Scotland independence and golf

[Bob_Huntley]

This will no doubt say more about me than it will about most of you:

You're treating the 'financial markets' and 'economists' and 'political think tanks' as if (respectively) they abided by fundamental universal laws instead of simply being ever-changing tools for ever-changing clients with ever-changing wants; they were rigorous and dis-interested scientists and mathematicians instead of the doctrine-bound theologians and self-serving magicians that actually are; they stood outside and above the financial markets and economic theories like angelic and omniscient titans, when in fact they are not only influenced by but are often at the service of the very forces they pretend to understand.    

What will happen after a yes vote (or a no vote)? Let me tell you: for the vast majority of folks -- not including of course the economists, journalists, think tankers, and financiers -- life will go on exactly as it always has, with some doing better (financially) than others, with some healthier and/or happier and some much less so, marrying, meeting friends for a pint, retiring, shopping, divorcing, starting a family, gardening, complaining about the euro, making fun of the French, visiting the doctor, trudging off to work, travelling, playing golf (or not), window-shopping, day dreaming, taking their children to school, making dinner, glued to their i-phones, taking weekends in Paris, drinking coffee and visiting the Louvre, donating to charity, getting hammered/plastered/legless, watching the Premier League, praying, buying a house, flirting with a co-worker, moving to the country, watching porn, worrying about death or about life, designing golf courses (or not), renting a flat in London, loving and being loved, crying, laughing, comforting those who mourn, and making ends meet.

Peter

[Bob_Huntley]

This will no doubt say more about me than it will about most of you:

You're treating the 'financial markets' and 'economists' and 'political think tanks' as if (respectively) they abided by fundamental universal laws instead of simply being ever-changing tools for ever-changing clients with ever-changing wants; they were rigorous and dis-interested scientists and mathematicians instead of the doctrine-bound theologians and self-serving magicians that actually are; they stood outside and above the financial markets and economic theories like angelic and omniscient titans, when in fact they are not only influenced by but are often at the service of the very forces they pretend to understand.    

What will happen after a yes vote (or a no vote)? Let me tell you: for the vast majority of folks -- not including of course the economists, journalists, think tankers, and financiers -- life will go on exactly as it always has, with some doing better (financially) than others, with some healthier and/or happier and some much less so, marrying, meeting friends for a pint, retiring, shopping, divorcing, starting a family, gardening, complaining about the euro, making fun of the French, visiting the doctor, trudging off to work, travelling, playing golf (or not), window-shopping, day dreaming, taking their children to school, making dinner, glued to their i-phones, taking weekends in Paris, drinking coffee and visiting the Louvre, donating to charity, getting hammered/plastered/legless, watching the Premier League, praying, buying a house, flirting with a co-worker, moving to the country, watching porn, worrying about death or about life, designing golf courses (or not), renting a flat in London, loving and being loved, crying, laughing, comforting those who mourn, and making ends meet.

Peter

+ A  dozen

My goodness, how right you are

Bob

[Jim Nugent]

Rich I trust "Greece doing quite well" isn't a model for Scottish success?

Greece;

GDP growth -0.3%
Inflation -0.3%
Population below poverty line 36.4%
Unemployment 27%

The UK;

GDP growth 0.8%
Inflation 1.6%
Population below poverty line 5.6%
Unemployment 6.4%

What's the time frame, Mark?  Without context, numbers are irrelevant.

Late 2008/early 2009, Greek GDP was $341 billion.  Now it's around $241 billion.  i.e. in under six years GDP has dropped 29.3%.  That's almost exactly the same amount GDP fell in the U.S. during the Great Depression.  See http://www.tradingeconomics.com/greece/gdp

Also since 2009, the Greek unemployment rate went from around 9% to over 27%.  Youth unemployment, for adults under 25, went from the low 20s to 60%.  It's now hovering in the low to mid 50s.

All these numbers are full-blown disasters, whether viewed over time or as a snapshot.  And Greece is not alone.  Spain faces similar unemployment numbers, as Bob said deflation threatens the entire continent, and even Germany, Europe's economic leader, is pulling back.  

The various bailouts have not succeeded: that's why the ECB was forced to start its own Quantitative Easing program, buying a trillion dollars (or is it euros?) of mostly worthless debt European banks can't afford to show on their books.  

