Setting the financial ground rules for the next Indyref

TN4-HESTER.JPGAt first glance contactless debit cards for retail purchases less than £30 may seem to have little connection to Independence, but replacing the cash in our pockets with plastic cards marks the final demise of official government issued money. With that goes the last vestige of credibility from the role of the State in issuing the National Currency or exerting any influence over Monetary Policy. That is of major economic significance.

Everyone knows the regulation of banking is no more than a fig leaf. The underplayed announcement over the Christmas holiday that  the City Watchdog is to ditch a review of bank behaviour underlines the collusion with Westminster. This despite continuing public concerns  over mis-selling and rate-rigging – financial speak for fraud and conspiracy.

In all but name the private banks now own the money system lock, stock and barrel. The Bank of England has been reduced to little more than a convenience for the commercial banks, its main function being to act as ‘lender of last resort’, the guarantor of our bank accounts up to £85,000 and provider of a bottomless pit called Quantitative Easing – all of course at the expense of the taxpayer.

The banks have been writing their own rule book for many years now and these have been enshrined into legislation by politicians who, like most people,  do not appreciate the social consequences  of privatising the money supply.

The EU is equally complicit and this month is ‘tightening the rules’ on bank rescues – the ECB will now force losses on depositors holding more than €100,000, as well as bank shareholders and bondholders. No sign however of addressing the causes of failure and the treatment of Greece remains testament to the primacy of private finance over human rights and the democratic process..

The TBTF (too big to fail banks) are still stuffed with derivatives (financial speak for bets) which do not appear on their balance sheets. These contracts are secured on the banks’ assets, the largest of which is their customers’ deposits. Too many of us forget  that when we deposit money with a bank the law dictates we are just ordinary creditors sharing what is left after all sorts of secured lenders have been paid out.

There was a time when those not prepared to gamble on the stock market  could save for retirement or that new house by earning interest with a Building Society where your money was as safe as the houses they financed. You could trust a Building Society – at least you could before Lady Thatcher deregulated them…

There was a time when those not prepared to gamble on the stock market could save for retirement or that new house by earning interest with a Building Society where your money was as safe as the houses they financed. You could trust a Building Society – at least you could before Lady Thatcher deregulated them…

But now you earn no interest and your savings could be wiped out before you even realised they were at risk. Worse still, you are virtually obliged to place them with a private corporation you do not trust, and with very good reason.

For a time the astute saver bought gold coin and bullion as a store of value. It earned no interest, but at least the price kept pace with inflation and it was safe in a deep vault somewhere. The banks deemed this a threat to their hegemony and devised “Exchange Traded Derivatives in Gold.

These are ‘contracts’ to buy or sell gold at a fixed price at a future date. These derivatives now total some one hundred times the world’s total supply of real gold, so we now have paper gold priced on the same basis as the genuine article. That price is supressed and decided by the Big Five Banks at their weekly price fixing sessions in London. If ever this particular scandal comes to light it will put all the others into the shade.

Many factors contributed to the loss of the Independence Referendum, but none was more telling than the absence of a fresh financial strategy. The currency issue dominated the closing stages and this was by far the top reason given by No voters for their decision (Ashcroft Poll).

In short most banking institutions have become financial prostitutions and our Westminster MPs appear happy to fall over themselves to accommodate them with their custom and supportive legislation. Indeed 99% of the population believe they can do nothing but wait until the next crash to find out how much the rescue package will cost them this time in terms of yet more National Debt, austerity, lost savings, pensions and heartbreak.

Of course it’s very complicated because it’s meant to be. It’s more complex than nuclear physics because there is no logic, let alone science underpinning the system. It is a triumph of spin and PR which is precisely how the bankers get away with feathering their own nests whilst  destroying the real economy.

In the past the threat of collapsing the payments system has been enough to panic a handful of reforming politicians back into their boltholes. That might have had some substance in the days of cheque clearing, cash and a branch bank on every street corner, but today we are looking at  little more than an alternative way to manage a National computer system. Once that is separated from the fantasy world of financial markets and the supply of endless credit to inflate speculative bubbles then the word economics will take on a new meaning.

So it’s not even worth trying to figure it out. Whether you are struggling on a minimum wage, retired with what you believe to be a safe and comfortable pension or and employer building a worthwhile business, just pause for a moment and ask yourself if this banking system is working in your interests.  If the answer is no then we need to fix this before it reduces us all to financial feudalism.

