You see it all the time on Twitter, a myth perpetuated by the union supporters that there is no answer to what currency an independent Scotland would use. The truth is that the currency question is pretty much now a certainty.
What will the currency of an independent Scotland be?
An independent currency! Eventually!
The one thing you all need to know about having your own national currency is that you need several major things. Firstly you need a national bank, a lender of last resort. In the UK, we call that the Bank of England. You also need to have currency reserves to underpin that currency. The unionists will point to a report made last year which says we will need hundreds of billions of a reserve, which was quickly disproven because the figures used in that report were from Norway and included their sovereign wealth fund (you know the oil money they have that they didn’t squander like Westminster). A better comparison would be Denmark at approximately £25 – 50-billion pounds, which is pretty easily achieved over a period of 8 years.
Both the national bank and the currency reserves need to be built which will take time so it won’t be instantaneous. That’s why between the point of voting for independence and establishing a currency of our own, we will need a stopgap measure.
Now! The day after we vote for independence we will continue to use the currency we use now, the UK Pound until the negotiations are all complete and Scotland formally withdraws from the UK.
Then we will need a stop-gap between the formal withdrawal from the UK and establishing our own currency and there are two ways we can do that. The first is an informal arrangement with Sterling (the UK Pound). For those who say that Westminster won’t allow that, well, in a nutshell, it isn’t really up to them. You see, any currency can be used by any country in an informal way without permission. All that country has to do is buy that currency on the international market. For Westminster, this would also be the preferred option because in the days after we vote for independence, Scotland will be seeking to assume a per capita (population percentage) share of the UK national debt in return for an equal share of UK assets. If the UK refuses the assets, we refuse to assume the share of the debt.
But it is reasonable in all cases to assume that Westminster will agree with that because it is just a fair arrangement. In any case, transactions between an independent Scotland and the rest of the UK will be going back and forth during the negotiation and transition period, so it makes complete sense that both countries be using the same currency for purely logistical reasons. Its faster, cheaper and less hassle for both sides so it would be the preferred option for both parties.
The other, less attractive option is pegging to another currency, so we basically go out and buy in any currency from around the world we want and use that instead. For Westminster that would cause a bit of a headache, for a large number of reasons, not just the fact that it would cause their currency to probably slide in the interim like a lemming off the Dover cliffs.
But in any case, just because we use sterling or any other currency does not mean that’s the note that will be in your hand. We could print any note design we wanted and call it whatever we wanted. It would just be backed by a currency of our choosing. Sterling being behind it means a 1 to 1 exchange rate with the rest of the UK. So we could call it the smackeroonie if we wanted, it would just be backed by the currency we chose.
Ahhhhhh! Exchanging currency to cross the border? What a headache! That’ll be terrible! We’re all doomed! – Newsflash! In the past 15 years, I have been to 12 different countries and have NEVER been to an exchange office or bought foreign notes. Why? Because I have this thing called a Visa Debit card which works in almost every single country in the world. I especially use it when I am in England because there is always some twit at Heathrow airport who takes my Scottish Note and holds it up to the light and hums and haws. So having a different currency from the rUK is not a big deal because as a society we probably won’t have physical notes in 20 years anyway! So my answer to that is: How would it be any different to what we have now?
But what about charges on the card? Well! That’s not really going to be an issue if the rUK wishes to continue functioning as a country. The rUK, particularly the City of London are a service based economy, the brainchild of Margaret Thatcher. Namely, destroy heavy industry and turn the country over to the banking industry. That entire industry is completely dependant on a system called financial passporting, the ability to trade and to transact across many countries. Passporting requires following a set of rules, particularly when trading with EU countries. If Scotland is an EU member and the UK is not, if the UK were to put charges on a card and other transactions, then they would face the wrath of the EU with fines and levies against the City of London, something which would not be conducive to either the rUK financial sector or the UK Government.
The next stage is establishing a national bank and a national reserve. This will take up to 8 years and once in place we simply sell our sterling and hey presto! Independent Currency! If we can do this quicker (which is dependent on how fast we build our national bank and reserves) then we will, because pegging to another currency means while we have our own fiscal levers, exchange rates are ultimately set by the owner of the currency.
The thing about this is that the notes themselves never need to change because as I said before, in both informal arrangement and independent currency we can call the notes in our hands whatever we like. Its the workings behind those notes that change which to the normal consumer is basically invisible.
But if we are staying in the EU we will need to adopt the Euro!
No we wont and anyone who peddles this IS LYING TO YOU!
This is another unionist myth and is based on what is called the European Union “Acquis” or what is basically the rules for joining the European Union. But those rules can be derogated from, particularly with regards to the issue of the Euro, that is to say, the European Union can choose not to enforce certain rules just by voting on what is called a “derogation”. How can I make that assumption? Well! There are members who have joined the EU since the acquis was established who are not in the Euro because they have permission to derogate from that rule!
Another thing about the Euro is that in order to join it, you need to have your own independent currency and you need to enter that currency into what is called the ERMII (Exchange Rate Mechanism II) which is basically a club of currencies and a way to measure your economy and currency for volatility. It is not an optional step in joining the Euro, it is a regulatory requirement to measure your currency and economy, stabilise it in-line with the Euro’s standard margins and ensure that your country is stable enough to enter the Eurozone. This is to stop a country joining the Euro and causing it to collapse.
It does this by setting rules that you must be within certain margins of the Euro in terms of interest rates and policies. Indeed, the predecessor to the ERM II was what was called the ERM which was operated by the Germans at the time. This was many moons before the Euro existed and the Tories under Thatcher joined the ERM for political reasons, She was subsequently eaten by her own party and John Major took over, tried to play silly sods with the Germans and market speculators, who subsequently retaliated and the pound nearly collapsed. ERM II is obviously a heck of a lot better than its predecessor but the important part in all of this is that IT REQUIRES YOU TO HAVE YOUR OWN INDEPENDENT CURRENCY and you must put that currency INTO THE ERM II FOR A MINIMUM OF 2 YEARS BEFORE JOINING THE EURO.
Scotland is not going to create a currency to enter it into the ERMII just to change to the Euro 2 years later and the EU know that. Considering the Euro has always been a flexible condition which has been derogated multiple times over the years, this is not going to be an issue.
What about the pound in a currency union with the rUK?
Well, that one is most certainly out the window now! Why would we leave the UK (especially one whose currency will slide after Brexit) and then hand back our fiscal future to the Bank of England? We won’t! So it is out of the question.
So! To recap. The Euro is out. The Pound Sterling (UK) in a currency union is out. That leaves only pegging a currency and independent currency. The first we will do in the interim until our national bank is ready and the second will replace it!