Alex Salmond voices support for an independent Scottish currency

In a change from his position during the 2014 referendum, Alex Salmond has backed the idea of an independent Scotland having a new currency

ALEX SALMOND has given his support to an independent Scotland having its own currency.

Speaking at his sold-out Edinburgh Fringe show, ‘Alex Salmond… Unleashed’, the former first minister and SNP leader was joined by acclaimed Scottish chef Andrew Fairlie.

“We live in different times. This is not 2014.” Alex Salmond

During their onstage conversation, Fairlie mentioned his support for an independent currency, a suggestion Salmond gave his backing to, saying: “We live in different times. This is not 2014 … And you have to anticipate two, three, four years’ time.

“You have a different policy for different times.”

Salmond’s backing for an independent currency is a notable shift from his position during the 2014 independence referendum, which was to support a currency union with the remaining UK. This proposal was controversially rejected by the UK Government and particularly by the then-Chancellor of the Exchequer George Osborne.

The decision by the Yes campaign to pursue a currency union was later described by former SNP deputy leader Jim Sillars as “a gift to the No campaign” in his book In Place of Failure: Making It Yes Next Time…

“Only a Scottish currency fully controlled by a Scottish Central Bank could allow an independent Scotland to utilise its currency to maximise its national resources.” Ben Wray, Common Weal Head of Policy

At present, the Growth Commission instituted by Nicola Sturgeon, is considering the viability of a new currency for an independent Scotland, compared to pound sterling or the euro.

Earlier this month, Ben Wray, head of policy at the Common Weal think tank, also gave support to an independent currency, writing: “Only a Scottish currency fully controlled by a Scottish Central Bank could allow an independent Scotland to utilise its currency to maximise its national resources.”

Picture courtesy of michellebflickr

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Comments

MauriceBishop

Mon, 08/28/2017 - 13:11

What would it take to establish an independent Scottish currency? Thankfully, we don't need to speculate, or to rely on spurious "models" developed by people more interested in ideology than economic analysis. We can look at a real world example: Denmark.

Denmark operates its own currency and its own monetary policy. Denmark and Scotland have roughly the same size populations and economies. They are geographically close and have a great deal of overlap in terms of trading partners. (Denmark, top 10 export destinations: Germany, Sweden, UK, Norway, Netherlands, France, Spain, Finland, Belgium, Russia. Scotland, top 10 export destinations: UK, USA, Netherlands, France, Germany, Norway, Denmark, Ireland, Spain, Switzerland.) This means they are sensitive to broadly similar cyclical trends and other macroeconomic stresses - things that economists and analysts in "the market" consider to be important.

And Denmark shares a land border with a currency zone with which it does the preponderance of its trade, just like iScotland would.

And unlike some theoretical "model" developed by someone with dubious credentials, Denmark's politicians have many years of experience and weighty responsibilities shaping their thoughts.

With that in mind: Denmark finds it needs over £50 billion in reserves to back its currency. At most iScotland would leave the rUK with £15 billion in cash, but will be losing Barnett at the same time and also runs a massive budget deficit, which means that there are going to be a lot of immediate claims on that already inadequate sum.

So, how will the iScottish government make-up the shortfall? The only way is years of savage austerity to create primary budget surpluses. This is not the kind of "austerity" that we have now. but the kind of savage austerity that is happening in Greece.

That is why Alex Salmond didn't want to talk about an independent currency in 2014, and that is why Nicola Sturgeon keeps running away from the question by claiming she's outsourced it.

jaydeeess

Mon, 08/28/2017 - 17:15

Economic data about Scotland's current financial position is far from clear. What is true is that the figures are estimates of where we are as a result of being in the UK. An independent Scotland with its own currency, its own National Bank, its share of UK assets to offset its share of liabilities and its own decision making about spending on vanity projects would be in a very different situation, and in a good position to be as successful a nation as Denmark patently is. Comparison with Greece is not valid. The two are very different in terms of resources, economies, politics and infrastructure.

MauriceBishop

Mon, 08/28/2017 - 19:11

I did not make a comparison with Greece. I made a comparison with Denmark. And then said that only way to get to that destination is a prolonged period of agony, not unlike what Greece is going through.

Tony Perridge

Mon, 08/28/2017 - 21:22

In the book, "Moving On", Andy Anderson and Ronnie Morrison have produced a blueprint for the currency for an independent Scotland.It is a readable and erudite treatise, covering the defects in the present fiscal system and the way to establish a secure, full reserve, constitutional currency. We will have only one chance, at the point of independence, to free ourselves from the shackles of the mad banking system that is the cancer of our times. This book should be required reading for all MSPs.

