Does Scotland need its own currency after independence?

There is still an ongoing debate on whether Scotland would need its own currency immediately after independence. I am baffled by this. The answer is yes if Scotland wants to really be independent. It's as simple as that. I explain the detail in this video.
ABOUT RICHARD MURPHY
Richard Murphy is a chartered accountant. After training with what is now KPMG he established his a firm of accountants in London, of which he was subsequently senior partner, in parallel with a career as an entrepreneur and company director which lasted until his early 40s. He then moved to a career in campaigning and academia. He co-founded the Tax Justice Network in 2003, the Green New Deal in 2008, the Fair Tax Mark in 2013 and the Corporate Accountability Network in 2019. From 2015 to 2020 he was Professor of Practice in International Political Economy at City, University of London and is now Visiting Professor of Accounting at Sheffield University Management School. His best known book is ‘The Joy of Tax’.
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[@jono_cc2258]

The lack of a clear economic plan was one of my biggest concerns, as was leaving the EU, how they can't address the currency and wider economic policy to this day is mind boggling.

[@bonariablackie4047]

If Scotland joined the Euro, thus ends any issue with currency when it severs ties with the Treasury in London. In addition, it would be completely responsible for taxation and spending in Scotland. It would be able to forge closer trading equivalence with the EU, and would, in time become a full member of the EU with all the benefits that would bring Scotland.

[@helenlewis1065]

Scotland need and deserve independence. Let's fight together for it !!!

[@julianshepherd2038]

Yes

[@PabloTBrave]

The only people wanting Scotland to use sterling after independence is SNP. If Scotland is independent It should have it's own currency. If Scotland then wants to join the EU it will have to commit to the euro at some point , and the EU is pushing this more and more .

[@rogerbrown5763]

rep of Ireland have done it, got the Euro, now look at them leaping and bounding ahead and good luck to them

[@chiefgilray]

@PatchesRips what position do you hold in the EU?

[@bonariablackie4047]

Having your own currency is expensive. It would struggle against all known currencies. The Euro struggled for years. It would be better to use the Euro, then try to do a Scots Dollar or Scots thingummy.

[@kieranwyse8227]

Given the amount of trade Scotland has with the rest of the uk and hopefully increasingly with Europe. Would it not add additional costs to individuals that have to change currency each time anyone outside Scotland would like to do business in Scotland? Would it be possible to still use sterling and the euro as legal tender in shops, restaurants etc. and what effect would this have? I and not being rhetorical here, I do not know.

[@grahamthomson6969]

I noticed that Marks and Spencer use to take Euros. I suspect that the exchange rates were in their favour. I think it would be up to the individual shop what currency they took but the shops taxes would have to be paid in local currency.

[@StrixTechnica]

@PatchesRips I agree with Murphy that joining the €Z would be a catastrophic mistake (if the past decade isn't enough to demonstrate why I don't know what will) but, should you want to join the €Z, you would need a Scottish currency first in order to prove competence at managing the economy after price discovery establishes some new equilibrium. It wouldn't be a quick process, anyway.

[@davidcann8788]

Exactly. What would be the point of independence for Scotland unless it was a sovereign state, with a sovereign currency?

[@bonariablackie4047]

The UK is a sovereign state, but it uses Sterling. America is a sovereign state but it uses the Dollar. Being a sovereign state doesn't mean you can't use the Euro. 27 Sovereign States do exactly that. They are no less sovereign because they don't have to change their currency to work and live in another country.

[@bonariablackie4047]

I think the best option for Scotland is the Euro. Rather than the cost of making a new currency and THEN joining the Euro when Scotland joins the EU.

[@rogerbrown5763]

Nothing wrong with the Euro, welcome all over the world

[@gordonwilson1631]

No. Money creation is power. The Euro is giving power & control to others. Simple as that. If you don’t know how 97% of money (not cash) is created see The Bank of England Q1 2014 Bulletin two articles & videos on “Money Creation in the Modern Economy-“

[@geomac650]

Agreed. Scotland is a small country. Less hassle changing currency while trading

[@bonariablackie4047]

@@geomac650 And equally important. If Scotland joined the Euro, it would sever all ties with the Treasury in London.

[@geomac650]

@@bonariablackie4047 also correct

[@chel3SEY]

A new Scottish currency "doesn't pose risks"? Ridiculous.

