All power to the speculators

Tweet I really don’t know where to start with the latest post from Lib Dem AM Peter Black.  One of the world’s leading speculators (described in the blog as ‘a world leading expert on currency’ – I thought it was tongue in cheek, but apparently it’s intended to be taken seriously) has said, in effect, that if the intransigence of the unionist parties in the UK forces an independent Scotland to create a new currency, it will leave Scotland open to attack by speculators who will see the new currency as weak and therefore an opportunity to destabilise a whole country in the interests of making a profit.

Well, of course, any small country with its own currency is open to the same sort of unprincipled attack at any time; it doesn’t need to be a new country.  And the “financial meltdown that swept through the Eurozone” didn’t happen by accident either; much of that was the result of speculation as well.  (Yes, of course the countries concerned had a few problems of their own making, but it only became a wider crisis because of the actions of the speculators).  Any country and any currency are open to such attack at any time, regardless of size; it’s not just a problem for an independent Scotland.

The speculators need to have a fear to play on of course – otherwise they don’t all act in the same direction, and their gambles cancel each other out.  But the story here isn’t really about Scotland at all – it’s about the power that our political leaders have ceded to the casinos which pretend to be markets.

And the political answer that we need isn’t – or shouldn’t be – “you can’t do that because the speculators will ruin you if you do”, which seems to be the conclusion of the blog post.  What we need is co-ordinated action to take speculation and gambling out of the equation; we need to curb their power not bend down before it.

Saving the £?

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Tom Bodden’s report on the SNP’s drive for independence refers to one aspect of the SNP’s proposals which I hadn’t previously realised.  An independent Scotland, he says, “would retain the pound as its currency and any decision to join the Euro would be taken in a referendum”.  That surprises me somewhat.

I can understand the political imperative behind it.  It makes the independence option look a little ‘safer’.  And I’ve heard many nationalists in Wales arguing that an independent Wales should retain the pound as well.  But it’s the economic rationale that I don’t understand.

As a part of a unitary state called the UK, with its own currency called the pound, Wales and Scotland send MPs to the Parliament in London, where they have as much (or as little) influence over monetary policy as any other MPs.  As direct members of the European Union and part of the Eurozone, Wales and Scotland would have as much (or, again, as little) influence on monetary policy for that zone as any other states of comparable size.

But to be part of a currency union with another country whilst having completely separate governing arrangements would mean having no influence whatsoever over monetary policy, and being completely at the mercy of decisions taken elsewhere.  I don’t understand why anyone would want to go from ‘not having very much influence’ to ‘having no influence at all’ over one of the main levers of policy affecting their economy.

I sympathise with the desire by some to see an independent Wales (or Scotland) adopting a currency of its own.  It makes a certain sense from a nationalist perspective, and puts the maximum level of power over monetary policy into the hands of the Welsh Government.  But it also seems to me to be attempting to swim against the tide of history.  For all its troubles, I’m still convinced that european currency union is here to stay, and that membership of that union is the least worst option for a newly independent state.

I’d rank an independent currency as the second option though.  But being an independent country and sticking with the pound looks to me like the worst of all worlds option.