During my holiday’s in Scotland we had a brief wee discussion about the future of any Scottish currency, in the unlikely event of Scotland gaining independence. As I mentioned before, the SNP plan for some sort of shared currency arrangement with England would only really work as a short term solution, longer term Scotland would have to either join the Euro or form its own currency or possibly both.
One of the reasons why Scot’s would like to keep the pound is a lack of faith in a Scottish pound, which they believe would likely lose value relatively quickly, be prone to high rates of inflation and significant fluctuations in value relative to sterling. I would counter by pointing out that Ireland, for 80 years before joining the Euro, had the punt and despite our best attempts at screwing up our own economy, the value of the punt rarely moved far from that of sterling. And Ireland didn’t have Scotland’s natural resources, such its oil and renewables potential, to back up the punt with. So I would question whether there is any basis for these fears in fact.
However, one way to nip things in the bud would be for Scotland to back up its currency with some form of commodity, e.g. a Scottish Pound (or real fucking money as I suspect they’ll call it ;D) will in theory be redeemable for a certain quantity of some commodity, such as gold, sliver or perhaps oil (which the Scots have no shortage of).
While such a plan would make speculative attacks against the Scottish pound nearly impossible and it would guarantee that it would hold value, it would have the disadvantages that the value of the Scottish pound would float with the value of the commodity and it could ultimately inhibit economic growth as a result. The price of gold, silver, oil, platinum, etc. fluctuates significantly over time, which would have a knock on effect on the Scottish economy. It was for these very reasons why Nixon abandoned the gold standard for the US dollar in the 1970’s.
However my solution would be to tie the value of the Scottish pound to something a little more flexible – Scotch Whisky! In my plan a Scottish pound would be redeemable for a certain quantity of Scotch. After oil, Scotch is Scotland’s most profitable export. While the amount of Scotch produced and sold each year does fluctuate (due to supply and demand issues), given that it is typically matured for at least 5 years (more like 10 years for many single malts) this means there is always a vast stockpile of Scotch on hand to meet any demand. The Scottish government would essentially pay the distilleries a small annual fee (or simply cut their export duty) in return for which it gets to bank that distillerys stockpile and count it against the Scottish pound.
Furthermore if any spiv wants to launch a speculative attack against the Scottish pound he would need to manipulate the sales of Scottish Whisky. Some simple controls on the Whisky industry would prevent this, although in all probability, it won’t be necessary. The Scottish Whisky industry is dominated by the large blended whisky makers, who are often owned by mega giant multinational drinks companies (who have a very specific agenda, sell as much booze to people as possible!) or smaller local run businesses behind the high end and expensive single malts. This lot tend to be fairly conservative and traditionalists (the sorts of people who still dress up and go to church every Sunday and believe hell is a very real place that people do go too…..if they head too far north along the M6! :)) ) and to be blunt they’d rather pour the Whisky into the Spey than let some shark in a suit from London get his greasy paws on it.
And the best bit? If the Scottish government ever did have to engage in “quantitative easing” the way it would do it would be to give everyone in Scotland a bottle of Whisky, so at least we’d be able to drown our sorrow’s :>>
Okay, the above article was a bit tongue in cheek and as you can imagine I came up with in a pub (I’ll let you guess what I was drinking) but I think it highlights some important points about currency to consider…..now if you’ll excuse me, I’ve a wee bottle of Jura single malt to finish!