Flyingfifer wrote: ↑Fri Apr 09, 2021 9:09 pm
Nanu wrote: ↑Fri Apr 09, 2021 9:02 pm
Flyingfifer is right that any country can use another's currency without permission, there are drawbacks though. Without a currency Union agreement between said countries which Bank of England, Conservatives, Labour and even Lib Dems have ruled out, then said country would have no input on monetary policy, such as setting interest rates. Not having control over your own interest rates and monetary policy some would argue is not really Independence. How could a country set spending budgets not knowing what the value of their currency would be the following month. So yes possible but selling that type of "Independence" to the Scottish people? Not sure but I wish them well and hope they do sort it amicably.
Interest rates are set by the MPC (Monetary Policy Committee) which is controlled independently from the government (this was done in 1997) and while the government theoretically has some influence (they choose the members of the committee) ultimately the bank acts independently and will pursue a policy of stability meaning that nothing ultimately changes in the short to mid to mid long term.
Thus the whole argument that you are posing doesnt hold water.
Sorry, that's disingenuous at the very least. The MPC may set policy but does so to meet guidelines set by the Chancellor and these guidelines can change as required by the government of the day. At the moment they are asked, among other things, to keep inflation in a band around 2%, but that could change next year.
From the BoE Monetary Policy Committee information
'Every year, the Chancellor sets out a framework under which we have to set monetary policy. They send this to our Governor in a remit letter.'
If the Government decides to change the targets for the MPC, they can, and will, do so without regard for the circumstances of any other country that may be using Sterling.
Scotland using the £ would be a hostage to circumstances
- No control over money supply to help manage economy
- No lender of last resort
- Scottish banks would have no access to BoE liquidity facilities (potential for bank runs)
- The Scottish Government could not afford to guarantee bank customer deposits in the event of bank failures (would need 10's of £Billion available)
- Monetary policy set in London by BoE without worrying how it affects Scotland’s economy
- Scots fiscal policy would have to be set to appease the money markets as they'd have to borrow sterling to cover budgetary deficits
Scotland would be better off biting the bullet and creating its own currency which would then find its own level in the global exchange rate matrix (pegging to Sterling is an option but can cause more problems than it resolves), but they keep shying away from that avenue because they know it will alienate an awful lot of potential 'Yes' voters if a second referendum is held.
Regardless of the problems involved in Sterlingisation, the real elephant in the room is that the SNP has no real plan as to how Scotland will finance it's brave new world. Currently the SNP's policy is to use the report from The Sustainable Growth Commission setup by Ms Sturgeon, and chaired by an ex-SNP MSP, as its guide - but trying to create the budgetary surplus envisaged by the report will result in austerity worse than the post-2008 era, there will either have to be large tax rises, severe cuts to public services/spending or a combination of both.
They need a new plan but don't seem to be able to come up with one - possibly because keeping all the 'promises' they've made is just fiscally impossible without a lot of hardship for the people of Scotland.
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