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Discussion point: currency options for an independent Scotland

In the event that Scotland disregards my feelings and votes for independence, what currency would you recommend it use?

Opinions on this matter do not split neatly between Left and Right. Here are two of today’s articles on the subject; one from the Adam Smith Institute and one from the Guardian. A few days ago the pro-independence, pro-market campaign group “Wealthy Nation” republished this article from the Institute of Economic Affairs, recommending that Sterling be kept for the time being. It looks a serious piece, but it was written before the recent interventions by George Osborne and Manuel Barroso.

Commenters wishing to use words like “seignorage” are requested to give me warning first so that I can hide behind the sofa.

81 comments to Discussion point: currency options for an independent Scotland

  • If the Scottish demos wish to create Havana-on-the-Clyde, I say “God Speed” to them. The sooner the better really. Scotland’s most entrepreneurial and productive folk will end up decamping en mass to London and hopefully the Islington Set will abandon London en mass and head north of Hadrian’s Wall seeking the long dreamed of Socialist Paradise.

    There is simply no downside to that scenario seen from where I am sitting.

    What currency should an independent Scotland use? Cuban Peso of course!

  • John K

    It won’t be gold, that’s for sure.

  • PeterT

    I could of course trot out ‘bitcoin’ or ‘gold’ but realistically:

    – keep the pound (the UK can’t stop them)
    – keep the pound but make euro legal tender also (and perhaps allow taxes to be paid in Euro)
    – Start a new currency.

    Probably the second option is best within this set, as it provides some flexibility whilst denying Scotland of the ability to resort to the printing press.

    A new currency is probably not a good idea if Scotland starts it new life with its slice of the UK’s debt, denominated in Sterling. (I bet they will default on it somehow though.)

  • Mr Ed

    Scotland’s most entrepreneurial and productive folk will end up decamping en mass to London

    Has that not already happened? And if those who decamp on independence bring ‘Scottish’ political ideas with them, would that be an improvement? Might it just reinforce the Islington Set? The lure of London is, in part, the great money fountain of the Bank of England spewing out economic distortions and thereby job opportunities that make parts of London prosperous and which distorts the entire economy.

    Why should Scots be permitted to move over the Border into rUK (remainder of the UK) if they are independent, should they not lose British nationality, and become Commonwealth citizens? It would be imperious to claim that they remain citizens of the UK after independence. As non-EU, non-EEA citizens, they would have no right of freedom of movement and establishment in the rUK and, fiscally crucially, no right to welfare in rUK. Rather like the San Marinese.

    There was a Scots Pound long ago, trading at 12/1 with Sterling by 1707. The obvious libertarian angle is that there should be complete monetary freedom in Scotland, and let a currency (ies) emerge. The horror of the newly-independent Scottish Kingdom not being able to borrow on the international capital markets is about as terrifying to me as a good harvest of wheat.

  • Sigivald

    I suggest the “McDollar”, in honor of Scrooge McDuck. Sadly, it’d be too confused with a stupid “anti-consumerist” wordplay on McDonalds.

    (I don’t suggest a metallic currency, because it’s pointless; the only utility of such is to prevent inflationary policies.

    Thus if they want a non-inflating currency all they have to do is not inflate their currency; this is the reason people like Mises argued for gold in the 20s and 30s – because inflationary policy was actually popular for a time, disastrous as it was, and predictably so.

    That non-inflationary fiat currency gets all the benefits of metallism, without the need to stockpile giant gobs of metal, and without having to worry about the worldwide potential for precious metal bubbles and fluctuations unrelated to the actual Scots economy; being the only gold-based currency on Earth is much more awkward than being one of many.

    If they wish an inflationist policy, well, nothing can really stop them – and people will flee the depreciating currency in droves.)

  • Brian Micklethwait (London)

    How about the Zimbabwe solution? Allow all currencies, and let the best one(s) win. Not have a nationalised one of their own. And let the market sort out all the “confusion”, same as it did with computers when IBM compatibility happened.

    I know, too sensible. But worth throwing into the argument.

  • Patrick Crozier

    Deep-fried Mars Bar?

  • Paul Marks

    The Zimbabwe solution is the least bad one – the Guatemalan solution is a variant (allowing people to make any contracts in any currency – whilst still having a government one).

    Of course no one is suggesting a commodity money.

    Even in the early 1960s some of the coinage of many nations was still basically) silver – and there was a link between even the paper currency of Switzerland had a link with gold till the 1990s.

    Now we get a choice between government fiat (whim) currencies – and the “crypto” currencies (i.e. air pies).

    Not good.

  • Julie near Chicago

    “Air pies.”

    Inspired :>))!!

    . . .

    Depending on your estimate of Gary North as an economist (I don’t have one), see this:


    73% Loss on Bitcoins

    Written by Gary North on February 17, 2014

    For anyone who bought Bitcoins at the top at $1200 in December, he has suffered a 73% loss if he bought from Mt. Gox, the largest American exchange.

    If he bought Bitcoins from one of the competitors, he is down by about 48%.

    Bitcoins are wildly volatile, as I have warned repeatedly. This is why they are not money. They are crap-shoot investments….

    [SNIP of much more….]

  • Mark

    They can use whatever they like at their own risk. All that Osborne, Cameroid et al have said is that the taxpayers of England, Wales and Ulster will not be guarantors. A perfectly reasonable and totally expected response one would have thought.

    I must say, the next few months are going to be very interesting.

    Of course, unless Scotland has its own currency it is not independent so that really is the only proper thing to do.

    They should call it the “which part of independent don’t you understand” divided into a hundred “dariens”

  • PersonFromPorlock

    Just a WAG, but since the people of Iceland seem to be more serious about fiscal integrity than most, how about the Icelandic króna? Fiat currency may be inevitable, but fiat currency that changes value at the whim of government is not.

  • Mr Ed

    PfP Iceland has a long, inglorious history of inflation.


  • Paul Marks

    Mr Ed is correct.

