How refreshing to read Professor Brian Quinn’s comments and Bill Jamieson’s related article on the major uncertainties of currency union (Perspective, 29 August).
Quinn is a giant among central bankers whose experience, knowledge and understanding of all the practical aspects of monetary and currency issues extends far beyond the glib fantasies expressed by the financial pygmies promoting independence.
In the independence scenario, where the Bank of England continues to act as lender of last resort, Quinn has added his wisdom to reinforcing the view that it is virtually certain the Bank of England would judge the Scottish banks to be riskier and, therefore, apply higher regulatory requirements to protect depositors.
That action would inevitably encompass the protection of the holders of Scottish banknotes in circulation north of the Border.
However, the circulation of Scottish banknotes will become severely at risk, either because the Bank of England will no longer be prepared to be involved in that unique burden of prudential responsibility for banks integral to the economy of what then would amount to a foreign country, or because the Scottish banks themselves, as Bill Jamieson flags, will have re-domiciled south of the Border.
With the cessation of Scottish banknotes, coupled with Scotland continuing to retain the (by then English) pound, what would take the place of the £3.5 billion of Scottish notes in circulation? Bank of England notes, of course! There would be no alternative; a result that would daily and most visibly expose the fallacy of so-called “independence”.
The alternative, longer-term, aim in an independent Scotland of it creating and taking full control of its own currency is fraught with even more frightening uncertainties.
Not the least of those would be the new currency’s potential weakness on the international currency markets. Such a significant risk would result in a massive exodus of wealth from Scotland and into established currencies south of the Border and elsewhere.
(Prof) J Robin Browning
Retired general manager
Bank of Scotland
In reply to Prof Quinn’s sceptical view of Alex Salmond’s policy of a sterling currency zone, his spokeswoman, presumably with his approval, claims the eurozone as an exemplar, saying that its reforms allow the European Central Bank (ECB) to oversee member states thus providing a “co-ordinated and integrated system of financial supervision”.
That may be what the theory says, but the reality is that Germany, the largest and richest member, calls the shots, so much so that the eurozone crisis – and there is one, a big one – has been postponed until after the German elections.
Ask the Greeks, Portuguese and Irish whether they are under the hammer from the ECB or Angela Merkel, and they will point in the direction of Berlin.
It is Germany which says there must be internal devaluation in those countries, and nation-breaking austerity, because if this policy was not followed the German taxpayer would have to foot the bill for Greek and other debt in a “co-ordinated and integrated system”.
Not a cent of aid has been given to Greece and the others, just more loans building up more debt.
Small Scotland in a currency zone with large England would leave only one final master, and you would not find him in Bute House.
Before this hole in the independence case gets bigger, someone in the SNP parliamentary ranks will have to tell the First Minister to think again.