On Thu, 18 Sep 2014 09:55:44 +0100, Big Les Wade wrote:

Rod Speed posted
Dave Plowman (News) wrote
Rod Speed wrote
Dave Plowman (News) wrote

Just been listening to an SNP person stating that a common currency
would be to the benefit of both an independant Scotland and what
remains of the UK. Again.

Since she obviously doesn't have the best interests of the UK at
heart, should anyone believe her?

Doesn't matter given that only Scotland gets to vote.

But not in their power to say under what terms they can use the
pound, though.

Fraid so.
That remains under the control of the UK government.

Nope. Any country is free to use any currency they like. The country
whose currency it is gets no say whatever on that. Plenty use the USD for
various reasons.

Ah. If all you mean is that Scottish institutions and individuals will be
able to continue holding sterling accounts and notes (as Puerto Rico does
with US dollars) then of course you are trivially correct.

But in such a set-up the Scottish government would not be able to borrow
money by issuing sterling-denominated debt instruments (because London
wouldn't back them) and therefore it couldn't manage its own public
finances independently. To do that, it must issue its own debt - i.e.
launch its own currency. And that is more problematic, because it requires
Edinburgh to persuade the markets that it can and will repay the debt.

If they still use the GBP after independence, it would mean they have /no/
say in how the Bank of England sets monetary policy & – even more
importantly – (as you say) Threadneedle Street would /not/ act as the
lender of last resort for Scotland's banks (just as the US Treasury would
not act as a lender of last resort to the Panamanian "Balboa - which is to
all intents & purposes is the USD by another name.)
And (as you again say) they'd have to have a Scottish central bank to
stand behind /their/ banks because the liabilities of the Scottish banks
are 12 times as big as the annual output of the Scottish economy. To put
that in perspective, in Ireland & Iceland they were eight times as big
ahead of the crippling 2007-08 banking crisis.