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This was on facebook. I'm old enough to remember most of it but I have to say I'd forgotten.
It might be worth considering a Brief History of the Pound.
1947-1971 - The pound was in a formal currency union with the US dollar in a fixed exchange rate known as the Bretton Woods system. In effect, the UK used the dollar and did not have an independent monetary system. This period is remembered for a long trend of economic growth, albeit not directly related to currency management.
1971 - After Nixon ended Bretton Woods so that he could pay for Vietnam, the GBP moved to a floating exchange rate with the USD similar to the way that Denmark is pegged to the euro today. In the same year, Decimalisation was introduced. This re-denomination remains the most drastic and noticable change in money handling that the British public has seen in living memory. Only limited control of the pound is possible.
1976 - Economic turmoil results in the UK asking the IMF for a bailout loan. One of the conditions of the loan is tighter management of the currency peg.
1979 - 1986 - Thatcher's government adopts monetarist policies involving loosening but not abandoning the informal peg with the USD.
1986 - The Louvre Accord. Thatcher's government agrees to change the benchmark of the currency peg from the USD to the German Deutsche Mark. The UK still does not have an "independent currency".
1990 - John Major's government signs a formal currency union taking the pound into the Exchange Rate Mechanism, the forerunner to the euro.
1992 - Black Wednesday. The pound is taken out of the ERM, not because of any failure of the Mechanism itself but because currency speculators, encouraged under Thatcher's policies of the '80's, realised that they could make a quick buck by crashing the system. George Soros infamously made himself £1 billion by this move. The pound is now "independent" of any other currency though still partially pegged to gold and silver. The Treasury estimates that the move cost British taxpayers around £3.3 billion.
1999 - Gordon Brown announces in advance that he'll sell the UK's remaining gold reserves and buy euros. Traders short the value of gold and drive it to a near historical low price. By 2002 the move is completed and the UK, for the first time ever, has a fully, freely traded and independent currency.
You'll notice all of the options on this list: Formal Currency Union, Informal currency union, fixed peg, floating peg, mixed basket peg and freely floating.
All of these options are currently on the table for Scotland's currency choice post independence. The UK has actively used all of them in the last 60 years. I don't recall at any time the UK declaring that it was no longer an independent country.
It might be worth considering a Brief History of the Pound.
1947-1971 - The pound was in a formal currency union with the US dollar in a fixed exchange rate known as the Bretton Woods system. In effect, the UK used the dollar and did not have an independent monetary system. This period is remembered for a long trend of economic growth, albeit not directly related to currency management.
1971 - After Nixon ended Bretton Woods so that he could pay for Vietnam, the GBP moved to a floating exchange rate with the USD similar to the way that Denmark is pegged to the euro today. In the same year, Decimalisation was introduced. This re-denomination remains the most drastic and noticable change in money handling that the British public has seen in living memory. Only limited control of the pound is possible.
1976 - Economic turmoil results in the UK asking the IMF for a bailout loan. One of the conditions of the loan is tighter management of the currency peg.
1979 - 1986 - Thatcher's government adopts monetarist policies involving loosening but not abandoning the informal peg with the USD.
1986 - The Louvre Accord. Thatcher's government agrees to change the benchmark of the currency peg from the USD to the German Deutsche Mark. The UK still does not have an "independent currency".
1990 - John Major's government signs a formal currency union taking the pound into the Exchange Rate Mechanism, the forerunner to the euro.
1992 - Black Wednesday. The pound is taken out of the ERM, not because of any failure of the Mechanism itself but because currency speculators, encouraged under Thatcher's policies of the '80's, realised that they could make a quick buck by crashing the system. George Soros infamously made himself £1 billion by this move. The pound is now "independent" of any other currency though still partially pegged to gold and silver. The Treasury estimates that the move cost British taxpayers around £3.3 billion.
1999 - Gordon Brown announces in advance that he'll sell the UK's remaining gold reserves and buy euros. Traders short the value of gold and drive it to a near historical low price. By 2002 the move is completed and the UK, for the first time ever, has a fully, freely traded and independent currency.
