ScotPound: Digital Money for the Common Good

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  1. sandy ritchie says:

    At last a realistic proposal to the currency issue. Indies constantly refer to the fear….others may call it common sense…postulated about pensions etc. But the single biggest concern to majority of voters was Salmond’s endorsement of using pound Sterling as Scots currency. It was obvious that it was simply a tactic to try and allay voters fears about the currency (as was retaining the Queen as head of state because she’s still popular with many in Scotland). But it never stood up to scrutiny …given that the BoE would determine interest rates based on England’s economy …not Scotland’s. So now the SNP has time to convince the electorate that a Scots pound is viable… but I suspect many will remain to be convinced..

    1. Ryan says:

      And more importantly is this something the SNP will endorse? I very much doubt it. They are failing to change any of the structural problems in our society and campaigning for radical change. There is still far too much “don’t rock the boat” stuff going on from the SNP and I don’t like it. Excellent work by the New Economics Foundation and thumbs up to Common Weal for publishing this report. It is fantastic. Now how do we convince Scots it could be done today? And how do we make sure it doesn’t create fear among Scottish Citizens?

      1. Ryan says:

        Sorry, I want to correct a sentence I wrote. I should have written “the SNP are failing to change any of the structural problems in our society or campaign to radically and fundamentally change our society.” This site doesn’t let you edit your posts.

      2. Ryan says:

        Sorry, I want to correct a sentence I wrote. I should have written “the SNP are failing to change any of the structural inequalities in this country or campaign to radically and fundamentally change our society.” This site doesn’t let you edit your posts.

      3. Duncan McCann says:

        Certainly making this happen will not be easy. The economist Minsky has a great quote summing up the problem ‘anyone can create money, the problem is getting it accepted’
        I will be working hard to get consideration of parallel and local currencies into the election manifestos for 2016. Good arguments and pressure are the only way that we can succeed.
        There will be an event at the SNP conference on the subject to continue to remind them and I will be doing the same with the Greens

        1. Ryan says:

          Thanks for answering Duncan. Thanks for doing this work to help improve our country.

  2. Kangaroo says:

    A Gold standard is the best way forward as it does not even need trust. A digital currency is fine as a payments system, much like paypal. However it has no intrinsic worth and is therefore not a store of value.

    1. craig says:

      I agree, gold standard is the way. I mean if Gadafi and Hussein both got killed for suggesting it, and if Warren Buffet is telling you metals are a bad investment (while sneakily buying them up large) , then you know you are onto something. People, start converting your savings from £ to Gold and Silver Bullion Coins.

      Also, invest in both BitCoin and Scotcoin. No currency in history has made the gains bitcoin has, even if you take the dips, its still worth £155 per coin now the market has settled down to non-hype conditions.

      1. craig says:

        Reason I say Scotcoin is to realise, all it takes is beleif and confidence, thats all forex rarates are based on anyway. If everyone just put 1% of their savings in Scotcoin, it would become another LiteCoin (another strong AltCoin)

        CryptoCurrency means no more banks, banks are a parasitic condition which technology and networking (not even the wider internet, but just networking) has already rendered banks obsolete. Imagine you could wipe out mosquitos and cockroaches, would you not seize the chance?

        1. Wul says:

          Interesting point Craig. Both my business bank and my personal bank both closed their local branches this month and never miss an opportunity to encourage me to bank on-line. I am now left wondering; what exactly does my bank offer? There are no staff to deal with my queries, there is no actual, human “service”. There is no longer a physical “bank” to visit.
          My two bank accounts are now 100% virtual. Apart from the debit cards (which will soon be replaced with contactless smart-phone payment) the “bank” seems to be offering me very little which couldn’t be handled by a web hosting service.

          1. Broadbield says:

            The idea of a bank isn’t in itself a bad thing – it’s the way they have become nothing more than profit centres for executives that’t the problem. The mutual/co-operative model is worth retaining.

  3. Alan Martin says:

    This looks like a step in the right direction, just one wee thing though, there is a large number of poor people not on the electoral register, many because they are avoiding creditors, …under this system this group, possibly the poorest of the poor, will be precluded from partaking..