The euro has fallen from over $1.60 to under $1.30.  The ECB recently introduced negative interest rates: you have to pay them to loan your money to them.  Much of the continent depends on Russian gas & oil, which the kind and gentle hands of Vladimir Putin could pull out from under them without a moment's notice.  

IMO the EU as a whole faces the biggest crisis in its young lifetime.  

[David_Tepper]

PPallotta -

Yes, life, for most, does go on. But the choices made by the powerful, based on the advice they receive from their economists and financiers, can profoundly impact how lives are lived and if they get lived at all.

Whether it is the potato famine in Ireland, the Highland Clearances in Scotland, World War 1 or the Great Depression, the decisions of a very few can profoundly effect, for better or worse, the lives of many.

As someone fortunate enough to get to spend almost 2 months a year in Scotland and own a 2nd home here, I wish nothing but the best for the people of Scotland. I hope they make the right choice this week.

DT 

[Duncan Cheslett]

Late 2008/early 2009, Greek GDP was $341 billion.  Now it's around $241 billion.  i.e. in under six years GDP has dropped 29.3%.  That's almost exactly the same amount GDP fell in the U.S. during the Great Depression.  See http://www.tradingeconomics.com/greece/gdp

Also since 2009, the Greek unemployment rate went from around 9% to over 27%.  Youth unemployment, for adults under 25, went from the low 20s to 60%.  It's now hovering in the low to mid 50s.

All these numbers are full-blown disasters, whether viewed over time or as a snapshot.  And Greece is not alone.  Spain faces similar unemployment numbers, as Bob said deflation threatens the entire continent, and even Germany, Europe's economic leader, is pulling back.  

The various bailouts have not succeeded: that's why the ECB was forced to start its own Quantitative Easing program, buying a trillion dollars (or is it euros?) of mostly worthless debt European banks can't afford to show on their books.  

The euro has fallen from over $1.60 to under $1.30.  The ECB recently introduced negative interest rates: you have to pay them to loan your money to them.  Much of the continent depends on Russian gas & oil, which the kind and gentle hands of Vladimir Putin could pull out from under them without a moment's notice.  

IMO the EU as a whole faces the biggest crisis in its young lifetime.  

Which is why I, as a life-long socialist, am having serious thoughts about voting for a right-wing bunch of nutters called UKIP...

[Rich Goodale]

Well, this is entertaining. Okay, Rich, how bout knocking down Martin Wolf and Neil Irwin?

https://finance.yahoo.com/news/scottish-independence-could-mean-the-unraveling-of-spain--martin-wolf-203224982.html

http://www.nytimes.com/2014/09/10/upshot/why-does-scotland-want-independence-its-culture-vs-economics.html?abt=0002&abg=0

(Full disclosure: previously undecided, I am now siding with Krugman, Ferguson, Wolf, and Irwin. Where do I vote?)

As for Southern Europe, here are unemployment rates in July:

Greece 27 percent
Spain 24.47 percent
UK 6.4 percent (June data)

Youth unemployment
Greece 53.1 percent (May data)
Spain 53.5 percent
UK 17.9 percent

Thanks for those references, Mark.  Both focus on the minutiae of possible future uncertainties and both have a concept of "nationhood" which is firmly based on the status quo.  What exactly is wrong about Spain splitting into 2 or maybe more "states" within the larger "state" that is the EIU?  Maine used to be a part of Massachusetts, but broke away and both are doing nicely these days, or so I hear.  To use a more recent example, the Baltic states have moved from one mega-state (the USSR) to another (the EU) over the past 20+ years.  Do you think that they want to move back?  What used to be Czechoslovakia is now the Czech Republic and Slovakia.  That seems to be working out OK, no?  A bit further back, but again in my lifetime, states such as India, Indonesia, Nigeria and Vietnam gained independence from larger states which were controlling them.  Was that a bad thing?

Let's cut to the chase.  The only reason all the pundits and many of us are at all concerned about Scottish Independence is that it yet another nail in the coffin of what used to be the British Empire.  My blood is mostly English and I grew up in a family of unabashed anglophiles, but that was yesterday.  Today, the current "United Kingdom of Britain and Northern Ireland" is a mongrel state, of geometrically decreasing influence in an interdependent, increasingly transparent world, and it doesn't like to admit this fact.  We anglophiles don't like this and so we fulminate.  If it were Catalonia voting on independence next Thursday, nobody on this board would give a hoot, except maybe me....

