I’d like to run a straw poll to help inform some thoughts I’m having on currency.
So imagine you are in charge of the newly reformed indyref2 campaign. You’ve been asked to direct the currency question strategy. What’s your preferred “Plan A” going into the campaign?
Poll now closed – Results below. Thank you for voting.
Feel more than free to expand on your thoughts in the comments below.
(If it’s your first time commenting on this blog you may end up in a moderation queue. I’ll approve as quickly as I can)
The Common Green 
Both the Euro (3 yrs min to meet entry criteria) and a new sovereign currency (18 months min set up time, just to handle design, print and roll-out) have a practical lead time, so are not ‘day one’ solutions. Given this, our Plan A should have two steps: unilateral use of Sterling immediately, followed by one of the other two options (no great preference from me) at an appropriate time later, based on clear criteria.
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Most “currency” these days is electronic ones and zeros in computer systems. Scottish Banks already issue Bank Notes (these are just Promissory Notes issued by a private bank instead of a central bank). There is therefore virtually zero setup time. We need a central bank with a computer to keep track of the “Scottish ” banks and to act as lender of last resort etc.
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I advocate a currency backed by gold. This will prevent politicians and bankers from defrauding the public by inflating the currency by QE etc
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That basically would limit the government or private banks from being able to issue loans or grants to new start-ups , small and medium businesses or anyone else, to the value of the country’s gold reserves, which are as arbitrary a value to base it on as any other.
That would limit economic growth.
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Also there’s an argument, especially when inflation is close to zero, for a Peoples’ QE , like the one Corbyn has suggested, with a nationalised bank issuing money to spend on one off payments to the unemployed, disabled and people on low incomes to increase demand for goods and services and reduce poverty ; and grants or low interest loans to small and medium businesses and start ups
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I’d also add that
a) in a world of global commodities, a metal standard is effectively a peg to the USD by an indirect route.
b) It doesn’t guarantee stability. There will always be the temptation to move from a 1:1 reserve to some fractional reserve basis (for reasons Duncan mentions. You can only grow your economy as fast as you can grow your gold reserve). Once you have moved to a fractional reserve, it’s politically easy to change the fraction. Moving from a 10:1 to 11:1, for example, would increase the money supply by 10%.
Of course, this is functionally equivalent to debasing once’s coinage and history abounds with examples of what happens when one starts walking that road too hard.
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http://www.silverdoctors.com/headlines/finance-news/the-clip-the-banksters-dont-want-you-to-see-the-american-dream/#more-69576
This just came up on the website.
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DR Dazell you have posted a comment but removed the “Reply” button. ???
With a Gold Standard you dont have to be 1 for 1 it all depends on what price is set for Gold in local currency. It absolutely does not peg us to the USD. Note Alan Greenspan has in the last few days advocated a return to the gold standard as per pre 1913. This is the only way out of the current debt dilemma. You will see the price of gold and silver soar in the next few months as people realise this. Our current global finance crisis (yes it is still an issue) is a direct result of Not using a Gold standard. I only hope Scotland is independent before the whole ponzi scheme collapses.
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The reply button wasn’t removed, there was just a limit as to how deep the replies could nest. I’ve extended it.
Do you have a link to Greenspan’s statements? Asking for interest. Would like to delve into this a bit more.
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As requested
http://www.silverdoctors.com/gold/gold-news/alan-greenspan-says-return-to-the-pre-1913-gold-standard-would-be-a-great-thing/
Happy researching.
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As an extra try youtube and
John Law and the Mississippi Bubble a cartoon explanation of the ponzi that is QE
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Not a straightforward question because it would depend on how the EU treats Scotland e.g on insisting on use of the Euro or not and whether they want Scotland to have had its own currency first. I’m warming to the Euro (it was never that bad an option, but had had a bad press, but there is the own currency first requirement). I think initial own currency pegged to Euro (£ is down the swanee) followed by possible entry to the Eurozone in future maybe.
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The EU can’t insist ion Scotland using the Euro, though. We’d probably have to commit to using it at some point, but can’t be actually forced to do so. The Wee Blue Book . .
