Currency

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Westminster parties tell us we cannot use the pound. Why should we not believe them?

Because:

  • The pound, like the $US and Japanese Yen is a fully tradeable currency, which ANY country can use. Nine countries use the pound sterling unofficially.
  • The pound is as much Scotland’s currency as the rest of the UK. The Bank of England was nationalised in 1946 and is owned by the 4 home countries.
  • A formal currency union will be in Westminster & Scotland’s interests as it will ensure economic and fiscal security

In a letter to the Sunday Herald, Alex Salmond said:

“There is literally nothing anyone can do to stop an independent Scotland using sterling, which is an internationally tradeable currency.

The No campaign’s tactic of saying no to a currency union makes absolutely no economic sense.

But it also makes no political sense, and is a tactic that is a deeply dangerous one for them.

If the No campaign think that spending the rest of this campaign telling ordinary people in Scotland that they have zero entitlement to a currency that is already theirs and which they can’t be stopped from using in any case, they will pay a heavy price.

It is simply impossible for the Westminster establishment to follow through on their campaign rhetoric about blocking Scots using the pound. They can however deny Scotland continued use of the Bank of England, which is a shared asset that Scottish taxpayers have contributed to since it was nationalised in 1946.

The Bank of England itself holds the title to over a quarter of the UK’s entire national debt of around £1.3 trillion. And it is all that debt which Westminster would be agreeing to take on board in its entirety if Scotland was denied continued use of the central bank.

Assets and liabilities go hand in hand, and no one would expect Scotland to pick up a share of the debt if we were being denied a share of the assets.”

In February 2014, the Fiscal Commission Working Group warned that such a move by the No campaign was likely:

“it is important to acknowledge that political considerations will play a role and may cloud pre-referendum comments and policy statements. However, these are likely to differ from the actual decisions taken post-referendum when agreement is likely to take place where there are common interests”.

After the debate between Alex Salmond and Alistair Darling, Sam Bowman, research director of the Adam Smith Institute said:

“An independent Scotland could flourish either by using the pound sterling without the permission of the rUK* (or by setting up a “ScotPound” pegged to sterling through a currency board, which would achieve a similar end).

(1) Because Scottish banks would not have access to a currency-printing lender of last resort, they would have to make their own provisions for illiquidity, and would necessarily act more prudently.

Scotland actually had this system of ‘free banking’ during the 18th and 19th centuries, during which time its economy boomed relative to England’s and its banks were remarkably secure. And Panama, which uses the US Dollar in this way, has the seventh most stable financial system in the world.

(2) Everyone says Mr Salmond needs a Plan B if the rUK does not agree to a currency union with Scotland. But unilateral adoption should be Plan A, making Scotland’s economy more stable and secure. The UK’s obstinacy would be Scotland’s opportunity.”

The Adam Smith Institute is an independent, non-profit and non-partisan organisation based in London and is one of the world’s leading think tanks.

A video featuring SNP’s Treasury spokesman at Westminster, Stewart Hosie answering questions on currency is on BBC News Scotland. Mr Hosie also faced questions on Scotland’s share of the UK’s debt, Trident, and the EU – and gave his views on British identity.

Commenting on George Osborne’s speech in February 2014, Professor David Blanchflower, a former member of the Bank of England’s Monetary Policy Committee said:

“There are clearly things to be worked out but a lot of this sounds like political posturing rather than economics”.

Chief Secretary to the Treasury, Danny Alexander, at least paid passing reference to the post-referendum position:

“I have no doubt that both the UK and Scotland would – if it came to it – negotiate Scotland’s independence in a responsible manner”

In March of this year, a government minister told The Guardian that a currency union will be agreed.

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Professor Leslie Young, of the Cheung Kong Graduate School of Business in Beijing, accused George Osborne of basing his ‘no currency union’ stance on a “lurid collage of fact, conjecture and fantasy”.

In an article entitled: The Big Independence Lie: Why Scotland Could Keep The Pound, Avinash Persaud (Emeritus professor of Gresham College, chairman of Intelligence Capital, and a former global head of currency research at JP Morgan) said:

“There is nothing stopping an independent Scotland from declaring sterling sole legal tender and borrowing it on the financial markets to hold in reserve. However much it may appear to be like having your cake and eating it, neither action requires the permission of the rest of the UK.”

“The Bank of England cannot even deny sterling liquidity to any Scottish-focused bank prepared to put up the necessary collateral, without jeopardising sterling’s international liquidity and external value.”

“Moreover, assuming Scotland continues to run a healthy external balance of payments, courtesy of 90% of UK’s oil and gas being in Scottish waters and other foreign currency earners like whisky and tourism, sterling liquidity will likely flow from the rest of the UK to Scotland. Scotland will be a net lender to England.”

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Will Scotland be forced to use the Euro?

No. It is a matter of choice as to whether a country uses the euro. Sweden is a member of the EU, but does not use the euro.

At present, the euro is legal tender in 18 out of 28 European Union member states. Five non-EU countries also use the euro. These are Monaco, San Marino, Vatican City, Andorra and Montenegro. They are allowed to use the euro because it is a fully tradeable currency.

10 members of the European Union do not use the euro: Bulgaria, Czech Republic, Denmark, Croatia, Lithuania, Hungary, Poland, Romania, Sweden and the United Kingdom.

Who owns the Bank of England?

The following is an excerpt from Ceasefire Magazine, in an article written by Yvonne Ridley:

Osborne justified the alliance (Conservatives, Labour and Liberals ) by saying the pound was not like a CD collection to be divided in a ‘a messy divorce’, while Lib Dem Danny Alexander refused to allow the UK to be ‘exposed’ to Scotland’s risks. For his part, Labour’s Ed Balls accused nationalists of “not living in the real world”.

Now while number crunching might be their area of expertise, quite clearly history is not. Every schoolboy and girl north of the Border knows that the Bank of England was founded by William Paterson, a Scotsman. The successful merchant, trading with the West Indies, proposed the creation of the Bank of England in 1691 and when it was founded three years later he became a director.

Another piece of history of which the three politicians also seem to be unaware is that the Bank of England became a shared asset with Northern Ireland, England, Scotland & Wales when it was nationalised in 1946.

And so the Bank of England, owned by private individuals since 1694, became the property of the British people. The reality is if Scotland is forced by Westminster to drop the pound then the British Government will, by law, have to give a proportionate share of the Bank of England’s assets to an independent Scotland. But let’s face it – that isn’t going to happen because all of the businesses on either side of the Border who do billions of pounds worth of trade with each other will not want the added complication and costs of trading in other currencies.

So what’s this all about then?

The truth is, Westminster village is in a panic at the prospect of an independent Scotland which, according to polls, is becoming more of a reality as the referendum day in September approaches. The Tories are panicking because an independent Scotland is committed to getting rid of the nuclear facility in Faslane in its first term of government. This would jeopardise the UK’s nuclear power status and therefore its standing on the UN Security Council and possibly a seat at the G7/8.

Labour is panicking because it knows the chances of ever regaining power in a country without Scottish voters is highly unlikely, so their power and influence would also diminish rapidly.