If Scotland votes to leave is the pound doomed?

[paddyjenkins]

Four scenarios:

1. No vote and pound strengthens

2. Yes vote and Scotland goes it's own way with its own currency and pays it's it's debts then pound strengthens hugely

3. Yes vote and Scotland goes it's own way with its own currency but defaults on its debt than the pound falls

4. Yes vote and Scotland becomes independent but keeps pound in a union with the UK and pays it's debts then pound stays in a range

3. should read. Yes vote and Scotland goes it's own way with it's own currency but chooses not to take on debts in a currency that they're not being allowed to use.

Legally speaking, Scotland would technically be a NEW country, with no debt. It is offering to take on a share of debt if there is a currency union, but as a new country, it has no debt, and so not taking on UK debt is NOT a default.

There's a reason Deutsche Bank today said that after a yes, Scotland would hold all the cards when it comes to the negotiations.

Well I said they default, that's all that counts. They have borrowed money, they should repay. If they think they can default and get away with it, wrong. England is by far their biggest trading partner. They can be cut out of the English market. And they will be cut out of global financial markets. It's not quite the one way street these bank analysts think.

[Strangebrew]

The pound will go from pound to quarter pound without cheese.

[i claudius]

...who needs the POUND really? We in Ireland are happy without and love our independence. Congrats to the Scottish !

Banknotes issued by northern Ireland are denominated in pounds sterling...talk about thick.,.this guy doesn't even know what currency his own country has. As for Southern Ireland, it's in the euro, I doesn't have it's own currency, it has the euro. LOL.

Do your home work, man! There is NO SOUTHERN IRELAND !!!....But Ireland as a REPUBLIC. And we are indeed happy to have the EURO. Please YOU stay away from my country please. Simple minds are prohibited...!

unfortunatly you are one of the simplest minds ,southern Ireland is a wasteland ,buy one house get one free a couple of years ago ,half finished estates and generaly in the sh t, i know i go there.

[tonika]

Little is mentioned of the rest of the UK being partly governed by 49 very left wing Scottish MPs.

Should the 'Yes' movement actually get their independence Scotland would be governed to a wholly left wing agenda inevitably suppressing the remaining businesses with higher taxes and bigger spending, rather like the French under president Hollande. We all know where that is leading.

Meanwhile the rest of the UK would be relieved of this leftish yoke and be free to recover from this awful mess.

However I believe when they get to 'the wire' reason will prevail over mindless nationalism.

You have hit the nail on the head. Why do think the likes of Tommy Sheridan(Left Wing Socialist Solidarity Party)is promoting a YES vote, because he and Salmond are about as Left Wing, as you can get. Can't call themselves Communist, even the Scots wouldn't put up with that. But if they get Independence, you'll see a raft of Socialist policies.

Just look at what Humza Yousaf (wonder what clan he's from ?), SNP Minister for External Affairs and International Development has to say about the amount of Overseas Aid, they intend to give away annually. He says they intend to increase the amount the present UK Government gives(£12 Billion). Where does he intend getting the money to pay for the likes of this project, as well as increasing the State Pension etc. I really think they live in the realms of fantasy. And anyone who takes the SNP at face value, should give themselves a shake.

[attento]

The reason that Scottish bank notes are different is that the Scottish (and Irish) banks retained the right to print their own notes when the English banks lost that right and they save the cost of paying the BoE for notes. Bank notes are what their name suggests - promissory notes of a bank. The Scottish notes are obligations of those individual banks not on the central bank and, as such, they are not legal tender. You are not obligated to accept Scottish bank notes, even in Scotland. If it goes independent, Scotland will have to set up its own central bank to issue legal tender bank notes and coins which will cost money. You can't have a country with no legal tender currency.

It's certainly possible to have a country without a currency of its own. Both Panama and Ecuador use the USD as their legal currency, to say nothing of Euroland whose countries do not have their own currency. However, it's a bad idea not to have your own currency as Greece and Spain could tell you.

Some Germans regret exchanging the DMark for the EuroDrachma.

[attento]

International Business and Banking abhors uncertainty. The very recent fluctuations in UK exchange rates and Share prices for Scottish based companies, exemplify this. The British Pound will withstand this period of uncertainty.

[sawadee1947]

...who needs the POUND really? We in Ireland are happy without and love our independence. Congrats to the Scottish !

Banknotes issued by northern Ireland are denominated in pounds sterling...talk about thick.,.this guy doesn't even know what currency his own country has. As for Southern Ireland, it's in the euro, I doesn't have it's own currency, it has the euro. LOL.

