WHILE the latest currency proposal from the SNP leadership is a small improvement, it remains poor.
All we need to adopt as the policy is that “an independent Scotland will adopt its own currency as soon as practicable after independence day”. Short, to the point and easy to understand and explain on the doorstep.
The economically illiterate “six tests” need to be dumped forthwith. I think they are only there for the same reason as Gordon Brown’s tests on the Euro – to provide a reason for not doing it.
There is nothing particularly difficult about setting up a currency and central bank, indeed it is something that even the most backward and impoverished countries on the planet have managed.
I am sure for a country that set up the Bank of England (it was founded by a Scotsman) and the Bank of France (another Scotsman) this will be straightforward. Without our own currency it will be simply impossible to achieve the other objectives of the Growth Commission, as Scotland would remain tied to rUK austerity, monetary and fiscal policy and the whims and demands of the City of London.
On the perennial subject of the “deficit” then I will point out again that Scotland as a country does not have a deficit as our Balance of Payments is in balance at roughly zero, while rUK has a huge deficit (studiously ignored by Westminster) exceeding £120 billion per annum.
What we may have is a Scottish Government deficit, but that is not a problem. Most countries should run a government deficit most of the time. With your own currency this can never be a problem. Government borrowing is only a problem when you borrow in the currency of somebody else. To which end, delaying the Scottish Pound and borrowing in sterling is potentially creating an entirely needless problem.
Almost everyone loses sight of the fact that accounting is a double entry system. A state deficit is a private sector surplus, while a state surplus is a private sector deficit. Running a government surplus sounds nice until you consider that means that we will be paying in more than we get back in services, benefits, etc. The reality of a permanent private deficit would be far from nice!
To the same end the National Debt is also the National Savings. What is a debt of the State is at the same time an asset, i.e. a saving, of the owner of the asset. If you were to succeed in wiping out the National Debt you would at the same time wipe out all the assets, i.e. the savings of us, our pension funds, etc. Whenever you bring a debit and a credit together they cancel out and you are left with a zero, i.e. the money simply ceases to exist. Issuing bonds is essentially a policy choice and they are in demand because they provide a safe, reliable and guaranteed home for our savings that pays a modest return as well.
Austerity has had the effect of reducing state spending (which depresses the economy) and forcing up private debt instead.
That is not sustainable and it is not good for the economy. It generally impoverishes the many and the young while enriching the providers and exploiters of all that new private debt.
The state paying, for example, university education directly, by contrast, is a much more sensible approach that gets rid of private debts, increases human capital and economic potential and promotes social mobility and equal opportunity.
Dr Tim Rideout
Dalkeith
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