Scotland … The real debate

Unfortunately I was unable to watch the Salmond Darling debate.

It seems that the "Better Together" campaign is still hung up on the currency issue, while Salmond seems unwilling to tackle the issue head on.

Obviously refusal by the UK to enter into a monetary union with Scotland post independence, is within the UK's right. The wisdom of this on the part of the UK is worth further debate, as the effect would be to widen the already untenably large trade deficit of the Sterling zone. A conservative estimate of this effect on the UK would be an additional £40/60 billion in annual trade deficit, which it would need to fill by further foreign borrowings.

Just how compliant the foreign markets will be to this situation is a mute point.

In the shorter term this will mean that Scotland would have to accept operating with the British Pound as it's currency without any say over monetary policy. In the medium term say 5 to 10 years, it would need to evolve it's own currency and Central Banking institutions which could be designed to lessen the monetary inter dependence of the two states.

I can see no reason that Salmond should not take this issue on directly.

Monetary Union would be good from both points of view, however, only so long as monetary policy being applied is sensible and sound. Scotland, if forced to create it's own Central Bank, would have an advantage of hindsight, would be able to avoid the traps created by "light touch" regulation, or Chancellors who do away with the legal requirement for banks to hold solid reserves as a form of security for depositors, turning the liabilities of banks into taxpayers responsibility. Using the Pound without any say over Interest rates would leave Scotland no worse off than it is at the moment, where effectively they have no say over monetary policy of the UK.

The development or evolution of these institutions would allow for a uniquely Scottish Financial Sevices sector to develop alongside the existing sector. A sector characterised by Scottish prudence and wisdom, not so much to replace but to run alongside the existing industry, giving people a choice of whether to "invest prudently" or to make use of the "Casino Markets" of the lightly regulated UK Financial Services Industry.

The Financial Services Sector in Scotland would be given the choice of whether they wished to fall under the UK regulatory system or Scotland's system. This would indeed be an opportunity to grow that market inside Scotland with companies that adopt the Scottish regulatory system being exclusively allowed to trade in Scottish Government Financial Instruments. As long as all Financial Services Companies tell their customers which regulatory environments they are operating under, there should be no reputational damage to Scotland as has indeed happened in the recent past when the UK adopted a regulatory system that amounted to non-regulation.

Many of the issues in the debate between the two sides are emotional rather than rational.

Both sides of this issue need to face up to the realities.

The amount of inter dependence between Scotland and the UK will always remain strong. Scotland is not declaring war on the Sassenachs, the debate is not about them and us, it is about how the people within a region of a country can be given the freedom to govern and freedom to express themselves, without resorting to fisticuffs and the "philosophy of might being right".

It is about giving democracy a chance.

Possibly within a framework of a federation or "commonwealth" giving Scotland full fiscal autonomy, with some sort of agreement about contributions to common needs like mutual defence, with obvious rights to resile from foreign military invasions without the concurrence of their people, we could find a solution to both parties.   

 

 

 

 

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