Views on Independence.

[campbell]

See this for fun, found by my Dad ...

http://newsthump.com/2014/02/17/alex-sa ... member-of/

[Dominic]

See this for fun, found by my Dad ...

http://newsthump.com/2014/02/17/alex-sa ... member-of/

That's very good.

[pete]

As far as the pound goes England doesn't own it.

I think you want to research the legal position on that - the pound in your pocket is nothing more than a promise to pay.

Actually, that promise is hollow.

(a) it's a promise to pay in what form? another pound note to replace the one you hand over? Since the abandoning of the gold standard, there is no true value beyond trust.
(b) It's not a promise to restrict the total number of pounds in circulation - i.e. they can (and do) print as many as they need; so as a percentage of national wealth it is not particularly useful either.

The truth about currency is mind bending - it only has one real purpose - to act as a moderately stable representation of value to allow people to swap stuff without bartering. The longer you think about it, the more confused you will get!

"So far the UK (the rest of the UK) has had to guarantee that promise after Alex threatened to default."

The UK cannot default on its debt (which is different from failing to honour the empty promise printed on the pound note); most of its debt is valued in sterling; so they could repay it simply by printing the requisite money and handing it over. Of course that would trigger massive inflation and a substantial reduction in the exchange rate of our currency - actually quite handy for exports

The truth is Scotland is not in the position to guarantee any currency at the moment - and it would be a long and painful process to generate the reserves and market confidence needed to start one.

See above - no country technically guarantees its currency any more - they are all take-it-or-leave it bits of paper. The difference is that many countries have sovereign debt valued in foreign currency, whereas the UK and US have sovereign debt in their native currency.

The banks are underpinned by a "lender of last resort" (Bank of England) which is what Scotland would not have without a currency union - it prevents banking collapse, but only by printing money in a controlled way (they call it quantitative easing).

Cheers,
Robin

Ace post.

I was wondering what happens to Sterling if Scotland leaves the UK. I reckon that the value of a currency is not just trust but also the stuff that country owns. So if they suddenly discovered a MASSIVE oil puddle (that's a technical term for all you Oil n Gas types) under the UK the value of Sterling would jump up.
So I also suspect that if Scotland leaves then the value of Sterling will fall (for a given number of notes in circulation) as rUk would be smaller than UK so Sterling represents less. Now if Scotland forms a currency union with rUK there's no change. If it doesn't there is change (OK there is change as the market reacts to uncertainty but I'm talking about a perfect sane market here - it's a thought experiment).

I also wonder if this is why the SNP is saying that if there's no currency union then there's no Scotland taking some of the debt. This isn't defaulting per se, it's just the understanding that it is a 2 way street.


Also - presumably there is nothing to stop Scotland setting up a "lender of the last resort*" but it would be a lot of effort. It's unlikely that Scotland would be borrowing in Scottish pound anyway, but probably Sterling or Dollar. (Incidentally this is the cause of the problems in Southern Europe, their sovereign debt is not held in their own currency so they can't just pay it off. UK has a huge debt to GDP ratio but the debt is held in Sterling so it can always be paid off - we can just print money to do so. And ironically it is becuase this ability exists that we can still borrow at reasonable rates.) But that doesn't necessarily cause a problem, Germany is the world's strongest economy at the moment, at lest until France crashes out, and it can't print money either.

The idea that Scotland and rUK forming a currency union would cause massive instability is just political posturing. The countries already have separate laws, parliaments etc and also share a huge amount, there would be very little difference (at least at the beginning) and how much difference there is would be entirely down to the post referendum negotiating. In fact i would view it as the best option, essentially devoMAX and a gradual moving away rather than a lurch.

Also (while I'm here) the European stuff is more massively inconsistent posturing - the EU is an expansionist organisation - are we supposed to believe that it wants ex-Soviet countries with their shonky economies and legal systems but it won't want a state which has been a de-facto member since (almost) the start. Likewise all the stuff about borders etc. That's just details.

