Who promises to pay the bearer on demand?
I’ve thought long and hard about posting this, I usually keep my politics separate from my business interests but the situation with the forthcoming vote in the Scottish referendum and the implications of a Yes result are too important to ignore any more. So I am putting my head over the parapet, at the risk of the usual about of vitriol and nastiness that seems to follow anyone daring to comment on either side of the debate.
Those of you who know me know that my position on the referendum has always been firmly in the ‘No’ Camp. I moved to England in June and I no longer have a vote (sadly) but I have family, friends and business interests in Scotland, I was born and brought up there and I’ve lived most of my adult life in Scotland. Besides, if Jim McColl, Sean Connery, Brian Cox and Alan Cummings can all back the Yes campaign as tax exiles and ex pats then I think as a tax payer in Scotland for most of my adult life, I’m entitled to a say! For us in our new home of Northumberland a Yes vote would, whilst being sad, be potentially a very good thing. My colleagues and neighbours here envisage millions of pounds of Scottish investment migrating south, jobs on border controls and shopping centres along Tynedale and the Marches catering for the non EU customers from the north.
What I have to say is to those out there who are so far undecided or who are voting Yes in the misguided view that the independent Scotland Alex Salmond is offering will be a ‘free’ country in charge of its own destiny. I’m going to park all the emotion, all my distaste for nationalism in any form and my dislike of the way the SNP in particular has demanded that demonstration of love for one’s country and support for independence are one and the same. They are not and it is my love for my home country and my nation that has prompted me to pen this.
No, let’s keep this strictly unemotional, let’s look at what is on offer.
The Yes campaign want independence, and their supporters are being passionate and forthright about it but this passion is clouding their eyes because, since Tuesday this week they are not being offered independent Scotland but a Scotland that will effectively be the satrapy of the Bank of England and the UK Treasury.
I’ll explain; in the halcyon days of 2006 everything was rosy and we all enjoyed easy credit and life was good. The Euro project had been in operation for some years and economies like Ireland were admired for their spirit and growth. If Ireland could do it the why not Scotland? Scotland had been punching above her weight culturally and politically for a while, leaving the Union and becoming part of the EU, using the success that was the Euro would allow us to tap into the success that Ireland had. Few at the time, myself included, could argue against this. Given the evidence, the benefits were there for all to see. Alex Salmond courted and was courted by Edinburgh banking executives, it looked like he was going to be able to pull of his dream of a lifetime. We all know what happened next and Mr Salmond deleted Fred Goodwin from speed-dial and dropped his association with RBS like a hot sausage.
This was Plan A – Euro membership and when the Euro zone started to recover it became an option again. However, he (Salmond) hadn’t factored the political pressure that could be brought to bear by those states who oppose, what they would call, ‘regional self-determination’ Spain being very vocal for obvious reasons. The relatively recent union of nations that is Germany scratched it’s head in Teutonic bewilderment over the idea, to a German, uity is everything. To reassure everyone the SNP hiheidyins commissioned a report on the likelihood of an independent Scotland retaining EU membership. We waited for the publication….and we waited….and waited. We knew the report was finished but Mr Salmond wouldn’t publish it. This ended up in court and eventually in the Scottish Parliament where the SNP used their majority to bully through an ‘Erstaz’ version with a positive spin and to block the repost in its unadulterated form.
Why? Well, the reason came obvious when the answer from Europe was a resounding NON. Scotland would HAVE to reapply for membership and this would take some time (periods of up to six years have been quoted).
Now this left the SNP with a BIG problem, if automatic, seemless entry to the EU and membership of the Euro was no longer an option, then what currency was the Independent Scotland going to use?
At this point, spring 2014, it could be argued that surely, given the ramifications of this decision, the referendum should be postponed until after the UK’s EU membership referendum? This would allow time to consider the situation and address this currency issue. But this didn’t happen.
It was only a matter of time before the No campaign spotted the gaping hole in the Yes campaign’s strategy – what the hell was iScotland going to use for a currency? Immediately the main UK party leaders all issued statements categorically saying there would be NO currency union with an independent Scotland. Darling made capital on this in the televised debate on the 9th and grilled Salmond to tell everyone what his ‘Plan B’ was going to be? However, the No campaign leadership has miscalculated. You see, to most of the population, a currency is the money in your pocket, in your bank account. What you borrow on your mortgage or from a payday loanshark, what you buy food with and what you change into Turkish Lira at the airport. What they rarely do is look at what it says next to Robert Bruce’s stern, glowering face on the Clydesdale Bank £20 note..”no – it doesn’t say “take that you English b*****d!”, it actually says, next to the etching Bruce in his armour, the words: “promise to pay the bearer on demand”. Darling etc. had miscalculated because they assumed that the common or garden Scottish voters would all understand what a currency is. Darling hasn’t understood that the hoi polloi don’t necessarily get the meaning of this phrase. ie who is going to pay the bearer on demand?
With his instinct for the populace, Salmond worked out that most of us don’t understand what a currency is beyond what it is called and all he had to do was to say “we’ll use the Pound!” There is nothing to stop us using the pound, lots of countries use the pound as currency – Egypt etc etc…He even got the flustered Alistair Darling to ADMIT that Scotland can use the pound during the debate this week and since then the Yes supporters have been dismissing any challenge on the question of currency with contempt – “That question’s be answered, how many times do I have to repeat it? Are you deaf?”