Do your home work, man! There is NO SOUTHERN IRELAND !!!....But Ireland as a REPUBLIC. And we are indeed happy to have the EURO. Please YOU stay away from my country please. Simple minds are prohibited...!

unfortunatly you are one of the simplest minds ,southern Ireland is a wasteland ,buy one house get one free a couple of years ago ,half finished estates and generaly in the sh t, i know i go there.

your logo says: old enough to know better... Then we'll have to wait until you are grown up.....only yackety-yack so far, little boy.

[super22k]

Well said Fletchsmile.It is about time we English had some referendums.

[Jaggg88]

And for those with GBP held in Scottish banks or other deposit taking institutions, what becomes of that money if Scotland leaves and adopts a currency that is not the GBP?

For a start banking rules state that a bank must be based in the country where it has most customers so the main Scottish banks will be forced to move HQ. There are similar rules for parts of the insurance/assurance business.

Although the oil and gas is running out there has already been some new finds north of Shetland and Shetland has said it will not leave the union, so lots of contentious issues abound.

[CaptHaddock]

The reason that Scottish bank notes are different is that the Scottish (and Irish) banks retained the right to print their own notes when the English banks lost that right and they save the cost of paying the BoE for notes. Bank notes are what their name suggests - promissory notes of a bank. The Scottish notes are obligations of those individual banks not on the central bank and, as such, they are not legal tender. You are not obligated to accept Scottish bank notes, even in Scotland. If it goes independent, Scotland will have to set up its own central bank to issue legal tender bank notes and coins which will cost money. You can't have a country with no legal tender currency.

It's certainly possible to have a country without a currency of its own. Both Panama and Ecuador use the USD as their legal currency, to say nothing of Euroland whose countries do not have their own currency. However, it's a bad idea not to have your own currency as Greece and Spain could tell you.

Some Germans regret exchanging the DMark for the EuroDrachma.

Germans took a short-term hit on their savings from the adoption of the Euro, but they have hugely benefited ever since because the cheap Euro made their exports cheaper. The Euro put the price of labor in the southern periphery of Europe too high to compete with German labor, especially after the Germans coerced their unions into giving up wage gains early in the 2000's. The way to correct the mispricing of labor in Portugal, Spain, Italy, and Greece would be for those countries to devalue their currencies. That's what the Brits did after the 2008 crisis, but the European southern tier couldn't because they are nailed to the Euro. The other corrective would be if Germany permitted a higher national rate of inflation that would eventually equalize labor rates. But the Germans will never accept inflation. So, they are playing the same mercantilist, beggar-thy-neighbor game as China which pegs its yuan against the dollar too cheaply.

[chiang mai]

And for those with GBP held in Scottish banks or other deposit taking institutions, what becomes of that money if Scotland leaves and adopts a currency that is not the GBP?

For a start banking rules state that a bank must be based in the country where it has most customers so the main Scottish banks will be forced to move HQ. There are similar rules for parts of the insurance/assurance business.

Although the oil and gas is running out there has already been some new finds north of Shetland and Shetland has said it will not leave the union, so lots of contentious issues abound.

Which banking rules, please?

[simple1]

And for those with GBP held in Scottish banks or other deposit taking institutions, what becomes of that money if Scotland leaves and adopts a currency that is not the GBP?

For a start banking rules state that a bank must be based in the country where it has most customers so the main Scottish banks will be forced to move HQ. There are similar rules for parts of the insurance/assurance business.

Although the oil and gas is running out there has already been some new finds north of Shetland and Shetland has said it will not leave the union, so lots of contentious issues abound.

Which banking rules, please?

I was interested so did a Google search, issue discussed at URL below:

Council Directive 95/26/EC of 29 June 1995, The directive says that banks must have their head offices "in the same member state as its registered office". It also implies that those registered and head offices should be located where a group has the bulk of its activities

http://www.bbc.com/news/business-26455655

[chiang mai]

Interesting, thanks, it sounds like anti competition legislation.

Edited September 10, 2014 by chiang mai

[bkk_mike]

Re post paddyjenkis

Fully agree 100% with the economist. I too, doubt that the majority of Scots really understand the financial implications of voting for Independence. When I read some of the comments by fellow Scots on this forum, I can only shake my head. I only hope the majority of Scots have the sense to vote NO, as Salmond, and his cohorts, haven't got a clue.