[@davidmcculloch8490]

How does it pose risks?

[@chiefgilray]

Explain... Slovakia managed fine,

[@georgeross9834]

Fantastic explanation, thank you

[@bobbresnahan8397]

Yes and if it doesn't it will be in trouble, serious trouble.

[@karlkerr7348]

Yes it does if it wants control over its own sovereign economic policy.

[@robertkincaid7335]

Mr dribble loves a good dribble talk

[@MadTamB]

One of your plants looks as if it needs watered.

[@uweinhamburg]

No real reason why not to use the GBP and the Euro as a parallel currency. Shops could be forced to accept payments in both and employees could tell their companies which currency they want as payment. And the exchange rate of the day could be on the front page of each newspaper and a standard element of each TV news broadcast. The tiny minute to minute changes are only interesting for monopoly bankers, not normal citizens. This way the people could decide with their purse which currency it will be in the end.

[@donharrold1375]

Like Panama?

[@chiefgilray]

@@donharrold1375 Scotland gets you triggered huh

[@donharrold1375]

@@chiefgilray It doesn’t get me “triggered” as you put it. I simply try to put across an honest and realistic perspective about the risk of independence. It’s not that Scotland wouldn’t become a highly successful small European country eventually. It would. I’m more concerned about the wreckage that would ensue during the transition. The SNP are economically and fiscally incompetent and would lead Scotland to ruin.

[@philg7889]

According to your analysis, going independent, with your own currency, appears to be of great benefit. So why stop at Scotland? Why not make individual streets independent, so the local community can look after its own, and not worry about the people down the road? All this divide and conquer thinking is ruining the world. However, if Scotland does go, I wish them the best of luck.

[@DrSpooglemon]

It's not about divide and conquer, it's about us getting way from perpetual Tory rule that we never vote for.

[@chiefgilray]

What a stupid comment

[@stewartmcintosh1073]

You're correct but independence not join in Europe because you have to take the Euro one so you have the same problem all over again

[@tonynewnham3114]

How will iScotland deal with its budget deficit? Will MMT perpetually prop that up? Or will economic growth mitigate the budget deficit in the short term? I'm not sure there is room for tax hikes, but maybe things like free tuition fees for universities will stop, free prescriptions? What are your thoughts on these problems, could you make a video around these subjects? Me and many others would be very interested to hear your musings....??

[@donharrold1375]

Economic growth could eventually deal with the deficit; higher revenues lead to higher tax returns and that could eventually balance the books providing that inflation was controlled. The question is how would economic growth be encouraged. It’s also worth considering that even with the correct economic policies, growth takes time to actually happen. Inflation on the other hand can happen rapidly. Inflation controls are highly linked to currency. If the new currency exchange rate was to depreciate, which would be quite likely at least in the short term, then inflation would be inevitable. Scotland could easily find itself in a cataclysmic downwards cycle where it was impossible to square the fiscal budget. The problem is really instability; navigating the choppy waters to get to a steady position might not be that easy.

[@chiefgilray]

@@donharrold1375 the uk is not on a good path... Best to make our own

[@alst4817]

Yes, to be successful as an independent economy, and as a small country, Scotland must trade everywhere. Small countries need a large foreign trade to survive. What trade policies will independent Scotland pursue?

[@nebody4457]

The SNP have a policy of a new currency on independence, asap. And what's with the six am premiers? Who do you think is watching in the UK at that time in the morning?

[@cathjones4899]

The membership voted for it but it’s clear the leadership is not on board. If they were they would lock Andrew Wilson in a cupboard and stop him proliferating the GCR recommendations which they are still supporting.

[@stewartmcintosh1073]

How about you've got a mortgage in English money recall English money you get independence your Scottish pound is weaker you have to pay that mortgage back is the amount to get on at the time another currency

[@chiefgilray]

English money? What is "English money" exactly...

[@TomekSw]

EURO!!!

[@DrSpooglemon]

no

[@gorseyleas]

This is a red herring. The problem for the secessionists is the deficit, not the debt; it is a flow not a stock issue. The UK does not have a public debt problem so this was never going to be such a overwhelming issue. How the deficit gets funded after leaving the UK is the issue that needs addressing. Is the solution going to be austerity or borrowing? If it is borrowing, in which currency will the debt be issued? Who will buy the debt and at what borrowing cost to the taxpayer?