You'll notice all of the options on this list: Formal Currency Union, Informal currency union, fixed peg, floating peg, mixed basket peg and freely floating.
All of these options are currently on the table for Scotland's currency choice post independence. The UK has actively used all of them in the last 60 years. I don't recall at any time the UK declaring that it was no longer an independent country.
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That's nothing like a Leopard.
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And the point is ... ?
Of course, Scotland can use the pound without being part of a formal currency union. Ireland did so for decades. The point is that in a currency union, the Bank of England would be "lender of last resort" for the Scottish banks, whereas without a currency union, the Scottish Government would need to stand behind them (or announce that it would not). If there is no *credible* lender of last resort, the banks would need to shift themselves south of the border, together with their assets, best-paying jobs, and taxes. That is why it matters. It has sod all to do with being an independent country. Now, if Scotland is to enter a currency union, its choices are rUK (which does not seem to be on the table) and the Eurozone. Either way, Scotland's economic policies will be largely dictated by the larger parties. In which case, what is the point of independence? Scotland already has its own flag national anthem at sporting events. The polls suggest Scots will vote no. The main parties have already made it clear more powers will be devolved -- the so-called Devo-Max option. Cynics, including me, will say this is what Alex Salmond wanted all along. So Salmond will lose the referendum but still win the main prize. |
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And the point is ... ?
No particular point, but interesting nonetheless. Of course, Scotland can use the pound without being part of a formal currency union. Ireland did so for decades. Correct. I've made that point on several forums but have yet to receive any reply or comment. The Punt was pegged to Sterling for long enough. The point is that in a currency union, the Bank of England would be "lender of last resort" for the Scottish banks, whereas without a currency union, the Scottish Government would need to stand behind them (or announce that it would not). If there is no *credible* lender of last resort, the banks would need to shift themselves south of the border, together with their assets, best-paying jobs, and taxes. That is why it matters. It has sod all to do with being an independent country. That's your opinion, others disagree. Personally I don't know enough about the mechanics to argue. Now, if Scotland is to enter a currency union, its choices are rUK (which does not seem to be on the table) and the Eurozone. Either way, Scotland's economic policies will be largely dictated by the larger parties. In which case, what is the point of independence? Scotland already has its own flag national anthem at sporting events. As things stand, the UKs economic policies are dictated elsewhere. Oh whoop de doo, we have a flag and anthem, let's all be grateful! The polls suggest Scots will vote no. The main parties have already made it clear more powers will be devolved -- the so-called Devo-Max option. Cynics, including me, will say this is what Alex Salmond wanted all along. So Salmond will lose the referendum but still win the main prize. The main parties are to be trusted? Give me one instance of any party manifesto being carried out to the letter, or even close to it. I can assure you that you are 100% wrong with your assertion about Salmond and "Devo Max". That is nowhere near the main prize, and he and the SNP urged that it should be a third option on the ballot paper. This was refused by the "main" parties. Finally, check what the polls said just before the 1997 devolution referendum, and also the last Holyrood election. Both times significantly wrong. |
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Im sick of Salmond and his childish threats concerning reneging of the debt.Scotland post independence needs trade with England far more than the other way around and its time the UK politicians spelt the reality out to him.
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The currency issue is what's going to result in a no vote.
SNP should have put forward a better case, i.e. ask/agree for a 10 year currency union with the aim of having an independent currency in 10 years time. |
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This has gone all around the internet in the last few days but completely fails to mention that at all times the Bank of England was lender of last resort for UK financial institutions. With a Yes result, the BoE will be lender of last resort for rUK not for iScot.
