Scottish Independence

[Rich Goodale]

Mark

If Scotland gets Northumberland, do we get Sunderland too (sorry if I'm ignorant of Sassenach geography)?  If so, they might be able to give ICT a good match.

PS--if you join us, maybe Queen Moira (Alex's wifey) will make The Northumberland "The Royal Northumberland."

Rich

[Craig Van Egmond]

'Scotland, stay with us'   

As said by David Bowie, a Brit living in New York City.     

[Mark Pearce]

Mark

If Scotland gets Northumberland, do we get Sunderland too (sorry if I'm ignorant of Sassenach geography)?  If so, they might be able to give ICT a good match.

PS--if you join us, maybe Queen Moira (Alex's wifey) will make The Northumberland "The Royal Northumberland."

Rich

God no.  The Mackems are in County Durham. 

[Lou_Duran]

Lou,

did Panama, El Salvador, and Ecuador have to get permission from the USA to use the dollar or could they use it even if the USA was not in favour?

Jon

Not to my knowledge, but I am not all that well-informed in this area.  The linked article suggests that it is done unilaterally (I'll make an inquiry to a contact with the FRB of Dallas for verification).

http://rottenindenmark.wordpress.com/2014/01/06/zimbabwe-dollarized-us-perspective/

Mark and Tony,

My family hails from an area (Galicia) not far from the Basque region.  While it makes sense that the federal government would oppose secession in another country in order to remain consistent internally, it doesn't make one iota of difference to the folks in Bilbao or Barcelona.  As to Gibraltar, I was unaware that the UK and Spain had resolved their centuries old argument.  Being that consistency is probably an important factor in Spain's posture vis-à-vis Scottish independence, is democracy as defined by majority rule and self-determination not an overriding issue?  I am hardly the separatist- and have no knowledge of the issues involved in the UK/Scotland argument- but I have a strong suspicion that economics presently more than anything else lie at the root. 

[Adam Lawrence]

Lou - the Spanish government position is that admitting Scotland would set a precedent that would make it more likely either the Basque region or Catalonia might vote for independence. That's the whole story.

[Jim Sherma]

Lou - I believe the peg is essentially unilateral. As long as the FX markets believe that a country has sufficient reserves and the political will to continue setting a price floor/ceiling by guranteeing all purchases or sales of their currency at the fixed price then the peg will hold. Speculators can challenge this however ala George Soros.

More generally, the confidence of the markets is both a function of the reserves necessary to do it as well as the poilitical will to give up sovereignty of your monetary poilicy. As long as your economy is procyclical with the currency your pegging to this is likely to be not too costly with certain reputaional benefits resulting from the peg. If your economy becomes counter-cyclical however then a peg can be very damaging (e.g. the pegging economy is expanding while the US is in recession, the expansionary monetary policy that the US pursues would be very inflationary for the pegging country unless contractionary fiscal policy is useed to offset this impact).

If your source at the Dallas FRB has other info I am interested in it. Many moons ago I used to be at the Philly FRB in the research group and it was a great place to hang out and discuss these types of topics.

Lou,

did Panama, El Salvador, and Ecuador have to get permission from the USA to use the dollar or could they use it even if the USA was not in favour?

Jon

Not to my knowledge, but I am not all that well-informed in this area.  The linked article suggests that it is done unilaterally (I'll make an inquiry to a contact with the FRB of Dallas for verification).

http://rottenindenmark.wordpress.com/2014/01/06/zimbabwe-dollarized-us-perspective/

Mark and Tony,

My family hails from an area (Galicia) not far from the Basque region.  While it makes sense that the federal government would oppose secession in another country in order to remain consistent internally, it doesn't make one iota of difference to the folks in Bilbao or Barcelona.  As to Gibraltar, I was unaware that the UK and Spain had resolved their centuries old argument.  Being that consistency is probably an important factor in Spain's posture vis-à-vis Scottish independence, is democracy as defined by majority rule and self-determination not an overriding issue?  I am hardly the separatist- and have no knowledge of the issues involved in the UK/Scotland argument- but I have a strong suspicion that economics presently more than anything else lie at the root. 

