Quotulatiousness

August 15, 2013

Egyptian military empowered by Western approval

Filed under: Middle East, Military — Tags: , , , , , — Nicholas @ 10:51

Brendan O’Neill says that we should not be surprised by the bloody turn of events in Egypt … after all, we collectively acted as enablers:

There is ‘world outcry’ over the behaviour of the Egyptian security forces yesterday, when at least 525 supporters of the deposed Muslim Brotherhood president Mohamed Morsi were massacred. The killings were ‘excessive’, says Amnesty, in a bid to bag the prize for understatement of the year; ‘brutal’, say various handwringing newspaper editorials; ‘too much’, complain Western politicians.

Such belated expressions of synthetic sorrow are not only too little, too late (hundreds of Egyptians have already been massacred by the military regime that swept Morsi from power); they are also extraordinarily blinkered. To focus on the actions of the security forces alone, on what they did with their trigger fingers yesterday, is to miss the bigger picture; it is to overlook the question of where the military regime got the moral authority to clamp down on its critics so violently in the name of preserving its undemocratic grip on power. It got it from the West, including from so-called Western liberals and human-rights activists. The moral ammunition for yesterday’s massacres was provided by the very politicians and campaigners now crying crocodile tears over the sight of hundreds of dead Egyptians.

The fact that General Abdel Fattah al-Sisi, the head of the Egyptian armed forces who swept Morsi from power on 3 July, feels he has free rein to preserve his coup-won rule against all-comers isn’t surprising. After all, his undemocratic regime has received the blessing of various high-ranking Western officials, even after it carried out massacres of protesters campaigning for the reinstatement of Morsi, who was elected with 52 per cent of the vote in 2012.

Baroness Catherine Ashton, the European Union’s chief of foreign affairs, who, like al-Sisi, is unelected, visited Egypt at the end of July. She met with al-Sisi and his handpicked, unelected president, Adly Mansour. She called on this junta disguised as a transitional power to start a ‘journey [towards] a stable, prosperous and democratic Egypt’. This was after it had massacred hundreds of protesters, placed various politicians and activists in prison, and reinstated the Mubarak-era secret police to wage a ‘war on terror’ against MB supporters. For Ashton to visit al-Sisi and talk about democracy in the aftermath of such authoritarian clampdowns was implicitly to confer authority on the coup that brought him to power and on his brutal rule and actions.

Meanwhile, the US has refused to call the military’s sweeping aside of Morsi a coup. The Democratic secretary of state, John Kerry, has gone further and congratulated al-Sisi’s regime for ‘restoring democracy’. Kerry said the military’s assumption of power was an attempt to avoid ‘descendance into chaos and violence’ under Morsi, and its appointment of civilians in the top political jobs was a clear sign that it was devoted to ‘restoring democracy’. He said this on 2 August. After hundreds of Morsi supporters had already been massacred. If al-Sisi’s forces believe that killing protesters demanding the reinstatement of a democratically elected prime minister is itself a democratic act, a necessary and even good thing, it isn’t hard to see where they got the idea from.

August 14, 2013

If there’s a conspiracy, it’s a pretty ineffectual, incompetent one

Filed under: Economics, Government, USA — Tags: , , , , , — Nicholas @ 08:20

Jeff Thomas asks whether the gold market is being manipulated by shadowy conspiracies of governments, big banks, and international bodies:

… we are reminded that, no matter how evil we think a given government may be, no matter how greedy we think a given banker may be, both the world’s governments and the worlds banks have proven time and time again to be guilty of overreach; that is, they assume that their position of power will assure that, if they attempt to control a market, they will succeed.

However, history shows that both governments and banks have a patchwork quilt as a record for effectiveness in this regard. Both exhibit a history of misinterpretation of market drivers, inadequate planning and inadequate execution, to say nothing of a penchant for betraying one another. (The admission by Barclays Bank that they manipulated LIBOR is a good example.)