A "Yes" vote will put Scotland in a massively strong position to negotiate an independence treaty with rUK. What we are hearing from Westminster at the moment is them throwing everything they can think of at the wall to see what sticks because independence scares the hell out of them. You might say that the terms of that treaty should be pre-negotiated but Cameron rejected that, and understandably. If they managed to negotiate a mutually satisfactory treaty prior to the referendum and then said "population of Scotland what do you think" then it would almost by definition be acceptable and voted in! And thus Cameron would lose.

A "No" vote will put Scotland in a massively weak position in the UK, the Barnett formula may well be the first casualty but there will be others. UKiP and the Tory grandees will delight in putting the boot in for generations to come. But no costs, and no change brings certainty and stability.

For me I struggle to see how the change itself can be a bad thing - Scottish politicians are no better or worse (on average) than any politicians, no one questions anymore that Scotland could be a successful small nation, I think a small nation would probably do better than one that has, IMO, too much of a North/South divide. But I will accept that there is maybe half a generation or so of work to be done to make it happen.

So the question for me became "is the benefit worth the cost". And I don't know. But I'm a bit of a Keynesian so I don't mind spending money*** and a lot of an optimist. I understand the argument put forth on here by some that the costs are too high and that the change will be too great. I understand it, but I don't agree.

But as Keynes himself said "When confronted with new facts I change my mind Sir," so I'll keep reading the debate and see if anything new comes up...


pete

*they should base the bank in Ullapool. The last resort. You know because it's the most northerly holiday resort I could think of.**

**A Pedant writes -
Did you just include that to see if anyone reads to the end?

- NO. For years I've been unsuccessfully lobbying the BoE to move to Blackpool.

***That is a massive misuse of Keynes you know, did you just use it so you could shoehorn a pretentious (mis) quote in at the end.
-Look i get enough stick as it is without heckling my own posts.

[robin]

Pete, you should see two psychiatrists - one for each of your schizophrenic personalities

[woody]

Pete, Generally we campaganza at Lochinver, around 30 miles north of Ullapool.

[pete]

Pete, Generally we campaganza at Lochinver, around 30 miles north of Ullapool.

That's excellent - if this had been last year you could sign my petition at number 10.gov entitrled "In the event of Scottish Independence the BoE should be moved to Blackpool. Or somewhere on the Solway Firth." But they took it down and had me categorized as a "Vexatious Litigant".

Maybe you could put one up petitioning for it to be moved to Lochinver in the event of a No vote?

[woody]

Pete, Generally we campaganza at Lochinver, around 30 miles north of Ullapool.

That's excellent - if this had been last year you could sign my petition at number 10.gov entitrled "In the event of Scottish Independence the BoE should be moved to Blackpool. Or somewhere on the Solway Firth." But they took it down and had me categorized as a "Vexatious Litigant".

Maybe you could put one up petitioning for it to be moved to Lochinver in the event of a No vote?

Well, the pie shop is excellent.

[robin]

Pete, you've been promoted Woody, the pie shop is OK, but seems excellent when all you've been eating is sand, charcoal, mango vodka, burning creosote ...

[pete]

Pete, you've been promoted Woody, the pie shop is OK, but seems excellent when all you've been eating is sand, charcoal, mango vodka, burning creosote ...

Weren't "Burning Creosote" a punk band from St Helens? I think I have a couple of their EPs.

[woody]

Pete, you've been promoted Woody, the pie shop is OK, but seems excellent when all you've been eating is sand, charcoal, mango vodka, burning creosote ...

I can only go on what I've been told. Despite appearances to the contrary over the years I don't often find the pie a hostage of my stomach.

[robin]

The real stuff of independence - "ironic" punk bands and pies

[Mikie711]

Seen as fear mongering has been all the rage throughout the run up to 18th September I though I would share this...........