    1. Duncan McCann says:

      Using the electoral register, which is about 97% complete, will be a useful tool to help make giving the money out easier. However this will not be the end of the story and should the currency be implemented effort would be made to encourage the remaining 3% to register for accounts. They would not need to be the register to get the dividend

  4. Doug Daniel says:

    There arguments to be made for and against the main currency options considered by the Government’s fiscal group and how they may have increased or decreased the support for independence. I struggle to think of a single argument for how a digital currency would have had anything but a negative impact on support for independence, though. The very people who thought independence was too scary are the exact same people who would run a mile from the idea of a digital currency, and many of those who eventually voted Yes would have definitely voted No.

    I heard the guy from NEF on GMS today, saying payments would be made using texts from mobile phones, or voice recognition software could be utilised so those who refuse to use the mobile technology could make payments over the phone. Me and my workmate couldn’t believe what we were hearing.

    I dare say we’ll eventually see all the world’s currencies becoming fully digital, but we’re decades away from that point – we haven’t even phased out cheques yet. My dad still needs to get me to come and help him order things from Amazon, and that’s just a few button clicks.

    That said, as an experiment, it’d certainly be interesting. But there’s no way any governing party is going to chuck £15 million at a currency experiment, and even if they did, there’s no way that’s happening before a second referendum. We’d be better focusing on the more standard currency options, which we can actually sell to people as viable post-indy options.

    1. Indiaosaka says:

      ‘I struggle to think of a single argument for how a digital currency would have had anything but a negative impact on support for independence, though.’

      I haven’t yet read the NEF’s report, so I may be wrong, but I don’t think this proposal would be for a primary currency either now or in a post-independent Scotland, but for a parallel currency. NEF and Duncan McCann on Bella have previously talked about WIR; a business to business currency that operates in Switzerland, has some 77000 SME users and which, according to some evidence, helps protect Swiss businesses from some of the boom and bust cycle; and the SoNantes experiment — this project seems along those lines and it would demonstrate the ability to create a currency.

    2. Thanks Doug – I think you may have misunderstood the proposal. My understanding is its more about a process than a single event. I thought you’d be more open to innovation?

      What’s your own proposal for resolving the various currency issues? It would seem to be the status quo remains a great weak point in the argument for independence.

      1. Doug Daniel says:

        Personally, I favour a Scottish currency, and I always have, even though I went along with the sterling zone idea – I always saw that as a transitional arrangement, even if that wasn’t how we were selling it to folk. But the more I see folk speaking as if currency was the magic bullet (eg Jim Sillars this week), the more sceptical I become of their – and my own – motivations for saying it.

        There seems to be little to no polling evidence that currency was the stumbling block, and when I think back to the reasons folk were giving me for voting No last year, currency barely figured. There’s obviously an argument that it may have been something eating away at folk’s subconscious, that it was underpinning various other fears these folk actually told us about, and the sterling zone idea certainly stopped us being able to make a full-blooded argument against being chained to the rUK economy and for the benefits of controlling our own economy. But I thought Iain MacWhirter made an interesting point this week, that without the currency union plan we wouldn’t have had Osborne and co telling us we couldn’t use “their” pound, which undoubtedly crystallised the reality of the UK in many folk’s minds. That certainly seemed to be the point the polls started moving our way for real – although that may have happened anyway.

        I think we need our own currency in the long-run whatever happens, so it’s about judging whether it’s best to sell that idea to folk now or after independence – if it’s before, then it’s going to require a good bit of normalisation as an idea in folk’s minds. But I know I’m biased, and I feel there’s far too much navel-gazing amongst the already-converted, a lot of people trying to claim their long-held pet ideas are the answer, and not enough listening to those who erred on the side of “caution” (ho ho ho) last year.

        So I dunno, basically.

        1. Duncan McCann says:

          Firstly this is absolutely supposed to be a proposal for a parallel currency – if we were proposing a primary currency we would design it differently.

          A key point that we are trying to raise is that money is a social technology, meaning humans invented it and decide the rules and parameters for the system. This means that we can change the money to better serve our needs. In addition NEF believe that all complex systems benefit from some diversity (although not too much) and that this is also true of the money system. The WIR mentioned above is a great example that has proven counter-cyclical effects for the Swiss economy.

          So hopefully this can start an open debate – although I like our idea I know that there are many other options that could benefit Scotland and its people

        2. I’m undecided and unclear too. After the Greek crisis the EU institutions look in a different light and a new left-critique is emerging strongly. A recent visit to Iceland reinforced the possibility of an independent currency, but this is also highly problematic, both practically and politically, particularly in the context of historical lack of confidence and dealing with an intransigent brutalist British state (as we just saw).

