Except that you can't stop a foreign country pegging their currency to yours.

( Dr Preference AjcuiVd289, Mon 15 Oct 2012, 14:52, 2 replies, latest was 13 years ago)

Or, for that matter, simply using your currency.

( Dr Preference AjcuiVd289, Mon 15 Oct 2012, 14:55, Reply)

No, I know. I thought that was what I said? as in, that's the only real solution.

( the mighty badger Aphrodite, on a bar stool, by your side, Mon 15 Oct 2012, 15:02, Reply)

You said the rest of the UK would block it. They can't.

( Dr Preference AjcuiVd289, Mon 15 Oct 2012, 15:03, Reply)

They can block Salmond using the actual pound, absolutely.
They can't block him 1:1 linking a new currency to the pound.

His preference is to retain the pound, but he won't be able to.
( the mighty badger Aphrodite, on a bar stool, by your side, Mon 15 Oct 2012, 15:07, Reply)

He could, quite simply, pass a law stating that it is illegal to refuse to accept sterling as payment for a debt.
Bang, he's using sterling. He could, for that matter, do the same with any other currency he chooses, though it would be frankly daft to do so.
( Dr Preference AjcuiVd289, Mon 15 Oct 2012, 15:09, Reply)

You could use sterling like that as a day-to-day currency, I'm sure.
Your treasury and banking system can't though, I'm fairly sure. HM Government has a say in that.
( the mighty badger Aphrodite, on a bar stool, by your side, Mon 15 Oct 2012, 15:13, Reply)

No, our currency used to be pegged to sterling, and in 1948 there were calls from sections of the Tory party to prevent us doing so, as we'd left the Commonwealth.
Turned out there wasn't anything they could do. Using the currency of a foreign country has its advantages and disadvantages, but unless Westminster wanted to kick off some kind of economic war over the issue it wouldn't have any say. Also, having a foreign country use your currency can't hurt you, and keeps trade with them fairly simple, so it's hard to see why they'd have a problem with it on economic grounds.
EDIT: Yes, I understand that there's a difference between a pegged currency and outright use of sterling, but I can't think of any legal mechanism which could be used by HMG to prevent it.
( Dr Preference AjcuiVd289, Mon 15 Oct 2012, 15:18, Reply)

see my thing below
being pegged to sterling isn't the same thing as using sterling, though. That was my whole point at the start of this.

The reason they have a problem with it on economic grounds is that you have no control over interest rates or economic policy. Let's say Scotland continues to use the pound but sets a higher base rate to the Bank of England. Financial transactions between the countries become fucked, because I can move £1,000 from an English to a Scottish bank and make more money, effectively making the currencies worth different amounts even though they are the same.
( the mighty badger Aphrodite, on a bar stool, by your side, Mon 15 Oct 2012, 15:25, Reply)

The problem with it is that you have to use the same interest rates, as we did for fifty something years we were pegged to sterling.
That can cause problems, but at the same time you get the benefit in terms of international trade because your currency is percieved to be stable, which is a serious difficulty for new countries.
The only reason the Irish Free State didn't use sterling outright was because of petty nationalistic concerns, not having the King's Head on the banknotes and so forth.
( Dr Preference AjcuiVd289, Mon 15 Oct 2012, 15:30, Reply)

Yeah, that was kind of my whole point.
Probably not well articulated. You can't do what we're talking about and hope to be able to completely set your own economic policy. There's a belief within the treasury that even Salmond setting taxation levels too differently from the rest of the UK scuppers his ability to use the pound, although that's not a certainty.
( the mighty badger Aphrodite, on a bar stool, by your side, Mon 15 Oct 2012, 15:34, Reply)

That's all true.
Except the bit about the belief within the treasury. Well, that belief maybe there, but it's bullshit. The Free State, and later the Republic, had completely different tax rates to the UK, without it hindering our ability to use the pound. Though we did from time to time suffer from our inability to fully control our monetary policy.
( Dr Preference AjcuiVd289, Mon 15 Oct 2012, 15:42, Reply)

Yes, but Ireland wasn't tied up in the middle of a world-wide destabilisation of the financial markets back then.
The concerns are to do with how the markets and world financial bodies, credit ratings, etc, will respond to, on the one hand, the UK spouting on about fiscal prudence, and on the other, Scotland effectively pissing the same currency up a wall. It's a point of strong concern in some areas of the treasury, it's got the capacity to be an absolute clusterfuck, and is partly why my missus wouldn't work on scottish fiscal policy despite that being what they wanted when she was brought up here from the Treasury.
( the mighty badger Aphrodite, on a bar stool, by your side, Mon 15 Oct 2012, 16:00, Reply)

Except that Ireland was doing this in the late twenties and early thirties which were, as you may recall, a worldwide economic clusterfuck.

( Dr Preference AjcuiVd289, Mon 15 Oct 2012, 16:02, Reply)

Good point.
I think it's more about how the markets are stablised and destabilised, now, though. Very different from back then.
( the mighty badger Aphrodite, on a bar stool, by your side, Mon 15 Oct 2012, 16:18, Reply)

I've just checked
it's theoretically possible for Scotand to use the pound as it likes without approval from the UK treasury, but the currency wouldn't be backed by the Bank of England, so it would be utterly worthless and banks and financial bodies would be all but unable to base their trade in Scotland. So you're right in a sense, but it would be madness.
( the mighty badger Aphrodite, on a bar stool, by your side, Mon 15 Oct 2012, 15:19, Reply)

Bit like 3rd world countries that effectively use the dollar

( Naked Ape call me Caitlyn, Mon 15 Oct 2012, 15:20, Reply)

What you would do is have a Scottish Central bank who backs it at the same rate.
New central banks have been created before, and no doubt will be again.
( Dr Preference AjcuiVd289, Mon 15 Oct 2012, 15:21, Reply)

You can't just create a Central Bank based on someone else's currency
and hope for it to be able to back up an economy. I mean, I'm sure you actually could do what you are suggesting, but what for? Scotland would lose its entire finance sector in a second becuase the currecy would be worthless.

And the Scottish Central Bank would still be unable to use the Bank of England as a last resort, so how is that backing a currency up at all?
( the mighty badger Aphrodite, on a bar stool, by your side, Mon 15 Oct 2012, 15:28, Reply)

The only hope for Scotland to retain a financial sector, regardless of currency, would be for it to undercut London on corporate taxes, or go the whole hog and create an IFSC style wild west.
The SCB would be able to act as a lender of last resort in the same way that all other Central Banks do, by issuing government bonds.
Again, and I stress, I'm not advocating this, just pointing out that HMG can't stop it.
( Dr Preference AjcuiVd289, Mon 15 Oct 2012, 15:33, Reply)

Isn't it the case that bonds issued by a SCB would be effectively worthless unless somehow backed by the bank of england?
I'm not at all sure that a country's credit rating can be based on someone else's currency, can it?
( the mighty badger Aphrodite, on a bar stool, by your side, Mon 15 Oct 2012, 15:35, Reply)

They'd only become worthless if the Scottish economy screwed up spectacularly and the country was frozen out of the markets.
The credit rating is based on the perception in the markets that the country, via its CB, will be able to repay its debts. In the short to medium term Scotland would be seen as a fairly safe bet. Though after that, fuck knows.
( Dr Preference AjcuiVd289, Mon 15 Oct 2012, 15:40, Reply)