Sadly, most of us don’t understand the hugely complex world of international finance, what is it that makes our money worth what it is? Who is paying the bearer on demand? I’m no expert but I do know enough to understand the complexity. It is not what the currency is called that is the issue, rather what is behind the currency, what is it’s substance? In the days of the gold standard it was simple – turn up at Threadneedle Street, hammer on the door, hand over your £1 note and the Bank of England would give you £1 in bullion – simples! Thing is that the western economies no longer fix their currencies to a gold standard. Currency is valued on open markets which set the value based on many factors but the stability and size of the economy behind the currency is critical as is the careful and responsible administration of the currency by a central bank, in our case the Bank of England, which regulates our economy and is able to influence the value of our currency by turning the ‘gas’ of interest rate up and down. Interest goes up people stop spending and the real word value of the £ falls as demand for products falls. Interest rates fall and the opposite happens. The policy is, to an extent, decided by committee but heavily influenced politically.
The problems in the Euro zone have highlighted the dangers of currency union without political oversight. The reason why the rUK parties have been so vociferous in their refusal of a currency union is because they understand that to snip off 15% of the UK economy and population and to give them uncontrolled spending of the pound would be financial and political suicide for rUK. The money markets would take a very dim view of the lack of control of the £. The value of the currency would be undermined. rUK’s credit rating would be downgraded and the UK would have to pay more to borrow money from the international markets. There is no way that rUK will share the currency with rScotland.
So, Alex and John Swinney have decided to adopt what some see as a highly irresponsible option – that is to threaten rUK that unless iScotland gets a currency union with them iScotland will renege on it’s share of the national debt. Now legally, iScotland doesn’t have to accept any share of the debt but politically and financially it is highly irresponsible not to mention amoral. We don’t have a monopoly on national self-interest, already people in rUK are beginning to grumble about the ‘whining jocks’ this threat hasn’t gone un noticed by the English right who, having been relatively laid back about everything are now starting to sit up; this at a time when the centre right parties are combating the rise of the right. This threat means that if Yes wins, there will be huge pressure on the moderate Cameron to play hardball with negotiations if he doesn’t then Alex and John could quickly find themselves negotiating with Boris, or even Nigel.
Welshing on the debt would also undermine our ability to borrow money on the international markets which would cripple our ability to establish our own currency whether it is Stirlingised or not. On top of this it is an all-or-nothing throw of the dice by the SNP leadership. They are assuming and hoping that rUK sees more risk in not being able to off load a relatively small portion of the national debt versus the risk of currency union.
So – let’s assume Yes wins and Scotland is able to secure a currency union with rUK – what will that look like?
Well, it won’t mean independence. Far from it, the only way the rUK would possibly consider a currency union is if the Bank of England has a veto on iScotland budget and spending in the same way that The European Central Bank has a veto on Ireland and Greece. Don’t take my word on it, John Swinney recognises this and has admitted it in a leaked memo. For those of you who want independence – CURRENCY UNION WITH rUK IS NOT INDEPENDENCE. In fact, it is less democratic than our current situation, by voting Yes we will have given up any say we have in how the Bank of England operates. The Bank will now operate exclusively for rUK Treasury and will put the interests of rUK ahead of those of the foreign country that is Scotland.
On top of this there is no guarantee that rUK will agree to any sort of currency union. Swinney’s threat is a drastic and desperate move, independence at any cost.
What happens if there is no currency union? Well, we don’t know because Alex Salmond hasn’t told us. Mumbles like “you sound like a broken record” or “sterlingisation” are the response to “what about plan B?” We simply do not know. I suspect, however, that if Plan B is very bad news (like the Europe Report (buried) or the Independent cost analysis of separation (promised but never delivered) then Alex Salmond will simply ignore the question as he has done with other issues that are unpalatable for the voter. What we can speculate is that a stand alone currency, sterlingised or otherwise would be at the mercy of the money markets and as volatile as the petrol that underpins it. With no central bank or lender of last resort between us and the IMF one can only guess at the credit rating we would be allocated and the subsequent cost of borrowing the money needed to run the country. This could mean decades of austerity that would make the recent years look like a picnic and then we could be left with a currency worth a fraction of sterling or the Euro. This isn’t scaremongering, it is a sober reality.
What happens if there is no currency union then? Well this is just the latest in a line of questions that Alex Salmond simply refuses to answer. Either because he can’t or because he won’t. I am angry that he shows the people of Scotland so little respect that the will not just lay all the cards on the table and allow Scots make a decision after examining all the facts. It feels like the wool is being pulled over our eyes, that we are being distracted and diverted from the issue. It’s like they are trying to sneak independence under the radar of the national consciousness. Mr Salmond is, in short, treating this like a general election campaign rather than the potential matter of life and death of a nation that it actually is.
Some of you will have already decided which way to vote. Some of you will passionately disagree with everything I have said here. Some of you might be undecided. However, understand this – it’s not a general election. This isn’t a case of “I might try ‘yes’ and see how it turns out”. If on 19th there is a Yes majority then that is it, we cannot go back. If you believe in an independent Scotland then at least demand that the SNP and the yes campaign come clean and share everything with the electorate, warts and all and trust us to make a decision.
There will be no going back, end of, Scotland becomes a foreign country to rUK and the border will be an EU border. So for God’s sake and for the sake of your descents, make sure you give this decision very careful thought and only vote in the interests of the generations of Scots to come.