None of this is news, because it started with deregulation of the banks thirty years ago and came to a head with the financial collapse of 2008. That disaster has continued to suppress the real economy to this day. What is even more remarkable is that the SNP advocated sharing Sterling and saddling an independent Scotland with this same crippling burden.

Many factors contributed to the loss of the Independence Referendum, but none was more telling than the absence of a fresh financial strategy. The currency issue dominated the closing stages and this was by far the top reason given by No voters for their decision (Ashcroft Poll). 

So it is unthinkable to even contemplate a second referendum whilst this remains outstanding and the sooner we realise that financial independence is the primary advantage of independence then the sooner we turn defeat into victory.

Nor is this purely a matter for YES voters, it concerns all of us, young and old alike and getting it right this time would make all the difference to the outcome.

SNP politicians showed themselves as bemused as their Westminster counterparts when confronted with the currency issue. They wilted under the threats of doom peddled by the financial bogeymen from the City and the Bank of England. The battlefield was abandoned to bluster and confusion and what should have formed  the cutting edge of the campaign fizzled out into an embarrassing missed opportunity.

Even so, financial independence was being seriously contemplated outside the political bubble. A blueprint for a new banking system specifically tailored to the needs of an independent Scotland had been prepared and committed to print in the book ‘Moving On’. It was all there, and in great detail.

Unfortunately the politicians chose to listen to the bankers and economists who predictably recommended the existing arrangements. Surely it was the widespread discontent with these very ‘arrangements’ which sparked the demand for independence in the first place?

So the theory and practice of how a new Sovereign Money System would take over from the private banks already exists, framed in the context of a Scotland where the scandals and pain of the RBS debacle caused so much damage to Scotland’s reputation for financial prudence.

Since 2014 we have seen monetary reform being seriously evaluated at government level in smaller countries like Iceland, Finland and Switzerland which, as Sovereign States are free to restructure their monetary affairs in the interests of all their people rather than the one per cent.

The banner of The Campaign for a Scottish Currency is unequivocal,  ‘There can be no Independence without financial independence.’ If you share that sentiment then please visit the website and add your name to the contact list.

We need a truly monstrous petition to the Holyrood  government, one signed by everyone who has a bank account, demanding that banking reform becomes a keystone of the next referendum campaign.

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Comments (41)

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  1. Ken McNeil says:

    On a point of accuracy. The Bank of England may be the lender of last resort but it is not responsible for guaranteeing bank deposits. The bank deposit cover is no longer £85,000 it is £75,000. This is because the compensation scheme is an EU requirement and the cover is E100,000. The fall in the value of the Euro v Sterling is the reason for the change. The compensation scheme comes under the auspices of the Financial Services Compensation Scheme. The scheme is funded by a levy on financial services companies, including the banks.

  2. Frann Leach says:

    I can’t find the Campaign for a Scottish Currency link.

    1. Astragael says:

      If you go to
      http://www.scottishmonetaryreform.org.uk/
      you’ll find an embedded link.

  3. Freda Satow says:

    I totally agree that an independent Scotland will need its own currency.

  4. Neil Anderson says:

    There’s no link to the website and a google search doesn’t show anything remotely close to what is mentioned here. Can we have a link please? I will most certainly be adding my name to this campaign.

  5. Neil Anderson says:

    It also states at the end of the article that there are “0 comments”. I make this one I’m writing now to be number 6. Any idea what’s going on?

  6. Scott Egner says:

    Well said Ronnie.
    Have to admit I find it worrying that an snp economic advisor still believes that banks are mere intermediaries between savers and borrowers…

    http://www.debtdeflation.com/blogs/2016/01/07/note-to-joe-stiglitz-banks-originate-not-intermediate-and-thats-why-aggregate-demand-is-stuffed/

  7. Neil Anderson says:

    Apologies. THIS is number 6.

  8. Peter B says:

    I agree with the sentiment expressed on the banner of The Campaign for a Scottish Currency and (I think) with most of this article. Unpicking the first paragraph however, has escaped me, and presumably much of the subsequent argument depends on it – – – can you help? I don’t see how replacing the cash in our pockets with plastic cards marks the final demise of official government issued money – – – since leaving the gold standard governments have declared fiat currency at will, and this hasn’t and shouldn’t depend on whether money was real or not – – – they surely just adjust the balance sheet, issue bonds or borrow – – – all of which applies if money is plastic, real or not. Can you explain why contactless payment spells the end of fiat currency?