    As for fiat (whim) currency that is not inflated.

    Then what is it for?

    The basic point of having a fiat currency (rather than a commodity one) is so one can inflate it.

    Otherwise one might as well have commodity money.

    Of course dear Max Keiser (yet again today claiming that unlimited Welfare States could be afforded – if only it were not for the bankers…..) claims that Iceland should introduce a “crypto currency” “backed by energy” (geothermal power that is very useful in Iceland – but is actually not impractical to export from Iceland).

    Next he will be suggesting wooden blast furnaces.

    An in-joke for Mr Ed.

  • Mr Ed

    Paul, it is recorded by Robert Conquest that the Soviets built blast furnaces from wood in order to meet Stalin’s quotas. I had once fondly imagined that a gross output indicator might be met by such methods in satire, a reductio exercise, but Conquest showed me that socialist reality got there long before.

    My own plan for Scottish independence involves its expulsion from the Union in May 2015, after Rockall Act is amended and it is is reclaimed as UK territory. All Scottish MPs leave Westminster and none are returned, even if all welfare payments in Scotland cease in week 1 of independence as there would be no money to pay for it. Human cannonball devices are installed at Berwick and Carlisle to return unwanted Scots, whilst Army Group North sets up base camp in Chillingham Castle lest Wallace’s heirs return to burn women and children in the local Abbey as Wallace did. But purely on the basis of a net reduction in government expenditure. Then Scotland might flourish and a currency might emerge, after all, a free currency is what economic actors make it.

    I would then expel England, Wales and Northern Ireland from the UK, leaving the gannets on Rockall to meet the National Debt, and to crap on the creditors who seek to recover it.

  • Sam Duncan

    The whole debate is absurd. As a new state wishing to join the EU, it’ll have to accept the acquis communitaire in its entirety. That means EMU and the Euro. I don’t know what all the arguing is about (other than the SNP not wanting to admit this because it would scupper their already slim chances of winning the referendum). Granted, there’ll have to be a transitional period, during which Sterling is the obvious choice, but that’s all it’ll be: transitional.

    Always assuming the EU lets it in, of course. That could turn out… interesting. In the Chinese proverbial sense.

    As I’ve said before, much as I’d like to – really, I would – I just can’t take people like Wealthy Nation seriously. Minor, but telling, example: Dick Puddlecote reported the other day that electronic cigarettes will be banned near Commonwealth Games venues in Glasgow. I ask you, does this sound even remotely like a polity just itching to unleash its inner libertarian? A low-tax, small government Scotland, a sort of Isle of Man writ large, would be fantastic, but that’s just it: it is, literally, fantastic. It’s just not going to happen with a political class that thinks that sort of thing is perfectly normal behaviour, and an electorate who just sit back and take it because the Person in St. Andrews House knows best, and after all it’s for their own good.

    There isn’t a snowball’s chance in hell of sensible politics arising from Scottish EU statehood, any more than it has in Greece or Portugal. We were promised a Great Revival of the Scottish “Right” before, from the devolved Parliament, and it just didn’t happen.

    And Mr Ed points to the principal reason: anyone with an ounce of sense gets the hell out as soon as humanly possible. (What that says about yours truly, we shall quietly gloss over.)

    “Cuban Peso of course!”

    The Venezuelan Bolivar would be more Alec’s style.

  • Richard Thomas

    Sigivald: “was”?

    Julie, MtGox is not operating as an exchange at the moment as one can withdraw neither fiat (GBP or USD) nor Bitcoin. The colloquial terms for these are “Goxbux” and “GoxBTC”. No inferrence of the price or value of Bitcoin can be drawn from that entity. The price is expected to shoot up when/if BTC withdrawals are resumed, partly since those who are holding USD are expected to use BTC as an escape route.

    As to other exchanges, it should be noted that those who bought at the height of the previous “bubble” would currently be able to sell for more than twice what they paid (assuming they didn’t buy high, sell low). Make of that what you will.

  • Richard Thomas

    Oh, and there’s speculation (no pun intended) that the current low Gox price is because there is some skepticism about the liquidity of that entity and people think they’re more likely to be able to recover government-backed currencies than bitcoins if/when it fails. Which is interesting in itself.

  • Stuart

    Just out of curiosity one of the solutions to the Scottish currency problem is to use sterling/euro/whatever with out the support of said currency central banks, on the ASI piece the use the examples of panama et al. who get round this lack of central bank support with higher amounts of capitlisations, is such a set up legal under EU law? that is to say is a retail bank operating in the EU (whether inside or outside the euro currency zone) allowed to operate with out explicit deposit insurance/capitlisation/liquidity quarentees from a sovereign?

  • Alsadius

    OP: The pound and the euro are the only serious choices – a Scottish currency is ludicrous. Of the two, the pound is much more secure. I’d say no official currency, taxes payable in GBP, and if EUR usage takes off, petition to be let into the Eurozone.

    Paul Marks: The point of a fiat currency is that commodity currencies are hilariously unstable, and that instability causes serious economic problems. If you don’t like inflation, consider that the collapse of gold prices from the 1980 peak works out to something like a 30% average inflation rate for over a decade. Fiat is actually the stable option, not commodity. Yes, the motion is all in one direction, so over the long run it inflates, but the volatility is immensely lower. I prefer a zero inflation target to the now-canonical 2%, but I’ll take a 10% target over gold, if they can keep the 10% stable and predictable. A small tax on holding cash is hardly government’s worst sin. Hell, it’s not even in the top 10.

  • Nick (BTF) Gray

    What resources would Scotland have? Would it claim the North Sea oil fields? Or would it trade in bottles of whiskey? Say hello to the dram!

  • David Moore


  • PersonFromPorlock

    Mr Ed
    February 18, 2014 at 10:48 pm

    PfP Iceland has a long, inglorious history of inflation.


    I guess I assumed too much from their refusal to support a bank bailout. I stand corrected. I now suggest a monetary unit backed by baby giant pandas, the supply of which I understand to be quite hard to increase.

