THESE ISLANDS: NEW PAPER ON SNP CURRENCY PLANS
26 April 2019
In an important new paper to be published at 9am on Friday 26th April, These Islands takes a detailed look at the currency options to be debated at this weekend’s SNP Spring Conference.
Currency is a particularly thorny issue for the SNP. Many of its most ardent supporters would like to see an independent Scotland with its own currency from day one. But in order to achieve independence, the SNP must win over voters who have a stubborn affection for the pound.
This has resulted in a cobbled together mess, which tries to be all things to all people. It promises independence with the stability and continuity of the pound, and a smooth transition to a new currency once the time is right.
But the SNP is, once again, offering Scotland a false prospectus.
Choose Your Poison: The SNP’s Currency Headache explains why Scotland’s balance of payments position deals a fatal blow to the SNP’s plan for a temporary period of ‘sterlingisation’, and means that an independent Scotland’s only other option – its own currency – is not the panacea that its advocates suggest.
Either way the outcome is the same: Scotland has a new currency which is worth less than sterling, and ordinary households pay the price. Imports and mortgages are more expensive, wages and state pensions are less valuable. An independent Scotland is certainly possible – but it would come at an immense cost.
Reviewer comments
“This is an important and timely paper. There is much misunderstanding, misinformation and indeed ignorance on what would be an appropriate currency regime choice for an independent Scotland. Many seem to think that by defining a wish list on the currency issue that that is how the issue is settled. However, in a world of trillions of dollars of foreign exchange transactions each and every day, moving freely to capture maximum returns, the only test of a currency regime is whether it is credible to international capital. As this paper clearly demonstrates, neither of the proposals advocated by proponents of independence would meet that test and both are simply a recipe for a speculative attack, which would be hugely disruptive and costly to the Scottish economy.”
– Professor Ronald MacDonald, Research Professor of Macroeconomics and International Finance, Adam Smith Business School, University of Glasgow
Click here to read the paper online.
Click here to download the PDF version.
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