Free at Last…?!

If the  Tim Reid’s  (BBC) briefing by the Treasury is correct and the British Chancellor officially rules out a currency union this week, we move into a different phase of the debate. It would be confirmation that they recognise that the current position is unsustainable and it isn’t convincing the Scots or the rest of the country who are making it clear they believe it will and should happen.

So in one way, that is good news. It is forcing them to go further than they wish and puts them in a dangerous position. First because it means the markets have to work out a position and decide if this makes the pound more or less attractive. If they think independence is possible and if they buy Osborne’s line, they may decide to bet against the value of sterling. In fact, if that gained traction he might be forced to reverse his statement in order to save the currency. The other danger is that big business gets alarmed and someone steps out of line and challenges his claim to refuse a union. Also, if there is a Yes and he eventually concedes a union he looks like a liar and a conman. The British state at work.

This is a dangerous game for the British state in which they cannot be certain of winning so we can deduce from that there are, as Allan Little said the other night, panicky people in Whitehall. After all, if the strategy is working why risk anything by going to the point of denial of a union? In that sense, we can assume things are looking up for a Yes.

It also means that the game changes for the Yes side. We DO have to think of an alternative but we will do so in the knowledge that we will begin independence with no sovereign debt. The implicit linking of national debt with the currency is exactly right by Salmond who has made a reasonable offer of taking some debt as a quid pro quo. Just as they turned down a second question it looks like the Neanderthals are blundering again.

I know it makes the cross-border issue potentially trickier but what a bonus to say No Thanks to £150b of British debt….I hear voices saying it would morally wrong to refuse but isn’t it morally wrong to deny us access to our own currency? And when they say no one will respect us, what drivel. There will be many neighbours cheering our ability to get out debt-free from burdens we didn’t run up and don’t tell me international lenders will refuse us credit. They won’t look at the morality if that’s what is it…they are profiteers and only  will look at our credit worthiness….£1.5 trillion in oil assets, a highly developed successful economy, a highly educated workforce, renewables, exports including whisky and food and to cap it all – NO SOVEREIGN DEBT.

No debt hanging over us and constraining what we can do and how much we borrow and at what rate of interest. In today’s market they will love us. And Britain will be stuck with ALL of the debt and 10 per cent less of its economy to help pay it back, a crippling overload which rises by the second and which will threaten further their credit rating.

This isn’t the perfect solution because it severs a link many wanted to keep with Britain and in the short term with conversion charges it is bad for cross-border trade but it means we have our own currency with no British Treasury interference and constraint and we start out with no debt. We have a Scottish pound and, I think, begin long-term moves to converge with the Euro so in time we join the Euro currency just as it comes out of its crisis, this time stronger,  and takes over from the dollar as the world’s strongest tradable currency – it’s already overtaking the dollar in oil transactions.

If this story is true, it is not a reason to be despondent…just think – no more Osborne, no more arrogant lectures from the London supremacists, real economic flexibility and real independence.

It is a reason to climb your nearest Munro and shout…Freedom…! 

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46 thoughts on “Free at Last…?!

  1. I think that many would see it as a relief from all of that cruel tantalising and that as you said, we will be free from ties with them.

  2. I agree Derek we are dealing with a special breed of idiots here

    But do we want our major trading partner to be hobbled potentially to the point of default ?

  3. They would be giving the Scots possible a real, in your hand Independence bonus, How bright are they!
    Well doing this WOULD be the most stupid panic measure yet!

  4. Wonder how people in England , Wales and N Ireland will view George Osbourne if they think Scotland will not have any debt, then add in the effect on the markets? It’s a bit scorched earthy is it not , pity Newsnicht before going on air didn’t think to contact George to ask for clarification.

  5. Plan London must be to say pay shared debt but we do not give you shared assets. Yes, they are that stupid.

  6. I’m not so sure about this. The SG have said it is the sensible solution and given the nation of Fearties we occupy it is not what Yes voters like us think – it’s the ‘don’t knows’? If Osborne is going to block it he must believe the markets won’t respond- at least not in the short term and if it does affect the polls ie towards No the markets might comfortable. If the opposite happens game on. But most likely immediate reaction is business coming out with ‘uncertainty’ line surely. His ploy will be to get businesses who have sat on the fence to ‘jump’!