According to Money weekly the current national debt for the UK stands at north of 700 billion, nearly 3 times GDP for the entire UK. Projections estimate this to rise to 1.4 trillion by 2015 (£21,800 per person). Now no country has ever survived this much debt/gdp imbalance, ever. So the future looks bleak, the only reason that we can currently service this debt is because interest rates are so low but it wouldn't take much of an upward shift in interest rates for this to become to large a burden to bare. It gets worse because when you add in all of Britain’s “unfunded obligations” – promises the Government has made on things like public sector pensions – our debts swell to 900% of our economy. This has been caused mostly by promises made decades ago when the government started the welfare state. Pensions were for anyone who reached 70 but back then live expectancy of your average worker was 48years old. Now they are 80 with a lower, 67, retirement age currently. That and there were 10 workers to every one pension claimant. Couple that with NHS and you can see the spiraling costs that add to the national debt.

Granted it takes a pretty bleak view and is as much a sales pitch to buy their magazine as anything but the figure stack up against other sources with regard to the size of the uK national debt. It makes for a sobering read.

Now given that Scotland has a higher GDP than the remainder of the UK and excluding debt interest payments Scotland contributes 4.9% of the UK debt which we currently pay 8.4% of the interest on, would we not be better to jump ship, take our share of the debt, currently about £5-7billion and have at least a fighting chance of mitigating the damage that will inevitably occur when all our pigeons come home to roost as it where.

I would be a much happier person if A) I had never stumbled across the article, and B) if someone tells me it's a load of rubbish. Unfortunately it all makes entirely to much sense and looks kinda inevitable when you sit a think about the cost of the welfare state which is already unsustainable and will only get worse. No politician will privatise any part of the welfare state or indeed abolish any part of it as it would be tantamount to political suicide and would never fly in the face of public revolt. Very hard to take away something that is so intrenched in our society.

Artical here

[Rosssco]

There is a significant difference however between a country that has a high debt / GDP ratio but with it's own currency, and one thats's in the same situation but has no control over it's currency.

Plus the figures quoted don't seems right. UK GDP is around 900 billion UKP, so debt currently stands at ~80% debt GDP ratio. This is comparable to other developed economies, including the biggest of the all, the US. Not sure if it's the same Moneyweek story you see on every on other website these days, but if it is, have a read here for some debunking:

http://coppolacomment.blogspot.co.uk/20 ... t-yet.html

The primary risk is obviously default, but in theory Britain could never default on it's debt obligations as the vast majority of that debt is in Sterling. And most of it is interest upon interest, not necessarily just pure over-spend. I've came across some interesting theories on Tinternet which compares there relitive merits of debt vs. inflation, where in an extreme case a country prints of sufficient currency to pay off a large part or all of its current debt obligations, against the spectre of higher (likely significant) inflation and currency devaluation, as a result of the huge increase in currency. As an example, the BoE has pumped many billions (as has the US Treasury) into the system with very little resultant effect on inflation levels. Tell me if I've got this wrong, but thats my current understanding. Countries like the UK and the US will always have this debt servincing option as long as they maintain their individual currencies.

Citing the Eurozone, countries like Greece (easy example) have no control over a central bank, so couldn't print money to pay off debt's and devalue it's currency to become more competitive. An independant Scotland would be stuck in a not too dissimilar situation even in a currency union. And I'm not convinced by the higher GDP part. It may be now, but I also think it has more chance of being variable over the coming years as certain major industries fluctuate in output, if independance was granted..

And this associated article is quote a good read:

http://coppolacomment.blogspot.co.uk/20 ... nk-it.html

My view would be that if the polls were to drastically swing towards Yes for independance, and 2 years from now they are all sitting round the table tryin to sort of who gets what from the UK, Scotland should offer up its entire North Sea oil&gas assets in exchange for no debt servicing requirements from the UK. So Scotland would start debt free, and its higher GDP would (according to those who subscribe to this) provide at least as much financial security as we have now, and avoids us being a 'petro-economy'.. That lack of debt (possibly not including internal social debts) would also seem to make a Scottish currency more lilely to succeed..