As such, the concept of a finely-tuned conspiracy of bankers and governments in which all the players (including the egotistical heads of countries) all agree on every facet of a “Grand Plan” is unlikely in the extreme. On the other hand, it is highly likely that an endless series of deals between any two or more parties will crop up along the way. They will succeed or fail to varying degrees. (And we should not overlook the likelihood that, whatever one group should attempt, another group may, inadvertently or not, spoil that attempt through their own plan, which may well be a different one.)

By arguing whether or not gold manipulation exists, we may find that we are wasting our brain cells on the question. A better question, and one that we might choose to monitor on a regular basis, might be, “To what degree is successful manipulation taking place?” We might then use the on-going answer as a guide, to inform our reasoning going forward, as to what impact any perceived manipulation is likely to have with regard to our precious metals investment.

August 13, 2013

It’s accurate to describe the Greek plight as a depression

Filed under: Economics, Europe, Greece — Tags: , , — Nicholas @ 10:44

Allister Heath says the catastrophic state of the Greek economy fully merits the descriptor “depression”:

Sorry, but the fact that Greece collapsed at an annual rate of 4.6 per cent in the second quarter, rather than a little bit faster, isn’t good news. It’s terrible, awful, horrible news. Greek output is down by 23 per cent since 2008 and unemployment is at around 28 per cent; no wonder, given the shrinking economy, that gross tax revenues are continuing to undershoot targets.

Hyperbolic economists sometime claim that the UK has undergone a depression, which is nonsense — but Greece’s woes cannot be described in any other way. Its depression has been catastrophic, one of the worst ever recorded for any country in the modern, industrialised era (apart from during or immediately after a war). Its dramatic collapse reminds us that stupid economic policies can destroy a nation; depressions have not been banished from modern civilisation.

It may be, of course, that the collapse is beginning to abate and that the economy may finally stabilise next year. I’ll believe it when I see it; unless Greece’s money supply starts growing again, and demand begins to increase, a recovery is impossible. But Greece is just a tiny part of the Eurozone, so achieving such an outcome is even harder than in a country like the UK, especially given that the Greek financial crisis hasn’t really gone away. There is no way that Athens will meet its bailout targets and its debt burden is utterly unsustainable.

July 19, 2013

Bitter reality scheduled to return on September 22nd

Filed under: Economics, Europe, Germany, Government — Tags: , , , , , — Nicholas @ 08:46

Here’s an unpleasant idea to disturb your narrative of economic recovery:

You may have noticed the small blurb recently that the ECB had eased the rules for asset backed securitizations. You may have read this snippet and thinking nothing of it you moved on. This would have been a mistake because just here you would have noticed the cracks of a crumbling empire.

The French banks, the Spanish banks, the Portuguese banks are all engaged in an ongoing charade so they do not need to ask the EU for help. They all are taking their Real Estate loans, the properties that they have confiscated, the commercial loans that are no longer paying and they have put them into massive securitizations that are pledged at the ECB as they are given cash for the collateral. The collateral, as you may suppose, has all of the value of cents on the Dollar but they are given money at par while the ECB carries them on their books at par. It is a fraudulent scheme jam packed with money created out of nothing but it is judged to be a better plan that to have to admit to accurate financials and have the banks of Europe default all across the Continent.

[. . .]

There will be nothing but lying until September 22, 2013 which is the date of the German elections. This is the drop dead date that I have been asked about for so long. Then, as soon as the celebration is over that Ms. Merkel is to remain in power, the world will turn on its axis. The status quo will disappear and there will be a “shock and horror” campaign as the Southern nations of Europe demand more help and Germany squirms and then refuses to provide it because it does not have the assets to do so.

Spain, France, Portugal, Greece, Cyprus, and even Italy are all going to line up at the trough only to discover that the promise of water was just that, a promise, and does not exist. A Biblical drought will be upon the Continent and from the political battles will emerge new alliances and new screams calling the traitors by name. The twin towers upon which the markets rest, money from nothing and fairy tale financials, will decompose in the light of this new sun and our old friend, Fear, will return to haunt us.

Sleep well.

