One thing which must now be crystal clear to anyone thinking about currency, it that a country’s currency must ‘fit’ with its economy and must be able to be ‘adjusted’ to meet the needs of the economy.
If that was not clear to people in Scotland in 2014, then surely the example of the events in Greece in 2015 should have opened their eyes. The Greek people wanted to have an end to ‘austerity’ and they voted for that twice, but they also wanted to keep the Euro which was outwith the control of their elected Government. Sadly we saw the results. The Greek people’s wishes and their political democracy became quite ineffective, because they could not control the currency. Adam Smith must have turned in his grave at this nonsense.
Smith had made it clear, and no economist has ever been able to challenge him in this, that money, or currency, has no intrinsic value. So how is it possible for something, which has no intrinsic value, to undermine a country’s economy which has considerable intrinsic value?
This can only be the case because the use of the Euro to undermine the Greek economy is a political weapon, not an economic one. If Greece had the normal power of an independent country to control the supply and monetary policy of its own currency, as for example Iceland has, then its currency could not undermine its economy, or challenge its economic and political power. The economic situation in Greece is appalling with vast numbers of unemployed people, particularly amongst the young, low GDP, incomes, and resources; yet the only reason why that persists and can’t be altered, is because the currency is ‘fixed’ and controlled from outside Greece. If Greece had abandoned the Euro in 2015, when the banks ran out of Euro’s and if they had re-established a new drachma as the national currency under Greek Government control, their economy today would have been much better. Of course, it is true, that the economy would have suffered an initial shock when the currency was changed and the new drachma would have lost value in international currency exchanges after the change; but once that had happened, employment would now be much higher, the GDP would have risen substantially and social benefit claims would have fallen. The ordinary Greeks would have been better off and the economy would have been much stronger.
If you disbelieve that, follow the obvious economic implications. If the value of the Greek currency fell exports would be cheaper and imports would be dearer. More people would take Greek holidays or buy Greek goods or services. The new demand for Greek goods and services would stimulate and in turn would increase employment in Greece, this in turn would reduce State Benefits and increase tax economic growth, which intake for the Government. Low cost Greek home production would have encouraged inward investment and the Greek economy would be much healthier today than it currently is. It the Greek people had used the change over, in its currency, to reform the banking system this would have been even more helpful to the economy.
The lesson for Scotland is clear. The economy is of much more importance than the currency. So an Independent Scotland which is determined to develop its domestic economy must take control of the currency and make it meet the requirements of the economy, not the other way round.
If Scotland does this it will need to reform the banking system and keep it under strict regulation as it should be. That is why we need a new, full-reserve currency and a new banking system under new legislation in the new Scotland, because if we do not control the currency, we will not be able to control the economy. An independent Scotland which can’t control its own economy would not be what most people believe they would be voting for if they support independence.