Seil Chat

If Scotland were to become independent it may inherit a proportion of the UK’s national debt although even if it had not, it would still have to issue debt to finance its fiscal deficit, which would most likely be in the region of 5-6% of GDP post independence. That debt has to be sold on open financial markets. Again it is now widely accepted that an independent Scotland would incur a premium on its debt (i.e. a higher interest rate), which is simply in the nature of small countries with shallow capital markets, especially new ones. This premium would be determined by financial markets but is likely to be in the region of 1 – 2% above what HMT would have to pay on similar UK debt.

However, the 1-2% premium is predicated on an independent Scotland having a credible currency arrangement and, indeed, wider macroeconomic framework in place. As things stand at the moment, the proposed currency system is not credible and international capital markets would require such a huge premium on and independent Scotland’s debt that its deficit would be unsustainable and the Scottish Government would be forced to make significant cuts to public expenditure, or raise taxes or both and abandon its exchange rate policy at huge cost to the Scottish economy.

Of course, even before the first day of independence individuals and business would have an 18 month transition period to move capital out of the Scottish economy if there are clear uncertainties arising from its currency policy. Attempts by, for example, key elements of the Scottish Financial sector to locate some (perhaps in proportion to its trade with rUK) or all of its business south of the border, could have massively profound effects on the Scottish economy in terms of employment and output.

So with no well thought through plan B in place the outcome of a Yes vote would produce a very uncertain time for the Scottish economy, with likely massive disruption to employment and output which would be generational in its impact, just as in the case of previous economic mismanagement of UK exchange rate policy.

Their also seems to be an important misperception in the recent White Paper, and in statements by prominent figures in the SNP, that the UK would have to sign up to a sterling zone arrangement because the balance of payments consequences of not doing so would be unpalatable for rUK. However, it is widely accepted that sterling is currently overvalued. Much of this comes from the effect of North Sea oil revenues on the UK balance of payments. Freeing the UK from this burden would make the UK much more competitive but have the opposite effect on the Scottish economy. This is surely not a very good bargaining position for the Scottish government?

Without a plan B, then, on the currency issue the Scottish public are effectively being duped about the potential massive costs and disruption to the Scottish economy.

PentlandPirate II wrote: It's the Pound or bust.

Here's an interesting Reuters article about it : Lessons from Czechoslovakia: a currency split that worked

can be solved by the Scots for the Scots - but only if we vote YES

PentlandPirate II wrote:Actually if you research it you will find there are a large number of Czechs and Slovaks who think it was a mistake to split the country.

PentlandPirate II wrote:How many Czechs and Slovaks do you know? I rarely go through a day without meeting or talking to one.

MonaLott wrote:LS, you really need to learn to make your valued contributions more succinct and less frequent over multiple threads. Currently you're like a scattergun and it's boring and confusing. Too much time on your hands. Bearing in mind that you once were a local school teacher, you should already know the virtues of brevity and precision.
And get this into your head - this is NOT at all about Alex Salmond - or about some donkey at Glasgow Uni. It's about our apolitical future - the pound issue is trivial. The running of our own affairs is critical, as is our future as a positive, mature, unpretentious, non-invasive, fair and just country with a proud history and a great potential future.

longshanks wrote: . . . one of our leading and most respected academics . . .

longshanks wrote:He's The Adam Smith Professor of Political Economy at Glasgow University.

Can you name a higher or more prestigious chair in that subject in another Scottish University ?

NickB wrote:

longshanks wrote:He's The Adam Smith Professor of Political Economy at Glasgow University.

Can you name a higher or more prestigious chair in that subject in another Scottish University ?

It's just a chair.

Or do you think Adam Smith himself has personally approved Prof MacD's appointment from beyond the grave ?

longshanks wrote:
Why do you prefer to attack the man yet refuse to address the published result of his work ?

longshanks wrote:A wise man listens to opposing views and tempers his judgement accordingly.

NickB wrote: How 'respected' is he on a scale of 1-100 ? How does he compare with, say, Professor John Kay?

It is possible to imagine a future for an independent Scotland characterised by reactionary municipal socialism – and the crony capitalism that brought Ireland and Iceland close to economic collapse.

While Mr Salmond insists that there is no currency plan B, Scotland would have no negotiating power without one and the rational plan B – a Scottish pound pegged to sterling – is also the likely outcome.

longshanks wrote:Why doesn't Salmond listen to him ?