July 14, 2013

Signs of an economic Sharknado

Filed under: Economics, Government, Media — Tags: , , , , — Nicholas @ 11:51

Feeling positive about the economy? Michael Snyder has ten reasons to change your mind:

Have you ever seen a disaster movie that is so bad that it is actually good? Well, that is exactly what Syfy’s new television movie entitled Sharknado is. In the movie, wild weather patterns actually cause man-eating sharks to come flying out of the sky. It sounds absolutely ridiculous, and it is. You can view the trailer for the movie right here. Unfortunately, we are witnessing something just as ridiculous in the real world right now. In the United States, the mainstream media is breathlessly proclaiming that the U.S. economy is in great shape because job growth is “accelerating” (even though we actually lost 240,000 full-time jobs last month) and because the U.S. stock market set new all-time highs this week. The mainstream media seems to be absolutely oblivious to all of the financial storm clouds that are gathering on the horizon. The conditions for a “perfect storm” are rapidly developing, and by the time this is all over we may be wishing that flying sharks were all that we had to deal with. The following are 10 reasons why the global economy is about to experience its own version of Sharknado

#1 The financial situation in Portugal continues to deteriorate thanks to an emerging political crisis. […]

#2 The economic depression in Greece continues to deepen, and it is being reported that Greece will not even come close to hitting the austerity targets that it was supposed to hit this year […]

#3 The economic crisis in the third largest country in the eurozone, Italy, has taken another turn for the worse. […]

#4 There are rumors that some of the biggest banks in the world are in very serious trouble. […]

#5 Just before the financial crisis of 2008, the price of oil spiked dramatically. […]

#6 Mortgage rates are absolutely skyrocketing right now […]

#7 This upcoming corporate earnings season is shaping up to be an extremely disappointing one. […]

#8 U.S. stocks are massively overextended right now. […]

#9 Rapidly rising interest rates are causing the bond market to begin to come apart at the seams. […]

#10 Rapidly rising interest rates could cause an implosion of the derivatives market at any moment. […]

Most Americans don’t realize that Wall Street has been transformed into the largest casino in the history of the world. Most Americans don’t realize that the major banks are literally walking a financial tightrope each and every day.

All it is going to take is one false step and we will be looking at a financial crisis even worse than what happened back in 2008.

So enjoy this little bubble of false prosperity while you can.

It is not going to last for too much longer.

June 26, 2013

Mark Steyn on the rise of UKIP

Filed under: Britain, Europe, Media, Politics — Tags: , , , , — Nicholas @ 00:01

It’s the attack of the swivel-eyed loons:

It’s all but impossible to launch a new political party under America’s electoral arrangements, and extremely easy to do so under Continental proportional representation. The Westminster first-past-the-post system puts the task somewhere in between: tough, but not entirely the realm of fantasy. The Labour party came into being at the dawn of the 20th century, and formed its first government in 1924. The United Kingdom Independence party was born in 1993 and now, a mere two decades later, is on the brink of … well, okay, not forming its first government, but it did do eerily well in May’s local elections. The Liberals were reduced to their all-time lowest share of the vote, the Tories to their lowest since 1982, and for the first time ever, none of the three “mainstream” parties cracked 30 percent: Labour had a good night with 29, the Conservatives came second at 25, and nipping at their heels was the United Kingdom Independence party with 23 percent.

They achieved this impressive result against not three opponents but also a fourth — a media that have almost universally derided the party as a sinkhole of nutters and cranks. UKIP’s leader, the boundlessly affable Nigel Farage, went to P. G. Wodehouse’s old high school, Dulwich College, and to a sneering metropolitan press, Farage’s party is a déclassé Wodehousean touring company mired in an elysian England that never was, populated only by golf-club duffers, halfwit toffs, rustic simpletons, and hail-fellow-well-met bores from the snug of the village pub. When I shared a platform with him in Toronto a few months back, Mr. Farage explained his party’s rise by citing not Wodehouse but another Dulwich old boy, the late British comic Bob Monkhouse: “They all laughed when I said I’d become a comedian. Well, they’re not laughing now.”