[Rich Goodale]

With all due respect, but these figures are misleading. You can't compare Greece and the UK, these are totally different countries economically, culturally and in laws and taxation and living circumstances. I don't mean to say that Greece is doing well, they're not. But not at the rate that these figures suggest. And nothing has a bearing on Scotland, independent or not.

How about comparing the UK to Germany? Is that sensible? I think not. Germany has a very strong industrial background, whereas the UK is very strong in the finance sector. You will get different numbers for differently structured economies. You can argue that the UK has outsourced all industrial production to the Far East, putting themselves at their mercy. A financial empire can much more easily crumble than one based on brick and mortar. But you can also argue that Germany has been left behind, they're still basking in yesterday's success. In the age of globalisation you just cannot produce at reasonable cost in a country like Germany anymore, what with its high wages and high standards of social security. Germany should have invested in brains, not machines.

Coming back to what Scotland should do: you need to consider a whole range of issues, not just a few isolated numbers. This task is more complex than the average voter and probably the average politician can handle. People are going to vote with their hearts, because that is all they're qualified to do. No one really knows how Scottish independence will turn out in the long run and better yet: no one will know in hindsight how the downvoted alternative would have worked out.

One thing is for sure: it's a 50% bet, so half the economists are going to be right and boast that they knew it all along. Best to ignore the lot of them, vote to the best of your ability and be open to reverting the result of the vote down the road, if need be.

The worst idea would be to deprive yourself of future options by casting the result of the vote in stone. That would be completely undemocratic. Yes, democracy isn't always very efficient, but it is very good at correcting glaring mistakes.

Ulrich

Extremely well said, Ulrich.  Thanks.

Rich

[Rich Goodale]

This will no doubt say more about me than it will about most of you:

You're treating the 'financial markets' and 'economists' and 'political think tanks' as if (respectively) they abided by fundamental universal laws instead of simply being ever-changing tools for ever-changing clients with ever-changing wants; they were rigorous and dis-interested scientists and mathematicians instead of the doctrine-bound theologians and self-serving magicians that actually are; they stood outside and above the financial markets and economic theories like angelic and omniscient titans, when in fact they are not only influenced by but are often at the service of the very forces they pretend to understand.    

What will happen after a yes vote (or a no vote)? Let me tell you: for the vast majority of folks -- not including of course the economists, journalists, think tankers, and financiers -- life will go on exactly as it always has, with some doing better (financially) than others, with some healthier and/or happier and some much less so, marrying, meeting friends for a pint, retiring, shopping, divorcing, starting a family, gardening, complaining about the euro, making fun of the French, visiting the doctor, trudging off to work, travelling, playing golf (or not), window-shopping, day dreaming, taking their children to school, making dinner, glued to their i-phones, taking weekends in Paris, drinking coffee and visiting the Louvre, donating to charity, getting hammered/plastered/legless, watching the Premier League, praying, buying a house, flirting with a co-worker, moving to the country, watching porn, worrying about death or about life, designing golf courses (or not), renting a flat in London, loving and being loved, crying, laughing, comforting those who mourn, and making ends meet.

Peter

Yet another excellent post.  Thank you, Peter.

Rich

[Jon Wiggett]

Rich,

are you still pushing Eire as an example for Scotland? Just like earlier in the thread when it did what you are claiming is simply not true. Eire had the Punt which it backed with its own lender of last resort. I like Mark am curious as to why yu have not got the vote having lived here so long.

Jon

Jon

Eire was without a lender of last resort (except England) until 20+ years after independence.  Look it up.

Rich

Yes Rich this is true and I do not dispute it is possible to do this but you have pushed it as a good example to follow. If this were so then why did they change?

It is all good and well to produce examples to prove a narrow point and try to sell them as a rounded view point but it also important to be able to show that such examples stand up to examination. Your examples unfortunately do not. Ignore answering questions where you know full well the answer will undermine your claims does not legitimise them but rather shows even you know them to be folly.

As I have said before it is also interesting to note the questions you do not answer and what this says.

Jon

Jon

I am only pointing out that there is a Home Countries example of living within a shared currency.

Please remind me of any questions I have not answered to your satisfaction.

