Letters: How can we be independent without our own currency?

In short, it displays a sad lack of optimism about a Scottish currency, and a great deal of nonsense about government funding and spending. A proper response to the document would be a very long letter indeed, so I will keep to the main points.

Firstly, an independent country can only be independent if it has its own central bank that issues its own currency. The report suggests we have our own central bank, but that we use the pound sterling (£UK) for “an extended period”. So we will have to borrow every single £UK we use in Scotland on the open market or directly from the Bank of England (BOE). Section C1.9 of the report notes that this is very far from “monetary policy autonomy” but claims the “stability” of using sterling “far outweighs the benefits” of using a new currency.

I beg to differ. Surely it would be better to introduce a Scottish currency (£SC) in parallel with using sterling, initially pegged to the £UK, and gradually introduce the £SC?

As for the frequent mentions of government deficits and government debt, I despair of the mainstream economic errors spouted in the document. Let’s compare a country with its own central bank that issues its own currency, like the UK, and an “independent” Scotland that uses a foreign currency like the £UK.

Contrary to what most people (especially politicians) believe, the UK can never run out of money. It creates its currency out of thin air; quantitative easing showed that. Taxes don’t pay for government spending. Bond sales don’t pay for government spending. The government spends first, then taxes. All government spending is either taxed back over time or saved by the private sector. Government deficits are completely normal and usually required in an economy where imports are greater then exports and the private sector wants to save instead of get into greater debt. Most importantly, they can’t be controlled by governments. Ask any Chancellor of the Exchequer. As for “government debt” needing to be less than 50% of GDP – don’t the authors understand that UK “government debt” is simply all the money spent by the BOE into the economy that wasn’t taxed back? It’s private-sector savings. The institutions that own government bonds want to keep the bonds, they don’t want cash that provides no financial return.

Now let’s look at our “independent” Scotland using the pound sterling. All government money will have to be borrowed, paid for by taxes or obtained when exports are greater then imports. Government will have the same financial constraints as a household, or for example, Greece. Borrowing will be at interest rates determined by the international money markets. We will always be at the mercy of the “bond vigilantes” if we have to actually borrow our currency, like members of the Eurozone do. Will we be hammered like Greece at the whim of the BOE? In this case government deficits and debt will be what the words actually mean. Then we may have to meet the targets described in the report, which unfortunately are also impossible to meet.

The document is a complete and total macro-economic failure. Didn’t they listen to people like Richard Murphy and other non-neoliberal economists?

Brian Stobie
Penicuik

MY worst fears were confirmed when I read the Growth Commission’s section on currency. What a shower of feartie-shirts!

Don’t they think the Scots are intelligent enough to embrace the fact that by not having its own currency, an independent Scotland would be unable to shake off the shackles of the neoliberal macroeconomic crap that is crippling us and the rest of the UK?

Even the Unionists expected the recommendation to be in favour of an independent Scottish currency, and had prepared a ludicrous £300bn cost scare story to counter it.

Luckily, there is still time for the SNP to correct the tired old failed economic thinking of the commission, and for further information I recommend reading Richard Murphy at www.taxresearch.org.uk/blog.

Jack Foley
Hamilton

IT was with sadness that I listened on the BBC to the advice that we should, after a successful independence vote, continue to use the pound sterling for at least ten years in the future. This I had just read about in your preview of the document in yesterday’s issue (‘Scotland is without doubt a rich and successful nation’, May 25). Now I am no whiz kid financial wizard, but it seems to me that there is more to this than just following what may be one person’s genuine thoughts on a satisfactory way forward with an independent country’s finances.

You mention the case of Ireland continuing to use the pound after it became independent, but the circumstances were quite different from those which would pertain after a Yes vote in Scotland. Ireland became the Irish Free State in 1922 and for many years was in a quite different type of arrangement with the UK as regards its status in the world. At a later date it set up its own currency.

There was one quite big difference in the circumstances then prevailing. Politicians were, by and large, more trustworthy and honourable than is the case in present times. Having watched the honesty and morality of the Westminster political scene descend right down to gutter level – what price a good working relationship for a currency arrangement? We have had, and continue to have, an ongoing situation of evasion, half-truths and downright dishonesty from them on all sorts of headings.

I would put it to you that we could not trust the Westminster scene to deal with a situation such as suggested between an independent Scotland and rUK.

I fear that the proposed route as regards post independent currency, as it appears to have been proposed yesterday, will not sit well with a large number of would-be independence supporters. The proposed continued linking up with the Sterling currency was certainly a vote loser last time around, and I feel that today has changed from a day of hope for the future to something much less hopeful. Sorry Nicola, this has to be looked at again, soon.

George M Mitchell
Dunblane