Quantitative easing brought benefits

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Malcolm Parkin (Letters, 15 July) suggests the Bank of
England’s quantitative easing (QE) has only had the effect of boosting the stock market and raising bankers’ bonuses. In fact, the Bank’s policies have had much more favourable effects than that, ones which many Scots are benefiting from.

The effect of QE, forward guidance and base rates has been to lower borrowing costs formortgage payers, for industry and for the government. As a result, the housingmarket is recovering and industry is hiring. Scottish unemployment is at its lowest in six years, while the percentage of people in employment is above the UK average.

QE has helped ensure that the Scottish economy is growing again. PwC, for example, forecasts that our national income will rise by 2.8 per cent this year.

Mr Parkin states: “Westminster would be doing Scotland a favour by refusing the use of the currency, thus compelling it to create and issue its own debt-free currency.”

Yet again, a supporter of
independence has misunderstood that an independent
Scotland will not be debt-free. In fact, it will have a sizeable national debt of some £125 billion–£150bn on which it will need to pay a higher interest rate than rUK does.

This is the conclusion of every study from every credit
rating agency, investment bank or academic researcher that has looked at the issue.

The error in Mr Parkin’s thinking possibly concerns the pound. To repeat, a currency is not a financial asset to share – it is an obligation issued by the central bank of a country.

Whether or not an independent Scotland uses sterling, it will have its share (about 8.5 per cent if it’s on a population basis) of the UK’s financial assets, such as gold and foreign exchange
reserves, worth a little over £100bn in total for the UK, and will also take on its share of UK financial liabilities, mainly the national debt approaching £1.4 trillion.

If it did not, our borrowing costs would soar as the markets would see us defaulting on 300 years of good faith. A currency is not debt-free. Such a statement makes no sense.

A country may or may not be debt-free – and in Scotland’s case the population will be dealing with high levels of debt for years to come, but better for our homeowners and businesses if we do so together with our friends and neighbours in rUK.

Brendan Corkery

Barnton Avenue

Edinburgh