WE SHOULD NEVER BE DEFENSIVE ON CURRENCY.
I have been getting requests all the time to write an article on currency. I do not claim to be an expert on the subject but I have experienced the introduction of a new currency in a country where I was running a business. That makes me unlike most Scots who have always lived with the UK POUND. That experience brings me to my first point, changing currency is not the traumatic experience that the forces of Unionism would have you believe.
You require a central bank, any country can set one up. Your country does not even need to be Independent to do so. Estonia actually set up their Central Bank the year BEFORE they became Independent. They were moving from an economy based on the Russian rouble to a new Estonian currency, the kroon. They pegged their new currency at a fixed rate of 8 kroons to 1 German mark. They introduced their new currency TEN MONTHS after Independence.
The “experts” had a field day, how ridiculous, a tiny economy of 1.35 million tying their currency to the largest, most productive economy in Europe. It can’t possibly work they said , except it did, and the rate was never adjusted or changed until Germany scrapped the mark and joined the Euro. (Germany surrenders, Estonians joked at the time) At that point Estonia pegged its currency to the Euro at a fixed rate and thus it remained until Estonia joined the Euro in 2011 when Estonians experienced their second new currency being introduced in less than twenty years.
So what happened, how was it achieved? A date was set and on that date all deposits in bank accounts were moved from the kroon to the EURO. For a period of two weeks all transactions in all shops and businesses could be carried out in dual currencies. At the end of that period the Euro became the sole currency in use in Estonia. If after this date you suddenly discovered a whole stash of Kroons you could take it to the bank and you would be paid out the equivilant value in Euros. This all took place in 2011, if your granny died the next week, next year or the next decade and you found kroons under the mattress you could still cash them in. There is no time limit on how long this can be done. That ladies and gentleman was the total “disruption” involved for the average citizen in the country. Not very scary is it?
Now of course there is much more to it for the Government of the country but it is not the huge problem that Better Together made it back in 2014.
The big mistake, and a mistake it was, was stating that we would continue to use the pound. It was said with the best of intentions, not wanting to make older folk think it was going to be a huge change, but what it did in truth was give Westminster the opportunity to create difficulties and they grabbed it with both hands and here is the first lesson we should learn from the experience. The average voter does not understand the technicalities of currency, so the more you can keep your proposals simple and easily understood the better. The minute you get dragged into the intricacies of the argument you have lost. It is much easier to scare on a subject where there is general ignorance than it is to reassure. The irony of course was that the Better Together position was all bluff. If Scotland had voted Yes, the Bank of England would have been begging the Scots Government to stick with the pound. This was widely accepted across the financial community as anything else would have been a huge problem for the UK pound in the currency markets.
So our policy on currency should be, we will have our own currency (Scots pound or whatever) just the same way as dozens of other countries, much poorer and smaller than Scotland have done. Initially for reasons of stability it will be pegged against (your choice) My preference would be to tie the Scots pound to a basket of three currencies, the UK POUND for historic trading reasons, the EURO, given our extensive trading and export performance with Europe and the US DOLLAR because of our considerable oil wealth. This would provide a platform to argue our savings, pensions etc would be safer tied to three major currencies rather than being tied solely to the UK POUND which as we all know is mired in huge debt. Our tactic here is to force Unionists to explain how a rich country like Scotland with huge natural resources can uniquely be unable set up our own successful currency when so many others, poorer and smaller than Scotland already have.
The most common problem associated with creating a new currency is being able to earn sufficient foreign currency to build up a foreign currency reserve. Scotland fortunately is in a very enviable position when it comes to this as oil is priced in dollars and our excellent export performance and balance of trade surplus makes this much less of a problem that it would be for most other countries in the World.
Instead of getting tied up in technicalities our spokespeople should respond with answers like “it will be a decision for the first Scottish Government” if they persist you go on the attack “have you any idea how insulting that question is.? Why do you constantly talk Scotland down? How dare you suggest that a highly successful, well educated country like Scotland can’t do what, insert a huge list of countries have already successfully achieved”. Watch Unionists squirm as they struggle, as they respond you just fire in a few more examples with every sentence. They have no answer.
We need to train our spokespeople to argue off the front foot next time round. It works by the way, I did it on a BBC radio programme right at the start of the 2014 Referendum and severely verbally beat up a Tory from Better Together. I was never invited back by the BBC for the entirety of the referendum. They can’t do that with everyone, our people need to know our currency script inside out. When the BBC don’t invite you back you know you have landed a mighty blow. A true badge of honour. I of course was arguing for our own currency, it would not have been possible to deliver to the same effect arguing to stay with the UK pound.
So we should be confident about currency, keep “experts” from our side locked up in a bunker somewhere, stick to the offensive message and force them to defend their position. If we do, we win!
For a bit of fun I compared the exchange rates of the Great Mighty Pound in September 2014 with the pound today. In 2014 the pound was worth 1.63 dollars. Today as I write this the exchange rate is 1.32 an almost 20% drop in value. So sticking with the pound as advocated by Better Together has been another decision that cost Scots money as well. We can do better. Much better.