  • Mr Ed

    PfP Well one might hope that Iceland has learnt from their mistakes, the figures from the 1970s don’t make pretty reading either. My guess would be that they take the Golgrafrincham option from the Hitchhikers’ Guide to the Galaxy where, upon landing on Earth, they declared leaves as currency, then found it took 3 forests to pay for one peanut.

    The Golgafrinchams then started on a massive deforestation campaign to bring the money supply under control, which at least has a semblance of economic logic behind it. I suspect the Scottish political class would raid England’s northern forests for leaves.

    I look forward to spending my bitPandas on my next trip to the fine city of Edinburgh.

  • John K

    As a nation of about five million people, with still large oil reserves, it is not on the face of it implausible to imagine a Scottish state with an independent currency. The problem is that Alex Salmond does not want that. He wants Scotland to be a member of the EU, and thus a bit player in the European Project, and he wants to keep the Pound Sterling because he knows the Euro is political poison. Hence his fantastic plan for an “independent” Scotland to be in the EU and in a currency union with the UK. The fact that both the EU and the UK have told him this is not on is being portrayed as “bullying”, which just shows how pathetic the SNP stance really is. If they want independence they should go for it, no-one is standing in their way. In reality the SNP wants to be free to ban air guns and e-cigarettes whilst still clinging to the comfort blanket of the EU and UK. They are utterly pointless people.

  • Paul Marks

    Nick – it if it is “Scotland’s oil” then it is “Shetland’s oil” – no doubt the people of the Shetland Islands will soon work that.

    Mr Ed.


    Everyone bar the island of Rockall expelled from the United Kingdom.

    The birds of Rockall can be responsible for the entire National Debt (evil spend thrift birds – I fully support the actions of the creditors against them).

    Rockall (as the United Kingdom) would remain in the E.U. and be subject to the blessings of E.U. regulations.

    The rest of us would have to, somehow, live without the blessing of E.U. control of our lives.

  • Paul Marks

    Alsadius – I am interested to hear that you think that commodity currencies (which dominated the world for thousands of years) are more “unstable” than fiat (government whim) currencies. Especially as the high denomination coinage of many countries (including the United States) were still basically silver only 50 years ago (the early 1960s) and the Dollar was still linked (at least for overseas Central Banks) to gold till 1971 (the link between gold and the Swiss Franc lasted till the 1990s).

    I remember this great era of “currency stability” (the last half century) rather differently than you clearly do.

    When, and if, you build your wooden blast furnace – please stand directly beside it when you first bring it into operation.

    In the unlikely event you survive – you can make steel coins (which is where our coinage is going – even nickel being too “restrictive” for modern inflationists) and try and convince people that steel coins (or even bits of paper) are just as valuable as gold and silver coins (good luck with that effort).

    By the way – a Scottish fiat currency would be no worse than the Pound or the Euro, it would also be just legal tender laws and tax demands. And even that is better than “crypto currencies” (which are nothing at all, the contents of an empty bag, – hence the word “crypto”).

    The idea that fiat money is “backed by the wealth of the country” or “the wealth of the financial system” was absurd when the French Revolutionaries claimed it – and it is still absurd when Mr O. claims it now.

  • Eddy

    It seems unlikely that Scotland would remain part of the EU if they declared independence. If Scotland does apply to join the EU then they would be required to adopt the Euro (aiui). If they do want to join the EU then any currency arrangement would be temporary.

  • On this side of The Pond, we are beside ourselves with mirth at the Scottish Folly. As noted by my wife (Clan Fraser), “all the good Scots have already left the country; what’s left are the dregs”.

    Given that a huge proportion of Scotland’s future revenue would be derived from U.S. tourism and trade (i.e. whisky), why not let them use U.S. dollars? It’s the de facto world currency already, and we don’t care if they do.

    I’m also laughing at several of my English friends, who refer to Cullodden as “unfinished business”, and point out that at last there’s a decent use for Romanian/Bulgarian/Polish “guest workers”: rebuilding Hadrian’s Wall.

  • I must say that I found many of the comments here to be deeply upsetting. A few readers may remember me when I looked after the LA’s accounts for over 30 years.

    Inevitably we start with Hadrian’s Wall. It isn’t and never has been the border. Were it to be so even more of the offshore resources would be in Scottish waters and, amusingly, although Newcastle Central Station would be in England, St James’s Park would be in Scotland. I quite like the idea of Newcastle United playing in the Scottish Premier League. And as for the Charlton brothers playing for England in 1966 given that they were born north of the wall…

    More seriously. PeterT: Agree that keeping the pound is the best way to go. But, although the British state was founded by a voluntary merger between England and Scotland, London politicians insist that the UK would continue to exist as if nothing had happened after Scottish independence. Hence, the UK government has properly confirmed that it is liable for all UK debts. Despite that, Salmond has repeatedly said that Scotland would take on a share of UK debts, as long as we also got a fair share of the assets. The second part of that statement is almost always left out by Cameron, Darling, not to mention the BBC and the press. The assets to be divided would of course include a share of the UK government bonds owned by the Bank of England as a result of quantitative easing.

    Patrick: the two locations that I’ve seen selling the dreaded Deep Fried Mars Bar both assured me that the only customers were English tourists…

    Sam Duncan: sorry that you can’t take Wealthy Nation seriously. There’s a lot more going on behind the scenes than you might think. I can assure you that folk in the City and abroad are beginning to worry about a pound excluding Scotland given our smaller government debt per capita and our export figures.

    Nick(BTF)Gray: Why would Scotland need to “claim” North Sea oilfields? The ones relevant to this debate are in Scottish territory. As for “whiskey”, I don’t believe we make any in Scotland.

    Paul Marks: A recent opinion poll in Shetland found that over 80% wished to remain in an independent Scotland. Besides, even without counting any oil revenue the Scottish GVA per capita is 99% of the UK average.