[@chiefgilray]

Scotland has no national debt though so an independent Scotland 's deficit wouldnt be as much of a burden if independent

[@gorseyleas]

@@chiefgilray Back to talking about stock again! That doesn’t answer the question.

[@chiefgilray]

@@gorseyleas again, Scotland does not have a national debt... The uk is in massive debt and has an austerity and borrowing in its future so basically its the same if we stay in the uk... The uk's credit rating has already been lowered and at this stage, will be again... Which currency was debt issued in to the likes of Slovakia? Do you even know how other independent countries worked?

[@gorseyleas]

@@chiefgilray OK, I am a monetary economist, so seriously I do actually know what I am talking about. Let me explain. The stock of debt is not greatly important, provided it is stable as a proportion of GDP. The UK’s public debt to GDP ratio is around 100% of GDP which is pretty close to its average level over the last 200 years. It is also much below the peak periods (1920 to 1970 and early 19th century). The record level was around 260% of GDP after the Napoleonic wars. If you don’t believe me, the UK public spending website contains all the historic data. Look at the graph of UK Government debt since 1692 (under History and Analysis) and you will see what I mean. Why doesn’t the stock matter so much? Because provided the nominal cost of financing the debt and the rate at which the debt is being accumulated (this is the flow or in other words the actual budget deficit) is at or below the growth rate of nominal GDP then the stock of debt as a percentage of GDP will not increase The UK can borrow at much lower rates than its real growth rate. The current real borrowing costs for the UK are actually negative. In other words, when economy grows faster than the debt accumulates, total debt falls relative to the economy. This is basically the history of UK public debt and why, contrary to your claims, the UK does not face long term austerity. No serious economist would really think otherwise. The rating agency point is totally irrelevant since the UK public sector borrows overwhelmingly from the UK private sector in the currency that the central bank controls. There is therefore zero risk of default (short of a Bolshevik revolution). Indeed this is why the yield on government liabilities is known in financial economics as the ‘risk free rate’ and is precisely why the UKs borrowing costs remain so incredibly low, irrespective of rating agency action. Why then is the flow so important? Because if the deficit is not cut and exceeds the long term nominal GDP growth rate, it will grow exponentially and will quickly get out control. The only way out is massive austerity (to bring the deficit down to a sustainable percentage of GDP) or default which would be financially catastrophic). This is the situation Scotland would be in in the event of independence. It is simple mathematics and the math doesn’t lie! btw Slovakia is not remotely a realistic comparator, since its deficit was a very sustainable 1.9% of GDP going into the pandemic.

[@montytostig6643]

​@@gorseyleas All I can say you are deadright. Wish people would take time to understand this - it is simple once you think about it. Scotlands defict was 9% of economy when pandamic began (over 20% since) - 9% wud mean really bad austerity :(😮‍💨

[@lynxo5695]

The SNP want to rejoin EU. Given that, why is it bad for them to adopt the euro?

[@stewartmcintosh1073]

Simple you using someone else's currency you're going to have the same problem again someone else will give you your interest rate these rates might not suit you or your Economic and your country what houses are problem in the European Union one size do not fit all

[@chiefgilray]

@PatchesRips that's like saying geany was a basket case... Economies rise and fall

[@donharrold1375]

The challenge with any new currency is establishing an appropriate exchange rate. That would be significantly uncertain in the case of Scotland. Two potentially negative consequences could occur quickly after Scotland’s newly formed central bank became operational. The exchange rate could fall dramatically if investors and speculators perceived a relative weakness in the Scottish economy compared to the rest of the UK. That would be a reasonable assumption considering that the Scottish economy currently underperforms the rest of the UK. That would have two significant consequences: Devaluation of savings and assets priced in the new currency; a need to increase interest rates to defend the currency and prevent it falling even lower. Both these consequences would be utterly disastrous. Why do it? Look at the history of the Argentine Peso. Sobering.

[@chiefgilray]

Scotland's economy is nthign like Argentina pal

[@donharrold1375]

@@chiefgilray Correct, Argentina’s economy is much bigger and more diverse. It (Argentina) has larger land and natural resources and isn’t facing the same demographic challenges. Scotland’s principal plus point is its relatively capable and well educated workforce, but the current political and economic leadership is woefully inept.