  7. The Bank of England said they would work with the SG provided the London Gov agreed,A gun is now pointed at our head

  8. May we be cursed to live in interesting times. It is the best of times and the worst. Who couldn’t love it!

  9. Best news I’ve heard in a while.

  10. This can’t be wholly political. Osborne must have sounded out all the major city players and be confident of the market reaction to such an announcement. This could be a decisive moment and will define the credibility of the whole campaign for NO. He must have had nods from the city, but politically this is tantamount to playing russian roulette.

  11. Derek; stuck for words to try explain the reasoning behind the BBC’s program and conflict with its own chartered responsibilities, it leads one to wonder who else is involved. The whole strategy seems an
    orchestrated do by ‘hired-in’ political hoodlums. The aforementioned BBC2 propaganda show followed by this currency refusenik is quite Monty-Python-esque – market feedback will be just about boiling point..

  12. “if there is a Yes and [Osbourne] eventually concedes a union he looks like a liar and a conman”
    Yes, imagine that :^/

  13. What the announcement will do, if it rules out currency union, it will enable the NO campaign to sow fear in the minds of the older generation, those most likely to vote, over their pensions, mortgages, savings and life insurance, all the personal financial stuff really. We all know that the pro Union media will take the line that an indy Scotland cant use sterling and the potential to reverse the gains in the polls is there.
    Any thoughts on the BBC hour long documentary last night. Seems that any pretence at impartiality is now gone and looks likely that BBC Scotland is to be sacrificed to protect this great Union. It also seems that a large number of high profile BBC journalists are out to save their jobs at all costs. Im sure that if there is a NO, there will be quite a few folk that will have something to say to this failing institution.

  14. I don’t disagree with the sentiment of this piece but I worry that the there are a lot of Scots out there who fear the Euro and cannot see positively into the longer term. I’m with you Derek but are we able in the time left to get enough people on side. I hope so!

  15. George and Dave must be banking on Scots “bottling it ” if they announce they won’t agree on a currency deal. I don’t doubt there has been a lot of serious thought and discussion with the City And Treasury Mandarins but they’re assuming the Scots have no stomach for a fight. Maybe they’ve got it right, but this is a tough land to grow up in and live in and it makes tough people who are known for their fighting spirit never more so than when their backs are to the wall and the odds against them high, so this is a huge gamble by these two and if I know my ain folk it will prove to be a major error of judgement if that’s their announcement.

  16. And al the while I can think only on this: Sovereign Fund,infrastructure redevelopments,eduducation,health, pensions,highlands & Islands development and this list is near endless without the constraints of an imploding short sighted Westminster. Oh I truly hope this is true!

  17. Looks like Nordic Council here we come!

  18. Scotland will be stronger. It doesn’t matter what currency you use. What matters are whether the books are balanced. Scotland balances the Books. To cut red tape and costs for business, join the Euro. The BoE is not the lender of last resort. It’s the Arabs and Chinese. They are now buying Gold for reserves. The £/$ devaluing (govs printing money) means they are not repaying their debts. The UK Treasury is borrowing money (selling Bonds) at 2.5% and lending it at 1%. How long can that go on?

  19. (UK) gov Pensions are paid by Scottish tax payers. There is no Pension Fund. It comes out of general taxation. £17Billion (pensions/benefits). 25% of tax revenues raised in Scotland. Could be lower with less unemployment. £8Billion goes south. More of it would stay in Scotland maintaining jobs here. Mortgage rates are more likely to be lower in Scotland than the rest of the UK. (The books are balanced, no Southern inflation) People get mortgages whether they can repay. Insurance etc is likely to be cheaper. Less crime/flood etc. Insurance is calculated on risk.

  20. innerbearsdenurchin

    I stuck this up on WoS and guess what, the site is down again.
    I wonder why?

    Ireland used the £ for bloody years as did Australia and New Zealand.

    Osborne has taken out his Grandad’s revolver which he used in Ireland at the turn of the 2oth Century, loaded the chamber with six bullets, pressed it to his temple and threatened to pull the trigger.

    Right after him, Clegg will pick it up and do the same immediately followed by Miliband or so they say.

