THE plummeting value of the pound is a strong sign the UK is “going downhill” and it’s time “to jump ship” according to Scotonomics co-host Kairin van Sweeden.
Following a warning from powerful Wall Street banks that the pound is risking a crisis only usually seen in emerging markets, she said Scotland had to “get out” of the Union as quickly as possible.
“These are indications of a tinpot dictatorship,” said van Sweeden. “We have a very unstable government in Westminster and the Prime Minister is breaking all kinds of international and domestic rules but political stability is really important for financial stability.”
According to the latest figures, the pound is the third worst performing currency this year and Bank of America strategists have said investors should be prepared for an “existential” crisis in sterling while the pound faces struggles more common in emerging markets.
The hike in interest rates will not rescue it, according to strategist Kamal Sharma, and the deterioration of relations between the EU and the UK over the Northern Ireland protocol, the current account deficit and the questions over the credibility of the Bank of England were combining to form a “perfect storm”.
He added that there was “a failure to discuss and acknowledge that Brexit has been a significant headwind to the supply side”.
“What strikes us, despite GBP being one of the most actively traded currencies in the world, is how it has regularly succumbed to liquidity black holes since 2016,” said Sharma.
Citigroup Inc strategist Vasileios Gkionakis agreed the pound was facing difficulties.
“At a point of increased uncertainty over domestic growth, signs of regional fragmentation and Northern Ireland-related risks, the UK will find it increasingly difficult to attract portfolio flows to finance a widening current-account deficit,” he said.
Van Sweeden said it was now obvious to many people how bad the situation was in the UK.
“It’s another indicator for people unsure about Scottish independence that the UK is a union that is going downhill and it’s time to jump ship and get out of this,” she said.
“In 2014 the opposition said independence was the unstable thing to do and the UK was the stable place to stay whereas now that is not the situation.
“Investors are looking for somewhere stable and on the international markets you have to be seen as someone who is prepared to stand by agreements and rules but we have a Prime Minister who has shown he is someone that does not really care for rules and agreements.
“That just makes the UK look very, very unstable and that is going to affect the currency and that is going to have a negative effect for importers and exporters in Scotland and that obviously comes back to affect us in the shops.”
As a floating currency, the pound is subject to fluctuations but van Sweeden warned that it is not a good sign if the movement is drastic.
“If the currency is going up and down a lot then that is a problem for importers and exporters as well as people travelling abroad,” she said.
Van Sweeden said that although it would not be possible for an independent Scotland to have its own currency right at the start, it would be important to move quickly away from the pound.
“Soon after independence day we need to start having our own currency because the UK Government and the Bank of England are not going to play ball with us on that,” she said. “We are fundamentally colonised by using another country’s currency. We have to become currency issuers but we can’t right away because we need to set up a central bank and get the currency going. Some countries have done that really quickly so it would depend on how much preparatory work has been done before.”
SNP policy is to set up a central bank as quickly as possible.
Green MSP Ross Greer agreed the move from the pound should be made quickly.
“It has been the longstanding position of the Scottish Greens that an independent Scotland should establish an independent currency,” he said. “If we truly wish to build a country that is capable of forging a distinct path, then fiscal independence is key. Keeping the pound in the long term would mean limiting Scotland’s ambitions, when surely independence must be about broadening our horizons.”
Scotonomics can be found at: https://podcasts.apple.com/gb/podcast/scotonomics/id1609044754?i=1000555245480
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