[Lou_Duran]

Thanks Jim.  Yours is my understanding as well.  If I was sitting in Ecuador, it would give me pause that my government is putting all its eggs in the currency of a country which lacks the discipline to live within its means, and rather than allow interest rates to rise as a way to correct its imbalances, it instead creates more money at a pace far exceeding its production of goods and services.

If the rest of the world was not so screwed up that the US dollar remains the reserve currency, we'd be commiserating with our friends in Argentina.  Though the fear of deflation continues to be cited by the Keynesians populating most ruling classes (I include crony capitalists in these), I have to believe is not a question whether inflation will wreak havoc, but when.  Of course, some believe that the laws of supply and demand can be repealed by the passage of a law (say Obamacare) or an executive or agency order (minimum wage, CAFE standards).  Perhaps some day New Man will rise and human nature can be molded by our Betters.

[Jon Wiggett]

Thanks for the answer Lou & Jim.

Jon

[Rich Goodale]

Mark

We'll take Durham too.  Nice cathedral, nice Uni, nice cricket ground to host England-Scotland test matches.

Adam

You are spot on vis a vis Spain's POV regarding Scottish independence.  If Scotland goes Indy, Catalonia will not be far behind, and the Basques will start blowing up the rest of Spain again.

All

This whole Indy thing up here in Scotchland is nothing if not pride and self esteem.  If you think it is about money, the Scots can be bought quite cheaply.  Numerous polls indicate that if each family was handed £500 by either side they would vote that way.  That's oinly ~£1 billion for the bribe.  Peanuts in todays finances.  Does anybody on this board believe that 1776 was all about money?  Moneywise it was a stupid idea for the USA to fight for independence from the UK, but we did so and we survived and then thrived.  If Scotland has the cojones to do so (and I am not at all sure that they do), there is no reason that its future as an independent nation cannot be better than its past.

rfg

[Paul Gray]

Not that the SNP will say it just yet but Scotland could indeed simply use sterling. If the remaining British government wanted to avoid huge deflationary pressures (or even, in certain circumstances, the opposite) they would have no choice but to keep the supply of currency much as it is at present. Ultimately, smaller countries often adopt the currency of larger nations because of its stability and the sovereign nation has to behave accordingly. This situation is no different.

[Rich Goodale]

Well said, Paul.  Few people these days remember that for ~70 years(1928-1998) the Irish Republic used a currency that they called the Punt which tracked the British Pound religiously.  This was allowed by the Bank of England even though the Irish split from the UK was far more bloody and rancorous than any Scottish split would be.  Anyone who thinks that the rUK (aka "Rump United Kingdom") will play economic hardball with the Scots after any positive political Independence vote just does not know how mutually destructive that would be.

[Mark Chaplin]

Rich - why would it be mutually destructive? The remainer of the union will cope fine without Scotland can the Scot's be so sure it works the other way around? How will immigration work, with Scotland not being in the EU will there need to be border controls?

[Sean_A]

I don't think its the actual use of the currency which is the problem for Scotland.  It is the building blocks and decision making behind that currency which is a problem for Scotland.  Still, if Scotland is going indie, I can't help but think its on London's interest to ease the break anyway within reason.

Ciao

[Jon Wiggett]

The independence vote is all about 'wee Eck' being remembered in history as the man who liberated Scotland from evil England. If it were about self determination then the vote would be about devo-max which would have almost certainly got a yes vote but no one will remember the man who got Scotland devo-max.

As for the using the pound, what is the point of being independent but having no control over your finances?

