WHO said this?

“While indeed her contradictions, her antagonisms, the class contradiction and so on, reached an even higher degree than in any other country of the world, all the same Scotland never experienced a real monetary crisis (the fact that a few banks, exceptions, collapsed because they had made careless loans is irrelevant here): no depreciation of notes, no complaints and no inquiries into the sufficiency or insufficiency of the currency in circulation.”

Those are words of Karl Marx, in the Foundations of the Critique of Political Economy (1859). I use them to kick off this week’s column partly as a compliment to my many communist readers, as revealed by the letters to the editor of The National.

But there’s a wider purpose because Marx was describing the old Scottish banking system, which lasted from the Union of 1707 till Westminster forced its subordination to the Bank of England in 1845. Now that, under this modern regime, we have had a “real monetary crisis” with the virtual collapse of the Scots banks in 2007-8, let’s look again at a proven alternative. This, by the way, was also highly praised by the philosopher of Scottish independence, Friedrich von Hayek. Hayek and Marx are usually opposed, but in combination they can’t be less than formidable.

They remain relevant because they help us to decide what currency independent Scotland would be best to use. In fact they support Nicola Sturgeon in her confirmation at the weekend that she would want to keep the pound, regardless of the result of the EU referendum or its further ramifications. Alex Salmond has been promising to “refurbish” the arguments for this policy over the summer, after they had been “gazumped” in the referendum campaign.

Let’s make a start here.

The currency was the weakest point in the Yes side’s case. We basically had no answer after Chancellor George Osborne said he would refuse to enter into a formal currency union with independent Scotland. The hapless Scottish suitor was left emptily mouthing a rejected proposal of marriage: not a good place to be the nearer we got to September 18, 2014.

A better place to look for answers would have been the Wealthy Nation website, which I ran and which is still up for anybody to see. I had recognised early on what big trouble was looming on the currency front, and set out to explore alternative policies. I used to get fuming phone-calls from Yes Scotland telling me to stop and stick to the official line, but I just told them what to do with it.

The answer Wealthy Nation came to was that independent Scotland could continue to use the pound without a formal currency union: this was exactly the system in place before 1845. It could be done whether the government in London liked it or not, so it is hardly a matter, as the First Minister seems to think, of who owns the pound, if that question has any meaning. More important is the fact that sterling has long been an international reserve currency free for any country to use. Many other countries do still use it.

In the period straight after the Second World War, about half the reserves held by sovereign states worldwide were in sterling. Today, following more than half a century of British economic decline, the share has sunk to 10 per cent – but that is still quite a chunk, more than for any other currency except the dollar and the euro and the yen. At the moment the pound’s share happens to be rising.

If the Czechs want to build a dam or the Poles to construct a power station, in particular if the project involves internationally traded goods and services, they are quite likely to borrow the necessary in sterling from the money markets in London. Such completely unrestricted access helps to make the City the profitable motor of the British economy.

Should Osborne or a future chancellor want to stop Scotland using sterling, he would need to put up barriers to this kind of business. He would have to erect exchange controls and restrict the volume of pounds traded or purchased. But the controls would be ineffective against Scotland alone because we could never be stopped from trading or purchasing in Frankfurt or Luxembourg instead – these would have therefore to be general controls, directed against all foreign countries, not just one. So far from ruining Scotland, they would herald the end of the City as an open market place. It could not be done.

I always suspected Osborne was bluffing, and that if we had voted Yes in the referendum he would have been saying something rather different the morning after from what he had said the day before. But even if my judgment was wrong, we still had the word of Sir Mervyn King, for ten years governor of the Bank of England (and a cleverer man than Osborne), when he surveyed this battlefield after the dust had settled.

There was a solution to the currency question, Sir Mervyn mused: “and that is that nothing happens. Scotland just carries on using sterling. I think that would have been totally feasible: there was no need for an independent currency, that wouldn’t have posed any threat or difficulty for an independent Scotland. And I see absolutely no reason why it would have caused a problem for the Bank of England to allow banks to keep on functioning in Scotland.”

With this, Sir Mervyn actually joins Karl Marx and Friedrich von Hayek in calling for the resurrection of the old Scottish banking system. Count me in too: that option would give us stability in continuing with the same currency, yet open up the freedom to rebuild the banks with a greater sense of responsibility to their customers and to the nation than they showed in the hectic years before their downfall. To any venture there is always a downside, and we would still need to deal with the problem of the lender of last resort – but that’s a subject for another column. Meanwhile, if we can’t get married to the pound sterling, let’s propose to be a bidie-in.