    I’d add that as someone who generally seeks a universal solution before seeking a Scottish one, I think that cryptocurrency even if not suggested as an option for independence is the securest route as it would wipe out banks, and is a peer-to-peer form of money from which no middle-organisation can profit from. But that is another discussion. Thanks for your article.

    1. ScottieDog says:

      It alludes to the fact that all but 3% of our money supply is electronic money issued as debt by private banks. 3% is notes and coins issued by the treasury and royal mint.

      When notes are printed up and sold to private banks (process called seniorage), the profits from that sale go to the treasury which can then be spent into the economy.

      The ratio of notes has declined over the decades from around 21% in the 60s

      1. Peter B says:

        Hey thanks, Scottie D, I knew that figure actually but I didn’t make the connect, looked like RFM was talking about money in toto.

  9. muttley79 says:

    The currency issue dominated the closing stages and this was by far the top reason given by No voters for their decision (Ashcroft Poll).

    So it is unthinkable to even contemplate a second referendum whilst this remains outstanding and the sooner we realise that financial independence is the primary advantage of independence then the sooner we turn defeat into victory.

    Nor is this purely a matter for YES voters, it concerns all of us, young and old alike and getting it right this time would make all the difference to the outcome.

    SNP politicians showed themselves as bemused as their Westminster counterparts when confronted with the currency issue. They wilted under the threats of doom peddled by the financial bogeymen from the City and the Bank of England. The battlefield was abandoned to bluster and confusion and what should have formed the cutting edge of the campaign fizzled out into an embarrassing missed opportunity.

    I think this part of the article is trying to rewrite history. The vast majority of No voters were imo never seriously either intending or even thinking about voting Yes in the referendum in 2014. You just need to look at the opinion polls over the last 20 or 30 years on support for independence here, let alone those polls conducted from 2011 to September 2014. To say that the currency issue decided the independence referendum, or was even the most important issue, is an attempt to rewrite history in the most silly fashion imaginable. The truth was that if the SNP had backed a separate currency, then the Yes campaign would have faced an even greater backlash from the British state, big business and the financial markets. The SNP choose the most conservative option on currency because they were trying to convince a largely conservative electorate in Scotland to support major constitutional change, at a time of major economic turbulence.

    A better way of looking at the independence referendum from a Yes perspective was the success in getting support for independence above the 25 per cent to 30 per cent level, where it had been stuck for decades after all, to one that polled 45 per cent when it really mattered. No mean achievement, and of course it has reached around 50 per cent in opinion polls since then.

    To say that SNP politicians wilted in the face of the massive financial threats, and left the battlefield is laughable, and does an great injustice to the likes of Salmond, Sturgeon and co, who campaigned extremely well and hard right till the end. This really is a mockery of an interpretation of what really happened in September 2014. The truth was that the British establishment had a massive scare around a week or two before the vote, and were forced to cobble together a vague more powers offer in complete panic. The author of this article is clearly not taking into account the power available to both sides in the independence referendum. The power imbalance between the two campaigns should never be forgotten, and it is a huge one in terms of economic, political and media power. But the fact that is was as close as it was tells you everything you need to know about the official campaigning period.

    1. Broadbield says:

      Yes, I think the conflation of what are separate issues (currency, banks and how they create money, and the reasons Yes failed to win) weakens the argument and confuses. The separate currency and bank regulation and credit creation, although connected stand on their own. Whether or not an Independent Scotland had its own currency, the issue of bank regulation and a credit driven economy would still need to be addressed. The cycle of banking and credit bubbles and busts, with the taxpayers picking up the tab while the banks win even when they lose has to be tackled. The UK government will never reform the banking industry because they have been captured by financial interests. We must make sure the SG doesn’t go down the same path.

    2. Gordie says:

      I think this article is correct in stating that a democratic central bank and Scottish currency are a necessity to an Independent Scotland. I accept your take on the criticism of the SNP within this article. It seemed obvious at the time that the SNP took the currency union option because they thought that it would be easiest to explain in the face of opposition by the State and its media.

      Can the SG spend tax payers money on work on a currency and a democratic central bank when 55% of the punters voted against Scottish Independence? Do you think that the SG can carry out that work while we are still part of the UK?