    Kim du Toit: Sorry to read that I am a “dreg”. My tax bill indicates otherwise. As for Culloden, there were more Scots on the government side than were fighting for the statist Bonnie Prince Charlie.

    Best wishes to all of you.

  • Jaded Voluntaryist

    As one of Samizdata`s resident Scots, all I can say is my heart is breaking at the appealing state of my homeland. I find some of the comments on here more than a little tactless.

    In related news it looks like I`m going to have to contend with a State appointed guardian for my children.

    Consequently, I’m expanding my overseas job search and trying to hurry up with finishing my PhD so we can get out of here pronto. I wish with all my heart I didn’t have to leave, but the way things are going it appears to be my only choice.

    This is no laughing matter.

  • Jaded Voluntaryist

    * correction – “appalling state of my homeland”

    Stupid tablet…..

  • Alsadius

    Paul, it’s interesting to note that many commodity currencies were also wildly inflationary. Adam Smith has a section in The Wealth of Nations talking about how medieval Europe redefined weights aggressively in order to reduce the size of their debts as measured in actual metal. IIRC, the French at one point inflated their currency by a factor of 70 within a century, which is higher than the Federal Reserve, and vastly less predictable(and correspondingly, more economically damaging).

    Also, I’ll admit the obvious and say that governments need to behave responsibly for fiat to work. In the developed world, they generally do, but if you gave me a choice between gold and the Zimbabwean dollar, I’ll take gold of course. But the USD blows gold out of the water. http://en.wikipedia.org/wiki/File:Gold_price_in_USD.png is not my idea of stability.

  • Tedd

    It’s deja vu all over again! Quebec went through this same exercise and concluded that their best option was to retain the Canadian dollar, but with an agreement from the rest of Canada that they could also print it themselves. I doubt there’s enough chutzpah in the Scottish heart to propose that, nor enough guilt in the English to contemplate agreeing. Lucky you!

  • Snorri Godhi

    Sorry to be late to the party: just wanted to say that i am dismayed at the failure of some commenters to realize that Scots, like all other people, respond to incentives.
    At present, Scots have an obvious incentive to vote for more public spending. Remove this particular incentive (by granting them independence) and what other incentives are left?
    I’d expect a painful transitional period, but let’s keep things in perspective: it would be much less painful than it has been for the former Soviet Union.
    Much depends on how long it takes for the Scots to learn to vote sensibly. It has taken decades for the Irish, but maybe the Scots can learn from the Irish experience. (Not to mention the experience of the former Soviet states.)

  • Mr Ed

    Snorri, the Soviets built their society on around 60,000,000 corpses, today’s Scotland is built on welfare and fantasy resentment of the Union (it is really a hatred of freedom and the flimsy check on the State that the Union represents). The belief in public spending as a panacea is infused in the political discourse in the British Isles, hence John Major’s boast in the 1992 general election that he had spent more than the Labour Party had promised to spend at the previous general election. I do not think that the Scots as a political entity will ever learn, any more than Argentina. However it would have to be good thing that they would be contained within a smaller area that they are currently in by achieving independence, leaving some hope for England.

    Let us all secede until we have 1,000 Liechtensteins in these Isles. And even then the Crown Prince of that blessed Realm has endorsed the right of secession.

  • Tedd

    I do not think that the Scots as a political entity will ever learn, any more than Argentina.

    I hesitate to get involved with such generalizations, since they are inherently unfalsifiable. But I would like to remark that Canada avoided much (though not all) of the foolishness that infected the British Isles during the 20th century, and for most of that time the population was about 50 percent Scots-descended.

    (Full disclosure: my own ancestry is a bunch more than 50 percent Scots-descended, so I plead guilty in advance to accusations of bias.)

  • Laird

    Alsadius, commodity currencies are not, and cannot be, inflationary (“wildly” or otherwise) absent one of two factors: exogenous events materially affecting the extant quantity of that commodity (viz the Spanish/Portugese discovery and importation of vast amounts of gold from South America, and a massive gold strike such as the American gold rush of 1848, neither of which is likely to recur since we’ve likely already discovered all of the world’s major gold deposits); and governmental action intentionally debasing the currency. Your reference to Adam Smith talking about “redefining weights” is an illustration of the latter, as were such events as Roman and French adulteration of their coinage. In the 18th century gold (and silver) coins of various nations circulated freely around the world without any problem, and that fact tended to keep coinage honest (if any one nation started adulterating its coinage people would quickly catch on and stop accepting it, at least at face value). By contrast, there is not one example in all of human history of a country that issued pure fiat currency which didn’t eventually debase it, to its eventual sorrow. No monetary system is perfect, but a commodity-based one serves as a check on the depredations of the political class. It’s the only check which has proven to work over the long term.

    Which, by the way, is why I disagree with Paul about Bitcoin. Provided that the hype is true, and the amount of Bitcoins which can ever be “mined” is truly fixed and can’t somehow be expanded, that too would serve as a guard of their value. It really doesn’t matter what the “commodity” (real or virtual) backing the monetary system is, as long as it is relatively stable and not subject to political manipulation. That last point is the key, and it is a test which all fiat currencies fail.

  • Mr Ed


    I do not assert that political thought is determined by ancestry. It is an impermissible leap in deduction to believe that I do. I am simply speculating on future political trends.

  • Alsadius

    Laird: I see no reason to believe that we’ve discovered all the world’s gold deposits. The world is a big place, and improved mining and prospecting technologies are the sort of thing that comes along regularly. And those aren’t the only possible causes – the price of gold fell immensely after 1980, with no government interventions or major discoveries. You need to be able to explain that.

    That said, you being right is no great improvement. All that means is that the currency is now constantly deflationary, as a fixed pool of cash needs to buy ever-increasing numbers of goods. If your goal is stability alone, that’s no better, and pretty much every strain of economics(including the sensible ones) implies it’d actually be worse as simply holding cash becomes a better investment than anything that improves productivity.

