vtsnowedin wrote:UndercoverElephant wrote:
Yes there is, at least as the banking system currently works. There will be no Scottish-registered banks, because Scotland won't have access to a central bank.
.
If Scotland becomes a sovereign country why would it not create it's own central bank?
Damned good question. A question the Scottish Nationalists are very, very reluctant to answer. Alex Salmond has been asked repeatedly over the last six months about what currency an independent Scotland would use. He could, at any time, have said "well, we'll set up our own currency, of course", but those words have not slithered out of his mouth. Instead he's produced a mountain of bullshit about how an independent Scotland would "keep the pound", claiming that the rUK point-blank rejections of a currency union is "bluffing"" or "bullying". Five years ago he was saying that "sterling is a millstone around Scotland's neck", but that was when it was likely that Scotland might be able to join the Euro.
The truth is this: Scotland, on its own, does not have the economic clout to stand behind what would be an over-sized financial sector. It would be in the sort of position Iceland was, before the events of 2008 turned Iceland into a European pariah. The truth is that if the nationalists declared openly that an independent Scotland would set up a new Scottish currency, not only all of its banks but a lot of its other major companies would immediately declare they were relocating to England.
So they lie to their own people.
http://uk.reuters.com/article/2014/09/0 ... K520140908
(Reuters) - Scotland's nationalists may have to add the creation of a central bank and a currency to their plan to build a new country, if they win next week's independence referendum.
The Plan A of Alex Salmond's Scottish National Party has long been for an independent Scotland to share the Bank of England with the rest of the United Kingdom, along with the pound as a joint currency.
Britain's three big political parties say they are not bluffing when they rule out such a currency union.
The question of what money an independent Scotland would use is the biggest point of contention ahead of the vote on Sept. 18, which opinion polls show is too close to call.
Unless British leaders do a U-turn and agree to a currency union after a vote for secession, Scotland would face the choice of adopting the pound unilaterally or creating a currency run by a central bank of its own.
If it took the latter route, some economists say, the oil-producing country could struggle to build up sufficient reserves despite Salmond's hopes of creating a Norwegian-style sovereign wealth fund.
Using the pound without an agreement with the rest of the United Kingdom would raise major questions about the ability of Scotland to provide support for its banks and steer its economy.
A former top European Union official warned last week that it would also kill Scotland's chances of the joining the EU, something which is central to Salmond's independence plan.
Olli Rehn, monetary affairs commissioner in Brussels until July, said Scotland would have to commit to joining the euro zone as a condition for accession to the broader EU, something he said the country would be unable to do if it did not have a monetary authority of its own.
Salmond has said an independent Scotland would not join the euro.
The British government seized on Rehn's comments to renew its attack on the nationalists' proposals.
Rehn's view has been challenged. Andrew Hughes Hallett, a member of the Scottish government's council of economic advisors, said Scotland could set up an embryonic central bank of its own and argue that it was outsourcing its functions to the Bank of England, even if there were no currency union.
"You have to have the paraphernalia of a central bank in place so you can signal that you can go into the euro, should you choose to do so," said Hughes Hallett, who teaches economics at George Mason University in the United States and St Andrews University in Scotland.
"But there is no requirement that you go into the euro."
He pointed to EU member Sweden which has so far not been required to make good on its commitment to join the euro zone.
Such arguments may one day be heard in the European Court of Justice and they would probably run into opposition from within the bloc, not least from EU member Spain. Madrid is worried that a smooth Scottish accession would embolden Catalan nationalists.
NEW COUNTRY, NEW CURRENCY?
A simpler option, many economists say, is to create a new Scottish currency under a new central bank, giving the new nation more freedom to pursue its own policies.
The task of creating a central bank itself is not a big problem. The Edinburgh government has already proposed the creation of a Scottish Monetary Institute to oversee the banking sector and collect data.
Institutions such as the International Monetary Fund would be able to help. Croatia and Slovakia, which were born from bigger nations, set up central banks smoothly.
Wim Boonstra, chief economist at Dutch bank Rabobank, said Scotland, with its long history of producing leading economists, would have no problem finding the right people.
"In a technical sense, if there is a transition period of two years, of course you can establish a central bank," said Boonstra, who teaches money and banking at the Free University in Amsterdam.
If Scotland chose to launch its own currency, the most likely option would be to peg it to the UK pound.
James Mirrlees, a Nobel prize-winning economist who advises the Scottish government and favours a formal UK-Scotland currency union, said Scotland could follow the example of Hong Kong which pegs its dollar to the U.S. dollar.
He also said Scotland would be able to borrow to build up reserves to back up a new currency, despite warnings from London that it would face higher borrowing costs, especially if Scotland shuns its share of UK debt in response to a refusal by the UK to share the pound.
Ronald MacDonald, an economics professor at Glasgow University, said building up reserves could be more problematic, something which would raise questions about the Scottish nationalists' public spending promises.
Similar-sized Nordic countries each held on average around 40 billion pounds of reserves while Scotland's share of the United Kingdom's reserves would be only around 6 billion pounds, he wrote in the Financial Times.
"To generate sufficient reserves would require an austerity programme," he said.
An austerity programme? Like, you mean...RAISING TAXES AND CUTTING SPENDING????
Noooooo! We'll be setting up a sooocialist utoooopia!!!!!!!
I do so hope they vote yes.