[@chiefgilray]

@@donharrold1375 you do understand that the uk is in financial control of Scotland though right... We get a budget from Westminster which they borrow heavily to provide... As for Argentina having a more diverse economy, 😂😂😂😂 okay son GDP per capita of Scotland is over 40k whereas its 8k in Argentina... Good effort though, clearly you know nothing

[@donharrold1375]

@@chiefgilray I’m not saying that Scotland has nothing going for it. It clearly does. A very capable work force and, relatively speaking, a strong work ethic. The problems are abundant though. Scotland has an ageing population; every year fewer and fewer people are economically active and the Scottish economy is not an attractive environment for inward investment to help reverse that trend. Partly that’s down to the overall UK political and governmental structure, which concentrates wealth and investment in the South East, but a large element is down to the prevailing negative, spiteful left wing politics of the SNP. The question you have to ask is: would you take the risk and invest your money in Scotland, when Sturgeon’s goon squad is likely to legislate in a way that will make success unlikely. Frankly their track record in government has been amateurish, parochial and appallingly ineffective, and I have no confidence in their ability to organise anything, far less an orderly transition towards independence. I think economic meltdown would be more likely than not. My preference would be to remain in the UK, and provide the Scottish Parliament with full fiscal autonomy to set its own budget and vary tax rates as it desired. Any chance of success though requires a different breed of politician and politics. The cadre of ex social workers, Trumpton town clerks and ex football referees running the country are utterly incompetent and out of their depth. Scotland needs less legislation, smaller government, lower taxes, more inward investment and economic activity and frankly fewer people waiting for the next hand out.

[@donharrold1375]

@@chiefgilray Argentina is a good example. Abundant natural and human resources; massive untapped potential, but an ineffective and corrupt administration holding progress back? That’s what Scotland would become with the SNP in charge. I don’t think government corruption is much of an issue in Scotland, but competence clearly is. The SNP have filled the Scottish parliament with dullards; the flotsam and jetsam of the student politics and local government scene. With little vision and imagination, their instinct is to legislate and control rather than let people get on and thrive. Endless promises to the great unwashed about abundant money trees and a land of milk and honey are simply pipe dreams.

[@grahamthomson6969]

How do the EU countries get by when they can't print their own currency? Who actually makes euros?

[@cathjones4899]

The European Central Bank. All the countries in the Eurozone are currency users not issuers. See the problems with Italy and Greece and Spain. Some of this could be managed far more effectively if they had their own currencies.

[@grahamthomson6969]

@@cathjones4899 Thanks

[@cathjones4899]

@PatchesRips the Eurozone will continue to have major problems if it does not replicate the functions of a central bank with fiscal and monetary responsibilities alongside a common idea of managed and guaranteed “debt”. This is what has been stripped from countries with their own currencies. Spending is not an issue if you have your own currency as long as you properly manage and balance your economic sectors. The EU rules do not allow for any deviation from their arbitrary deficit rules which is crazy and utterly against what is in the interests of individual states. Why would countries who have their own currency need to be “bailed out” that makes no sense. Yes, fluctuating currencies are an issue for trading but is the flattening of this issue worth the concomitant loss of control over individual economies? Member states who have their own currency still manage to trade with the EU.

[@chiefgilray]

@PatchesRips lol like Germany???

[@donharrold1375]

How would you deal with debt established in Sterling if the Scottish currency depreciated say 20-30% relative to Sterling? That would increase the debt burden on existing mortgages and loans by 25-43%? Every business, public body and mortgage holder in Scotland would be pushed to the brink?

[@tonynewnham3114]

Which debt would an iScotland 'establish' in sterling? With my limited knowledge, that doesn't seem a sound idea when you have your own currency....

[@donharrold1375]

@@tonynewnham3114 I’m talking about the millions of mortgages that have already been struck in Sterling. When a “Scotopunt” ends up being worth 70-80 pence how will people feel when they’re poorer and burdened with a higher level of debt than they can afford?

[@chiefgilray]

@@donharrold1375 just ask Slovakia pal ✋ managed fine

[@donharrold1375]

@@chiefgilray I love Scotland. I just don’t want it to be utterly ruined by an SNP vision that would lead it to economic failure.

[@donharrold1375]

@@chiefgilray Slovakia is a good example actually. Their currency devalued significantly after independence? They became the poor man of Europe overnight. Is that what you want for Scotland?

