x404.co.uk
http://www.x404.co.uk/forum/

Osborne tries to quash UK-Scotland currency union suggestion
http://www.x404.co.uk/forum/viewtopic.php?f=19&t=21664		 Page 1 of 1
Author:  pcernie [ Sat Mar 29, 2014 2:56 pm ]
Post subject:  Osborne tries to quash UK-Scotland currency union suggestion
http://www.theguardian.com/politics/201 ... h-scotland

Gimps.
Author:  jonbwfc [ Sat Mar 29, 2014 4:32 pm ]
Post subject:  Re: Osborne tries to quash UK-Scotland currency union suggestion
There's nothing and indeed no way to stop Scotland still using the pound should they become independent. It's just not a very good idea.
Author:  l3v1ck [ Sat Mar 29, 2014 9:43 pm ]
Post subject:  Re: Osborne tries to quash UK-Scotland currency union suggestion
Just tell them they can't have British oil in international waters if they use it.
Author:  ShockWaffle [ Sat Mar 29, 2014 11:17 pm ]
Post subject:  Re: Osborne tries to quash UK-Scotland currency union suggestion
Using pounds and printing them are very different things. With a currency union the Scots would be able to do both. Without it they can use our money, or Euros, or Dollars or their own (pegged to any of the above if they so wish).

The most obvious solution is to print Scottish Pounds and peg them to the GBP, and then do a currency swap deal with the BoE. That is a technocratic decision and government ministers would have little influence over it.

If they want currency union with us, then the problems of the Eurozone currency union seem to be relevant right now. The Scotts would have to subject themselves to the sort of mutual obligations to us that make independence a bit of a sham. As the larger partner, and the de-facto underwriter of their currency we would assume a great deal of control over their fiscal policy. Their financial regulation and monetary policy would all be imposed. The Scottish government would be a glorified council with a foreign policy.

I don't understand why the SNP would want that. A currency peg can be broken when things go south.
Author:  paulzolo [ Sun Mar 30, 2014 4:32 pm ]
Post subject:  Re: Osborne tries to quash UK-Scotland currency union suggestion
Didn't Argentina use US Dollars as their official currency? Did that work for them?
Author:  jonbwfc [ Sun Mar 30, 2014 5:19 pm ]
Post subject:  Re: Osborne tries to quash UK-Scotland currency union suggestion
paulzolo wrote:
Didn't Argentina use US Dollars as their official currency? Did that work for them?

Not sure Argentina did, they may have pegged the ARG peso to the dollar. There is definitely one Central American country that does use the US Dollar as their official currency, can't remember which one, but it's not a big economy. The problem with using a currency without union is, obviously, you have no control over the monetary policy that affects your economy. If Scotland adopted the pound without union and say the UK government decided to devalue, the money in Scot's pockets is suddenly worth less even though their economy may not require it. It's also likely to inhibit an Independent Scotland's ability to finance itself on the markets.

It may actually turn out to be the 'least worst' option in the short term - assuming currency union will be politically untenable in the remainder of the UK - but will have significant issues and to present it as a great solution for both sides is disingenuous at best.
Author:  ShockWaffle [ Mon Mar 31, 2014 2:22 am ]
Post subject:  Re: Osborne tries to quash UK-Scotland currency union suggestion
paulzolo wrote:
Didn't Argentina use US Dollars as their official currency? Did that work for them?

Other American countries where the USD is legal tender include Panama, Ecuador, El Salvador and Uruguay, and several others. Some allow it to be spent in shops alongside their own currencies, others have fully replaced.

These sort of arrangements can work, but are also an admission of failure. Running two currencies, only one of which you print, is a trap. People will swap currencies to save in the one they trust, constantly offloading the local one to get dollars. Full substitution is usually the result of absolute failure, it is very difficult to reverse, and it deprives the government of valuable seigniorage income.
But it has a single clear advantage also. Which is that you pay your workers, tax your citizens, buy imports and borrow on the bond markets all in the same currency.

Maintaining a currency peg over the long term (like Hong Kong for instance which has been pegged to the dollar for 3 decades) is a blessing and a curse. It imposes similar fiscal constraints to those of currency union, and locks you into a consistently mis-priced currency. If you allow the stresses on that peg to build up, eventually somebody will massively short your currency and make you pay through the nose to defend the peg (remember the UK exit from ERM?) or break it.

Argentina used to peg to the dollar, but they never did so with the necessary restraint. If you try to maintain it by letting values slip out of reason and imposing controls on how many dollars people can buy, stresses build and the whole project fails. The important thing about a peg is that you have to make sure people are willing to exchange between currencies at a constant rate. If you force the issue through repression, that won't last. This has recently become an increasingly urgent problem for Argentina yet again, and is a major reason for Venezuela's slow motion collapse in penury.

The best solution in an ideal world is for Scotland to be brave. As a sovereign nation they should have their own currency and let it find its own price. The problem is likely to be that they are too tied into our economy, meaning their businesses will want to accept and be able to make payments in GBP without the costs and uncertainties of fluctuating exchange rates, and all the expensive hedging that requires.

As I haven't even heard the notion of a free floating currency mentioned, I assume that concern looms large, and therefore a peg seems unavoidable. One day they will probably walk away from a GBP peg and switch to the Euro. Unless we peg to that first.
Author:  hifidelity2 [ Mon Mar 31, 2014 10:08 am ]
Post subject:  Re: Osborne tries to quash UK-Scotland currency union suggestion
jonbwfc wrote:
There's nothing and indeed no way to stop Scotland still using the pound should they become independent. It's just not a very good idea.

The problem for Scotland if they just use the pound is that they are no longer able to become a Lender to last Resort . This means that all their finance industry will have to relocate to England so removing a good percentage of the none oil income

Also they would have no input into any decisions on interest rates or money supply. At the moment (in theory) the BofE and the chancellor consider what is best overall of the UK. With independence they will only consider what is best for the rUK.
Author:  pcernie [ Mon Mar 31, 2014 7:41 pm ]
Post subject:  Re: Osborne tries to quash UK-Scotland currency union suggestion
Scotland currency union with UK is not going to happen, Nick Clegg states

http://www.theguardian.com/politics/201 ... nick-clegg

Probably will, then.
Page 1 of 1 All times are UTC
Powered by phpBB® Forum Software © phpBB Group
https://www.phpbb.com/