The British media spent 20 years laughing at UKIP. But they’re not laughing now — not when one in four electors takes them seriously enough to vote for them. So, having dismissed him as a joke, Fleet Street now warns that Farage uses his famous sense of humor as a sly cover for his dark totalitarian agenda — the same well-trod path to power used by other famous quipsters and gag-merchants such as Adolf Hitler, whose Nuremberg open-mike nights were legendary. “Nigel Farage is easy to laugh at … that means he’s dangerous,” declared the Independent. The Mirror warned of an “unfulfilled capacity for evil.” “Stop laughing,” ordered Jemma Wayne in the British edition of the Huffington Post. “Farage would lead us back to the dark ages.” The more the “mainstream” shriek about how mad, bad, and dangerous UKIP is, the more they sound like the ones who’ve come unhinged.

June 25, 2013

Portugal’s experience with drug decriminalization

Filed under: Europe, Health, Law, Liberty — Tags: , , , — Nicholas @ 14:38

The Cato Institute sent out a Twitter update, reminding everyone about the 2009 White Paper by Glenn Greenwald on how the Portuguese drug experiment played out after 2001:

On July 1, 2001, a nationwide law in Portugal took effect that decriminalized all drugs, including cocaine and heroin. Under the new legal framework, all drugs were “decriminalized,” not “legalized.” Thus, drug possession for personal use and drug usage itself are still legally prohibited, but violations of those prohibitions are deemed to be exclusively administrative violations and are removed completely from the criminal realm. Drug trafficking continues to be prosecuted as a criminal offense.

While other states in the European Union have developed various forms of de facto decriminalization — whereby substances perceived to be less serious (such as cannabis) rarely lead to criminal prosecution — Portugal remains the only EU member state with a law explicitly declaring drugs to be “decriminalized.” Because more than seven years have now elapsed since enactment of Portugal’s decriminalization system, there are ample data enabling its effects to be assessed.

Notably, decriminalization has become increasingly popular in Portugal since 2001. Except for some far-right politicians, very few domestic political factions are agitating for a repeal of the 2001 law. And while there is a widespread perception that bureaucratic changes need to be made to Portugal’s decriminalization framework to make it more efficient and effective, there is no real debate about whether drugs should once again be criminalized. More significantly, none of the nightmare scenarios touted by preenactment decriminalization opponents — from rampant increases in drug usage among the young to the transformation of Lisbon into a haven for “drug tourists” — has occurred.

The political consensus in favor of decriminalization is unsurprising in light of the relevant empirical data. Those data indicate that decriminalization has had no adverse effect on drug usage rates in Portugal, which, in numerous categories, are now among the lowest in the EU, particularly when compared with states with stringent criminalization regimes. Although postdecriminalization usage rates have remained roughly the same or even decreased slightly when compared with other EU states, drug-related pathologies — such as sexually transmitted diseases and deaths due to drug usage — have decreased dramatically. Drug policy experts attribute those positive trends to the enhanced ability of the Portuguese government to offer treatment programs to its citizens — enhancements made possible, for numerous reasons, by decriminalization.

June 6, 2013

IMF forced to admit that the Greek bailout “included notable failures”

Filed under: Economics, Europe, Greece — Tags: , , , , — Nicholas @ 08:58

In the Guardian, Larry Elliott, Phillip Inman and Helena Smith round up the IMF’s self-criticisms over the handling of the bailout package imposed on Greece:

In an assessment of the rescue conducted jointly with the European Central Bank (ECB) and the European commission, the IMF said it had been forced to override its normal rules for providing financial assistance in order to put money into Greece.

Fund officials had severe doubts about whether Greece’s debt would be sustainable even after the first bailout was provided in May 2010 and only agreed to the plan because of fears of contagion.

While it succeeded in keeping Greece in the eurozone, the report admitted the bailout included notable failures.

“Market confidence was not restored, the banking system lost 30% of its deposits and the economy encountered a much deeper than expected recession with exceptionally high unemployment.”