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Dotchinite 09 Aug 14 14:21 Joined: 19 Apr 04 | Topic/replies: 3,731 | Blogger: Dotchinite's blog
Im sick of Salmond and his childish threats concerning reneging of the debt Nobody is threatening anything and it wouldn't be reneging. If you can't have the assets, why should you shoulder any of the debt? Remember, it's the UKs debt, not Scotland's. Scotland post independence needs trade with England far more than the other way around and its time the UK politicians spelt the reality out to him. By England, I assume you mean rUK, yes? If England/rUK doesn't need Scotland so much, why the phuck are the Tories, Libdems and Labour all desperate to keep Scotland in the union? You use the term "UK politicians". Who exactly do you mean? The present Westminster govt has no mandate in Scotland. For most of us, that's the big problem. You think Cameron can throw his weight around with only ONE MP from 59 seats?  erse2, there are still nearly six weeks left. That's about the normal span of a general election campaign. Prepare for some surprises, lots of things can happen. |
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1979 - 1986 - Thatcher's government adopts monetarist policies involving loosening but not abandoning the informal peg with the USD.
1986 - The Louvre Accord. Thatcher's government agrees to change the benchmark of the currency peg from the USD to the German Deutsche Mark. The UK still does not have an "independent currency". |
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Pegging a currency has more to do with its relative value against all other currencies, rather than being the lender of last resort or setter of interest rates. Seems to me that the notion of independence would give us the desire to set our own interest rates, regardless of whether our currency would be pegged or not.
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I admit that I don't understand it as well as you seem to, erse. A point Ramruma made above though interests me and over the last couple of weeks I've asked for thoughts on it on different forums - i.e. the Irish punt was pegged to the £ for long enough before RoI joined the euro, and it seemed to work OK. Any thoughts?
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When it's pegged like that it tends to be to avoid volatility and is done by smaller nations. It can work against you though, e.g. if England set interests rates to 5% and GBP strengthened considerably, it'd hurt an independent Scotland's exporters. Essentially any kind of currency union are hands are still tied to London's economic policy.
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It worked for Ireland though. and it works elsewhere I believe. What about the likes of Norway, outside the EU?
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I guess 'worked' is relative though. Ireland had done pretty well after adopting the Euro and becoming part of that economic area.
It would have got messy if Ireland could not rely on Europe for its bailout too. Who would bailout Scotland as an entity independent of the UK and Europe? Iceland is probably a good example there. Norway has about 500 billion USD in a trust fund from its oil. That's probably more than the entire economic output of the country. I think their government could comfortably be a lender of last resort. btw I'm not all up on the finer details either, but I get the general gist of the pros and cons. |
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I'm pro independence ideologically and will vote accordingly alias but some of the leading lights in the SNP are behaving like spoilt brats. It has been said by several of them that if they can't have the asset ie the currency then they don't take the debt. That seems to me to be a bit of a can of worms. If you load the gun in that way don't be surprised if it blows up in your face with the rest of the UK saying post independence, "okay we will take the assets and take the debt".
Bye bye oil.  |
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Then there is the point previously raised which is that at all times The Bank Of England has remained lender of last report. This will not be so with independence for Scotland. There are several ramifications flowing from that but also a great big elephant in the room which hasn't been touched on. In an article in The New Statesman (I think it was) earlier this year it was asserted that a precondition to entry to the EU was a banking system with a lender of last report. That won't be the case. That may have ramifications for whether Scotland is accepted into the EU as a sovereign nation.
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I seem to remember that the UK Treasury bailed out the Irish economy to a tune of 6 billion because they were one of our main trading partners.
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Bye bye oil
So it IS an asset then? And I reckon that argument would have to be settled by some kind of arbitration, as it's in Scottish waters. Most of it. AND once we get rid of the Nuke trash, the fields in the Clyde basin can be exploited. |
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earlier this year it was asserted that a precondition to entry to the EU was a banking system with a lender of last report.
Shirley Sum mishtake! Do Luxembourg, Belgium, etc have their own? BTW, as for spoilt brats, there are still nearly 6 weeks to go - a week is a long time in politics said H Wilson - there'll be lots of toys bunged from prams yet. |
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Norway has about 500 billion USD in a trust fund from its oil.
EXACTLY erse. That is where we could and should have been, and if the reports of the west Shetland fields and Clyde basin are correct, we still could be. |
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It would have got messy if Ireland could not rely on Europe for its bailout too.