Scott Egner

Mon, 08/28/2017 - 22:19

Usual troll peddling household analogy. Don't feed it.

RogueCoder

Tue, 08/29/2017 - 00:42

Current Bank of England assets total £423bn. See
http://www.bankofengland.co.uk/statistics/Pages/bankstats/default.aspx

A population share (8.3%) of these equates to £35bn in gold, bonds, foreign currency, and sterling assets. (UK gold reserves held by the bank total 310 metric tons [see https://tradingeconomics.com/united-kingdom/gold-reserves] which at today's gold price [$41,553,092] would result in a Scottish population share worth just over $1bn).

In addition, it's highly likely that an independent Scotland would attract considerable inward investment and speculative investment in Scottish Government bonds (fixed or perpetual).

Although much reduced since their heyday, hydrocarbon reserves (estimated at 6.2 billion barrels of oil equivalent [see https://www.ogauthority.co.uk/data-centre/data-downloads-and-publication...) would be more than sufficient to provide 'real' asset backing for a Scottish currency. The current UK tax regime is deficient in that it allows excessive offsetting through the Supplementary Charge and Corporation Tax [decommissioning notwithstanding] and final tax profits filtered through offshore shell companies. This would need to be addressed in designing an independent Scotland's tax code.

jaydeeess

Tue, 08/29/2017 - 10:22

Also worth reading, in my opinion, is Ann Pettifor's "The Production of Money".

jaydeeess

Tue, 08/29/2017 - 10:29

I agree with your comparison to Denmark. I think we could emulate them and add in the prudent management of remaining oil reserves as has been done in Norway. You did end by stating that Scotland would have to enforce austerity as in Greece. With that I disagree. The comparison is invalid for a number of reasons, not least the disparity in natural resources.

MauriceBishop

Tue, 08/29/2017 - 13:13

@RogueCoder: You are looking at the wrong figure. It is, at most, £15 billion - this was discussed at great length during the 2014 campaign, and the head of the BoE explained how the sum would be calculated. Even the "research" department of this site tacitly agrees, although they have curiously decided to inflate Scotland's population share to 10%.

MauriceBishop

Tue, 08/29/2017 - 22:20

@jaydeeess: Of course you disagree - being an independence supporter requires that you avoid acknowledging the costs.

Feel free to use the space below to explain how indy Scotland could build the required central bank reserves without years of severe austerity designed to generate primary budget surpluses.

Or, feel free to use the space below to explain how indy Scotland could design a severe austerity program designed to generate primary budget surpluses without creating the agony that the Greeks are suffering through.

If you can't do that, then it will remain clear that you "disagree" with the mention of Greece because you don't want to face the reality of what you are advocating for.

RogueCoder

Wed, 08/30/2017 - 15:19

This is 2017, not 2014. Please provide a source for your figure of £15bn.

Please also explain how Scotland would be uniquely incapable of setting up a central bank when every other country has had little trouble doing so.

RogueCoder

Wed, 08/30/2017 - 15:23

Even mentioning Greece displays your lack of knowledge. Greece has for generations been afflicted with endemic corruption and industrial scale tax avoidance. Scotland is more than capable of collecting its taxes. We are nothing like Greece.

I suggest that you read some books on this subject. Start with Yanis Varousfakis.

RogueCoder

Wed, 08/30/2017 - 15:44

We do not need a "severe austerity program". You clearly don't understand how modern economies work.

First of all, governments don't actually *have* to levy tax at all. Currency can generated simply by entering numbers into a computer. This is exactly how high street banks do it (see www.positivemoney.org).

The reason for taxation is to responsibly govern an economy, and to encourage positive behaviour rather than negative, speculative behaviour.

How would Scotland generate the £50bn or so required? I've already given you figures from the BoE (which you dispute, but you haven't provided any evidence against), and pointed to gilts as the commonplace route to raising capital. Inaddition, you may want to read Common Weal's latest paper for sensible tax policy and means to raise capital:

http://allofusfirst.org/library/a-scottish-tax-system-imagining-the-futu...

It is not independence supporters avoiding facts. Indeed, we've become rather good at unearthing them. It is supporters of the union - perhaps with a vested interest in maintaining inequaliy - who ignore the facts and instead reach for fear and condescension at every opportunity.

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