THERE are very many reasons to posit Scottish independence as preferable to Unionism, but the UK Government’s deficit is not one of them. Both government debt and deficits are poorly understood and that is deliberate. Keeping the polity feart of deficits – especially the Scottish polity – is a form of political control.
In 1971, the gold standard ceased. This is also referred to as the Nixon shock. Thereafter, globally, a system of fiat currencies has been used, with variable exchange rates. Fiat money has no inherent commodity value, its value comes from the necessity to pay your taxes in it.
Some countries “peg’” fiat currencies to others, but many countries prefer the freedom of keeping theirs “free-floating”. This is the case in the UK, Sweden, Norway and Japan, among others.
Monetarily sovereign countries can never be “in debt” in their own currency. If you were to try to create your own version of your country’s currency, also known as counterfeiting, you will face a lengthy prison sentence.
READ MORE: Richard Murphy: GERS is a con-trick intended to make Scotland look bad
Understanding that currency no longer has a “commodity” value brings the concept of government deficits and debts into sharp relief.
Can you actually be indebted in something you can create at will? Clearly, the answer is no. So what is meant by government “deficits” and “debt”, and are these the words we should use, when what we are really talking about are private savings (bonds) and government expenditure? In fact, countries with their own free-floating fiat currencies no longer need to create bonds, these are a gold-standard anachronism.
However, they are certainly a more politically popular option for reducing money supply in the economy than taxation. Logically, this leads you to the understanding that tax revenues are not necessary for funding government spending– this has been amply demonstrated during the Covid pandemic.
Moreover, monetarily sovereign governments choose the interest they are willing to pay out on these anachronistic bonds. A political choice, which benefits the better off.
Modern Money Scotland began at the start of the pandemic because of the increasing alarm I felt as the mainstream media seemingly accepted and promote the concept of more austerity, post-pandemic. When you understand how the money system works, it becomes very clear that austerity and involuntary unemployment are both political choices, wrong choices I would assert.
You also gain an understanding of how Scottish independence will be achieved on a mechanical level. Using British currency, whose supply is controlled by Westminster and the Bank of England is the reason we cannot build up the Scotland we all wish to see. Using another country’s currency severely constrains your political choices because currency is the policy tool used to pay people to make policies actually happen in the real world.
It is worth emphasising that it is not the policy of the Scottish National Party to help the UK Government pay down its “debt”. SNP policy is voted for at conference and this was not a policy we voted for.
If you regard an annual solidarity payment as “behaving well” then I say let’s behave badly. Attempting to collect up pounds, the currency that it is the monopoly issuer of, in order to give back to the UK Government is not a moral choice, just a very, very bad one.
It is crystal clear that GERS is a political document which uses the myths around government debt and deficits to make some Scots feart of Scottish independence. But Scots shouldn’t be feart, deficits are the norm, as is being independent country.
Kairin van Sweeden is executive director at Modern Money Scotland and co-host at Scotonomics
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