    We could be doing the English, Welsh and N Irish a great big favour by calling Osborne’s bluff and clearing the Augean Stables of Westminster.

    What is not to like.

  21. We’re being very naive if we think that rUK will be saddled with £150bn of “Scotland’s” debt.

    Between 2009 and 2013 the Bank of England created £375bn of new money which it used to buy £375bn of government bonds (i.e. government debt) from the market.

    This means the Treasury is paying interest on these bonds to the BoE.
    But the BoE is a nationalised bank that’s owned by the Treasury, so the BoE returns the interest payments to the Treasury in the form of dividends.

    When the bonds mature the Treasury buys them off the BoE, which returns the money to the Treasury as dividend payments.

    QE has already solved the “problem” of rUK being saddled with Scotland’s share of UK debt liabilities, financially. The markets know this and sterling will not suffer as a result.

    Refusing a currency union will not cost the rUK taxpayer a penny more but throws a bomb into the middle of the Yes camp.

  22. Alex Salmond should seize this chance, Ok Mr Osborne, I’m taking currency union off the table, we want our deposit back from the BOE and we WILL NOT be paying any share of the debt run up by the UK government..Watch the smile disappear from their faces..

  23. The chancellor can’t refuse us the right to use a freely tradable currency, only a say in the control, but as the BoE is independent then he has no guaranteed say or control. For those who think QE is the solution try paying those debts and buying bonds with a reduced income!!!

  24. Getting more an more desperate. At least Dick wore a mask. No interference in the Referendum?

    QE has not reduced £1.2Trn debt. Nothing has been paid off. US debt is increasing from €16trn to €18trn. The world economy will collapse. £80Billion in Bankers bonuses, since 2008. That is what interest rates are supporting. The decline in living standards, NHS/Education. The rich getting richer, the poor getting poorer.

    The UK taxpayers are paying for that. Scottish taxpayers subsidises the UK Treasury £7Billion Even more paying for Trident £1.Billion. A tax on ‘loss leading’ alcohol would save £1.5Billion. Osbourne is worried about loosing £10Billion from Scotland.

  25. If the case, then isn’t good news (and I suspect has been kept in the No locker until polls started to threaten). Like most of international law, there is more horse-trading than hard and fast rules, but there is an expectation that there will be a division of assets between separating states, and that includes debt. I don’t know what Alec Salmond is basing his claim on, I’ve not seen any precedent for separating states abandoning debt (and like credit cards, a good repayment record helps the ability to borrow) except the Soviet Union – who got to keep all foreign assets and memberships as recompense.

    The Czechoslovakia breakup is probably the most useful recent guide in terms of context (mutual agreement, rather than Yugo fractious breakup) if not scale, under the Vienna Convention:

    “The successor States to the former Czechoslovakia favoured a settlement in rough proportion (2:1) to the size of their respective populations, a solution inspired by the equitable principles contained in the 1983 Convention.”

    http://legal.un.org/avl/ha/vcssrspad/vcssrspad.html

    Depending on where the oil is allocated, that is probably a better settlement than GDP as the basis for allocation.

    However, a Scottish currency at this stage does flag up some issues, the need for a central bank (which we need anyway for EU membership, should have been in the White Paper), a Scottish financial services regulator, and the fate of contracts denominated in sterling – which for most voters will be their mortgages. This is an extra level of risk, and people as a generality are probably more risk averse than risk tolerant, I would say.

  26. The UK is paying £40Billion a year in interest paying of money borrowed and spent in the rest of the UK. Scotland raises and spends £60Billion as part of the UK. Could spend less Independent. (Defence etc Trident/illegal wars, tax evasion). Get’s saddled with £4Billion % of the rest of the UK debt. Total taxes raise in the UK £600 Billion. Total Gov spending in the UK £700Billion. The rest of the UK raises £540Billion but spends £640Billion. Rest of the UK spends £100Billion (£10Billion pro rata) more than Scotland. Scotland balances it’s book (and should be in surplus). The rest of the UK raises less in taxes and borrows and spends more.

  27. The Housing/Commercial bubble which created much of the unregulated Banking debt was in London S/E and the Midlands. Scotland borrowed half the debt (pro rata). Mathewson RBS, ‘Scotland borrowed £1Billion, the rest of the UK borrowed £19Billion’. Nearly twice as much pro rata.

