Comfortable with uncertainty

George Kerevan states that the Sustainable Growth Commission (SGC) “wants an independent Scotland to keep the pound sterling for an indefinite period”. This is not the case. What the SGC suggests is that Scotland continues to use our existing currency for a transitional period which is undefined. ‘Undefined’ is not the same as ‘indefinite’.

As in many other areas, this is simply a matter of the SGC acknowledging reality. The point at which Scotland transitions from sterling to any new currency arrangement cannot be predetermined. It must be a matter for the judgement of the government of the day taking account of prevailing circumstances.

It is, of course, possible to argue that there should be no transition period; that Scotland should move to an independent currency immediately upon independence being restored. But, if the need – or desirability – of a transitional arrangement is accepted, then it must also be accepted that the duration of this period cannot be set in stone. To do so would impose undue constraint on the Scottish Government.

The most we might sensibly do is place an obligation on the government to move to an independent currency at the earliest possible time.

We might reasonably suppose that, if the intention is to adopt an economic strategy informed by MMT, some preparation will be required. This could necessitate a transitional arrangement even if it is not ideal. The crucial factor here is the timescale for restoring independence.

If we had another five years then it would almost certainly be possible to eliminate the need for a post-independence transitional currency arrangement. Anybody who thinks we can afford to wait that long to dissolve the Union really isn’t paying attention. Perhaps because they’re too busy obsessing about the fine detail of currency arrangements and economic policy.

Not being either an economist or a political fantasist, I long since became comfortable with the fact that the future can nether be wholly known nor absolutely determined. I am satisfied that Scotland will have a functioning currency. Because the notion that we might not is too ridiculous to contemplate. And I am satisfied that Scotland is perfectly capable of managing its own currency arrangements and economic policy. Because the implication that we might not is both profoundly offensive and contrary to all available evidence.

4 thoughts on “Comfortable with uncertainty

  1. So true. As an example Malta got Independence first, set up its Central Bank and floated its own currency (the Lira) as soon as it was able to (a few years later). It stayed with sterling initially. Look at Malta now. It’s never looked back or regretted it. The Economy is shaped on changeable variables, and therefore cannot be reliably predicted. To suggest that Scotland is unable to take charge of its own fiscal and economic policies/direction is a total insult. The diehards who hate the notion of Scottish Independence will never be convinced. They ONLY desire London control. Scotland, a country with enviable natural resources, is already successful but shackled to a union that impedes its true potential, and has and will, happily drain Scotland’s wealth.

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  2. This currency obsession is insane. If ~70 other countries who gained independence from the UK can organise a currency…then the question is idiotic (hence its purpose is to deliberately distract from arguments about the Union). The only answer to the currency question is – the one that best suits Scotland.

    There is a saying that the ground is as comfortable as you are tired. The level of threat to Scotland determines the level to which all the subsequent questions need to be answered (or if they are even asked). If the house is about to be flooded, you don’t get to fold your socks before you pack. Scotland, time is now the critical factor and the threat appears dire.

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  3. I think you do Mr Kerevan a wee bit of a disservice here. The following quote from the SGC will illustrate my point.
    “the Commission recommends that the currency of an independent Scotland should remain the pound sterling for a possibly extended period” (C1, pg 324, repeated C1.7 pg. 325)
    That said, and to be fair to the Commission, their position is that moving away from sterling should be a matter of fulfilling a number of economic tests – fiscal sustainability, credibility of a Scottish central bank, needs of Scottish business and so on (see C2, pg. 330). To be frank I don’t know where the 5-10 years that has been cited for the Commission comes from – I can’t find it in the document. Perhaps it comes from the emphasis on an independent Scotland’s first five to ten years, which will without doubt be significant. Perhaps an interview given by Andrew Wilson. However, the approach in the document is flexible and much more contingent on events.
    However, where I think the Commission goes wrong is that it really only seems to consider Scotland when, if we are sharing their currency, we can hardly ignore what goes on in rUK, and what this means for their currency. One only has to consider the present shambles, with the possibility of crashing out of the EU with no deal to see the potential for a newly independent Scotland’s economy to be dragged down by some other madcap plan that they come up with in London.
    Moreover, is it not fair to say that monetary policy in the UK just now is determined with little consideration for Scotland? How long do we want that to go on for. Its all very well to speak of coordination with WM, as the Commission does, but it also raises the possibility of obstruction by WM as the justification (correctly) for no monetary union.
    So in defence of George, you are correct that the Commission’s approach is to use sterling for a period that is undefined. However, if the Scottish economy fails to satisfy the tests could it not be said to be indefinite?
    My preferred position would be to put their undefined period process into a schedule or a plan – not one dimensional (eg in year 1 we will have ….) but flexible (in years 1-3 we will have ….), and explicitly referring to the ongoing wisdom of using sterling.

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  4. Don’t forget that as a joint partner in the UK Scotland not only has a share in the national debt, as we’re reminded of as a reason not to dissolve said union, but also in all the assets.

    There’s at least two banks in there. RBS is one. Another is the Bank of England which was rescued by Westminster decades ago.

    So the answer as to which currency we’ll be using is the one issued by the Bank we own a share of until such times as we’re offered enough for of an incentive to buy us out. Possibly by Westminster but we might be open to other offers. Whilst we own that share we might insist on a representation it’s board in order to guide it’s monetary policy.

    Unlike the UK leaving the EU where there may not be many shared assets to divide there a lot more in the UK and probably a higher than per capita share in the rUK. Dreams of a no-deal Brexit might be fanciful but the rUK might have far more to lose if they try the same delaying tactics and intransigence with Scotland.

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