The tumult in the Eurozone these days is well documented but the knock-on impact on Scotland and the SNP’s designs for independence are anything but clear. 

To suggest that it doesn’t matter which currency an independent Scotland would have would be ludicrous. Has it made a difference whether Ireland has had punts, pounds or euros these past 11 years? Of course it has. 

So, as the SNP softly and quite sensibly backpedals on it’s ‘Scotland in Europe’ message, it is worth considering what currency options an independent Scotland actually has. For me, there are really only three:

1 – Keep Sterling

Probably the safest option and straight of the drawer marked ‘if it ain’t broke, don’t fix it’. Our low rate of exchange has boosted exports at just the right time and that pound for pound advantage would remain even if our borders changed.   

Keeping the Queen on our bank notes is in keeping with the SNP’s strategy of maintaining the Queen (or King) as our Head of State and it avoids the otherwise unavoidable uncertainty surrounding the other two options. 

There is, of course, the rather odd anomaly of a Bank of ‘England’ deciding interest rates for Scotland but this is simply harmless nomenclature and not only no different to the status quo but also no different to the ECB deciding rates across the Eurozone. Who is to say that a Scot couldn’t be Governor of the BoE in this scenario anyway. Gordon Brown’s hardly a busy man these days, right? 

Indeed, a ‘Britzone’ of Sterling-denominated nations could seek to increase its power and influence by welcoming Ireland into the fold, a country that is already inextricably linked to the current UK’s economy. Who knows, maybe other countries in Northern Europe could be convinced to join – Iceland, Sweden, heck… Norway?

An independent Scotland outside of the Euro doesn’t mean it can’t still think big but even maintaining the status quo of old UK keeping the pound is a perfectly valid option for an independent Scotland.

2 – A Scottish currency

This is such a risky option for a new nation that it has pretty much already been discounted as an initial preference by the SNP, that I can tell. However, Sterling could provide the necessary stability in the first decade of independence before a new Scottish currency could be established thereafter.

A Scottish Central bank with Scottish interest rates and Scottish foreign exchange to help boost imports and exports, depending on economic conditions, is potentially a very powerful position for Scotland to be in. Ireland and Greece may have faltered but some of the strongest economies in Europe right now have this nimble, flexible model at their disposal, with similar population size, so there is no reason why Scotland could not leverage that to our own advantage.

It makes independence more of an adventure and puts us in better control of our own destiny too, which is not necessariy a bad thing at all. Life is to be lived, right?

3 – Join the Euro

An independent Scotland outside of the EU is, to me, practically unthinkable and, yet, ‘new’ nations cannot join the EU without joining the Euro so that leaves the SNP in a very tricky position as the Euro currency continues to approach the precipice.

An ‘inside or outside the EU’ is possibly the closest the SNP gets to internal warfare and Salmond will be mindful of plastering over any splits while European volatility continues, but he has his work cut out over the next few years. 

Pragmatically, the best thing for the SNP to do is simply sit on its hands and wait to see what is left of the Euro once Merkel, Sarkozy, Berlusconi et al are finished with their rounds and rounds of crisis talks. The SNP can then, to a certain extent, simply follow public sentiment to ensure their referendum chances remain intact.

That is not to say that the Scottish Government can’t be pro-Euro in the meantime. A quick win for the SNP right now would be to encourage Scottish businesses and retailers to accept Euros from the general public and tourists alike. After all, a country that looks and feels independent is more likely to be independent in due course. It would be a further welcome boost for tourism to me.

The jury is very much still out on whether the Euro will be in a fit enough state for Scotland to join it later this decade, if the referendum returns a yes vote but, thankfully, Scotland has time on its side. 

For me, an indepedent Scotland that used Sterling as a currency leading into either joining the Euro or creating a Scottish currency, whichever is the more practical at that point of time, would be a perfectly stable future for our nation.

So, exciting times and, hey, in amongst all of this, we might even get the gone-but-not-forgotten Scottish £1 notes back.

As I say, nothing wrong with thinking big.   

The logic behind the SNP’s proposals for devolving Corporation Tax can be summed up as follows – ‘Scotland needs more jobs, a reduced Scottish business tax would create jobs, ergo, Scotland should have power of Corporation Tax’. 

If it was an attempt at a mathematical proof, my old uni lecturer would tell me it was so sieve-like that it’s only good for rinsing potatoes.

 
No, for me it’s a backwards step and the downsides of Scotland having one (lower) tax take and rUK having another are as follows:

1 – George Osborne is already cutting Corporation Tax so any further reduction north of the border would simply be a race to the bottom. If zero-tax is a terrible idea then too low tax is certainly not a good one.

2 – There is no guarantee that benefits will outweigh the expense. Scotland could be left with a bloated public sector and a lower private tax take with which to finance it. Dare I mention Ireland?

3 – Did we vote for this? The SNP may have a majority at Holyrood but I can’t remember this being discussed. There’s a lot of high-fallutin’ talk about Calman this and autonomy that but paltry tax-raising powers only scraped through with a Yes vote 14 years ago so I just hope ‘the people’ don’t get left behind in these debates and decisions. 