In Athens, officials reacted with barely disguised glee to the report, saying it confirmed that the price exacted for the €110bn (£93bn) emergency package was too high for a country beset by massive debts, tax evasion and a large black economy.”

Under the weight of such measures — applied across the board and hitting the poorest hardest — the economy, they said, was always bound to dive into an economic death spiral.

May 30, 2013

Latest EU legal move may drive support to UKIP

Filed under: Britain, Europe, Law — Tags: , , , , — Nicholas @ 08:13

Mats Persson explains why Nigel Farage and UKIP may see a spike of support when the latest legal challenge gets going:

The European Commission will today take the UK to the European Court of Justice — the body meant to police the EU treaties — over its rules on EU migrants’ access to benefits. The Commission says the UK’s so-called “right to reside” test — a filter used to make sure that EU migrants are eligible to claim benefits — is illegal under EU law as British citizens pass it automatically. The UK Government is disputing this claim saying it is clear that the UK rules “are in line with EU law.” In other words, the folks in Brussels are about to throw a hand grenade into the already red-hot domestic EU debate.

The legal details around this case are hugely complex as are the rules governing EU migrants’ access to benefits […] But essentially, this is about the EU’s one-size-fits-all model sitting poorly with the UK’s ‘universalist’ welfare system, which is largely made up of means tested benefits rather than contribution-based benefits — unlike many other systems in Europe. The UK government feels it needs a filter — practically and politically — to make sure migrants come here to work rather than to claim benefits. Legally this is a grey area but it’s clear that the Commission is taking the strictest interpretation.

As I’ve argued before, claims that EU migrants come here in droves to claim benefits are widely exaggerated — and free movement of workers has been largely beneficial for the UK and Europe. However, it’s clear that the combination of immigration, Europe and benefits is one of the potentially most toxic ones in modern day politics, so needs to be treated with kid gloves. Even if all the evidence suggests EU migrants are less likely to claim benefits than British citizens, the perception of “benefit tourism” is still absolutely explosive.

May 16, 2013

You don’t have to be a “Little Englander” to think the UK would be better off outside the EU

Filed under: Britain, Europe — Tags: , , , — Nicholas @ 08:03

In sp!ked, Rob Lyons explains that it’s not just the neanderthal throwback Tories who are questioning whether the UK should leave the European Union:

Over the past week, there has been the most serious discussion about Britain leaving the European Union since it first joined in 1973, and since the British electorate voted in its only referendum on EU membership, under Harold Wilson’s Labour government, in 1975. This discussion a good thing, because it really is time we made a collective dash for the exit from the EU.

[. . .]

The EU doesn’t only elevate technocrats in the economic sphere. More and more political and social policy is also effectively being guided from Brussels. Consider an opinion piece [in the] Guardian this week, by the head of policy at Friends of the Earth UK, Craig Bennett. Bennett argues that the ability of the EU to impose rules and regulations on Britain has improved our health and environment. To be explicit: Bennett thinks it is better that people outside Britain impose these things upon us, even over the heads of our elected representatives. Where a national government might have to balance costs and benefits, and take into consideration the stated desires and priorities of voters, regulations and directives from Brussels can be imposed free from such consequences and accountability. From the point of view of NGOs and lobbyists, this is great news. Why try to change popular opinion when you can simply get the green light from some unelected body of technocrats?

To be anti-EU does not mean being anti-Europe. True, there is a fair degree of parochialism and anti-immigrant sentiment among many of those in Britain who want out. But those of us who believe in having closer ties with Europe and greater freedom of movement across the continent should also be opposed to the EU. Because, thanks to its anti-democratic institutions and its imposition of draconian policies on unwilling citizens, the EU is now doing more harm than good for the cause of creating a sense of European common interest. It might be uniting national elites, allowing them to take refuge from their electorates in the citadels of Brussels, but it is disempowering and even dividing the peoples of Europe — Germans vs Greeks, for example, or enlightened Western Europeans against allegedly backward, racist Hungarians.