  28. I can see it being unsettling to many people who haven’t made their mind up yet. Pensions, mortgages, savings do matter. In that respect it’s likely to influence the polls. At least, if it happens today, there’s time for the Yes campaign to come out with a solid alternative.

    • Why did the SNP put this forward as a solution in the first place,a self inflicted Achilles heel that was just waiting to be stabbed and we are deluding ourselves in the YES camp if we think this is not a massive blow.Andrew describeds it as unsettling and quotes the reasons I have just heard from NO and Undecideds in my village.If their opinion matters then a YES vote is as far away as ever it was.We are mainly dedicated followers of a YES vote,we cant hope to secure victory if we don’t convince at least the undecided who don’t share a Nationalist patriotic verve like we do,its their cash in their purse,cash in the bank,pensions and mortgages that they want security of mind with regard to the referendum.Here in the West I live in a Labour heartland,generations tied to that party.They condemn Lamont ,Milliband and Labour policy as vociferously as I do,they despise the Tories as I do,yet they are all voting NO.Wee Eck better have a plan B and there has to be someone in their ranks responsible for strategy who needs to realise that Labour dissatisfaction with their leadership and party direction is not being addressed and cashed in on to make them change their voting intentions come September.There are missed opportunities here due to a lack of strategy and this currency Union debacle wont help convince them to vote YES.We may have a knowledge and insight into the wider Independence issues and debates and may view Osbornes speech today as largely irrelevant, onwards and upwards to victory,but we are preaching to the already converted and convinced.,We cant secure a YES vote on those terms.I hope Alex has not led us up the hill and is now bereft of ideas and initiatives to lead us back down.My fear is that the damage done by this will stagnate and diminish the progress made in recent polls in favour of YES and to call the coalition ,which now includes Labour UK,foolls and cretins for denying a Union wont help our cause one bit,they have gone straight for the vulnerable spot here ,why did the SNP expose us all like this.I despair.

      • I suspect the SNP had the strategy for this mapped out a long time ago and that it is all going to plan. Salmond always plays a long game. This is just bringing home to people who thought we had a cuddly democracy just how vicious it actually is. If a week is a long time in politics we still have several lifetimes before the referendum.

  29. Pensions have devalued, mortgages/insurance depend on risks. Savings (no more) interest none.

  30. Last week I added a comment to one of Derek’s pieces, mentioning Galloway as Bruce’s Cradle of Independence and drawing parallels with the present drive for independence. I didn’t mention the legendary spider in the Bruce story but I think that would be apt today. The spider this time is Alex Salmond who has very neatly drawn the “no” brainers of the Westminster establishment into his web (sorry Derek I thought you were being a wee bit unfair to Neanderthals in your description above of these clowns).

    They are declaring war on us and are ready to use the old “Hammer of the Scots” routine to bludgeon us into submission. The strong arm stuff didn’t work then and it won’t work now. Nothing the third estate in Scotland likes better than taking on bullies when their collective back is up. Cameron failed miserably with his Olympian love bomb routine last week so this week they want to stick the heid on us. “Ferr enough pal if ye think yer big enough” will be the message aroon the pubs.

    Of course the Scottish Government will have the plan “B” that is continually being asked for in the media. But if Cameron won’t pre-negotiate at all, won’t sort out the EU issue and won’t debate, why should the Scottish Government show anything of its negotiating position on some daft radio or TV programme. It is insulting Scotland to ask for that – to respond to such media demands would make it a “wee thing” as last night’s programme on BBC 2 Scotland attempted to do with the whole referendum debate. That was like a presentation for primary schools – insulting or what?

    The old cliché of “one law for the rich (and powerful) and another for the poor (or powerless)” comes to mind today. We are to be bullied into showing our negotiating position. They really do believe they are powerful and we are fools. The imperial mind is alive and well in their approach. What kind of Scot would want to be treated as “one of those ridiculous aboriginal people who run about in kilts, play bagpipes and who are always out of their tiny minds with drink, old boy”? Say that last quotation over to yourself with a posh voice please.

    I think Alex Salmond is leading them beautifully into his web.