“EU member states CANNOT be forced to join the Euro. In order to do so, states must first join the ERM2 (“Exchange Rate Mechanism”) programme for a minimum of two years, and membership of ERM2 is entirely voluntary. All an EU member has to do to stay out of the Euro is not sign up for ERM2.”
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True in practice as Sweden has been an EU member since 1995 with membership terms including adopting the Euro, but is still using its own currency. Ditto for Czech Republic, EU member since 2003
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Should be a serious campaign to kickstart local currencies like the Bristol Pound so that people get used to trading in something other than GBP and currency is decentralised through local ‘central banks’ that federate into a national central bank with an overall currency for trading between local regions and externally.
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Reblogged this on Wee Radicals.
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I think we should replace it with a Scottish currency pegged to a basket of Sterling and Euro, gradually changing the weights until it’s fully pegged to the Euro, at which point we can discuss whether to introduce the Euro for real.
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There is no right or wrong answer as all options are workable to a greater or lesser degree.
What should be considered is the relationship between the rest of the UK and, of course, the EU but neither will be known prior to independence.
Initially, in order to alleviate voter uncertainty minimise the politicking of Westminster, I would prefer to use the pound unilaterally and continue to do so until such times as a long-term alternative – based on the political landscape we find ourselves in – is found and implemented.
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Currency hurt the economic Argument for indy in 2014. England would fight against using the gbp again. Although it doesn’t make sense for England now outwith EU previous no voters need strong convincing not more negative campaigning. I would accept Euro but 40% of Scotland voted out this is without Euro even more may not want Euro. Is it wise with med countries situation. I would not want use of gbp without Union. Our own currency scots pound to start scots pound for pound seems best option. Also Euro would be on a long path. Perhaps more than one option could be up for debate 1 question should we be an independent country then question two in event of yes vote Which currency option is preferred.
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The Dollar.Oil and gas are valued in this currency. Many countries use the dollar.
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A separate Scottish currency (ie , the Scottish pound). I am not sure of the relative benefits of pegging to one existing currency or another, or even free-floating. Pegging to the euro may make most political sense. However, I don’t think adopting the euro outright should be seriously entertained. This runs the risk of Scotland being forced in to various structural adjustments to suit the ECB etc.
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I voted ‘other’ as I think a degree of flexibility is needed.
As a temporary measure, sterling should be used unilaterally, definitely with no currency union assuming the UK goes ahead with Brexit. This should be followed as quickly as possible by a Scottish pound initially tied to sterling, (allowing a transitional period in which sterling and Scottish currency can be used interchangeably), with the link being cut when the Scottish Government decides the time is right.
The possibility of eventually adopting the Euro should be left open, with the proviso that the Scottish Government will not apply to join the Eurozone unless this has been approved in a referendum.
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The Euro, like Sterling, is a freely traded currency.
It is NOT essential to be in the EZ to use it.
https://en.wikipedia.org/wiki/International_status_and_usage_of_the_euro
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Of course, what’s not considered is that if anyone replies that we should use the £, the No campaign will of course deride us as saying ‘that’s not independence!’
-Whether or not it makes economic sense or not I should add.
Politics will undoubtedly play a part in this.
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One can never discount the politics. You’re right. Any currency option we choose as Plan A (and Plan B) will be derided by the opposition no matter how sound the case (even just NOT choosing a currency union will be derided as a U-turn). We need to be ready to defend and answer for any and all options we aim for. The other side won’t need to.
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I voted other as to me I could not care less whether you call it a pound, a scots pound or dollar or scheckle it is entirely irrelevant what matters is how stable it is and its actual value. Independence must be gained and any other decisions can be left to our soveriegn people once this is done.
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I notice that the majority so far vote for using the Euro asap. I suppose such an attitude would ring pleasantly in the ears of the EU members. However, it seems a little hasty and ill advised.
