Scotland's new currency

[doodab]

It turned out that greed is pretty universal... Deutsche bank allegedly holds derivatives 5 times the size of German GDP. How could that be even possible ...

The value of the derivatives isn't 5x the size of German GDP. The theoretical downside may be but that would involve some worst case scenario like *all* of the underlying assets becoming totally worthless and if that comes to pass it would basically mean every large corporation on the face of the earth had lost all value, even as a collection of physical assets that could be sold, so bailing out Deutsche bank would be the least of your worries.

[Zero Liability]

There was no easy monetary policy - rates were 5-6%.

I am referring to the Fed (Fed Fund Rate) more than the BOE, but even for the BOE, it did drop in 2003 to around 3.5%, and although that isn't as low as the Fed went, or as low as the BoE went now, it is still easy monetary policy. What matters is where it is relative to the natural interest rate(s) (which is in effect impossible to know in a FRB system with on-going expansion of credit), not what it was in the absolute. The British banks are major players in the US as well. I believe they even play a part in the conduct of OMO there.

But again, this was a global phenomenon, not a UK specific one. The exotic derivatives in question were mostly US creations.

Yes. There is a lot of interaction between easy monetary policy on a global level (originating with the Fed, whose currency many other central banks treat as a reserve), regulatory policies that favoured housing, shifting of risk from the banks onto other institutions (e.g. the GSEs in the US, which ultimately meant the taxpayers)/persons, fractional reserve banking more generally speaking (which is unstable irrespective of where the base rate currently sits) etc.

[scooterscot]

Use the pound even if London said it couldn't.

The Adam Smith Institute says it is both feasible and sensible. What it would mean is that the Bank of England would not act as the lender of last resort for Scottish banks or as a guarantor for an Edinburgh government, but according to Bowman this would be no bad thing as it would deter irresponsible lending.

"An independent Scotland that used the pound as its base currency without the English government's permission, with banks continuing to issue notes privately and private citizens free to choose any currency they wanted, would probably have a more stable financial system and economy than England itself".

[petergriffin]

Use the pound even if London said it couldn't.

I think you're forgetting or probably ignoring something. Modern currencies are "fiat money" that is they have no collateral. Once upon a time the value of the currency was static and a central bank could only print as much banknotes and coins as their countervalue in gold.

Nowadays it's the reputation of the nation that prints that money that counts.

A newly formed independent Scotland would have no gold, no central bank and no financial reputation. Unless Salmond comes up with some creative idea, I think you're pretty much fcuked.

[scooterscot]

A newly formed independent Scotland would have no gold, no central bank and no financial reputation. Unless Salmond comes up with some creative idea, I think you're pretty much fcuked.

We have black gold. I think you're forgetting about the £1 trillion+ of hard to get at black stuff remaining in the north sea.

[petergriffin]

We have black gold. I think you're forgetting about the £1 trillion+ of hard to get at black stuff remaining in the north sea.

It doesn't matter how much oil you might have (not much left, anyway). You can't use oil as collateral on currency.

The only realistic solution is that the Scottish banks print their own money, denominated in British Pound or any other currency. It is possible, it has happened before, you wouldn't even need a central bank. It happens regularly in South America and it happened in Italy in the late '70s. Problem is, I doubt the folks at the SNP have the technical and financial knowledge to manage this transition.

[scooterscot]

It doesn't matter how much oil you might have (not much left, anyway). You can't use oil as collateral on currency.

The only realistic solution is that the Scottish banks print their own money, denominated in British Pound or any other currency. It is possible, it has happened before, you wouldn't even need a central bank. It happens regularly in South America and it happened in Italy in the late '70s. Problem is, I doubt the folks at the SNP have the technical and financial knowledge to manage this transition.

I'm sure we could consult the financial wizards of the city when introducing a new currency. Would be starting debt free too.

You talk about reputation. Imagine though the reputation of greater England afterwards. The country that kicked out a union member after sharing the same currency for 300 years. Love has no sweethearts eh? You'd honestly think the world would look favourably towards the rUK after that move? I think not jimmy.

[petergriffin]

I'm sure we could consult the financial wizards of the city when introducing a new currency. Would be starting debt free too.

You talk about reputation. Imagine though the reputation of greater England afterwards. The country that kicked out a union member after sharing the same currency for 300 years. Love has no sweethearts eh? You'd honestly think the world would look favourably towards the rUK after that move? I think not jimmy.

That's because both you SNP guys and the UKIP are fcu*ing this country.

[The Spartan]

We have black gold. I think you're forgetting about the £1 trillion+ of hard to get at black stuff remaining in the north sea.

Aye but if it's hard to get it's going to cost a fair bit to extract it cleanly and carefully

[scooterscot]

That's because both you SNP guys and the UKIP are fcu*ing this country.

These parties exist because the main parties abandoned their principles in favour of short-terminism that would help fill their own pockets and that of big business.