    Also, the idea that all fiat currencies are eventually debased is basically false. None of the major industrial powers has had significant debasement in the last 90 years. Yes, all things must come to an end, but “It’s a much better government policy for going through civilizational collapse!” is not a winning argument to my mind. The fact that inflation is observably a bad idea has imposed a much better check than commodity money ever did. Free circulation only protects the people from funny money, but the point of debasement is to screw the Crown’s creditors, and it still works just fine for that in a time of free circulation.

    Don’t get me wrong, I’m all for suspicion of governments. I just think commodity money has more problems than can possibly be justified unless we’re actually in the middle of hyperinflation.

  • Tedd

    Mr. Ed:

    Other than my own, how did ancestry come into it?

  • Mr Ed


    I hesitate to get involved with such generalizations, since they are inherently unfalsifiable. But I would like to remark that Canada avoided much (though not all) of the foolishness that infected the British Isles during the 20th century, and for most of that time the population was about 50 percent Scots-descended.

    Your words made reference to ancestry. I was referring to a political culture, which can change (unlike ancestry), and which results from the preponderance of individual attitudes and choices in a population. It seems that however much political failure Argentina throws up, as a polity it comes back for more, like a dog to its vomit, and in Scotland, the trend seems to be similar. For a political culture to change, enough people need to reassess their fallacies, hatreds and prejudices and to remain to maintain a decent culture. Thankfully it is all to easy for the decent Scots to leave, taking with them some hope for the future of Scotland as an inevitable side-effect. Over the last 25 years, I have met Scots living in England who struck me as apolitical, but who make some occasional reference to the depressing culture of Scotland, be it a collectivist mentality or a large underclass.

    If Scotland does become independent, my expectation is that whatever government is elected will opt for the least freedom possible in response to any situation, and post-independence inflation of a Scots pound would be ‘explained’ by the extra costs of recovering from the ill-effects of the Union, and English bullying etc.

  • Paul Marks

    Commodity currencies (such as gold and silver) are “wildly inflationary”.

    “None of the major industrial economies has had a significant debasement in the last 90 years”.

    So there you have it – when commodities were currency there was massive inflation, but since fiat money has taken over there has not been massive inflation (not over “the last 90 years”).

    Now I am bad tempered middle age man (I admit it – fat, bald, and all the rest of it).

    But when a man comes up to me and comes out with flat-out-lies such as the above then I think anyone would (and should) be angry.

    There is such a thing as “righteous anger”.

    It is not an honest mistake (I would have no right to get angry over an honest mistake), it is a man spitting in my face. Blatantly lying.

    And I have a right (and a duty) to be angry over that.

  • Snorri Godhi

    Mr Ed:
    “For a political culture to change, enough people need to reassess their fallacies, hatreds and prejudices and to remain to maintain a decent culture.”

    My point was that for a political culture to change, incentives to vote in a certain way have to change first.
    Once people start voting in a different way, they’ll soon find a rationalization for it, ie they’ll change their political culture.

  • Mr Ed

    Snorri. I admire your optimism, I hope such things happen. If people are rational, indeed they may happen. We have a meme here in the UK about people voting for dogs or donkeys if the rosette it wore were red or blue in a lot of areas, as the case may be. Look at Venezuela and Argentina for places where reality and comparisons with neighbours seem to have no significant impact on political thought.

  • John K

    Also, the idea that all fiat currencies are eventually debased is basically false. None of the major industrial powers has had significant debasement in the last 90 years.

    You may care to reflect that a 2014 dollar is worth a 1914 nickel, and come back to us on that one, unless a 95% loss of value in a century does not count as a significant debasement to you, in which case I would have to disagree with you.

  • Mr Ed

    The UK decimalised its currency in 1971, a pint of beer cost between 11 new pence and 13 new pence at that time. If you don’t believe me, go to a pub in Suffolk and look at the prices still posted on the wall. In the same pub, a pint costs around £3.50, an almost 27-fold increase in price. Some of this is tax, some gentrification, but it indicates the collapse of the value of the Pound Sterling within living memory. One pound now gets you what less than four pence got you then.

    It took a long time for the Scots pound to go from parity to 12:1 with the English Pound Sterling. This depreciation has been easily beaten in less than half a lifetime.

  • John K

    Mr Ed:

    Too true. I was watching a rerun of the Likely Lads (1974) the other day. Bob bought Terry and himself a couple of pints and two pub lunches for 80p. It’s no wonder they have been making the coins smaller.

  • Paul Marks

    David Farrer. – so 80% of the people in the Shetland’s want to “remain” in an “independent Scotland”?

    Scotland is not independent so they can not “remain” in an independent Scotland (as there is not one). Nor is an independent Scotland even on offer – as the SNP supports rule by the E.U. (Brussels is not a Scottish city – no more than London is).

    Still let us see what the actual vote brings. If 80% of the voters of the Shetland Islands vote for what the SNP wants then I will shut my mouth on the matter.

    Some people I do not understand.

    I do not understand people who claim that “no major industrial country has suffered great debasement over the last 90 years” – so Germany had not gone through several currencies in that time? And France also?

    And what has happened in Italy and the United Kingdom over the last 90 years? “No major debasement”.

    Whereas the period of commodity money was a time of “wild inflation” – say the two centuries from 1714 to 1914.

    There is no way I can understand that position – and it is not just a matter of a different view of economics, it is two different histories (two totally different worlds – or universes).

    It reminds me of some of the people in Venezuela.

    With everything collapsing around them some people (quite a lot of people) still refuse to blame the government for the empty shops and the economic collapse.

    It is all the fault of “the rich” and “the corporations”.

    One can not reason with such people – it just can not be done.

    The question is – is Mr Ed correct?

    Are such people (people beyond normal human reason – at least in political matters) in the majority in Scotland?

    People who would support price controls (in the face of empty shops) and think that government power means “no major debasement” whereas physical reality (people, buyers and sellers, choosing what commodity they wish to trade with) means “wild inflation”.

    I do not know.

    I simply do not know.