Despite the creation of the European Parliament in 1979, there is no meaningful European demos. But the ability to move and trade freely is a good thing — something we could surely retain without the bureaucratic honeypot of the EU’s institutions. It’s time for all Europeans to reimagine how we might live and work together — and Britain marking a sharp exit from the anti-democratic, pseudo-unifying mess that is the EU could be the perfect catalyst for that.

May 5, 2013

An independent Scotland might not have an easy path to EU membership

Filed under: Britain, Europe, Government — Tags: , , — Nicholas @ 00:01

At the EUobserver, Benjamin Fox outlines the potential trouble spots for a post-independence Scottish government in any attempt to join the EU directly:

Scottish first minister Alex Salmond has indicated that he wants to keep the pound sterling rather than join the euro despite the fact that a commitment to join the single currency is in all recent EU access treaties.

Meanwhile, with Scotland having a large fisheries sector and being one of the largest claimants of EU structural funds in the UK, it would be likely to seek its own country-specific exemptions and opt-outs.

There has already been confusion over whether Scotland would have to negotiate its own accession treaty with the rest of the EU. Although Scottish ministers have claimed that this would be a formality, it admitted that it has not sought legal advice. In response to parliamentary questions, European Commission President Jose Manuel Barroso said that “a new state, if it wants to join the EU has to apply to become a member of the EU, like any state.”

The committee concluded that “it is clear from these statements that there is no formal, automatic right to Scottish membership of the EU.”

It noted that regarding Scottish EU membership as a formality “seems to us to misjudge the issue and underestimate the unease that exists with the EU member states … about Scottish independence.”

It said Scotland could also struggle to secure the same opt-outs as Britain together with new Scotland-specific exemptions.

May 3, 2013

A “bunch of fruitcakes, loonies and closet racists” finished second in UK by-election, gain seats in local elections

Filed under: Britain, Politics — Tags: , , , , — Nicholas @ 09:44

The initial reports from the UK’s local elections yesterday were certainly encouraging for the UK Independence Party:

Britain’s populist United Kingdom Independence Party made sweeping gains in local elections and finished second in a parliamentary by-election, according to results announced Friday, shaking mainstream political parties, consolidating its position as an emerging political force and claiming a “sea change” in national life.

Once scorned by Prime Minister David Cameron as “a bunch of fruitcakes, loonies and closet racists,” the party, which wants Britain to leave the European Union and strictly control immigration, gained about a quarter of the vote in a series of elections in different areas of the country on Thursday, according to an initial count. The outcome represented the party’s fourth electoral advance in six months.

“We have been abused by everybody, the entire establishment,” Nigel Farage, the Independence Party leader, told the BBC, “and now they are shocked and stunned that we are getting over 25 percent of the vote everywhere we stand across the country. This is a real sea change in British politics.”

A government minister, Kenneth Clarke, had also dismissed party members as “clowns,” prompting Mr. Farage, in a string of TV and radio interviews, to parry with, “Send in the clowns.”

April 27, 2013

The misplaced outrage over Amazon’s tiny tax bill in the UK

Filed under: Books, Britain, Business, Economics, Europe, Media — Tags: , , , , — Nicholas @ 08:40

Tim Worstall explains that the current efforts by various campaigners including Stephen Fry are not only a waste of time and effort, but betray a fundamental misunderstanding of how the EU is set up:

There are several points that could be made. One being that selling to Brits from Luxembourg is not tax dodging, it’s exactly what the EU intends the Single Market should be. A, umm, single market across 27 countries. A second might be that even if we start to whine about UK warehouses, tax is still not due here. Our double taxation treaty with Luxembourg means that such warehouses do not lead to tax being due. And that’s from 1968 or so when Wilson ruled: it’s also a standard part of all double taxation treaties and for good reason.

(For example, the metals trade uses warehouses in Rotterdam as the point at which a contract is concluded. The cut flowers business warehouses in a small village near Schipol. Should Holland get all the tax from the world’s metals and flower businesses? Or should everyone be taxed where they really are, not the warehouses?)