4 – So much for we’re all in this together. The naked opportunism of this move hardly suggests that Scotland is a team player within the UK. The SNP’s tactics are beginning to sit awkwardly against Cameron’s admittedly occasionally abandoned ‘respect’ agenda.

5 – Scotland should be looking for companies to invest here because they are impressed with Scotland’s skills, workforce, R&D and location, not to mention proud of putting a fair share of profits into society. They shouldn’t be investing here just because there’s a 20% deal going. This isn’t GroupOn.   

There’s an awful lot of guff being produced about the holy, inevitable, all-powerful markets. First, despite the evidence of this financial crisis, very few are debating whether we should continue to have our economic future determined by the direction in which trillions of pounds of complex financial instruments slosh around. Richard Murphy did so, although his piece uses the word “feral” so often that it started to look very odd to me.

Choices were made to open our economy up to volatile shareholder capitalism. It’s not some scientifically proven approach to economics, any more than it’s god-given. These choices favoured some, notably the buccaneer capitalists and pension funds whose exploits Adam Curtis set out in The Mayfair Set (Google Video). And they turned over others, most obviously those who directly faced redundancy at their hands, but also the wider set of taxpayers whose interests they undermined. We could still make other choices, or at least we could if all the parties of government weren’t utterly beholden to these modern-day Gnomes of Zurich (Westminster, primarily, not that there’s evidence the SNP would take a different economic approach if they had the levers to hand).

Second, though, markets don’t “give verdicts”. They look for margins and they put a value on risk. When interest rates are cut, you regularly hear “the stock market responded positively”, as if these reified and disembodied forces were independently assessing those cuts as indicators of a stronger economy in the future. Utter nonsense. Falling interest rates mean bonds deliver a lower return, so, relatively, the stock market becomes a more appealing place to buy. Sure, if a proposal comes forward to relax restrictions on deepwater drilling, shares in Cairn or Shell will rise, but that’s an expression of expected change in the relative return on investment, not “confidence” or somesuch anthropomorphic sentiment.

The current fiasco isn’t primarily driven by Greek debt or even Republican reluctance to raise revenue from those most able to pay. Nor is it a collective judgement on the future of the Euro (doomed as it surely is at least in anything like the current form), any more than Black Wednesday was a view that Britain’s economic interests would be better served by sterling not being pinned to a basket of European currencies.

Black Wednesday occurred because a UK Government committed itself to a particular exchange rate band despite the existence of a free trade in currencies, a trade an earlier phase of that same Tory government had opened up. That meant George Soros and the gang could freely bet against them, and the traders knew Norman Lamont would have to keep buying while they kept short selling.

Right now, what started as a similar series of minor chinks in the single currency, apparent only to specialist traders and some politicians outside the soggy centre in both directions, is becoming a series of chasms. It’s not that the markets have a view on whether a single currency would idealistically be better or worse for European economies, just that there are self-fulfilling margins to be made in the diverging rates of return on member state bonds. Traders have found a new game, and no amount of austerity, cuts to public services or privatisation (the icing on their cake) will end that game. Either the chasms get closed with a single economic and fiscal policy for the Eurozone – effectively an end to national politics – or, sooner or later, they’ll smash it like a piñata and take all the taxpayer-funded sweeties.

The American situation is a little different, largely because of the disproportionate power the Chinese hold over the US economy and policy-makers. Each month a balance of trade deficit pushes roughly $20bn from American consumers to Chinese companies, and the Chinese in turn bought US Treasury bonds – up to a peak of more than $1.1tn in October last year.

Effectively, the Chinese have been pushing home the economic advantage they hold by virtue of using cheap (or sometimes slave) labour. Not only are they draining capital from the USA, but they’re using it to gain massive leverage and undermine the US Government’s autonomy. The American economy has acted like an enthusiastic addict, welcoming the dealer’s reliability. But the signs are that the Chinese administration thinks this phase will have to come to an end. The Chinese even used the same language when upbraiding the Americans’ “addiction to debt”, in just the way I imagine some heroin dealers shake their heads sadly at their customers – “not you again – I thought you’d gone clean, man.”

The disconnect between the real economy and the tides of profit-taking and short-termism has never been larger, while the consequences of market failure for everyone outside the gilded feral elite have never been higher. The question is – will policy-makers anywhere ever be brave enough to go through the short- or medium-term pain of restraining the markets, trying to force the genie back into the bottle, and trying to build an economy where the interests of society, the workforce, and the planet come first?

Some would say it’s impossible, but read the business pages (or, increasingly, the front pages) if you want to see the kind of world they’re saying is inevitable. How far through this sequence of ever-deeper crashes and ever-shallower and more unequal recoveries will we have to go before there’s a willingness to address the real problems here? And that’s before we consider the additional risks the economy faces as oil production gets ready for the bumpy ride down from the plateau of its final peak. The signs aren’t promising.