    Many people are a mystery to me.

    Perhaps 80% of the people in the Shetland Islands wish to be looted by Strathclyde – and will vote accordingly in September.

    I just do not know.

    I am not being sarcastic – I really do not know (and will wait to find out).

    The interviews with some of the people in Venezuela have shaken me quite badly.

  • Mr Ed

    Paul, my inner pedant has been roused from a brief slumber, like Durin’s Bane.

    Scotland is not independent so they can not “remain” in an independent Scotland (as there is not one)

    If the people of Shetland were asked “Were Scotland to become independent, would you wish that Shetland remained a part of Scotland?” then surely they can remain part of an independent Scotland, as they are being asked if they wish to remain a part of Scotland, not a part of independent Scotland. For the purposes of the question, whether Scotland is independent or not is not the issue, the question is whether it is Scotland in which they wish to remain.

    However that ‘survey’ does not mean that 80% of the Shetlanders wish Scotland to become independent, rather that the thinking is that they would rather get on with life under Scottish rule than seek independence, retention in the UK, or Crown Dependency status like the Isle of Man, or perhaps an arrangement with Norway akin to the Faeroes’ arrangement with Denmark. The Faeroes are outside the EU, like the Isle of Man.

    Shetland opting to be under Scottish rule is, in terms of rational choices, not unlike Kuwait electing for union with Iraq.

    As for Venezuela, the insanity that led to this state of affairs is prevalent in South America. In 1983, the Venezuelan Bolívar was traded in Portuguese bureaux de change, as so many Portuguese flocked there for work. Now the relentless application of collectivist thought has led it to a situation where it is collapsing. We can see what the Labour Party and SNP really want by looking at Venezuela.

  • Paul Marks

    Mr Ed – as I have just told someone else…..

    It is not those people who used to support the socialists in Venezuela who horrify me – it is the people in Venezuela who STILL DO support them who horrify me.

    It would be a bit like supporting “independence in Europe” for Scotland in the Shetland Islands AFTER being looted by Strathclyde (still mostly Labour – rather than SNP).

  • Snorri Godhi

    Mr Ed: I am no optimist, indeed i take as an axiom the opening of Hume’s essay, Of the Independency of Parliament:

    POLITICAL writers have established it as a maxim, that, in contriving any system of government, and fixing the several checks and controuls of the constitution, every man ought to be supposed a knave, and to have no other end, in all his actions,
    than private interest.

    Nor am i a blinkered optimist about Scotland: i just think that blinkered pessimism is just as foolish as blinkered optimism.

    Yes, i have looked at Argentina and Venezuela; just a glance, but it should be enough. But why don’t you look at the bright side of life? Have you looked at Ireland? have you looked at the Baltics? have you looked at Slovakia?

    Actually it occurred to me that the Jews might be the best term of comparison, and not just because Scots and Jews are reputed to have similar attitudes to money. If you look at diaspora Jews, you might be forgiven for thinking that Jews are fanatically anti-capitalist, even willing to turn a blind eye to the antisemitism of fellow anti-capitalists. (Or alternatively to the anti-capitalism of antisemites.) Now put a few million Jews in a country in which their votes make a difference, and what happens? Jews stop voting for socialism! It’s taken quite a few decades, and not all of them stopped, but it happened.

  • Snorri Godhi

    PS: I might have quoted Machiavelli’s Discorsi instead of Hume, but then i’d have to choose a translation, so i quoted Hume.

  • Mr Ed

    Snorri. I suppose what it boils down to is if Socialists run out of excuses that their supporters accept before the supporters run out of food and starve, there might be change. There are variables here, the amount of food, and the quality of the excuses (relative to the smartness of the supporters).

    Perhaps I should derive* an equation for the fall of a socialist régime, with a ‘Gullibility’ factor that predicts when hunger, death, tyranny and squalor become too much for even the most stupid Orc.

    * i.e. Invent with a formula that looks ‘scientific’.

  • Am I to understand from some of the comments here that the EU does not want Scotland as a member, were it to secede from the UK?

  • Now put a few million Jews in a country in which their votes make a difference, and what happens? Jews stop voting for socialism! It’s taken quite a few decades, and not all of them stopped, but it happened.

    Oh my…

  • Jaded Voluntaryist

    Alisa, my understanding regarding the EU membership question is that Barroso has basically promised to veto any application. He doesn’t want to encourage the Basques and the Catalans.

    Wouldn’t want to give people the impression that they can vote for something and then, you know, actually do it – would we?

  • Snorri Godhi

    Alisa: i guess i subconsciously hoped you would react to my comment about Israel, but i am not sure what to make of your reaction.
    As to whether “the EU” wants Scotland in, it all depends on what you mean by “the EU”.

    Mr Ed: broadly speaking we agree.

  • JV: thanks, that sounds entirely plausible – but I do wonder if there are any additional rationales…

    Snorri, I think I may have subconsciously figured that out:-P Unfortunately I’m too busy at the moment to really get into the subject, and it’s too depressing anyway. I’ll just say that it is vastly more complicated than that, both historically and currently (I have no doubt that you took this for granted without me pointing it out, so it’s mostly for the audience, if any).

  • Snorri Godhi

    Thank you Alisa, maybe we better leave it at that,
    except that i’ll link to an essay that may prove as “depressing” (your word) to you as it was disturbing to me.
    OTOH it might also be comforting, because here is a Jew (in as far as i can judge by his family name) who chose the Red Pill:

  • Paul Marks

    A good essay Snorri.

    By the way – it is not just in Israel that (some) Jews do not vote for socialism.

    The most recent survey of voting in the United Kingdom shows that most Jews vote Conservative – which would have come as no shock to my (Jewish) father – who voted Conservative in every General Election from 1945 onwards.

    However, he had been a member of the Young Communist League (before he worked out that it had ideas other than beating up Fascists – an idea he found very attractive and put into practice) and then the Liberal Party – as Harry Marks said “the only major party I have never supported in England is the Labour party”.

