It's amusing (and rather scary) to watch the SNP's lack of understanding about how currencies work become so obvious.
Sterling is a 'fiat currency' and so only exists because it's backed by the UK Government. Sterling is useful and has value only because it's Government backed. When currency traders, speculators and international traders worry about a government and the economy that government manages then the currency drops in value compared others.
So, for a currency to have value the government that backs it needs to be trusted. Much of that trust is based on the view that national and international business has in the government and how financially responsible the government will be.
As the Euro has shown having one currency for economies managed by two or more governments can be problematical. It's interesting to see many Euro member politicians wanting to further integrate European political and economic power to protect the Euro.
If there were to be a rUK/Scotland currency union then the major player, the rUK, would clearly have the major say in the economic policies on the countries in the union. This would include interest rate policy and government borrowing.
Would the rUK really make decisions to the benefit of the 5million in Scotland and the detriment of the 60 million in the rUK? The obvious answer (basically, no) is one of the reasons that the SNP want independance.
Does it really make sense to gain independence and then shackle your monetary policy back to the country back to the country you've just gained independence from?
The two point of a fiat currency is that it's backed by a single coherent government. If you want to be part of that fiat currency you need to be part of that government.
Both Scotland and Europe have interesting issues ahead of them. Politicians may duck and dive over the issues but the international money markets don't'...
Sterling is a 'fiat currency' and so only exists because it's backed by the UK Government. Sterling is useful and has value only because it's Government backed. When currency traders, speculators and international traders worry about a government and the economy that government manages then the currency drops in value compared others.
So, for a currency to have value the government that backs it needs to be trusted. Much of that trust is based on the view that national and international business has in the government and how financially responsible the government will be.
As the Euro has shown having one currency for economies managed by two or more governments can be problematical. It's interesting to see many Euro member politicians wanting to further integrate European political and economic power to protect the Euro.
If there were to be a rUK/Scotland currency union then the major player, the rUK, would clearly have the major say in the economic policies on the countries in the union. This would include interest rate policy and government borrowing.
Would the rUK really make decisions to the benefit of the 5million in Scotland and the detriment of the 60 million in the rUK? The obvious answer (basically, no) is one of the reasons that the SNP want independance.
Does it really make sense to gain independence and then shackle your monetary policy back to the country back to the country you've just gained independence from?
The two point of a fiat currency is that it's backed by a single coherent government. If you want to be part of that fiat currency you need to be part of that government.
Both Scotland and Europe have interesting issues ahead of them. Politicians may duck and dive over the issues but the international money markets don't'...
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