Jon

[Niall C]

All

This whole Indy thing up here in Scotchland is nothing if not pride and self esteem.  If you think it is about money, the Scots can be bought quite cheaply.  Numerous polls indicate that if each family was handed £500 by either side they would vote that way.  That's oinly ~£1 billion for the bribe.  Peanuts in todays finances.  Does anybody on this board believe that 1776 was all about money?  Moneywise it was a stupid idea for the USA to fight for independence from the UK, but we did so and we survived and then thrived.  If Scotland has the cojones to do so (and I am not at all sure that they do), there is no reason that its future as an independent nation cannot be better than its past.

rfg

Really !?! So the Boston Tea Party was just an excuse for a rammy 

Niall

[Niall C]

Well said, Paul.  Few people these days remember that for ~70 years(1928-1998) the Irish Republic used a currency that they called the Punt which tracked the British Pound religiously.  This was allowed by the Bank of England even though the Irish split from the UK was far more bloody and rancorous than any Scottish split would be.  Anyone who thinks that the rUK (aka "Rump United Kingdom") will play economic hardball with the Scots after any positive political Independence vote just does not know how mutually destructive that would be.

Rich

They may well have tracked the pound but in doing so they they were restricted in using monetary policy to their best advantage, and that's the issue with a currency union also. Monetary policy will inevitably be biased towards the larger entity, assuming of course that rUK were daft enough to enter into a currency union in the first place which seems unlikely on the basis that all three main Westminster parties are against it as is the Governor of the Bank of England who let us remember is a Canadian and therefore impartial in the independence debate.

Niall

[Rich Goodale]

Rich - why would it be mutually destructive? The remainer of the union will cope fine without Scotland can the Scot's be so sure it works the other way around? How will immigration work, with Scotland not being in the EU will there need to be border controls?

Mark, I only said that it would be "mutually destructive" IF rUK tried to play hardball.  Even the English are not that stupid and/or stubborn to do so.

And Niall, I'm sure our BofE Governor is delighted that his country (Canada) is fully independent and no longer in thrall to either its former master (the UK) or its noisy southern neighbour (the USA).

Rich

[Sean_A]

The independence vote is all about 'wee Eck' being remembered in history as the man who liberated Scotland from evil England. If it were about self determination then the vote would be about devo-max which would have almost certainly got a yes vote but no one will remember the man who got Scotland devo-max.

As for the using the pound, what is the point of being independent but having no control over your finances?

Jon

Scotland needs to learn to walk again before it can run.  All I am saying is if a break is on the cards, its better for London to facilitate the break than not.  I personally think its loony toons stuff for Scotland to even conetemplate such a move, but you get these folks liquored up and they will fight for any cause  .

Ciao

[Alfonso Erhardt]

I have read through the thread and some comments from Spain

This matter has been going on in Spain for years. A majority of people in Catalonia and the basques don't want independence. Politicians toy with the idea to get more money from the central government and the central government, in fear, always gives out more. Always a question of money and in Spain independence  it is not an issue people on the street are demanding on a day to day basis (unless you are a politician). Both regions have control over everything except foreign relations and the army.
 The last time a basque president requested independence seriously  he was promptly kicked out by his own party members. Catalonia is an economic mess with an extremely corrupt local political system. Catalonia was Spain's richest region when Franco ruled. Since they gained the current semi-federal status in 1976, they have been surpassed by the Balearics, Madrid, Basques and Rioja, which is not a very good sign of how local politicians have managed so far. Why would they do better if completely independent?

About the EU matter, the biggest problem is that when asked, the Catalonian politicans were openly saying that they would remain part of the EU. They even maintained that FC Barcelona would still play in the Spanish football league.  Nobody wants to face the hard facts about the cost of becoming independent. It's very expensive, especially if you are a small economy which sells 50% of what it produces to Spain.

[Jason Hines]

I have read through the thread and some comments from Spain

This matter has been going on in Spain for years. A majority of people in Catalonia and the basques don't want independence. Politicians toy with the idea to get more money from the central government and the central government, in fear, always gives out more. Always a question of money and in Spain independence  it is not an issue people on the street are demanding on a day to day basis (unless you are a politician). Both regions have control over everything except foreign relations and the army.
 The last time a basque president requested independence seriously  he was promptly kicked out by his own party members. Catalonia is an economic mess with an extremely corrupt local political system. Catalonia was Spain's richest region when Franco ruled. Since they gained the current semi-federal status in 1976, they have been surpassed by the Balearics, Madrid, Basques and Rioja, which is not a very good sign of how local politicians have managed so far. Why would they do better if completely independent?