But there’s much worse than this. We’ve had the Margaret Hodges screeching that we’re talking about immoral, not illegal. The TJN and other fools similarly scream about how awful it is that people can do business without paying tax. And it is precisely all of this activism that leads these gentle booksellers to spend their year collecting signatures. To absolutely no avail whatsoever.

For in the year they are complaining about, last year, 2012, Amazon did not make a profit. A $39 million loss in fact according to their accounts. It’s simply not true that “tax dodging” by Amazon is leading to the crucifixtion of the independent book shop. That’s a lie that’s been foisted upon people by the obfuscations of the campaigners.

April 24, 2013

More on the currency choices facing an independent Scotland

Filed under: Britain, Economics, Europe — Tags: , , , , , — Nicholas @ 10:49

John Kay works through the short list of options about money that a newly independent Scotland would need to decide about:

Speculation about Scotland’s currency future would begin on the day Scotland voted for independence — or the day on which a poll showed that this result was likely. Scotland would have three main options — the euro, the pound sterling, or its own distinct money.

The euro is the official currency of the EU, and Scotland would in principle be committed to its adoption. But there would be little enthusiasm for that course in either Edinburgh or Brussels, and Scotland — like the UK — would not meet the criteria on debt and deficits for joining the euro. A vague Scottish aspiration to join the single currency at some distant date would probably satisfy everyone.

The sensible outcome would be continued currency union with England — or with the entity that, in deference to Wales and Northern Ireland, participants in the Scottish debate call rUK — rest of UK. Scotland might ask for — and get — a Scottish economist on the Bank of England’s Monetary Policy Committee (not a representative of Scotland — the rules of the committee preclude representative roles). But that would be the extent of Scottish influence on monetary policy.

[. . .]

If I represented the Scottish government in the extensive negotiations required by the creation of an independent state, I would try to secure a monetary union with England, and expect to fail. Given experience in the eurozone, today’s conventional wisdom is that monetary union is feasible only as part of a move towards eventual fiscal union. But desire to break up fiscal union was always a major — perhaps the principal — motive for independence in the first place.

Scotland could continue to use the pound unilaterally, whether the Bank of England liked it or not — as Ecuador uses the dollar and Montenegro the euro. But this is not really an attractive course, and the only countries that have adopted it are those — such as Ecuador and Montenegro — whose monetary histories are so dire that they prefer to entrust their policies to foreigners.

April 23, 2013

Independent Scotland would not be in currency union with the UK

Filed under: Britain, Economics — Tags: , , , — Nicholas @ 09:08

In the Guardian, Patrick Wintour and Severin Carrell cover the latest provocative notion coming out of London, directed at the Scottish separatists:

An independent Scotland would be forced to adopt new currency arrangements that would be a “very deep dive into uncharted waters”, George Osborne has warned. The chancellor said an independent Scotland would be unable to operate with a currency linked to sterling, let alone be able to form a currency union with it.

“The best arrangement is if they stay in the UK,” he said.

Osborne said he thought it “unlikely” the rest of UK would agree to a currency union with Scotland, noticeably hardening his rhetoric against Alex Salmond’s proposal.

Speaking on BBC Radio Scotland, the chancellor said: “Why would it want to risk a currency union? We’ve got a currency union in Europe and it’s called the euro, and look at all the problems that has had trying to co-ordinate the economic policies of different countries.”

Setting out the options, the chancellor said: “I think Scotland could either join the euro, and Alex Salmond is very nervous of saying that, or Scotland can set up its own currency. That is what lots of countries do, but Alex Salmond is again nervous of saying that.

“They can use the pound without our consent, like Panama uses the American dollar, or they can negotiate with the rest of the UK to form a currency zone. But Britain has had poor experience with things like the ERM [exchange rate mechanism], when it has tried to lock or peg its currency together with other currencies. So it is not clear that it would be in the rest of the UK’s interest to enter into a euro-style currency zone with the rest of Scotland.”

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