure. For example, if older, wealthy, conservative Scots take a ‘wait and see’ approach and younger, salaried Scots convert their mortgages to GBP. This will lead banks to sell SCP as a hedge.
What impacts will their be on corporate lending in the transition period?
What measures should be put in place to prevent destabilizing speculation?
Now, an independent Scotland must have it’s own currency … but there is a lot of stuff to be thought about beyond the outline given so far.
Tim – one for you, I think
I admit my thinking is elsewhere
How do we get the Scottish Pound?
Very Carefully – that’s how.
And I hope that it s not called a pound either.
Looks good to me. If Scotland gains independence I might well move north.
Just get my two cents in (pun intended), on a purely facile note, perhaps we should use a ‘Scots Dollar’ it could be likened to, say, the Canadian, Australian or New Zealand dollar.
It would be noteworthy if anyone compared it to the Zimbabwean dollar….
So no one will do it
The delusion is strong, as is the lack of understanding of FX rates and currency markets.
Third identity this morning. You need help.
Surely a Golden Eagle should adorn a note..
But yes, something like this will have to happen. There can be no fudge.