Regarding the above comment about Ireland, 'being happy, and love our Independence'. Independence, most of your laws come from Brussles. Wasn't it only a a couple of years ago Ireland had to go cap in hand for a bailout to the EU. And, as far as I'm aware you haven't paid it back fully, yet. Yes, just what we in Scotland need.

Brussels has never been an "enemy". Not any evil came from there. Much more was home made. All decisions have to be accepted by all member states. But if you can't agree with consense...

That you Poms might leave the EU...why not. We don't need you. You were always a problem for a sustainable future of EU. Scotland should use their rights of independance and join the Euro club with all advantages and obligations. Be proud Scots! Don't follow that isolated Cameron, who is not taken seriously in EU

Scotland can't just waltz into the EU but even if they eventually do, the EU has so far been an unmitigated disaster no matter what you decide to say on these forums.

If they want independence, fine, it's up to them, but they will need to stand on their own two feet with their own currency and pay their debts. If they do not pay their debt they will be frozen out of the financial markets and out of their biggest trading partner which will be disastrous for them. If you want to know how disastrous then look at Argentina, even Zimbabwe as examples. If they do find a way of creating their own workable currency and pay their debts then in the end they may just be okay, but it won't be easy. It's a huge risk they will be taking if they vote for independence and simple minded nationalistic nonsense is so far all I hear from the Yes campaigners.

From a legal perspective, the debts belong to the UK, which is the continuing country, and not to Scotland, which is being treated as the new country. (Like when the USSR split up, Russia kept things like the seat at the UN, AND soviet debt.)

As I see it, Scotland is saying they'll accept a share of the debt if they get an agreement to use the currency that the debt is in, but legally speaking, they can walk away from it and it's not a default.

That's the reason why Deutsche Bank said today that if it's a Yes, Scotland holds all the cards at the negotiating table.

[baboon]

H&PS3E4 pub:

Just for fun.

[paddyjenkins]

Re post paddyjenkis

Fully agree 100% with the economist. I too, doubt that the majority of Scots really understand the financial implications of voting for Independence. When I read some of the comments by fellow Scots on this forum, I can only shake my head. I only hope the majority of Scots have the sense to vote NO, as Salmond, and his cohorts, haven't got a clue.

Regarding the above comment about Ireland, 'being happy, and love our Independence'. Independence, most of your laws come from Brussles. Wasn't it only a a couple of years ago Ireland had to go cap in hand for a bailout to the EU. And, as far as I'm aware you haven't paid it back fully, yet. Yes, just what we in Scotland need.

Brussels has never been an "enemy". Not any evil came from there. Much more was home made. All decisions have to be accepted by all member states. But if you can't agree with consense...

That you Poms might leave the EU...why not. We don't need you. You were always a problem for a sustainable future of EU. Scotland should use their rights of independance and join the Euro club with all advantages and obligations. Be proud Scots! Don't follow that isolated Cameron, who is not taken seriously in EU

Scotland can't just waltz into the EU but even if they eventually do, the EU has so far been an unmitigated disaster no matter what you decide to say on these forums.

If they want independence, fine, it's up to them, but they will need to stand on their own two feet with their own currency and pay their debts. If they do not pay their debt they will be frozen out of the financial markets and out of their biggest trading partner which will be disastrous for them. If you want to know how disastrous then look at Argentina, even Zimbabwe as examples. If they do find a way of creating their own workable currency and pay their debts then in the end they may just be okay, but it won't be easy. It's a huge risk they will be taking if they vote for independence and simple minded nationalistic nonsense is so far all I hear from the Yes campaigners.

From a legal perspective, the debts belong to the UK, which is the continuing country, and not to Scotland, which is being treated as the new country. (Like when the USSR split up, Russia kept things like the seat at the UN, AND soviet debt.)

As I see it, Scotland is saying they'll accept a share of the debt if they get an agreement to use the currency that the debt is in, but legally speaking, they can walk away from it and it's not a default.

That's the reason why Deutsche Bank said today that if it's a Yes, Scotland holds all the cards at the negotiating table.