Slainte

Rich

Rich,

Eire's used the 'Punt' which shadowed the Sterling. This is not a shared currency. The continuous dressing up of mutton a lamb only weakens your stance. As to unanswered questions for starters you obviously do not read the posts you answer!

Jon

[Sean Walsh]

If the Scots do vote Yes I expect the economic outcome will depend on the attitude of the two independent governments. To some extent it will be like your average divorce.

If the parties decide on lawyers at 5 paces and are belligerent towards each other it will probably be to the financial detriment of both.  They will each continue to live on past glories and continue the long slide to obsolescence that probably commenced after WW1.

If both parties decide to accept the partition with a positive attitude each will re-assess their strengths and where they are heading as a country with likely improvements to innovation and better use of strategic advantages.  To do this each will have to concede on some points and ask for allowances on others.   

The worst case scenario is a Yes vote followed by the bitter divorce scenario. This last week of scaremongering that seemingly emanates from the proximity of Downing Street probably makes both a Yes vote and a bitter divorce more likely. 

[Rich Goodale]

Rich,

are you still pushing Eire as an example for Scotland? Just like earlier in the thread when it did what you are claiming is simply not true. Eire had the Punt which it backed with its own lender of last resort. I like Mark am curious as to why yu have not got the vote having lived here so long.

Jon

Jon

Eire was without a lender of last resort (except England) until 20+ years after independence.  Look it up.

Rich

Yes Rich this is true and I do not dispute it is possible to do this but you have pushed it as a good example to follow. If this were so then why did they change?

It is all good and well to produce examples to prove a narrow point and try to sell them as a rounded view point but it also important to be able to show that such examples stand up to examination. Your examples unfortunately do not. Ignore answering questions where you know full well the answer will undermine your claims does not legitimise them but rather shows even you know them to be folly.

As I have said before it is also interesting to note the questions you do not answer and what this says.

Jon

Jon

I am only pointing out that there is a Home Countries example of living within a shared currency.

Please remind me of any questions I have not answered to your satisfaction.

Slainte

Rich

Rich,

Eire's used the 'Punt' which shadowed the Sterling. This is not a shared currency. The continuous dressing up of mutton a lamb only weakens your stance. As to unanswered questions for starters you obviously do not read the posts you answer!

Jon

Jon, you are incorrect.  As per Wikipedia:

"From continuing to use sterling after independence (1922), the new Irish Free State brought in its own currency from 1928..."  They also did not have a central bank until 1943, 21 years after Independence.   I suspect that Scotland will settle its currency issues much more quickly than did Eire.

Rich

[Rich Goodale]

If the Scots do vote Yes I expect the economic outcome will depend on the attitude of the two independent governments. To some extent it will be like your average divorce.

If the parties decide on lawyers at 5 paces and are belligerent towards each other it will probably be to the financial detriment of both.  They will each continue to live on past glories and continue the long slide to obsolescence that probably commenced after WW1.

If both parties decide to accept the partition with a positive attitude each will re-assess their strengths and where they are heading as a country with likely improvements to innovation and better use of strategic advantages.  To do this each will have to concede on some points and ask for allowances on others.   

The worst case scenario is a Yes vote followed by the bitter divorce scenario. This last week of scaremongering that seemingly emanates from the proximity of Downing Street probably makes both a Yes vote and a bitter divorce more likely. 

Well said, Sean.  I personally think that rUK (after a few months of serious hissy fits) will enter into amicable negotiations with an independent Scotland.  Both sides will strongly defend their own interests, but I think they will reach a workable consensus sooner rather than later.  Both sides are too intelligent and too small in the global world we live in to act irrationally.  Of course, I could be wrong...

BTW, if the No supporters believe in "better together," why do so many of them support leaving the European Union?

Rich

[Sean_A]

BTW, if the No supporters believe in "better together," why do so many of them support leaving the European Union?

Because they hate the Germans and French  ? 

From my perspective, the EU doesn't allow a sovereign country to protect its borders by controlling immigration nor does it allow financial independence if one goes whole hog into the Union.   Throw in that it is long perceived that Germany and France dominate the EU and that many consider Brussels an expensive bureauratic nightmare (on top of the already existing British bureaucratic nightmare), is it any wonder serious numbers of Brits have their doubts? 