[@billpotter3383]

Great bit of Engsplaining.

[@countertopconfessions9975]

Engsplaining? What the fuck is that?

[@billpotter3383]

@@countertopconfessions9975 Engsplaining: Verb : When an English person explains to the Scots how much easier and better life would be if we would only listen to our English masters.

[@countertopconfessions9975]

@@billpotter3383 That's just negative visualisation. So, nobody who happens to be English can explain anything to anybody who happens to be Scottish just because they're English? Nevermind the nationality, pal. Did you even watch the whole video? Guy was reasonable and made good points. You're an idiot.

[@DrSpooglemon]

@@billpotter3383 Shut yer geggie!

[@chiefgilray]

@@billpotter3383 English masters???

[@petercolledge8204]

Should we call the new currency the Kilt?

[@chiefgilray]

Call it anything we want

[@davidmcintyre8145]

There is an easy solution to currency. As Scotland intends to join the EU we can just adopt and use the Euro

[@digger3606]

Yes, although there is a period of 2 years in the ERM beforehand,that members must sign up to, before the Euro can be used.

[@davidmcintyre8145]

The Euro could still be used"unofficially"there are already shops and companies in the UK that do business exclusively in Euros. It just means we have no control over monetary policy,interest rates etc but then we as Scotland have none now over UK monetary policy or interest rates.

[@davidmcculloch8490]

The downside is you can't set your own interest rates or use QE to issue money for capital projects. You are dependent on EU fiscal policy

[@davidmcintyre8145]

@@davidmcculloch8490 In Scotland under the union we already lack these controls being dependent on a UK central bank that pays heed only to the needs of a small percentage of the population of England and none at all to Scotland,Wales or Northern Ireland so at worst following EU Central Bank policies would mean no change but it could and likely would be a lot better for Scotland especially as the pound sterling is most probably going to collapse as a result of the combination of Johnson and brexit

[@davidmcculloch8490]

@@davidmcintyre8145 "collapse" is an overstatement with a fiat currency. Moving to the Euro is changing one set of austerity rules for another. Scotland would benefit from its own currency, to set its own interest rates and monetary policy. Worst case, the Euro as you say.

[@marklee7458]

Get ready 16% tax Mm you don’t want to say what risks are ?? just a hypothetical thought of a person..

[@chiefgilray]

16% tax... That would be good but I'm willing to pay for better services, cheap taxes means crap services and massive debt

[@boscoantony8088]

It's easy to say all these on KZbin videos, the reality is so different from the actual talks. It wont be easy for Scotland to rejoin EU as there are other hurdle to overcome. After all a hard border between UK and Scotland will cause more business to leave Scotland and many more consequence to be faced.

[@grubbygruber1621]

Or more business could leave the UK and head north ? If so, northern England would become a desert

[@bernieburrows3731]

@@grubbygruber1621 maybe northern England could have a referendum on staying part of Westminster gov, or creating it's own..

[@grubbygruber1621]

@@bernieburrows3731 thats a valid point too. Or come with us ?

[@bernieburrows3731]

@@grubbygruber1621 I wouldn't have a problem with that 😏

[@leonmcnair4615]

@@bernieburrows3731 in a geopolitical standpoint, they might actually fair better in that setup, being that they'd be closer to Scotland's capital and region than they are at London, maybe?

[@clarksson674]

Your talk is shite, every family and business in the UK would be effected so its not a Scottish vote in isolation. UK VOTE NOW !

[@chiefgilray]

Would it? How so? The majority of loans are from foreign banks anyway

[@clarksson674]

@@chiefgilray All backed and underwritten by the bank of England. I'm sure everyone left in the UK will be real happy backing Scotlands Pensions Mortgages and 400billion deficit

[@chiefgilray]

@@clarksson674 400 billion deficit, well If you think that's the deficit the you really need to do more research 😂😂😂 Scotland has paid into thw pensions, so will be due out. If England is so rich, sorry 'rich', then why are you lot not trying for independence???

[@clarksson674]

@@chiefgilray That not how it works so for research I think maybe you should do that 🤔 #radicalised

[@chiefgilray]

@@clarksson674 that's not how it works... So you just scream out any kind of figure and that's the truth is it? Scotland 's deficit is not 400 billion 😂😂😂 where did you get that figure from