Following on from yesterday’s post on plan B(ully) i feel I must clarify a specific point on Currency Union CU that seems to have escaped everyone’s attention.
Westminster, especially George Osborne, and the Better Together campaign have stated that an Independent Scotland cannot have a Currency Union. They have made this an enormous problem, and sadly, some Scots have been duped into believing this to be a showstopper.
The irony is this. If I ask someone why they think we need a Currency Union they probably won’t know. Why would they. We don’t need this kind of information as we go about our daily business.
Here is a very simple explanation that I hope will help some people.
The Bank of England, founded in 1694 by Scottish banker William Paterson, is an independent body whose purpose is to set the standards for the pound Sterling. Actually, they are not wholly independent because a) the Governor reports to the Chancellor of the Exchequer and b) the Government have the power to over-ride the Bank of England if they deem it important.
Basically, the Government’s main barometer of the economy is inflation. They have set a target of 2%. The job of the Bank of England is to adjust the pound Sterling in terms of the interest rate to deliver the Government’s 2% inflation target. IT’S AS SIMPLE AS THAT.
If inflation varies more than 1% up or down the Governor of the Bank of England must write to the Chancellor and explain, a) what is going wrong and b) what the Bank of England are doing about it.
THAT IS ALL YOU NEED TO KNOW
Oh, there is one tiny little detail I missed. The Bank of England manage the pound at monthly meeting of the Monetary Policy Committee MPC where they decide the interest rate [read about the MPC].
The MPC consists of 9 members; five from the Bank of England and 4 external members appointed by …. you guessed, the Chancellor of the Exchequer.
Now, let’s count the number of Scots on the MPC. After all we have a Currency Union. So, there’s ……… NONE! oops.
We have a Currency Union except WE HAVE NO SAY – GREAT! The members of the MPC are mainly from London and America (including Canada).
The Bank of England adjusts interest rates to control UK inflation. But hold on just a minute. The economy of Scotland is £248 Billion (with oil and gas) whereas the economy of England is £1.265 Trillion (or considerably less than their debt).
So, any change to inflation in Scotland will have practically no impact on the inflation in England.
SO, IF INFLATION IS HURTING SCOTLAND BUT NOT ENGLAND –
THE BANK OF ENGLAND WILL DO …. NOTHING!
WHY? BECAUSE IN MANY WAYS IN THE UK, SCOTLAND IS MATHEMATICALLY INSIGNIFICANT! SORRY, BUT IT’S TRUE!
DOES ANYBODY STILL THINK WE HAVE A CURRENCY UNION TODAY? OF COURSE WE DO NOT. SO WHILE IT WOULD BE BENEFICIAL TO US ALL TO HAVE A CURRENCY UNION IN AN INDEPENDENT SCOTLAND – IN REALITY, WE DON’T HAVE ONE NOW!
Just before I leave the point, think about this. If one of our banks in Scotland needed a bail out we couldn’t rely on the Bank of England – is that a problem? NO, because after the New Labour banking debacle NO BANK IN SCOTLAND WILL EVER FAIL AGAIN. So that is a mute point.
…And if we need to borrow and can’t get some ‘folding stuff’ from the Bank of England there are any number of lenders in the world who would gladly lend to an oil rich nation, with a history of balancing their own books and a AAA credit rating.
Why did Barclay’s not get a sub from the Bank of England? Because they got it from Kuwait, who did not take a controlling stake in their bank.
SO WHEN WESTMINSTER TELLS US WE CAN’T HAVE A CURRENCY UNION – THEY ARE DENYING US SOMETHING WE DO NOT HAVE. HOWEVER, WITH INDEPENDENCE WHEN WE DO HAVE A CURRENCY UNION, WHO KNOWS, WE MAY EVEN GET A SEAT AT THE MONETARY POLICY COMMITTEE OF THE BANK OF ENGLAND?
Catherine Tate summed it up nicely when she said, ‘I’m not bother, am I bothered, I’m not bothered!’