Ciao

[Ed Tilley]

Negotiations could be perfectly amicable. The UK government will have 2, eminently reasonable, lines in the sand:

- no formal currency union with an independent country
- Scotland pays its share of the national debt

After that, everything will fall into place.

Obviously what will likely happen is that Scotland will say this is very unfair and blame the English for everything. The tone of your mail is very much of this ilk - any breakdown in negotiations will be down to a UK hissy fit. The fundamental point is the first one. There is nothing intelligent and workable about monetary union without fiscal union. It simply will not happen, no matter how much Scotland stamp their feet and scream. We didn't go into the Euro for this precise reason (among others) despite.massive pressure. How did that decision turn out?

Whichever way the vote goes, I think the union's days are numbered. There is turmoil ahead. Much as this might annoy our friends north of the border, the default feeling of the English to the Scots is complete indifference. This has changed recently and not for the better. Rightly or wrongly - and there's no point quoting statistics - English people feel they have subsidised the Scots for 300 years and all they get is resentment and Gordon bloody Brown. The current situation where Scottish MPs vote on purely English matters will not be allowed to continue. Once this happens the union is on a very slippy slope. Pandora's box is opened!

[Mark Bourgeois]

 Maine used to be a part of Massachusetts, but broke away and both are doing nicely these days, or so I hear.  

West Virginia used to be part of Virginia and economically is worse off today because of it. As for nostalgia of the British Empire, over here we've just passed the bicentennial of their burning of our Capitol and White House, so...no.

What we are talking about is today's United Kingdom, whose history and economy the Scots built in partnership primarily with the English. The UK is as much the Scots' as the English's. (For that reason it is odd the Scots get to decide its fate but not the English. Ed Tilley has a point about the damage to the relationship already done.) I would like to see the UK in its current form continue.

Peter P, of course life goes on. We are talking about the risk that people will have fewer opportunities to engage in and less money to spend on the activities you list, not on the potential for them to be bombed.

[Craig Sweet]

If you are truly independent you have your own currency....It does not appear that Scotland will do that...they will keep their economy tied to the Pound and whoever controls the Pound will control Scotland's economic future...Not a good idea in my opinion. When the USA won its independence it created its own currency....the benefits are obvious.

[Bill_McBride]

If you are truly independent you have your own currency....It does not appear that Scotland will do that...they will keep their economy tied to the Pound and whoever controls the Pound will control Scotland's economic future...Not a good idea in my opinion. When the USA won its independence it created its own currency....the benefits are obvious.

I agree with this completely.  I'm sure that many of the European nations wish they had their own currencies again after years under Germany's thumb.

[BCrosby]

Adding to the states formed by splitting from other states are Alabama and Mississippi which were once part of Georgia. And they are no worse for the wear for having split off, so what's the problem with Scotland doing the same?

Answer: Asymmetric shocks. When the EU was formed, everyone (except economists) were happy. In 2009 many southern European countries faced debt and balance of trade crises. The normal response is to devalue your currency, juice exports, get the economy going, pay down debts, etc. But Spain, Greece et al.  couldn't do that because they were locked into a common currency.

If the economic futures of Scotland and England fail to track each other (something that is likely), Scotland will be vulnerable to the same consequences of an asymmetric shock. Scotland will be unable to adjust its currency to deal with the problem. Like Greece and Spain they will have voluntarily given up an important economic tool. There is nothing very controversial about any of that. The importance of being able to adjust your currency is received macroeconomics wisdom.

Note that in the US all states use a common currency, but the heavy fiscal lifting is done by a common government - the feds. Thus asymmetric shocks that hit, say, Georgia, but that don't hit other states, are remedied any number of ways by the federal government.

Scotland would not have that escape hatch. It would be the worst of both worlds for Scotland. First, English taxpayers are not going to pay to bail out an independent state and second, Scotland will have given up an effective (arguably the most effective) economic tool to deal with its problems. Note what Germany is saying about Greece these days. It is a dress rehearsal for what England will be saying about Scotland if it ever gets in trouble.

Bob        

[Jim Nugent]

Late 2008/early 2009, Greek GDP was $341 billion.  Now it's around $241 billion.  i.e. in under six years GDP has dropped 29.3%.  That's almost exactly the same amount GDP fell in the U.S. during the Great Depression.  See http://www.tradingeconomics.com/greece/gdp

Also since 2009, the Greek unemployment rate went from around 9% to over 27%.  Youth unemployment, for adults under 25, went from the low 20s to 60%.  It's now hovering in the low to mid 50s.