Ireland using the euro was reason why it needed the euro bailout in the first place, if the debt was in punts it would have just devalued like Wilson did to the pound in 1967. Lender of last resort is just access serious cash ie to the printing press so you can print money or raise cheap money via the bond markets. A debt free independent currency for scotland could do both of them imo just the same as the BoE could in a currency union |
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Please ring Alex Salmond and advise, Brendan.
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Alias: re pegging your currency to the pound, you say, "It worked for Ireland though..."
Did it really? As I understood it, economic life in the Republic when using the punt was pretty bleak. Why else did nearly all their good horses have to be sold? |
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So it IS an asset then? And I reckon that argument would have to be settled by some kind of arbitration, as it's in Scottish waters. Most of it. AND once we get rid of the Nuke trash, the fields in the Clyde basin can be exploited.
Did anybody say it wasn't Alias? If the argument is that you keep the assets and the debts it seems hard to validate an argument that you can't have the oil though. Like you say. Likely arbitration. Could take years to sort out. By the way once the can is opened don't be too sure where the contents will end up. Scottish waters? Not if Shetland and Orkney decide that it is actually their oil. Would you support their right to a referendum if that is what they want and their right t claim their oil if that is what they want? Let's be clear. You're selling the dream. Sell the reality or the fact that the reality is very uncertain. That's the only way to secure an honest and meaningful independence. |
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As for the central banking system of those countries I'd say that events have overtaken things somewhat. Nobody is under any doubt that existing countries now are effectively underpinned by the ECB. The question is do they want to take on more potential liabilities? I don't know the answer. I do know it was raised as an issue in respect of Scotland though.
The more information people have to go on the better don't you agree? |
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read somewhere but cand find it now but it was along these lines under international law a country doesn't gain full rights to its mineral wealth from the parent country (ie england) i think i read it was 10 years
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ffs |
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@Alias -- Norway has about 500 billion USD in a trust fund from its oil.
EXACTLY erse. That is where we could and should have been, and if the reports of the west Shetland fields and Clyde basin are correct, we still could be. Not if Scotland spends the oil money. Norway has pretty high taxes paying for government spending, so can invest the oil money. |
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What's the problem exactly? The world is full small countries with their own currencies. You can peg it to another currency if you like. Denmark for example has its own currency, but it's fixed against the euro. That works fine for Denmark. Sweden has its own currency that is freely floating. That also works fine.
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Not if Shetland and Orkney decide that it is actually their oil. Would you support their right to a referendum if that is what they want and their right t claim their oil if that is what they want?
YES I would. Can you now offer me a price against that happening?  |
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Salmond in the Sunday Herald:
http://www.heraldscotland.com/politics/referendum-news/if-the-no-camp-think-telling-ordinary-scots-they-have-zero-entitlement-to-a.25003848?utm_source=headlines&utm_medium=email&utm_campaign=email%2Balert |
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 options were all looked at in 2013, for "the Fiscal Commission Working Group - First Report - Macroeconomic Framework Chapter 7" .http://www.scotland.gov.uk/Resource/0041/00414291.pdf |
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"It concluded that retaining sterling in a formal currency union is the best option for Scotland. It is also the best option economically for the rest of the UK."
I think that's for us to decide Alex. |
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Why would one economy 12 times the size of the other, sign up to an arrangement to play safety net for the smaller economy, when there is no way the smaller country could reciprocate in any way?
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Koz weev goat ILE.
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I think that's for us to decide Alex.
No, it either is or it isn't. Anyway: http://www.businessforscotland.co.uk/of-course-there-will-be-a-currency-union-says-senior-uk-government-minister/ |
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And here's a man who should know.
http://www.newsnetscotland.com/index.php/referendum/7274-financial-giant-very-angry-at-distortion-of-independence-facts |
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You don't think it's for rUK to decide whether a currency union is in its best economic interests? That we should be forced into a currency Union even if we think it's a stupid idea?
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