  10. john young says:

    I don,t think that most debating currency/financial matters have much of a clue about them,we are at the behest and have been for a long time of the cartel/money launderers of international banking,we have no input or control over any of it,how do we address this?I haven,t a clue nor do I imagine many others have, the likes of George Soros/Rothschilds are the real deal,they manipulate and bully governments world wide to do their bidding?Yet we waffle on as if the Scottish pound is needed or the Queens pound is needed,we are groping about in the dark with a blindfold on.

    1. Gordie says:

      Discussing these issues is one way of learning about them

  11. Fed up with the Lies and Propaganda of the London Media Industrial Complex says:

    ”In all but name the private banks now own the money system lock, stock and barrel. ” It’s been like that for 200 years when the Rothchilds knew the result of Waterloo before everyone else did, put about that Napoleon had won, shares collapsed and the Rothchilds made a killing so to speak.

  12. Fed up with the Lies and Propaganda of the London Media Industrial Complex says:

    ”Give me control of a nation’s money and I care not who makes her laws”

    Mayer Amschel Rothschild

  13. Fed up with the Lies and Propaganda of the London Media Industrial Complex says:

    Mayer Amschel Rothschild’s wife.
    “If my sons did not want wars, there would be none.”

  14. Fed up with the Lies and Propaganda of the London Media Industrial Complex says:

    Otto von Bismarck,

    “The division of the United States into two federations of equal force was decided long before the civil war by the high financial power of Europe. These bankers were afraid that the United States, if they remained in one block and as one nation, would attain economical and financial independence, which would upset their financial domination over the world.

    The voice of the Rothschilds predominated. They foresaw the tremendous booty if they could substitute two feeble democracies, indebted to the financiers, to the vigorous Republic, confident and self-providing.

    Therefore they started their emissaries in order to exploit the question of slavery and thus dig an abyss between the two parts of the Republic.”

  15. Fed up with the Lies and Propaganda of the London Media Industrial Complex says:

    The only time Jesus was angry was at the money lenders, and they’re still at it today with their usury scam.

    1. Lawrence Anderson Burley says:

      Very true!
      A good example.
      Even when an overzealous disciple cut off the ear of a servant of the High Priests, when their militia came to get Jesus, in the night that he was betrayed, Jesus reached out and made the man’s ear whole again. So he really did single out the men of money as the sole exception to his thorough-going pacifism, and so should we.

  16. Gordie says:

    THanks for this article. Spot on surely.

    Wee thought in my mind though. Despite the screaming necessity of us needing our own currency and democratic central bank the punters in effect (55%anyway) voted against us needing these things. Can the SG legally spend tax payers money on it? Are they already doing it on the fly?

  17. Fed up with the Lies and Propaganda of the London Media Industrial Complex says:

    The Best Enemies Money Can Buy, Wall Street bankers supplied money to Stalins Soviet Union and Hitlers Nazi Germany — Prof. Antony C. Sutton https://www.youtube.com/watch?v=j3vZNSAi-QM

  18. kininvie says:

    This article would be much improved for a few facts and links and less of the pointless rhetoric. The key question that is not addressed is that of confidence. An independent Scotland will depend on international trade, and confidence in a nation’s currency is the key to that. Even if we have our own currency, we are bound to have to pin it to a reserve currency for several years.

    The article is also somewhat naive on the nature of financial derivatives. In one form or another they have been around for hundreds of years, and to write them all off as ‘a bet’ is simplistic. You need a mechanism where you can sell something (a crop, for example) in advance to someone who is prepared to take the risk of the price dropping before it’s harvested. All insurance and reinsurance is effectively ‘a bet’. Financial derivatives, properly used, ensure that trade can happen. The fact that in 2008 they were improperly used should not be an excuse for writing off the whole system.

    The mistake made in 2008 was the belief by many who should have know better that financial instruments (and that includes currency) have some intrinsic value. They don’t. And that takes me back to my point about confidence.

  19. Alf Baird says:

    “An independent Scotland will depend on international trade”

    Worth repeating. Perhaps someone in the SNP leadership might pick it up. They do have a trade policy, don’t they?

  20. scottieDog says:

    Here’s a link to the currency issue from an MMT persiective. Interesting reading…

    http://bilbo.economicoutlook.net/blog/?p=25895

    1. Fed up with the Lies and Propaganda of the London Media Industrial Complex says:

      Did you have the misfortune to read confused James Schipper’s turgid comments ? He thinks the United Kingdom and the Soviet Union are nations, (there’s no such thing as the British or Soviet language, it’s the English and the Russian language.) And Scotland doesn’t exist apparently.