All these numbers are full-blown disasters, whether viewed over time or as a snapshot.  And Greece is not alone.  Spain faces similar unemployment numbers, as Bob said deflation threatens the entire continent, and even Germany, Europe's economic leader, is pulling back.  

The various bailouts have not succeeded: that's why the ECB was forced to start its own Quantitative Easing program, buying a trillion dollars (or is it euros?) of mostly worthless debt European banks can't afford to show on their books.  

The euro has fallen from over $1.60 to under $1.30.  The ECB recently introduced negative interest rates: you have to pay them to loan your money to them.  Much of the continent depends on Russian gas & oil, which the kind and gentle hands of Vladimir Putin could pull out from under them without a moment's notice.  

IMO the EU as a whole faces the biggest crisis in its young lifetime.  

Which is why I, as a life-long socialist, am having serious thoughts about voting for a right-wing bunch of nutters called UKIP...

Duncan, another question is, how much can we rely on the data government releases?  They have every incentive to cover up bad news: they consider it their duty not to panic the public.  e.g. it's real hard for me to take Spain's GDP figures seriously, given the country's sky-high unemployment. 

[Ulrich Mayring]

I agree with this completely.  I'm sure that many of the European nations wish they had their own currencies again after years under Germany's thumb.

Anyone is free to leave the Euro (as opposed to the EU - you can't just leave that).

Ulrich

[Jon Wiggett]

Rich,

using and sharing are not quite the same, however I will allow you to enjoy your faux correctness. Shame about your refusal to answer those questions that apparently do not suit. Still I guess I did not expect anything else at this point anyway despite you saying you would.

Jon

[BCrosby]

Anyone is free to leave the Euro (as opposed to the EU - you can't just leave that).

Ulrich

In theory, yes. As a practical matter it would be a horrendous mess. It may still happen, nonetheless.

Bob

[Rich Goodale]

Rich,

using and sharing are not quite the same, however I will allow you to enjoy your faux correctness. Shame about your refusal to answer those questions that apparently do not suit. Still I guess I did not expect anything else at this point anyway despite you saying you would.

Jon

I'll try one more time Jon....  Scotland and the rUK currently share a common currency, the Pound Sterling, and use it for all internal transactions.  If there is a Yes vote on Thursday, negotiations will commence as to how to divide up the assets and liabilities relating to the pound once independence is achieved, which will be 18 months from now.  In the interim, Scotland will continue to use the currency and continue to have a shared interest in that currency.  During that 18 month period, Scotland will also continue to be a member of the UK and governed by the Westminster Parliament.  During that 18 month period, Scotland will also enter into negotiations with the EU for its potential entry.  In those negotiations, I would be very surprised if they did not discuss the possibility of using the Euro which, to me, would be the preferred long term option.  Others might disagree.  I did write my Masters thesis on the impacts of a common currency on the peripheral regions of the EU, and my first degree was in English, so I am not completely ignorant of the issues (or the semantics) we are talking about.

Please remind me of any question you have asked that I have not responded to and I will answer them as best I can and as soon as I can.  After that, I'll wait until Friday morning to make any further contributions to this thread.

Slainte

Rich

[Rich Goodale]

I agree with this completely.  I'm sure that many of the European nations wish they had their own currencies again after years under Germany's thumb.

Anyone is free to leave the Euro (as opposed to the EU - you can't just leave that).

Ulrich

You are right, as usual, on this Ulrich.  Many reliable commentators thought that the way for Greece to get out of the hole they got into was to reject the Euro and go back to the Drachma.  This would have almost immediately devalued their debts to external lenders, particularly Germany as it was they who sold the shovels to the Greeks (on credit) to allow them to dig their hole.  My guess is that Germany has been working very intensely over the past few years behind the scenes to assure that this would not happen.  I have heard that the Greek economy has stabilised and is currently improving.  Am I right in these assumptions?

Slainte

Rich

[Duncan Cheslett]

Anyone is free to leave the Euro (as opposed to the EU - you can't just leave that).

Ulrich

I would have thought that it would be easier for a country to leave the EU than leave the Euro.