  31. A good discussion ny Robin McAlpine on the various currency options available to Scotland and how this has strengthened our negotiating position.

    http://www.cmonscotland.org/#!Currency/c112t/C1626DDC-F8BF-40C4-98AE-26D348F165F3

    ‘This blog is about bluffing. In negotiating Scotland’s terms of separation some people may have thought that my argument that we could walk away from Sterling as a baseline negotiating position is a bluff. It most certainly isn’t. It is a very real proposition indeed. What I’m trying to show is that if we can make the option real, it puts Scotland into the prime negotiating position.’

  32. If Gideon totally locks and bolts the door to a currency union then surely this is an immediate issue for the international credit rating agencies.

    As Derek’s article has pointed out, the total debt of rUK has just gone up and their ability to repay it (through trade) has just gone down. That must affect their rating and thereby the rate at which they can borrow money on international exchanges.

    I cannot understand the financial logic of the Westminster government though I am not surprised. They have a history of politics running roughshod over reasonable economic sense. Boom and bust.

    We need to get out of this.

  33. Dunkie, I thought “trap” but “web” suits me fine. Alex Salmond and friends had the programme worked out long ago. Poor GO has discarded his Hobbs footwear to don a pair of hob-nailed boots. Problem – too big and no laces.

  34. But of course Scotland can continue to use the pound, with no debt and there is nothing, I repeat, nothing, that Westminster or the rUK can do about it.

    http://www.itv.com/news/update/2014-02-12/scotland-would-not-need-permission-to-use-pound/

  35. Good one Derek, I like that idea. Osborne is a millionaire Buffoon. Us Scots know that. I think him and his rich Bullingdon boys will be voted out next time. They do not know what a days work is.

  36. Well said Derek.
    I hope we can now get on the front foot and make it clear to people that independence gives us options from which me make choices,choices which suit us and not people in another country.
    People conduct the vast amount of their financial transactions using electronic means (credit cards etc) and the importance of printed/minted money is greatly diminished.
    The No campaign are trying to use the pound as some sort of emotive bond between the countries of the UK but I am sure that most Scots don’t agree with this and will treat Osborne’s pronouncement with the disdain it deserves.
    Now that the No campaign’s tent in Scotland has been dismantled and the activity returned to London,I would expect much more from Cameron and Osborne (a real boon to us on the Yes side).
    Thanks Derek.

  37. Even “Mad Max-well” Keiser agrees that Scotland would be mental to stay with the UK. His show on RT this Tuesday explained the libertarian/ capitalist point of view re- an independent Scotland, with his guest confidently stating that Scotland “could be the richest country in the World” – IF, we reject control from the City of London! I’m a socialist – but, when even inveterate Capitalists are telling us to go for it, surely we must take heed? See whit ye thunk yersel.
    http://rt.com/op-edge/independent-scotland-to-be-rich-551/

  38. “First because it means the markets have to work out a position and decide if this makes the pound more or less attractive.”

    Well since the pound rose today against the euro and the dollar i think the markets have already decided that this is a positive development.

  39. “I know it makes the cross-border issue potentially trickier but what a bonus to say No Thanks to £150b of British debt….I hear voices saying it would morally wrong to refuse but isn’t it morally wrong to deny us access to our own currency? And when they say no one will respect us, what drivel. There will be many neighbours cheering our ability to get out debt-free from burdens we didn’t run up and don’t tell me international lenders will refuse us credit. They won’t look at the morality if that’s what is it…they are profiteers and only will look at our credit worthiness….£1.5 trillion in oil assets, a highly developed successful economy, a highly educated workforce, renewables, exports including whisky and food and to cap it all – NO SOVEREIGN DEBT.”

    If iScotland even tried this Scotland will be come an international pariah state like Argentina is now. Our cost of borrowing will go up, everyone who has a loan from a bank will be faced with higher interest rates and hyper inflation and a basket case economy will be just around the corner.

    Oh, and the rUK may well veto iScotland’s membership of the EU and the EU itself may decide that iScotland is not responsible enough to join the EU because it has defaulted on its debts. Great move.

  40. OK Derek, you’ve sold me on the idea. Where do I sign up? 😉

  41. its all about the oil and gas.

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