    What turned my father against Marxism?

    Partly reading Karl Marx (it always struck me that my Marxist half brother, “Tony” Marks, never seemed to read Marx – always secondary texts by academic double talkers, like himself), but also the actions of the local Communists….

    Such as ordering the “picketing” of an old woman’s shop (a relative of the women had offended them by running a “sweat shop” a fur cutting business) – that brought home to Harry Marks that “picketing” is a military (or paramilitary) practice. Based upon force and fear.

    So he solved the problem by picking up the conference table of the Young Communist League Committee and using it as a club on the said committee.

    Truly a Jew with the strength of Samson.

    Strength he built up working in a “sweatshop”.

  • It may sound strange, Paul, but I miss old Harry Marks without ever knowing him…

  • …and thanks for the essay, Snorri – I’ll be sure to read it.

  • Paul Marks

    I miss him every day Alisa – I suppose we all miss our parents and grandparents.

    A very well dressed man (that generation made a real effort – he was born on February 2nd 1913).

    As for the essay – it is very short.

    I have no attention span now – and I managed it with ease.

  • Snorri Godhi

    Thank you for the feedback. Notwithstanding the leadership of the UK Labour Party, there are reasons to think that European Jews are more reality-based than their American counterparts: again, it’s a matter of incentives.

    WRT Paul Marks’s attention span, if he could read the essay in less than 40 minutes, then he has no reason to worry. (My attention span has greatly increased thanks to a low carb diet, but i’d probably have procrastinated.)

    BTW Paul Bogdanor’s site is worth exploring further for those of you who haven’t.

  • Paul Marks

    Errr it took me rather less than 40 minutes.

    Low carb diet.

    Well at least you do not look like the sterotype of a middle aged man (as I do).

    “But Paul – you are a middle aged man, you look like what you are…..”.

    True – but no comfort.

  • lucklucky

    What about none? Let people use what they want.

  • Snorri Godhi

    Hmm…Paul has been snooping on me?
    My pictures on the web are under my real name, and they are rather old.
    I used to look older, but i have recovered, except for the hair.

  • bradley13

    Ah, Scotland. I am very much of two minds on this issue. I have a suspicion that the romance of being independent would be more attractive than the reality.

    On the other hand, I find it deeply offensive that politicians resist the right of regions to secede from larger entities – as someone above mentioned, there is a lot of fear that a Scottish secession might encourage Catalonia or other regions to follow suit.

    But why shouldn’t they? Shouldn’t government be at the consent of the governed? Why did the UK claim that they Scots could only vote on independence with the UK’s permission, and the UK’s input on how the question must be formulated? Sounds more like tyranny than democracy. Frankly, the English view of the situation is arrogant, and is typified by many of the comments in this thread.

    Frankly, I would like to see international standards setting a standard procedure for secession: A certain minimum physical size and/or population (no, you can’t declare your house to be a country), a certain procedure for determining the outcome (popular referendum, at least xx% of the population voting), a certain threshold of approval (a good deal higher than 50%, to avoid silliness), and a framework for establishing the new, independent entity.

  • I think you should be able to declare your house a country.

  • Richard Thomas

    Patrick, hear hear.

    Seems like some people are trying to brush the violence innate in government under the carpet. The best argument against secession is and always has been “We’ve got a big army and aren’t going to let you”. That applies as much to the individual as large regions.

  • Alsadius

    Paul: I think most of the confusion here comes from the fact that I’m seemingly using different definitions than you are. Apologies, and let me clarify.

    I distinguish “debasement” from “inflation” – the latter refers to a slow and predictable process, the former to a sharp and sudden one. I can price 3% inflation into my bond prices and be okay, I cannot do the same with a “Well, he might just decide to lop a couple zeroes off what he owes me next week”. Inflation’s not great, but debasement is seriously economically damaging. Since Weimar, we’ve just had inflation in the developed world, and I can live with that far more easily than I can live with gold.

    John K: I don’t much care what money was worth a century ago. I care what it was worth yesterday and what it’ll be worth tomorrow. As long as those numbers are effectively identical, and quite predictable, a long-term shift is no big deal. I’d rather it didn’t happen, but it falls into the same category as “I’d rather the Leafs won the Cup once in a while” – it’d make my life a bit better, but I won’t worry too much if it doesn’t happen.

  • Mr Ed


    Why did the UK claim that they Scots could only vote on independence with the UK’s permission, and the UK’s input on how the question must be formulated? Sounds more like tyranny than democracy. Frankly, the English view of the situation is arrogant

    1. The rule of law requires that statutory bodies, like the Scottish Parliament, only do what is delegated to them, the basis for objecting was that holding a referendum was outwith the powers of the Scottish Parliament.

    2. Not tyranny, but the rule of law.

    3. It was not the ‘English’ view, but the view of the UK government. BWoA The view of Gorbachev in July 1991 was the Soviet view, Yeltsin’s was the Russian view. The typical ‘English’ view seems to be ‘yawn, off you go and don’t come back before we’re ready‘ before checking the weather and carrying on. Scotland will be missed as much as Kerry.

  • Snorri Godhi

    The best argument against secession is and always has been “We’ve got a big army and aren’t going to let you”.

    You have to admit that it’s a compelling argument.

  • Paul Marks


    No Sir.

    By your own definitions there has been debasement (as well as inflation) in almost all major industrial nations (including the United Kingdom) over the last “90 years”, I also do not accept that you are making an honest mistake (that you did not know this to be the case). For example in Britain in only a few years in the 1970s the Pound lost most of its value (it was debased already, as it was fiat, but losing most of its value in only a few years is debasement even by your definition). I do not accept that you did not know this.

    I also do not accept that you were unaware of the destruction of the German currency (in World War II), or of the French (in the supposedly stable 1950s), or of the Italian, and so on. Fiat currencies have lost most of their value (or even been destroyed) even in peace time (Argentina, 90 years ago a prosperous First World country, is a classic example of this)

    Therefore I do not accept your apology.

