The Scottish currency question won't go away until the SNP answer it

AFTER the shock and pain of the defeat in the 2014 referendum many people recognised that the SNP leadership’s inability to deal with the currency issue was the major cause of us losing the initiative in the campaign, and then losing the vote in the referendum.

Those of us who campaigned so long and so energetically to win the vote on Scottish independence will never forget the dismay when the SNP leadership seemed to have no answer to the refusal of Westminster politicians to agree to "Share in the Pound”.

This was great stuff for "project fear" and the Unionist Press had a field day.

So what currency will Scotland use? What about my pension? How will I get paid? What will happen to my money in the bank? How is Scotland going to trade with other countries? What will happen to the Scottish economy?

If you tell people that there may be some instability, and there may be some ambiguity around the currency they will be using, then you open up a hornet’s nest of political fears and worries and a whole host of urgent questions.

READ MORE: Solutions to currency queries after indy are quite straightforward

If we did not know that before, we learned it in the days before the vote in 2014. The SNP leadership made a bad mistake then, so let’s learn from that mistake and don’t let us repeat it.

Money, or currency is an issue which affects every one of us in a personal way, but strangely it is something we often misunderstand and do not see it real value, or role in the economy.

Adam Smith, way back in 1776, told us that "money has not intrinsic value" its role in the economy it to "represent" other things, "good and services", which do have value. This relationship gives money "exchange value".

Now what that tells us about the "wealth" of nations, which was what Smith was writing about, is that a nation’s real "wealth" is not its money or its "currency" but its skilled labour and its natural resources. This is where wealth comes from. 

So, if we have those things we can make any fiat currency we like from paper. Such currency, if made legal tender by a sovereign state, will have a high "exchange value".

So, "where will we get the money from, for my pension, or wages, or bank balance?" Are not the important questions. We print it, is the simple answer.

The important question is: Does Scotland have the necessary labour and resources to give "exchange value" to that printed paper money? 

If Scotland does have these resources, and we know it does, then any currency Scotland prints and makes legal tender will have high "exchange value", and those who get their hands on it will be able to exchange it for valuable goods and services.

The issue itself is simple, it is often presented in a complex way, but stripped to its fundamentals it is very simple.

A currency for Scotland  would be used, like tiny Iceland uses it currency, as a domestic currency only. Unlike the pound sterling, it would not be used for international exchange. Scotland, with its own domestic currency, could easily use other currencies for international exchange. This would be no problem for Scotland provided it kept its exports and imports in balance, because it would have no National Debt.

Now should the SNP address this issue now? Yes most certainly they should. The more people know about this issue, the easier it will be to understand and the less effective the Unionists' project fear will be.

But, the SNP leadership have been extremely slow and cautious about this issue.

They have moved from wanting to "share in the pound" to accepting that Scotland should have its own currency and its own central bank. Well, that is considerable progress because it would allow Scotland to print its own currency, and control money supply.

This is actually more than the Westminster Government and the Bank of England can do, because they have lost control of money supply to the big international banks.

The SNP, however, have got themselves tangled up in a contraption of their own design, which makes the Scottish currency much more complex than it need be for reasons inexplicable to any economist.

READ MORE: Why should Scotland pay off UK debts it did not create?

They feel the need to apply "special tests" to establishing a Scottish currency, tests which have never been considered by any other country in the world going through the same process.

This restriction of the "six tests" was torn apart by Dr Tim Rideout at the SNP conference, but for some inexplicable reason it is still hanging around the SNP’s thinking.

The wise thing for the SNP to do now is to have an open debate on this important issue. They should allow wide views to be openly discussed. This would be the open and democratic way to handle this important issue. Let people have their say, let the different economic views be heard.

Then they need to come out with a firm decision. They should confirm their policy on having a central bank and a new domestic currency for Scotland, and say this will be established as soon as possible after political independence.

Of course, the Scottish Government will need to form its own policy, but this could be done much better and have wider understanding and support if it is done after a national debate.

Andy Anderson, and his colleague from the Campaign for a Clean Scottish Currency Julian Smith, will be live on Zoom tonight from 7pm with the Grassroots Oban for Independence group. They'll be discussing currency in Scotland after a Yes vote and answering questions.

Those wishing to attend can register here.