Saturday, 8 March 2014

The Alexander brothers and the currency union myth

During the week we have seen the false 'love bombing' of Cameron turn into the misdirected 'Blitz Krieg' dive bombing by the two Alexander's, who are basically saying Scotland is too stupid to have its own currency without a UK Government at Westminster running it. The problem for both of the 'Alexander Brothers' is they have been aiming at a target which is unimportant to the independence debate at large, on a subject which is of only technical interest given the £Scots will continue to exist whether inside or outside a Sterling Union - just as it always has, since its introduction into Scotland in 1412. The money markets are expecting the £Scots to quickly increase in value in the first 48 months to be worth £1.20 Sterling; if a free floating currency on independence. This is hardly reflected in the press and media barrage we see from the usual Unionist sources with their increasingly hysterical 'scare stories'.

I spent a bit of time reading an interesting article in Money Week this morning where the authors calculated the total debt currently being run by the UK Government - not just the current 'recognised debt' but all the promissory notes the UK Government has currently agreed in terms of public, pensions, military and other spending over the next five years. Their figures are calculated from reputable international financial analyst sources - Bloomberg, Deutches Bank and the like. The sums do not make good reading for the UK Chancellor and his Treasury Officials: according to Money Week the total indebtedness of the UK state is currently 900% of GDP which is as high as Greece and only slightly behind the Wiemar Republic's 913% which lead to the rise of Hitler.

According to the most recent OBR figures the UK debt to GDP ratio is 75%, this is projected to rise to 95% for England and Wales (with NI) if Scotland exits the Union and stays in a Sterling currency union. The comparative figure for Scotland's debt to GDP ratio after a 'Yes vote' is between 45 and 50% depending whether Scotland is in or out of a Sterling currency union.

Money Week is not saying, but it is hinting, that investors in London need to be thinking about shifting investments out of the City - if for no other reason than to put their finances off shore in gold or other hard investments, beyond a panicking England and Wales Parliament with a Chancellor seeking to reduce cash, gold and other fiscal asset transfers out of Sterling as the actual Westminster debt - no longer backed by £2 trillion North Sea asset, without 25% of its foreign exchange earnings and a Scottish Sterling surplus - seeks to fund its commitments against a rapidly devaluing pound and rising Westminster Government borrowing costs. This is what 'no currency union' actually means for post 'end of Union' Westminster. Look at what is happening in Greece and Argentina in terms of civil unrest, financial division, scapegoating of minorities and an increasing right wing electoral voting preference - now compare this with what is happening in England right now.

This direct comparison can no longer be ignored - the UK Parliament at Westminster is in the thick and steaming and has neither the wit nor the political ability to think their way out the mess which decades of neo-liberal austerity, subsidising and propping up the 'City' at the expense of the rest of the UK, has inflicted on the UK as a whole.

The total debt of the UK is 900% of its GDP
- just think about this carefully and what it means.

It is not surprising that Alex Salmond is calm about the present 'no currency union' claim from Westminster because for Westminster to actually follow this path is economic suicide for England and Wales. The relative total debt of England and Wales (with NI) would quickly rise above the 913% of GDP which brought the Wiemar Republic crashing to the ground. This has a direct impact on Scotland as it would effect 70% of our immediate export market, made worse by a £Scots which will strengthen, backed - as it is - by substantial physical resources, products and modern transferable skills that the rest of the world will still require. This scenario will be our 'New Zealand' moment, comparable to the New Zealand agricultural industry being shut out of the UK over night on EU accession. It will not be easy, there will be short term losses, company failures while new markets are established but an independent Scotland's more balanced economy will be better placed to survive and then prosper, than England and Wales, as a result of a Sterling crash the 'no currency union' scenario inevitably creates.

The reality is the World Money Markets have made very clear to Osbourne and Alexander (x2) they want a 'currency union'. As all the recent reports on an independent Scotland's fiscal position make clear, Scotland is a good and safe place to invest, Money Week is suggesting the same is not necessarily so, with regards the City of London in a post independence England and Wales and a no currency union scenario. Money Week has a track record of reading the economic runes pretty well over the last decade so they are worth taking note of.

Can Osbourne ignore the markets continuing concerns about the actual state of the UK's Government's current and future England and Wales indebtedness and cut off his nose to spite his face by refusing a currency union on a Yes vote in Scotland? 

Only time will tell, but I would suggest Osbourne and the current UK Parliament are playing fiscal Russian Roulette with Sterling where only one chamber is empty.

1 comment:

  1. Thanks Peter.
    Even the Torygraph is saying that the current deficit (around £100b) is unsustainable and that further immediate cuts in spending are required.
    Westminster could start by reducing the anti Scottish propaganda activity being conducted by the civil service in London and the trips by various ministers north of the border to belittle our aspirations
    The UK economy is hanging on a very shoogly peg and an independent Scotland taking it's resources out of the sterling area will be calamatous for London.
    They,of course,know this which is why they are so desperate to prevent our independence in the first place.
    They are walking a fine line between trying to spook Scottish voters but not the markets but as time goes by,the latter will become the dominant factor.
    You can fool some of the people.............