The Scottish Pound and the Illusion of English Money

Scotland and the rest of UK are currently joined by not just one union, but dozens of unions, these include: political, economic, trade, social, defence, in my case a family union, and the topic of the week, the currency union. Some of these unions work and some don't, some work for one country, and not the others, and some still work for all countries.

Political Posturing - When you take political posturing and scaremongering out of the equation you are left only with the evidence, and that evidence points to an inescapable conclusion, that the currency union is one that works in the best interests of both Scotland and the rest of the UK in equal measure. The political union, however, works against Scotland’s interests and needs to be changed.

In my article Euro, Pound Sterling or Scottish Pound I demonstrate that maintaining the currency union post independence will help both Scotland with trade, and energy sales to the rest of the UK, and helps the rest of the UK by maintaining the sterling zone’s balance of payments at a manageable level (just).

For George Osborne and Danny Alexander to argue that it would not be in the rest of the UK’s interests to maintain a currency union with a newly independent Scotland amounts to political posturing, as they know the opposite is true, making it a counterfeit argument.

One of the points they made this week is that “Scotland's notes represent a ‘rare example’ of different cash being permitted across a single-currency area”. Not that rare, the Isle of Man, Jersey and Guernsey are not in the UK or the EU but are in a currency union with the UK. These islands are classified as Crown Dependencies and not sovereign nations in their own right. Rather strangely though they have a great deal more devolution of power than Scotland does currently. Don't need a passport to go there either!

Any outside expert looking at the arguments from a neutral standpoint would see the blindingly obvious truth of the matter, as have the foreign members of the Scottish Government’s Fiscal Policy Working group that contains some of the world’s leading economists and financiers, including two Nobel Prize winners.

So what is blinding the no campaign to the obvious post independence currency solution? Is it just political theatre, or is there something deeper going on in their psyche that makes them promote arguments with the intellectual rigor of “it’s our ball you can’t play”?

Could it be that unionists, even those who claim to be patriotic Scots, really believe that sterling is English money and that countries such as Wales, Northern Ireland and Scotland can only use it for as long as they are governed by a parliament based in London?

The illusion of English Money

Q - When is Scottish tax revenue not Scottish tax revenue?
A - When it is English Money!

Here is a short video interview (58 seconds) with Ken Clarke the former Tory chancellor. An excellent example of how Westminster thinks regarding Scottish tax revenues;

Note - According to official Government stats in 2011/12 Scotland contributed £10,700 of tax revenues per head to the UK Treasury and the average contribution from the rest of the UK was £9,000 per head. So Scotland pays more tax to Westminster per head than the rest of the UK (has done every year for 30 years), yet Westminster calls it "English money" and tries to lend it back to us with interest.

That, I think, gives an interesting insight into the belief system that underpins Westminster / unionist thinking on Scottish economics. George Osborne's intervention has inadvertently given the Scottish people a case study in the type of thinking we need to remove completely from the decision making process when it comes to managing Scotland’s economy.

No real threat to Scottish bank notes

If a Scottish retail bank wishes to print a bank note, it has to deposit one pound sterling with the Bank of England to guarantee the value of those notes. The value of the Scottish notes in circulation is currently around “three thousand six hundred million pounds, (£3.6bn) and that is how much money the Bank of England would have to give back to the Scottish retail banks to stop them printing their own notes. That would make it the most expensive pointless gesture in UK politics and one the BoE would rightly resist.

Conclusion

The pound sterling is not English money, it is British money, and just as with the Bank of England it is owned by the people of Britain in proportion to population. The political union has long ago stopped working in Scotland’s favour, the currency union still makes sense and will be of equal benefit to both Scotland, and the rest of the UK if maintained. What hasn't yet sunk in, is that a Scottish currency could be made to work for Scotland, but the threat to the rest of the UK would be significant if Scottish energy and Scottish exports were removed from the sterling zone’s balance of payments.

George Osborne appears to be saying that if Scotland votes yes he will commit political and economic suicide and ruin the rest of the UK’s economy, just to get back at Scotland.

A Bizarre, and totally political position for the Treasury to take, to say the least.

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