There are several arguments against it. First og foremost is that Scotland quite simply would not be eligible to join the Euro. Joining the Euro is a process that takes time and I fail to see how Scotland would be able to adopt the Euro on Independence day without the EU changing the rules surrounding Euro. To be honest I cannot see the EU doing that. So as a plan A it seems unsuitable. On the other hand, I suppose it depends on what you mean by “Plan A”. Is “Plan A” something that is prepared before independence and implemented upon independence; or, is “Plan A” the desired end result? If it is the latter, what currency do the Euro supporters tend to use on Independence Day?
For those who are keen to adopt the Euro then a practical solution could be to unilaterally use the Euro until the criteria for joining the currency union have been fulfilled. However, this option has not been presented in the poll. This is not surprising, I cannot remember having seen the idea of unilaterally using Euro proposed by anybody.
I favour using another currency unilaterally initially. The reason for this is that the markets will undoubtedly be hesitant with regard to Scotland’s economy. Unilateral use would buy time, time for the markets to evaluate Scotland and for Scotland to evaluate it’s next move while ensuring that the people and businesses in Scotland have cash (digital and physical). I would then float Scotland’s own currency and initially peg it to another established currency. I still have my options open, I can remain pegged to another currency, I can float it freely or I can initiate the necessary steps to join the Euro.
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Valid points all. The reason I didn’t suggest unilateral use of the Euro is basically because I very obviously completely misjudged how popular the option would be.
You’re quite right that we couldn’t be a member of the Eurozone on I-day+1 but I think it would be possible, in theory and if desired, to construct an independence campaign premised on entering the Euro as soon as possible. You’ve already mentioned the two ways you could do it. Either unilateral use of the Euro from day 1 or a £Scot launched and campaigned as a transition method.
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I agree with your first commenter.
Isn’t it utterly astounding that so few people are aware that EU rules preclude immedate change to the Euro?
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I prefer a Pound Scots, either free floating or pegged to another currency (which is not Pound Sterling). However, for a measure of stability, a percentage of it should be backed by gold. Maybe around 5-10% as this should give the government a measure of flexibility to issue loan, print money etc. This in theory would limit the effect the pitfalls of currency speculation/devaluation as there should be a some sort of floor price for the Pound Scot. In time of crisis gold is the only thing worth of value.
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Scottish Pound pegged to UK Pound Sterling as a starting point. This allows us to make an informed decision on currency at a later date – would also allow people to acclimatise to the concept / arguments for adopting the Euro.
Let’s not scare the horses on monarchy or currency until independence is won.
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Independence is about control – not which currency we use, but the ability to decided which currency we use. We need to start talking about the control aspect and to explain what it means.
Discussing individual things like currency which very few people understand is fighting on the unionists’ chosen ground – we have start drawing them on to our preferred ground. This will not be easy given the near universal opposition in the media – so we have to start now.
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Solutions to this issue need to provide
a) minimum disruption on day one, and
b) maximum flexibility going forward
This minimises the negative campaigning of the non indy supporters.
A possible solution from Day 1 using the above criteria is
1. Create a Scottish Financial Regulation Authority which monitors the financial health of various financial institutions such as banks, building societies, credit unions and other deposit taking institutions. The legislation can be adopted from existing regulations and the process of developing this legislation can start Now.
2. All holders of financial licences must be based in Scotland and be subject to the SFRA. They must be capitalised here.
3. All monetary balances currently held in existing scottish branches will be deemed to be scottish pounds from independence day. Note Scottish banks already issue their own currency so there is No requirement to issue new notes immediately.
4.Only Scottish notes will be legal tender from independence day. BofE notes will have to be repatriated just like all other foreign currency is now.
5. There should be little or no need to have small coins as most shops use card based payment systems and there are ways of using mobiles for payments. Banks can already issue travel cards in multiple currencies they could easily be used for local currency small denomination purchases if necessary.
This provides a simple to implement Scottish financial system from Day 1.
Other matters going forwards
1. Should it be pegged? If so to what?
2. Should there be a Scottish Central Bank?
3. Should it be Gold backed or be Fiat?
The answers to these questions are important but do not need to be answered from day 1. As there are a myriad of answers to the above three questions it makes it easy for non indy persons to attack. Keeping options open is best proindy stance IMHO.
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