Do us all a favour...copy this explanation below, and the next time someone blahs on about what currency we are going to use, and there will be no currency union, etc...copy and paste this statement right into the comments section, or print it and hand it to them! Scotland WILL be using the £ Pound. Read the white paper and youll see the other plans in black and white...but, its plan A that will be happening! Please! Mr Salmond, why wont you tell us your currency plan B? I watched the TV debate as many of you did. Alistair Darling put up an attack on an area where the unionists believe the yes side are weak. Ill qualify that, the idea of a currency union isnt weak, not at all, its just that this has become the setup major scaremongering ploy. And as we know, unionists will state anything so long as it gets folk to vote no. Weve been told several times now that a currency union is off the menu so why is Alex Salmond so hell bent on telling the Scottish people that it will happen? What gives him the right to stand up in the face of adversity, even when a studio audience are baying at him and say it will happen? And why wont he simply just tell us his plan B??? If youll give me five minutes of your time, Ill tell you exactly why. Contrary to popular opinion, it has nothing to do with a politician having stated a particular course becoming entrenched and arguing a particular way even though hes dead wrong to avoid showing weakness. No, Alex Salmond, like him or not, is far too clever for that nonsense and if his economic advisors came to him with a better solution, he would find a way to introduce that instead. You can take that one to the bank. So what gives? Lets look at the facts. Lets consider what most people would consider to be his plan B, that would be to use our Scottish currency which already exists and simply peg it to the pound Sterling. So whats wrong with that I hear you say? If the two economies, Scotland and the rUK are de-coupled, then two possibilities come into play, here they are;- 1. Scottish pound simply pegged to Sterling We could trade as normal because most transactions are electronic nowadays. Our currency in paper and coin would only be acceptable in Scotland. This in days gone by was generally how it used to be with funny looks given as you tried to pass a Scottish tenner across an English counter to buy something with it. It still happens today. More importantly its what you dont see thats important. The UK operates a balance of payments or a balance of trade. The value of Sterling is heavily effected by that balance. Any destabilisation causes fluctuations in the value of Sterling on the currency markets. If Scotlands exporting capability was de-coupled from the rUK, that would cause a massive destabilisation because it would remove approximately £40 billion of overseas trade from that balance of payments. Just for the sake of this explanation Ill remove any effect that Northern Ireland and Wales would have as we could assume their output to remain the same as it is now. Therefore - England is a net importer. Scotland is a net exporter. In the situation where such an instability happened, Sterling would start to reduce in value and that effect would gather pace over time. England, being a net importer would find that things they buy today from abroad would cost more than they did yesterday because the pound Sterling is steadily losing value (this is called inflation). Because they are a net importer to such a huge degree, the weakening pound wouldnt bolster their exports to the point where the problem was solved until the English economy had shrunk massively from where it is now. On the other hand, this situation would give Scotland a massive gain because having such a strong exporting side, the Scottish economy would be lifted and our own balance of trade would go heavily into the plus column, but because the Scottish pound is pegged to the pound Sterling, any imports would be costly. To put it in very simple terms, even though the economy was doing well, your holiday and purchase of say, Euros for that holiday would become a very expensive affair. So simply pegging our Scottish currency to the pound Sterling wouldnt be such a great solution after all. We would be forced in that circumstance to decouple and float the Scottish currency on the currency markets and it would take 18 months to two years for our currency to gain parity and surpass the pound Sterling which would be on a downward curve. My question to any politician on either side of the Scotland/England border would be; Youd actually want that? 2. A currency union So, that brings us nicely to the thing that Alex Salmond keeps banging on about which is a currency union between the Scottish pound and the pound Sterling... The problem here is that both countries would have to agree on spending and borrowing limits and Westminster wouldnt like that. However, given the alternative, they wouldnt have much of a choice. Thats why its vitally important for them to secure your vote to keep things as they are (not forgetting the bigger issue of keeping the oil and gas revenue). From both countries point of view, a currency union serves both in the best and most effective way. Thats effectively what weve got now. Every Scottish pound weve got in our pocket is backed up by a pound Sterling held in a current account in the Bank of England. Mark Carney, the Governor of the Bank of England told us several weeks ago that the value held for Scotland was £6 billion. And when people like Alistair Darling say that you cant have currency union without political union hes dead wrong, all you need is two governments who agree on the terms for each other. So, we have a situation at the moment driven purely by politics. Those politicians in or attached to Westminster see this very issue as the Achilies Heel of the Yes campaign because theyre hoping that no one can get their head around the issue. I think theyre wrong. I can guarantee you that after a yes vote, those who have been saying No currency union will be scuttling to the negotiation table to form one. Now, having said all that, I would prefer if we floated the Scottish pound straight away because I think personally that this is the way to head for the stars. However, thats just me. Kindest regards, David Milligan Lvss
Posted on: Wed, 06 Aug 2014 20:18:56 +0000
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