    As for the theoretical possibility that a fiat money might not be increased – yes I AGREE WITH YOU.

    However such a fiat currency would be utterly pointless.

    The point of moving from a commodity currency to a fiat currency being that one can increase the latter with more ease than the former.

    I am willing to accept that you did not know this particular point.

    But I will not be willing to accept it in future – because you have just been informed of it.

  • Paul Marks

    You may have a point Patrick.

    After all some very small areas had full autonomy (as long as they swore loyalty to the Crown) – for example the island of Sark.

  • Paul Marks

    No Snorri – I have not been snooping on you.

    I just assumed your low carb diet had been a success and you were now a Ring Wraith.

    Alas – when I walk the world shakes (and not from fear).

  • Laird

    Alsadius, the loss of 95% of the dollar’s purchasing power over the course of a century certainly seems to me to qualify as “debasement”, but I understand your point about the relative predictability of gradual, as opposed to sudden, debasement. But I still disagree with your comment, because you’re comparing apples to oranges.

    You complain about the relative volatility of gold prices since 1980, but that was during the period after the dollar had been completely de-coupled from gold. (Moreover, I would note that the average price of gold in 1980 [your choice of beginning year] was $615 and in 2009 it was $972, which is not really a huge change over 29 years. Most of gold’s real price volatility began in 2009, and is largely attributable to a significant political event which occurred in the US that year. Identification of that event is left as an exercise for the reader.) The price of gold exploded between 1971 (when Nixon formally abolished inter-governmental convertibility) and 1980, increasing by over 1500% in those years. By contrast, from the time Roosevelt outlawed private gold ownership in the US (mid-1933) until 1971 the price of gold had remained relatively stable. This series of events clearly demonstrates that even partial gold convertibility had served as a significant constraint on monetary expansion. Once it was removed all bets were off, and the results are clear.

    But rather than looking at the late 20th century, a period of absolutely unfettered fiat currency throughout the entire world, the proper basis of comparison is the 100 years before the dollar was (partially) removed from the gold standard. During that century the price of gold was extremely stable. The reason is obvious: during those years the dollar was formally “pegged” to gold. The ability of the government to debase its currency was severely constrained, which is precisely the function of a commodity-based system.

    You’re happy with 3% +/- annual inflation, resulting in the loss of 95% of purchasing power over the course of a century. I want essentially 0% inflation, with purchasing power almost unchanged over a century. The superior system is incontrovertible.

  • Alsadius

    I care about the second derivative of prices much more than I care about the first derivative. If inflation is a rock-solid number, it’s easy to price it into financial instruments. It’s when inflation starts to get surprising that bad news happens. The UK was among the worst, and even then inflation never changed by more than 10% in a year. Since 1981, the worst has been 5%, and even then only in a financial crisis(when gold was changing way more than 5%). Conversely, gold has posted swings in inflation of up to 125%(from doubling to losing 25% in a single year), and has in fact been in the double digits more often than not since the deregulation of prices, and has had years of inflation far worse than the GBP’s darkest days in the 70s – if gold had been the currency in 1981, inflation would have been 47%.

    Sure, it looks stable if you cherry-pick peak to peak, but look at the actual curve – from deregulation in 1968 to the 1980 peak it averaged 17.2% appreciation(deflation) per year against the US CPI basket, from 1980 to the 1999 bottom it averaged 7.6% depreciation(inflation), and from 1999 to 2012 it averaged 12% appreciation per year. The individual years were generally even bumpier than that. Some of that can be attributed to pent-up demand from the regulation years, but a lot of that just has to do with the inherent volatility of any single commodity. I doubt copper or pork bellies would be any more stable. Sure, averaging wheat prices over 50 years will make it look nice and stable, but ask a wheat farmer how much good that does them.

    Paul: German currency being destroyed when Germany itself was destroyed doesn’t count. If you stop being a country, you stop having a currency, that’s just common sense. Italy’s inflation was no worse than England’s. I can’t find a data set for France from before 1954, but after that it never got above 16%. And I thought Argentina’s problems were in the real economy, not in monetary policy, though I am again unable to find a data set to confirm.

    And you are completely wrong about fiat being designed for inflation. Fiat is designed on the premise that bankers can produce better monetary policy than miners can. While miners generally screw up somewhat less spectacularly(if no less terminally, as Habsburg Spain will tell you), under normal circumstances the bankers do a better job. I’d love to take it out of both their hands, but I don’t see any good ways of doing so, so I’ll stick with the bankers.

    Laird: The money supply grew immensely between 1933 and 1971. The fact that the USD was pegged to god did nothing to stop that growth. All it did was gold the price of gold artificially low. This is why I use 1980 as a starting point – that’s the first date where we can definitely say that the market had found its own level, and wasn’t just in post-regulation hangover mode.

    Also, do you think inflation wasn’t a problem in that era? It just doesn’t show up in the price of gold, because it was artificially pegged. Monetary policy was even more subject to political whims in that era – Bryan’s famous “Cross of Gold” speech is all about a politician advocating for increased inflation solely to screw bankers, within the context of a purely commodity money system. Not even Paul Krugman is that blatant today. Many of the depressions of the 19th century are attributable in large part to deflationary pressure, while we’ve only had one deflationary recession in the last century. You’re right, the superior system is incontrovertible.

    I still find it fascinating that a bunch of libertarians advocate the government fixing the price of a commodity.

  • Mr Ed

    Alsadius: ‘The UK was among the worst, and even then inflation never changed by more than 10% in a year.’

    1975, and your other ramblings.

    You are either almost unbelievably ignorant of historical facts, and/or utterly confused, as your own comments allude to, or a lying troll.

  • Alsadius

    I’m referring to the rate of change of inflation, as a measure of the predictability of the price of money. I’m well aware that inflation peaked north of 26%, but that was in the same ballpark as the year before and the year after. Again, I don’t so much care what the rate of inflation is, I primarily care how predictable it is.