The Wisdom of Alex Salmonomon on Scotland’s shared currency

wisdom of solomon

Is Alex Salmond as wise as King Solomon on how the two parts of the United Kingdom should divvy up the kids in the divorce settlement? I would humbly suggest he is not. I would further suggest that those sent out on behalf of the Official YES Campaign to sell Alex Salmond’s debating tactics last night on the shared currency are damaging us.

Blair Jenkins, Alex Neil and everyone else who insists that Scotland will ‘keep the pound’ regardless don’t seem to realize that they are coming across as clueless spin doctors, the kind that lead to the collapse of Tony Blair’s entire administration, not before time. This does not look good for any of them.

It should not be forgotten that I am saying this as someone who greatly admires Alex Salmond as a world-class orator and debater, skilled politician, tactician and strategist, someone who should be grateful that not all his admirers are yes-men who will tell him he walks on water, even when he has just been caught falling on his arse. His two hours outing last night was not his finest hour, and anyone who pretends otherwise is not helping the YES Campaign. He had so many open goals and failed to score. His performance was so off I am scratching my head in search of answers as to what went wrong. I have a few tentative theories.

I have tweeted a great deal about my take on what went wrong. Will write a more substantial blog entry later, pulling the threads of my ideas together. For now, I’d like to focus on one or two key issues. Anxieties over Scotland’s currency is an Achilles Heal. Ignore this at our peril. Ignore it and the British Establishment implication Scotland will reduced to barter grows. Pretending Scotland cannot be deprived of the pound by the remainder of the United Kingdom is fooling no one. Of course we can.

What Scottish independence gives Scotland is a divorce. We have a loveless marriage and want an amicable divorce. We need to negotiate over our shared assets. Sterling is part of that. But it is part that can’t be shared if either of the parties to the settlement refuse. This is the heart of our dilemma. Solomon called the bluff of both parties to see who was prepared to see ‘their’ child cut in half, therefore murdered. This is the bluff Alex Salmond is being offered. Telling the British Establishment to “Make my day, punk!” plays badly with Scotland’s undecideds.

It is not enough to ‘know’ that the British Establishment is bluffing. That doesn’t matter so long as the bluff convinces most of Scotland’s undecideds, and we clearly know it IS working. This is why Alex Salmond cannot pretend we can’t be kicked out of Sterling. It may be Mutually Assured Destruction for George Osborne and co to stick to their guns, but I would have thought a convinced unilateralist understands that warmongers are often MAD.

What Alex Salmond has to do is explain two things. Firstly, he has to explain that the shared currency is not merely as necessary for the English as for the Scots, but infinitely more important. Why is that? Transaction costs are as important for both sides. However, kicking Scotland out of the Bank of England absolves every Scot of 100% of United Kingdom debt. This is why Osborne, Balls and Alexander are without a doubt bluffing. The problem is the British Establishment are tippexing this fact out of the public consciousness. Why on Earth is Alex Salmond not bringing this to the forefront of debate? Time is running of. Yesterday was the best opportunity he had, and he forgot? Very dispiriting.

When the upside of being kicked out of Sterling is explained to Scotland’s undecideds, most will want to leave. However, that is a Catch 22 trap for us. If Scotland voluntarily walks, then the benefit of debt absolution vanishes. It only works if Scotland is the innocent party. So, with that in mind, maybe Alex is just keeping all of us guessing. But this is dangerous. It is dangerous because it will have lead to considerable demoralization on the part of many, if not most, supporters of independence. And the YES Campaign spin doctors are digging themselves further into the trenches of the shared currency we may have to do without, the shared currency we may be better off without.

International law will stand behind Scotland if we are kicked out of Sterling. Money markets won’t punish Scotland for having its debt written off by George Osborne, Danny Alexander and Ed Balls. Scotland would start with a blank sheet, and massive natural assets when Russia is turning of the gas in retaliation over sanctions, and Libya, Iraq etc are going into meltdown. Energy prices are set to rise, as paper money at the UK, Euro-zone and USA threatens collapse. Scotland has immense bargaining power.

An independent Scottish currency won’t be set up overnight. However, using Sterling without any currency is not a sustainable position. We can’t rely on Sterling not collapsing, due to debt. If Scotland did negotiate our way into Sterling, that would cede much sovereignty to a multinational body. Interest rate policy is gone. Borrowing limits would be set outside Scotland. SNP leaders imply that is not true. But that is fantasy economics. A shared currency does have advantages. While borrowing limits would be in the hands of the UK, tax and spend rests with Scotland. And this brings us back to Alistair Darling’s most uncomfortable moment: will 100% of taxation be ceded to Scotland if we vote NO? Ruth Davidson and David Cameron say yes. They do that as they know they can always break their promise.

Alistair Darling, Ed Miliband and Johann Lamont can’t accept 100% of income tax being devolved to Scotland’s Holyrood Parliament. That is because they know that this would be unacceptable to English voters, and to English MPs. It is the West Lothian Question raised to the power of infinity. I have explained this argument in detail here:

Tories and Lib Dems could accept income tax being devolved to Holyrood by removing Scottish MPs’ right to vote on English income tax. But Labour won’t accept it under any circumstances, as this would destroy all their Westminster ambitions as effectively, in their eyes, as would independence.

In other words, all three of the Better Together Party leaders have their prepared excuses in the bag for their inevitable breaking these referendum pledges: each will say they all did their best, but the MPs from the other parties refused to see sense. That is the precise nature of the betrayal of the Scottish voters that the editors of the BBC, SKY News and Channel4 News are aware of, but refuse to tell the voters about. It is an outrageous kick in the teeth to the people of Scotland.


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