Jim Duffy business comment: Scotland must think digital with any new currency

If we ever started again as a human civilisation, there are multiple things we could live without. One of them is economists. Banks yes, I definitely believe there is a place in society for decent banking, but economists we could do without.

Jim Duffy argues that Scotland should be at the vanguard of new currencies in digital form. Picture: AP Photo/Marcio Jose Sanchez

I guess my definition of an economist is a philosopher of finance. That’s it really, just opinions on economic theories. Mostly men gazing at their naval spouting tripe on what has happened in the past and what they “think” will happen in the future. But politicians give them so much credence.

And that has to stop. If Scotland is to try become an independent state, she needs to step outside the economists’ gaze and take bold steps to correct, reset and target a new economic pathway. Here is why.

For decades we have been economic slaves to inflation. Economists have warned us about how bad inflation and deflation are. They argue among themselves about the pros and cons of each. Someone somewhere in summertime, decided that 2 per cent inflation was the sweet spot that we should all be heading for. This was the primary arbiter of a successful economy. So, all the economists at the Bank of England went for it.

The only problem is that with all their fiscal, economic and monetary firepower they have consistently missed it over the last decade. If there was a report card to be written it would read: “Wee Johnny is a well dressed schoolboy and behaves well in class. Although his mind does tend to wander and he gets easily distracted.”

And what do economists use to control us and the inflation figures that are the nirvana that economies are built upon? Yes, interest rates. Those pesky little numbers that matter when we take finance out on a car, draw down a mortgage or put our money into saving products. So much control over what we do with our cash hinges upon interest rates. But set by whom? Ah, yes, of course, the bankers and economists at the Bank of England. I would have to argue now that having watched the last ten years play out, they literally make it up as they go along.

Once upon a time… is how each monetary report should begin. And now we have interest rates at near zero with chatter and forward guidance meandering towards negative rates. Give it up guys – it has not worked and now you have to print more and more money to keep your version of economics alive and on life support. It is debt upon debt and it is building up at the fastest rate ever seen in economic history. We have no cash reserves, no gold reserves to speak of and all we can rely on is more and more borrowing. So what is to be done?

If Scotland heads out on its own, it will be gunning for EU membership and the euro. Probably not a bad bet and first step as the euro seems to be stacking up well against the dollar and the pound. That said, the US is heading for troubled waters as it is borrowing trillions of dollars from the Federal Reserve who are printing zeros on its balance sheet with not a care in the world.

So, the euro looks good? Think again. The eurozone is a basket case. Spain is headed for a massive recession along with Italy and Portugal. These countries constantly drag the euro down as they live on life support and always want more. No, the European model might look good on a first pass, but dig deeper and the cracks are evident.

The future then for an independent Scotland looks a tad unsure. But only if it does what it always does. Now is the time for bold action, where Scotland looks for a new “peg” for its currency. Yes, its own currency that it can control. But not with interest rates and inflation. We live in a digital age where code and ingenious new forms of money are being brought to the table for discussion. Scotland should be at the vanguard of these new currencies in digital form.

C’mon Scotland wake up and try something new. No-one will criticise you for that. But, we should point the finger in ten years if you do the same old, same old.

- Jim Duffy MBE, Create Special

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