Scotland's new currency

[scooterscot]

The Icelanders did not default because they wanted, but because they did not have the money to bail their banks out.

They locked up their corrupt and now look they're following a recovery based on export rather than consumerism.

Bravo George.

[darmstadt]

I don't really care one way or another but:

The Sterling zone is currently comprised of the UK, Ascension and Tristan de Cunha, South Georgia and the South Sandwich Islands, and the British Indian Ocean Territory. The Isle of Man, Jersey and Guernsey are in formal currency union with the UK, and are 'Crown Dependencies'. Gibraltar, the Falkland Islands, and St. Helena use a currency board to peg their pound to the UK pound. Unofficial users include Uganda, Zimbabwe, Zambia, Sierra Leone, Tanzania, Rwanda, Malawi, Botswana, and Mirpur in Kashmir Pakistan.

If Zimbabwe and Sierra Leone can use the pound, so can an independent Scotland.

Given Scotland's massive petroleum reserves, whisky revenue, VAT, and tax revenue from their own lands and citizens' income, Scotland could begin independence debt-free, and remain so far into the future. If revenue and expenditure are properly planned and managed, the Scottish Republic would not have to issue bonds or borrow, and could institute a moderately progressive tax scheme with no loopholes that could be adjusted to balance the budget and build up a sovereign wealth fund like Norway. Scots could avoid Goldman Sachs and the financial markets becoming their new pimp.

In addition to a Scottish Pound, Scottish businesses could also accept payments in euros, as is done in parts of Northern Ireland and the Republic of Ireland. Both could be used in parallel and see which one works better, perhaps adopting the euro later on. Or, Scots can pursue a petroleum backed monetary union with Norway. That's the point of independence: ditching dependence on Westminster and making your own decisions.

[scooterscot]

So where do you think that would have left confidence in the scottish financial system and interest rates? What sort of conditions do you think the IMF might have imposed in return for replacing the funding you could no longer get from the market?

Think the threats are not as severe for a small economy as they would be a large one, like England. The bigger they are the further they fall. And my goodness what falling there is to be had. Look at property prices throughout the South of England. A new bubble is forming, the cost of homes is nothing to do with providing shelter over ones head anymore but an alternative investment for those with cash.

The threats of no monetary policy reside for sure, but our neighbours shall continue to have more debt problems to deal with for years to come against a more mobile economy.

I think if Scotland follows a capitalist approach like Iceland we'd be better off than we are now.

[doodab]

If Scotland joined the Euro (assumed the EU would accept Scotland in) then the ECB would buy Scottish debt at reduced rates, just like they have been doing with Italy, Spain, Greece and Ireland.

Interesting comments from Barosso saying it may not be so easy...

BBC News - Scottish independence: Barroso says joining EU would be 'difficult'

[minestrone]

I'm not saying anything is distorted, I'm just saying that Edinburgh has raised it's profile considerably over the last 15 years or so relative to it's competitors. This is undoubtedly true, it's been a real success story for UK PLC and it's disingenuous to suggest that having the same regulatory environment and so forth as the worlds #1 financial centre hasn't played it's part in that. Being part of the UK has been part of it's competitive advantage and that will cease to be the case if it's not in the UK anymore, never mind that for UK institutions that aren't interested in setting up shop outside the UK leaving will literally rule Edinburgh out as an option.

Well I disagree and I have yet to see clear evidence to support your claims, asset management moving into emerging markets has been very big for certain firms, really nothing to do with regulation though, really UKs piss poor regulation was very bad for Scottish banks, I don't know why you are regarding it as some great advantage we can't live without.

All it will take for a really big hit on London and a genuine boom in Edinburgh is a new Labour government with Balls in charge of the treasury and a pro business Scottish parliament ( that is in no way guaranteed ) to drop corporation tax. The parties can see that a mile away but obviously won't even mention it. It would be deeply unpleasant for England who cannot match the taxation drop.

[doodab]

I think if Scotland follows a capitalist approach like Iceland we'd be better off than we are now.

I'd say you might be right, but I don't think they will as it would likely eliminate DFI in your financial sector. Iceland were very different in that regard, they only had relatively small indigenous banks to worry about. The knock on effects of letting RBS, who were huge, fail would have meant a lot of pressure internationally to accept and pay for a bail out, if you'd let it go bust you'd have been a pariah. It was recognised after lehman that letting the whole system implode wasn't a viable option.

[doodab]

Well I disagree and I have yet to see clear evidence to support your claims, asset management moving into emerging markets has been very big for certain firms, really nothing to do with regulation though, really UKs piss poor regulation was very bad for Scottish banks, I don't know why you are regarding it as some great advantage we can't live without.

All it will take for a really big hit on London and a genuine boom in Edinburgh is a new Labour government with Balls in charge of the treasury and a pro business Scottish parliament ( that is in no way guaranteed ) to drop corporation tax. The parties can see that a mile away but obviously won't even mention it. It would be deeply unpleasant for England who cannot match the taxation drop.

Fair enough. Luxembourg is growing strongly, dublin not really so i'd say it takes more than low tax to be business friendly. Deregulation was a bit of a disaster but no more so than elsewhere, it was a global phenomenon and things have tightened up considerably now.

Either way that's missing the point which is that stability and confidence in institutions count, not the laxness or otherwise. The UK has taken a hit in that regard but is still streets ahead of many.

[scooterscot]

I'd say you might be right, but I don't think they will as it would likely eliminate DFI in your financial sector. Iceland were very different in that regard, they only had relatively small indigenous banks to worry about. The knock on effects of letting RBS, who were huge, fail would have meant a lot of pressure internationally to accept and pay for a bail out, if you'd let it go bust you'd have been a pariah. It was recognised after lehman that letting the whole system implode wasn't a viable option.

I agree. However RBS was only a Scottish bank in the sense of name and not much else. If only I could recall the newspaper article, might have been the NYT, the recognition of many creditors that RBS liabilities were the creation of those in the city of London and very little to do with those at HQ.

I'm certain the market realises true financial power lies in the city regardless of where those institutions set up camp.

Do any of us really believe powerful Google would fail up Dublin went belly up?

[doodab]

I agree. However RBS was only a Scottish bank in the sense of name and not much else. If only I could recall the newspaper article, might have been the NYT, the recognition of many creditors that RBS liabilities were the creation of those in the city of London and very little to do with those at HQ.

I'm certain the market realises true financial power lies in the city regardless of where those institutions set up camp.

Do any of us really believe powerful Google would fail up Dublin went belly up?

While it may be the case that most of the trouble at RBS happened in London it would have fallen on the scots to bail them out just as it fell on the US to deal with citibank, jp morgan etc all of whom have large London operations.

Google aren't a bank, so i'm not sure what they have to do with anything.

[Zero Liability]

Gordon Brown was the inventor of bail outs (remember the "When we saved the world" slip of the tongue?) and if I'm not wrong he's Scottish and wanted to rescue a Scottish bank.


The Icelanders did not default because they wanted, but because they did not have the money to bail their banks out.

A good thing that door was never open to them, then. Shame it wasn't closed to us too.

Regarding bank 'deregulation', I am still not entirely sure what is being referred to; the main issue with the banks is how they pyramid credit on top of their reserves. This creates the need for the central bank to coordinate this effort (their raison d'etre) and ensure these banks remain solvent and protected from bank runs, and also for institutions like deposit insurance. Anything else is just icing and cherries on the cake. 'Deregulation' may have worsened the crisis but easy central bank monetary policies provided the fuel for it.