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Last week we carried out a reality check on the main currency options being discussed for an independent Scotland. The currency question attracted significant debate below the line. Here we pick out some themes and best comments
1) Readers are concerned about the prospects of the Bank of England setting policy for an independent Scotland were there to be a currency union.
Fillingmyboots comments:
It does not sound like true independence if you are at the mercy of the Bank of England which in turn is closely linked to the politicians sitting in London.
completelydotty comments:
Ultimately Scotland will keep the £ as without it, thousand (of high paying) financial service jobs will move over the border. Unfortunately this means Scotland will not be independent - as it will have ZERO control over the main economic lever (interest rates).
To which Dave Smith replies:
What control over interest rates does it have now?
Related to that, joining a formal currency union is by no means without dangers for Scotland in the event of a financial shock, according to Lisa Tripp, associate professor at Atlanta’s John Marshall Law School. She emailed to share her article “Lessons for an Independent Scotland From Greece’s Euro Tragedy”.
She writes:
Currency unions provide benefits, but they deprive countries of important monetary policy powers and, in acute financial crises, they can undermine the very reasons Scotland sought independence in the first place–the right of self-determination. Scotland may in fact choose to take that risk, but it should do so with a full appreciation of the risks of being a small part of a much larger currency union.
2) Equally, there are concerns around what the costs to the rest of the UK could be from such a currency union.
furtherandfarther comments:
The BoE is a UK institution underwritten by the UK government and there is no way that a foreign government can piggyback off this. Sure there are extra costs to Scotland having its own currency and this will hit trade to an extent, but this is one of the downsides of separation.
MikoyanMig35 comments:
Underwriting Scotland’s borrowing and Scotland’s financial system - when Scotland can’t credibly return the favour - is clearly not in the economic interests of rUK.
3) But others commenting did believe a currency union makes sense for both an independent Scotland and the rest of the UK.
Kuala comments:
Currency union is clearly in the economic interests of not just Scotland but rUK. The current stance is one of “it’s our ball and you can’t have it”. Well, it’s not really your ball, and though this has been the most effective of the scare tactics overall, cutting off your nose to spite your face would be stupid, and unlikely in negotiations in the event of a Yes vote.
4) There were questions over why exactly the rest of the UK would oppose a currency union.
GoldenMileClover wrote:
I live in England and cant see what we gain from refusing the currency union. Nobody has told us any reason for refusing it. If it costs us more to refuse it then why do it?
Rider000 replies, citing the bailout of Royal Bank of Scotland and adds:
A little analogy is big bank in a foreign land, as big as your own big banks. Big bank fails you pick up 92% of the costs irrespecive of whether the big bank is one of your own or a bank in a foreign land.
So Jocky tax payer gets 100% of the gains for 8% of the risks. Whereas Johnny tax payer gets 100% of the gains for 92% of the risk. Its a disproportional risk to reward basis because the economic and demographic size is massively different. It’d encourage more casino banking in Scotland knowing Johnny foreigner is down to pick up the pieces.
5) There was some discussion over the potential need for another referendum on currency in the event of a yes vote.
dondavido comments:
The Scots can call it whatever they want and vote however they want.. If they want independence fair enough. The rest of the UK should then have our say on if we want a currency union with them.
michael98 says:
Any deal involving a common currency would surely have to be approved by a referendum in rUK. Given the reputation of the Euro, I cannot see the English and the Welsh agreeing it.
But HuwLyanThomas says:
You don’t need to consult the people about maintaining the status quo, which in this case is for the UK to have its own sovereign currency.
(otherwise we’d need a referendum every day! [Shall we keep on as we are (yes/no)]...
6) There were comments and emails that expressed concern over what some see as a lack of clarity from both sides of the campaign on the currency issue.
Robert Reid from Glasgow expresses his ”dismay in view of the shambles there is at present on the currency issue.” Here’s an extract from a letter he has sent to Alex Salmond and Alastair Darling suggesting a compromise on currency.
Serious consideration should be given to presenting voters, as soon as possible and before the referendum, with the possible option of a temporary/transitional currency union agreement. This would be for a definite and limited period, say five years, or whatever is required for financial stability, until Scotland with independence could have the option of its own currency. Scotland would pay its share of the ‘debt’.
Kenneth Urquhart from Fife appears to share that dismay. He writes:
It seems quite out of sequence to be asking the question, ‘Should Scotland be independent?’ as the first and only question to be asked at this point. We Scots are being asked to answer the question with a simple Yes or No – our only choice. Yet the question raises so many other questions that, it seems to me, could and should be considered first.
7) There were a few comments about a yes vote presenting an opportunity for a fresh approach to money.
Tom Bates from the Aberdeen Group of Positive Money Supporters emailed to say despite all the debate about currency “neither side have mentioned that Sterling has its flaws”. He says independence could create an opportunity to change what his group sees as the harmful status quo whereby banks can create money through the accounting they use when they make loans. Bates writes:
Scotland could design a better currency and banking system.
8) Some of those commenting emphasised that negotiations would start in earnest after a yes vote and that independence is a process.
JackDavey7 writes:
... as I hope Scots voters know, and as those of us working in the EU know, independence is a process not an event. The currency that an independent Scotland will use after the vote will depend entirely on the outcome of the negotiations that will follow a Yes vote, and will be whatever currency the Scots decide that they want.
Foreign exchange company Currencies Direct emailed to share its scepticism a transition option could work. Alistair Cotton, Currencies Direct corporate dealer says:
The ‘transition option’ of keeping the pound temporarily without currency union would not be feasible and could in fact be a fatal blow to Scotland’s monetary independence. The temporary use of the pound would lead to capital flight from Scotland to the English pound because, without a central bank or lender of last resort, Scotland would be dangerously exposed to a run on its banks.
Finally, Niall1974 gets the prize for funniest post, which may or may not be a dig at some of the spellings below the line:
I think it would be very difficult to take Stirling away from Scotland. It’s quite central and has a large fortress.
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