Curran’s Core Concepts on Currency!

This is my perspective as a Scottish voter, neither currency expert, economist, politician nor banker, but very definitely a nationalist, a left-winger and a professional negotiator. Read it in that context, please!

THE CURRENCY QUESTION
THE RATIONALE FOR A NEW CHOICE

PRESENT STATUS
Pre-negotiation phase, forty days and forty night to go. Scottish Government’s position based on Fiscal Commission reports (and TWO) and White Paper, Scotland’s Future.

Fiscal Commission identified four main options -

MONETARY UNION with rUK – STERLING

MONETARY UNION with EU – EURO

NEW SCOTTISH CURRENCY - Fixed exchange rate

NEW SCOTTISH CURRENCY - Floating exchange rate

(N.B. The New Scottish Currency options includes either using sterling (‘the pound’) as the new currency or designating a new Scottish unit of currency (e.g. ‘the groat’)

The currency option can be presented alternatively as -

Monetary union with rUK – the pound

Monetary union with EU – the euro

New Scottish currency, floating or fixed – the groat

Continuing to use the pound, floating or fixed – the pound on sterlingisation)

The recommendation of the Commission was -

MONETARY UNION with rUK - STERLING

The Scottish Government declared this to be its choice of currency arrangement and announced its intention to negotiate the terms of monetary union with rUK after a YES vote.

The UK Government has declared this option to be totally unacceptable, in a variety of forums and statements from the PM, the Chancellor, senior advisers and Better Together leaders.

PERSPECTIVES
This UK position can be viewed by the Scottish Government from two main perspectives, and response options developed accordingly.

Perspective One
It is not an outright rejection, but a referendum campaign tactic to influence the Scottish electorate into voting No (the UK’s primary objective in the pre-negotiation phase)

If this fails as a referendum tactic and there is a YES vote, the tactic is converted to an anchoring statement aimed at enhancing UK negotiating team’s response to the Scottish Government’s opener of a currency union.

Perspective Two
The UK Government really means it: they will not - under any circumstances - accept a currency/monetary union with an independent Scotland.

PRE-NEGOTIATION PHASE:

THE CURRENCY QUESTION: THE RATIONALE FOR A NEW CHOICE

RESPONSE OPTIONS
On both Perspectives One and Two, the same three responses are available -

Hold currency union position till the referendum

or

Adopt a new  plan of Scottish currency/sterlingisation and withdraw plan to negotiate a currency union

or

Adopt a new plan of Scottish currency/sterlingisation but reiterate continued willingness to negotiate a currency union

TENTATIVE EVALUATION

Move to  Scottish currency under sterlingisation plan – withdraw plan to negotiate a currency union

POSITIVES
Immediate media brief, maximum publicity, most supporters happy, many non-SNP YES people much happier. Electorate in the main probably relieved and supportive.

Scottish currency perceived as greater independence, more Scottish control.

Control shifts to SNP Government (no longer dependent on negotiation - anticipates control after YES vote and independence)

Opposition on backfoot, panicked, reactive. Immediate plans activated to prepare for Scottish currency, civil service briefed, etc.
 
NEGATIVES
Presented as a retreat by UK, ‘fallback to Plan B’, cave-in under pressure, etc.

New attack on alleged negatives of Scottish currency option - expert negative arguments (e.g. Carney) mined for negative critical analysis

Share of national debt occupies centre stage, claims of  reneging, defaulting, etc. 

Spotlight on the new institutions and regulatory framework cited as potential weakness.

Pegging to sterling categorised as powerlessness, dependency.

TENTATIVE EVALUATION

Adopt a Scottish currency-sterlingisation plan but reiterate continued willingness to negotiate a currency union

POSITIVES
As under previous option, but with advantage of being seen still open to preferred option, flexible, displaying concern for rUK interests and relationship.

Even if UK cautiously enters currency union negotiations, powerful Scottish fallback already in place.

NEGATIVES
Potential of frustrating expectancies of YES supporters and non-SNP parties already on board for Scottish currency.