I wonder if it's that simple. First, would Scotland be a newly independent state when it could be argued it was independent 300 years ago and so should be responsible for its portion of the state debt, apportioned according to GDP. And If Scotland separates voluntarily, common sense suggests it retains responsibility for its portion. Second, are there sufficient precedents to say what the finding would be in an international court? If it decided itself it wanted to go it alone, then so called reasonable man tests may well determine the outcome of a court case, held perhaps in New York. My guess is this will be a messy fight if there is a Yes vote. Scotland won't get away with defaulting on it's larger neighbor, it's largest trading partner, it's only military ally and it will have to wake up to the reality of economic life when access to financial markets is cut off and it is prevented from trading with England. What happens when Russian trawlers decide to fish in its territorial waters, do they imagine England would rush in to help? No, not if the Scots are playing dirty, they will be sitting ducks. Tot for tat, give and take that's how things work between countries mostly. The nationalists haven't thought through the I implications, which will be painful for both sides in my opinion.

[CaptHaddock]

In the case of protecting their territorial waters from encroachments by the Russians and anyone else, the independent Scots would do what Ireland or Taiwan or any other small country would do: they would make alliances, perhaps with the UK in exchange perhaps for harboring the Royal Fleet, or with the US, or join NATO. Not necessary to sacrifice their sovereignty to make a military alliance, although junior partners always have less say in such matters.

[paddyjenkins]

In the case of protecting their territorial waters from encroachments by the Russians and anyone else, the independent Scots would do what Ireland or Taiwan or any other small country would do: they would make alliances, perhaps with the UK in exchange perhaps for harboring the Royal Fleet, or with the US, or join NATO. Not necessary to sacrifice their sovereignty to make a military alliance, although junior partners always have less say in such matters.

They won't find the English in the mood for alliances if they default on their debt. That's the point.

[kennypowers]

Today the pound is down from roughly 54 (Baht) to 51.78 based on the speculation of Scottish independence. Surely it should strengthen seeing as we won't have to provide benefits for all the druggies and alcoholics? (hehe)

[tonika]

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In the case of protecting their territorial waters from encroachments by the Russians and anyone else, the independent Scots would do what Ireland or Taiwan or any other small country would do: they would make alliances, perhaps with the UK in exchange perhaps for harboring the Royal Fleet, or with the US, or join NATO. Not necessary to sacrifice their sovereignty to make a military alliance, although junior partners always have less say in such matters.

They won't find the English in the mood for alliances if they default on their debt. That's the point.

As Slamonds a big fan of Putin, I don't see him having a problem with the Russkies. Indeed i wouldn't put it past him to let them have Faslane, as a Russian base, once he's got rid of the Royal Navy. Mind you he could always make an alliance with Kim Jong- Un, as they share the same political views.

[Ulic]

Both sides will loose with a yes vote. Hopefully level heads will prevail and the majority will realize the country is better together.

The markets can take good news and bad news, they don't like uncertainty and a vote for independence will bring plenty

of that for both sides.

[Aceicol]

From a legal perspective, the debts belong to the UK, which is the continuing country, and not to Scotland, which is being treated as the new country. (Like when the USSR split up, Russia kept things like the seat at the UN, AND soviet debt.)

As I see it, Scotland is saying they'll accept a share of the debt if they get an agreement to use the currency that the debt is in, but legally speaking, they can walk away from it and it's not a default.

That's the reason why Deutsche Bank said today that if it's a Yes, Scotland holds all the cards at the negotiating table.

Where have Deutsche Bank said that? I had a quick search but can't see anything in the news? The only thing I can see from them is this -

"On the currency side, it could at worse lead to a destabilising crisis in the whole British banking system and at best leave the the rest of the UK with an unstable currency union in which the Bank of England is forced to continue to provide liquidity to Scottish banks while Westminster thrashes out a fiscal and monetary arrangement with a new Scottish sovereign government holding all the cards.

"A 'yes' vote could easily derail the UK economic recovery. Scotland represents the rest of the UK's second largest trading partner after the EU and many corporate investment plans are likely to be put on hold until clarity over currency, regulatory and tax questions is achieved."

- Oliver Harvey, Deutsche Bank

www.bbc.co.uk/news/business-29124551

Edited September 10, 2014 by Aceicol

[paddyjenkins]

Looks like major banks such as RBS to move to England if the Yes vote wins. Many other employers will do the same, not just in services but across the spectrum. Many investors will also abandon Scotland. Runs on banks and capital flight have already begun, money is already being taken out. It is becoming clear that a Yes vote is looking more and more an act of suicide. Will Scotland hold all the cards after a Yes vote? No, it won't have any cards.

