(17-09-2014 19:43 )Digital Dave Wrote: One of the key concerns of the 'no' camp is that Scotland wouldn't have control over their own currency if they adopted the pound. Yet no state in the Eurozone has local control over the Euro as the rate is governed by the European Central Bank. That seems to be a perfectly acceptable political model, so why is Scotland adopting the pound different? This is a genuine question.
I agree with the principle of all that Tumble_Drier wrote in response to this question, but I don't believe that it is necessarily that big a deal.
A government has two basic levers to pull when it comes to managing the economy -- fiscal policy and monetary policy. To be truly independent and in control of your own destiny, you need to control both or at least be a partner in determining how they are managed (i.e. the EU).
That said, I think the short term Scottish issue is about stability and a managed exit out of the UK in the (unlikely) event of a "yes" vote. There is absolutely no reason why Scotland can't go on using the pound for a year or two while it goes through the process of setting up the apparatus of a functioning independent state. Then, when the time is right and all of the hysteria has settled, you swap over to a new currency.
This is what many of the old Soviet Republics did after the breakup of the Soviet Union. They carried on using the Rouble while they put their house in order. Then, one by one and in their own time, they switched currencies. (Several have since switched again by joining the Eurozone.) Worth noting as well that it was always Russia that went bananas whenever a country abandoned the Rouble. There is as much upside as downside to a foreign country using your currency as long as you control the money supply. That's why I am always baffled by the argument that the UK wouldn't 'let' Scotland use the pound.
Other than spite or recrimination or a weird affinity for King Edward I, I can't imagine any scenario in which it is in England's best interest to
not help a YES-voting Scotland intent on independence to manage a smooth and staged exit from the pound rather than a fraught and difficult one. Why would we spend billions to bail out Irish property developers and more billions to bail out Greek tax dodgers and then NOT invest a bit of time, money and effort making sure that we DON'T have a basket case on our border?
Bottom line: a 'one way' currency union of the type proposed by Scotland -- where they continue using a currency over which they have no control or influence -- is not an ideal long term solution, but it is plenty effective as a short term solution to prevent any unnecessary financial panic.
[And the queue of people telling me that there
will be a panic because there will be a run on the banks, and Standard Life will leave, and Tescos will shut, and the oil will run out, and the Monster will abandon Loch Ness, and Brigadoon will disappear (again!), and etc etc etc starts ...
here]