Quote:
Originally Posted by Chris
I think you may need to re-read my post.
What the SNP demanded in 2014 - a full Sterling currency union - will not happen. Not ever. Full currency union requires a common fiscal and monetary policy to be secure. The Euro does not have one and is highly insecure. The US Dollar does have one, is utterly stable and is the world's reserve currency. The UK Treasury argued in 2014 - quite reasonably - that full currency union, complete with unified fiscal and monetary policy, is exactly what Scotland has right now, and to detach the government of Scotland from that of the rest of the UK would unavoidably end that state of affairs. You can't have a common fiscal and monetary policy between two governments which also claim both to be sovereign over their own affairs. It is a contradiction.
There is nothing to stop a third party country from using a currency that is not its own, either by directly circulating foreign banknotes, or else holding a supply of foreign notes equivalent to the value of domestic promissory notes it circulates within its own territory. For small, stagnant economies this can work fine. They lose some flexibility and dynamism but they save a lot of time and money because they don't have to worry about managing a currency for themselves.
You mentioned Ireland - they didn't quite do as you're suggesting. They hoarded a range of foreign currencies as backing for Pound Irish, buying and selling as necessary to ensure that the Punt retained parity with Pound Sterling. This approach is called a "currency board" and is widely used in many of the world's smaller economies.
The problem with any of the above from a Scottish perspective is that, by its rhetoric, the SNP doesn't see an independent Scotland as one of the world's small economies. In 2014 they talked it up endlessly. Their economic ambitions simply weren't in line with any achievable solution to the currency problem.
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Thanks for your comprehensive reply. I think if Scotland voted leave it would have to modify its currency ambitions but I doubt the SNP wants to raise the matter at this stage; ideally keep it in the long grass until after any vote.
In what way is the Euro insecure? People have been forecasting its demise since it was introduced in 1999. Surely it is more stable than Sterling which covers just one economy as it covers 19 countries including the largest EU economies.