Edited September 11, 2014 by paddyjenkins

[i claudius]

Public sector jobs will also go if Scotland votes yes ,as although it is smaller ,they have far more employes in the public sector ,Scotland seems to get far more than the rest of the UK ,i do not want to see the pound fall for obvious reasons and i have nothing against the Scotch people ,but the more i read about it all ,i am begining to hope they do split and go it alone.

[Boxclever]

Is it all about losing the North Sea oil? this revenue would now go straight to the Scottish coffers instead of being shared to all of Britain. Just a thought.

[paddyjenkins]

Is it all about losing the North Sea oil? this revenue would now go straight to the Scottish coffers instead of being shared to all of Britain. Just a thought.

Oil runs out in about 10 years....after that there will be nothing once the services jobs have gone South.

[sandyf]

Today the pound is down from roughly 54 (Baht) to 51.78 based on the speculation of Scottish independence. Surely it should strengthen seeing as we won't have to provide benefits for all the druggies and alcoholics? (hehe)

Dollar index drops slightly this morning and pound creeps up to 1.62.

[sandyf]

Looks like major banks such as RBS to move to England if the Yes vote wins. Many other employers will do the same, not just in services but across the spectrum. Many investors will also abandon Scotland. Runs on banks and capital flight have already begun, money is already being taken out. It is becoming clear that a Yes vote is looking more and more an act of suicide. Will Scotland hold all the cards after a Yes vote? No, it won't have any cards.

Last year the RBS tried to sell the high street branches in England to Santander but the deal fell through. A yes vote may well bring it back to the table.

[sandyf]

Is it all about losing the North Sea oil? this revenue would now go straight to the Scottish coffers instead of being shared to all of Britain. Just a thought.

I was born and brought up in Scotland and believe the yes vote to be a major mistake.

The concept of independence is a patriotic ideal that most small countries just cannot afford. Look at what the Kurds have put up with and they still belong to Iraq, better the devil you know.

Ireland is also suffering,plagued with debt and high prices, could this be Scotland in a few years. Much has been said about oil but the cost of extraction is just too high, both financially and in human life. This is why most of the wells were capped in the first place. With the cost of extraction in the ME being so low it is very likely that most of Scotland's oil reserves will never see the light of day.

Alex Salmond is on an ego trip with delusions of grandeur and many have been swayed by the rhetoric. The UK may lose the vote but that would be down to complacency rather than the best outcome.

[sandyf]

In the case of protecting their territorial waters from encroachments by the Russians and anyone else, the independent Scots would do what Ireland or Taiwan or any other small country would do: they would make alliances, perhaps with the UK in exchange perhaps for harboring the Royal Fleet, or with the US, or join NATO. Not necessary to sacrifice their sovereignty to make a military alliance, although junior partners always have less say in such matters.

Has the Yes camp really thought this through.

Faslane.

On independence, Scotland will inherit the barracks, air bases and naval bases on its territory, including Faslane. These will form the starting point for a new Scottish Defence Force.

How the defence forces of an independent Scotland are set up will be for future elected Scottish Governments to decide, just as the Westminster government is currently responsible for deciding the shape and size of UK defence forces.

The current Scottish Government has set out proposals in its white paper - "Scotland's Future: Your Guide to an Independent Scotland" - for the transition of Faslane from a nuclear submarine base to Scotland's main naval base and joint force headquarters. The transition would take place over the course of a decade. It is the expectation of the Government that that the number of military personnel at Faslane will match the numbers that are there currently, supported by a significant number of cilivilian personnel.

Lossiemouth

Will the UK defence system be weakened?

"From Summer 2014, the Northern Quick Reaction Alert (QRA) force of Typhoon FGR4 will relocate to Lossiemouth following the closure of RAF Leuchars. This will leave Lossiemouth as the only operational RAF base in Scotland."

Dounreay

Have the yes camp been advised of the costs involved with the outstanding work required at Dounreay? According to their own documentation, they will "inherit" the problem.

"On 1 April 2005 the Nuclear Decommissioning Authority (NDA) became the owner of the site, with the UKAEA remaining as operator. Decommissioning of Dounreay was initially planned to bring the site to an interim care and surveillance state by 2036, and as a brownfield site by 2336, at a total cost of £2.9 billion."

"In 2011 the MoD stated that NRTE could be scaled down or closed after 2015 when the current series of tests ends. Computer modelling and confidence in new reactor designs meant testing would no longer be necessary. The cost of decommissioning NRTE facilities when they become redundant, including nuclear waste disposal, was estimated at £2.1 billion in 2005."

http://en.wikipedia.org/wiki/Dounreay