Danger of pressures building to force Scottish Government to abandon negotiation on currency union. Uncertainty for those contracted to new Scottish currency institutions.

SOME PREVIOUS BLOGS

17th February 2014

30th March 2014

16th November 2013

30th April 2013

You will also find an abundance of video clips on the currency argument, from every conceivable perspective, on my YouTube Channel – simply enter search term ‘currency’ in box

 

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Currency creates crisis – the Better Together meltdown after Guardian leak

A few facts -

QUESTION: What is the “optimal currency arrangement" for Scotland and the rest of the UK (rUK)?

Murdo Fraser put this question to five experts on 12th March. They disagreed on the answer. This on the same day that the Treasury Committee was grilling Mark Carney, Governor of the Bank of England and doing their level best – unsuccessfully - to bounce him out of his neutrality and objectivity on the the shape of a currency union after a YES vote, and on Scotland’s independence, as re-confirmed and re-asserted to Stewart Hosie MP.

UK’s answer is “The present arrangement is the best. Stay with the UK and keep the present arrangement – vote No!”

Scottish Government’s answer is “We like many aspects of the present arrangement but we don’t like a host of other aspects of UK – let’s keep the best of the present currency arrangement, improve it - and vote YES to Scotland’s independence!”

Currency: Scotland’s currency after independence will be the pound sterling, either in a currency union with rUK (99% probability) or under sterlingisation - i.e. we will carry on using the pound as a tradable currency and peg it on a fixed rate to sterling.

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The Clash of the Experts – What is the “optimal currency arrangement" for Scotland and the rest of the UK (rUK)?

UK’s answer is “The present arrangement is the best. Stay with the UK and keep the present arrangement – vote No!”

Scottish Government’s answer is “We like many aspects of the present arrangement but we don’t like a host of other aspects of UK – let’s keep the best of the present currency arrangement, improve it - and vote YES to Scotland’s independence!”

Murdo Fraser put this question to five experts on 12th March. They disagreed on the answer. This on the same day that the Treasury Committee was grilling Mark Carney, Governor of the Bank of England and doing their level best – unsuccessfully - to bounce him out of his neutrality and objectivity on the the shape of a currency union after a YES vote, and on Scotland’s independence, as re-confirmed and re-asserted to Stewart Hosie MP.

 

THE SCOTTISH SECTION OF TREASURY COMMITTEE with MARK CARNEY, GOVERNOR OF THE BANK OF ENGLAND – STEWART HOSIE MP SEGMENT

)

THE SCOTTISH SECTION OF TREASURY COMMITTEE with MARK CARNEY, GOVERNOR OF THE BANK OF ENGLAND – End of Stewart Hosie segment (the confirmation) and into the COMMITTEE MEMBERS QUESTIONS

)

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Mark Carney gives evidence to the Treasury committee – 11th March 2014

The formidable powers of an independent Scotland that Johann Lamont thinks are “wee things”: Scottish Labour’s nadir at FMQs

Scotland doesn't control the currency or interest rates at the moment. Neither does UK - they're controlled by Bank of England. We won't control them under a currency union either, but we'll have more influence than we have at the moment, as an independent country, a partner in a currency union.

ECONOMIC LEVERS: Excise duty, air passenger duty, VAT, capital gains tax, oil and gas taxation, national insurance, income tax, corporation tax, competition law, consumer protection, industry regulation, employment legislation, the minimum wage, energy markets and regulation, environmental regulations.

ALL THESE THINGS ARE CONTROLLED IN LONDON UNDER UK

ALL OF THEM WILL BE CONTROLLED IN SCOTLAND AFTER INDEPENDENCE.

We'll be able to set the minimum wage, abolish the Bedroom Tax (not just mitigate it). We will be able to transform childcare.

WE WILL BE ABLE TO REMOVE WEAPONS  OF MASS DESTRUCTION FROM SCOTLAND

WE WONT HAVE TO PARTICIPATE IN ILLEGAL WARS

Bur all of these things - which we can only do with independence - are, to Johann Lamont, "wee things".

The prospect of this woman and her cohorts leading  even a devolved Scottish Government is not to be contemplated.

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