      1. ScottieDog says:

        I chose to ignore Mr Schipper. I wasn’t going to bring the tone down on Bill’s forum to that level.

  21. Crubag says:

    The lack of economic thinking – and a refusal to entertain questions on these issues – was certainly a major factor in the failure of the SNP campaign. Currency is only one facet of the economic system, but the most visible and easily comprehensible one.

    The SNP Plan A was wholly in the gift of our partner state. Who promptly refused.

    There was no Plan B. I understand that others in the Yes Scotland campaign wanted alternative thinking, but the SNP called the shots, banking on a single, simple, easily torpedoed proposition.

    The absence of any economic proposals since then, including on currency, makes me believe the SNP have no intention of calling a referendum in the next Parliament. Possibly they are waiting for the one after that, possibly they have settled for union as the way forward for the next couple of decades. Why take chances when you are already the government?

  22. Jim McWilliam says:

    When you deposit money with a bank, that deposit becomes a liability on the bank’s balance sheet, not an asset. Assets are created on a bank’s balance sheet by lending money out. Such is the crazy world of fractional reserve banking.

  23. ScottieDog says:

    For anyone wanting to provide friends and colleagues with an intro to the subject of money I would always get them to watch ‘97% Owned’ (positive money cut). It lasts about an hour..

    http://youtu.be/d3mfkD6Ky5o

  24. montfleury says:

    “That price is supressed and decided by the Big Five Banks at their weekly price fixing sessions in London.”

    Best call the police or amend the article.

  25. Alan Whitelaw says:

    A good article. There is no doubt the Banks and more importantly the “People Who Own Them”control the World as it currently exists. The City Of London is at the center of this and it’s there that we have the problem regarding the U.K. and our so called British Economy. A Show on R.T.V is ,I consider, well worth viewing. It’s produced and presented by Max Keiser and his wife Stacy Herbert and covers much of the topics regarding Banking fraud and how all the Main Banks in the Western world commit crime on an ever ending scale and are never brought to book by our government’s. The reasons for this is because all the main U.K. Political Parties have been bought out and infiltrated by people sponsored behind the scenes. I would recommend that the subject of The Banking System and the future Currency etc. of an Independent Scotland is examined, and would ask that Max Keiser should be invited to future forums to develope a way forward.

  26. Matt says:

    You’re right, but this had to be balanced against scaring people with too much uncertainty. “It will be different but the same” was a key plank of the Yes campaign and one which I think was required. For IndyRef 2 I would suggest proposing following the Irish model of remaining linked to the GB Pound in the formative years of independence and then, when the economic circumstances are right, uncoupling from it and launching a separate Scottish pound. This gradual transition along with the promise that the change would only be made when the time was right would reassure many No voters concerned about the currency.

  27. Penny says:

    Completely incoherent article provoking a series of responses which demonstrate the need for less inflammatory debate on two related issues: currency (whose) and financial independence. Hong Kong was financially independent prior to its absorption into Peoples Republic of China; its did not have a currency per se but a token pegged to a currency board -the same type of arrangement adopted in Argentina which lacked true financial independence.

    The problem facing any entity issuing a currency is a simple: who will accept it?

    1. scottieDog says:

      Taxes drive money. The population has to fulfil it’s obligation to pay taxes in the given currency.

  28. David M says:

    The task that faced the SNP was to overcome about 40-60 against Independence. The numbers from polling on only the question of retaining Sterling was much worse for the SNP than that, with the percentage who want to retain the Pound in the high 80s.

    Seeking to persuade Scotland off of Sterling makes your task harder not easier.

    1. Alf Baird says:

      “Seeking to persuade Scotland off of Sterling makes your task harder not easier.”

      The paradox here is that the majority of our society today are surviving off debt; does it really matter what currency that debt is in? Its always going to be just ‘units’ of debt. Maybe folk making the noise about the GB£ were those who have most of it.

      1. Crubag says:

        DavidM makes a good point about the polling – but that shows the need to start now to get ro a robust position that isn’t so easily derailed. Setting out where the currency reserves will come from (Bank of England, bond issue) would also be helpful.

        But we have to avoid the idea that it is unpatriotic to carr about the value of your house, or savings or pension. In the privacy of the polling booth most people most of the time will vote on the economy, not the constitution

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