About the EU matter, the biggest problem is that when asked, the Catalonian politicans were openly saying that they would remain part of the EU. They even maintained that FC Barcelona would still play in the Spanish football league.  Nobody wants to face the hard facts about the cost of becoming independent. It's very expensive, especially if you are a small economy which sells 50% of what it produces to Spain.

Thanks for that perspective Alfonso.

[Tony_Muldoon]

Re the Irish  Punt Éireannach shadowing the Pound from 1928 until 1978, when unlike GB it decided to join the EMS and broke the link.

That period was one of total economic stagnation and genral lack of ambition.  I am not an economic historian but which was the cause of the other is unimportant.  If Scotland wants to be a dynamic independent force then 'borrowing' another currency is not the way to do it. Ireland eventually chose to be a full part of the Euro, but the years before that, when it really had its own currency was the good period of the Celtic Tiger.



Assuming independence vote fails. If Salmond is as talented as some people think then it will be interesting to see how he leverages whatever vote he achieves to demand more power later.   Could the SNP hold the balance in what is likely to be a tight UK general election in 2015?

[Jon Wiggett]

The SNP should be arguing the case for an independent Scotland outside of the EU and with its own currency. If EU membership is achieved or monetary union then they can present that as a bonus.

However, at the moment we have John Swinney saying that they will argue for Scotland already being part of the EU for the last 40 years despite being told from several top officials and committees that they would have to apply as a new member.

They also want a monetary union with the rUK despite the fact that all the major politicians from rUK say no. Then they say they can do it anyway so why talk about a union if there is no advantage for it. The supposed disadvantage is that there will be massive charges for financial transactions. The obvious solution for Scottish firms would therefor be to have their finances for rUK/EU based in the rUK but of course the SNP have forgotten to mention this as this would lead to a tax base drain for Scotland.

Jon

[Niall C]

Tony

I think you ask a very good question, what will happen in the event of a no vote. I think a NO vote has got to take at least some of the sheen of the SNP and indeed make a dent in the credibility of Alex Salmond. Will he want to continue thereafter ? Who know's, time will tell.

With regards to the other aspect of your question on whether a NO vote would give the eventual leader of the SNP leverage assuming the vote was very close, welll I think that would depend on the debate going on elsewhere in the country. The Scottish independence vote has given cause for other parts of the UK to consider their position and how the country is run beyond the usual Westminster format. The mood of the nation elsewhere may be the SNP's biggest leverage. Devolution for England, why not ?  

Niall

[Mike Sweeney]

I was with a woman this week who is originally from Afghanistan, but considers herself German now. I am not sure if she has citizenship in Germany, but she has a German/EU passport.

She is working in Scotland temporarily and she said that she is allowed to vote in this Independence vote in Scotland. I know I read this before on this thread, but I did not really understand it till I heard it from her directly. She claimed no real "ownership" or citizenship of/in Scotland, and I personally found it strange that this would be allowed.

I personally like the sound of Scottish independence from afar, but it does seem strange to me that her vote would be allowed.

[Adam Lawrence]

Mike - the issue is that as things stand there is no such legal status as Scottish citizenship, only British. So deciding who was eligible to vote in the referendum was always going to be tricky. Plenty of people feel that those of Scottish origin living elsewhere should be able to vote, but I suspect that would have opened up a huge can of worms - how do you legally define 'Scottish origin'? Wherever they decided to draw the line there would be problems.

So instead they went down another route: the electorate for the referendum is the current population of Scotland. I'm slightly surprised that someone who doesn't have British nationality is qualified, but in all honesty what is the difference between someone of English or Welsh origin living in Scotland and someone with citizenship in another EU nation?