          I’m just learning about digital and crypto currency but it does strike me that we’re in an environment of rapidly changing institutions, cultures and emergent technologies – who would have thought the Banks would be nationalised, Woolworths and Ranfers disappear, or Jeremy Corbyn would be elected leader of the Labour Party?

          This isn’t to suggest that technology solves social or political problems but just a nod to being open to these possibilities?

    3. K Alexander says:

      The indyref framing gives this story a handy media hook, but it’s tangential to whether a Scottish digital parallel currency is a good idea or not.

  5. James Coleman says:

    There’s a cheapish way to get the idea of a Scottish Currency rolling and thus help to achieve a YES vote in a future referendum. Scottish £ notes already exist and are the main form of currency used in Scotland so it wouldn’t be a big step to officially regularise that use. The Scots Government should take ownership of a £Scot and set up the means to start officially quoting it daily in the currency markets against other currencies and to use £Scot terminology in all its Governmental documents and advice leaflets. At the same time Scots should be urged to use Scottish £s when changing into Euros or whatever both here and abroad. Take them down to England and use them where you can in taxis, and in stores which accept them, eg, in Westminster, all the major supermarkets and department stores. Over time and with constant use a de facto official Scots currency would come into being based on 1:1 with £ sterling, although at times the markets may show a difference.

  6. Tenthred says:

    The report suggests using mobile phones, with phones or voice recognition for social inclusion. But faster social inclusion and also an assisted start to the thing could come from the bus pass that pensioners and many people with disabilities already have issued to us.

    My pensioner bus pass is a BonAccord card that can have money loaded on it for use at swimming pools, libraries, on the bus and at some local retail outlets. Just load all those with the ScotPound starting dividend instead of sterling and away we go.

    That would be simple to do, and also covers the groups least likely to want or maybe be able to use mobile phones for the purpose.

    1. Duncan McCann says:

      That is a really interesting suggestion and certainly the kind of thing that could improve the proposal

      1. Sue Harkowa says:

        Unfortunately, not all councils use the same system for bus pass cards. Mine doesn’t have the money-loading facility, so as it stands wouldn’t be able to be used for this proposal. Maybe I’m just being cynical, but I wonder how long it would take to convince all councils to use the same type of card? I do like the idea, but can see problems implementing it.

        1. Doug Daniel says:

          “Maybe I’m just being cynical, but I wonder how long it would take to convince all councils to use the same type of card? I do like the idea, but can see problems implementing it.”

          Well for one thing, there would be outcry from the usual suspects of it being “proof” of the SNP’s dastardly plan to try and centralise everything.

  7. deewal says:

    Be careful. Osborne’s minions are reading this.

  8. Jim says:

    I’m not being pedantic, as the article is of interest to me, but the second last para states the immediate economic effects would be an additional 15m ScotPounds, when in actual fact it would be one billion ScotPounds, according to the report (based on 4m initially on the register). The 15m ScotPounds would be the impact every year thereafter as 60,000 citizens turned voting age and registered.

    The parallel currency concerns me, as does the complex digital nature of its use, and I believe our aspirations for independence should be balanced with a desire for a single unique currency that doesn’t depend on another country’s economic policies.

  9. Brian Stobie says:

    This is an excellent proposal. It may have some defects ( what doesn’t?), but I think a parallel Scottish currency operating alongside sterling would diminish peoples fears about a new Scottish currency to eventually replace sterling after independence, due to familiarity with a currency that ‘worked’, albeit on a small scale. It also opens up the debate about the meaning of money, who makes it, what backs it and so forth.
    It’s good to see more debate like this about money, such as the Murphy/Corbyn Peoples Quantitive Easing, coming into public discourse.
    Hopefully more people will also eventually learn more about Modern Monetary Theory and Functional Finance, and see through the lies that underpin Austerity.

  10. Will says:

    Great idea makes me so happy and proud to be Scottish roll on Scotland’s Independence.

  11. John young says:

    Off topic everyone I would imagine has read Owen Jones,s the establishment if not I suggest that they do,not so much an eye opener more a consolidation of what a lot of us know,the great UK is was always set up for the robber barons who have and will continue to rob the country blind,we need radical policy’s something I can,t see the snp delivering,the silence has been deafening since. They were elected are they getting a wee bit comfy

  12. Alan Weir says:

    I too think the option of a dual or parallel currency for an independent, indeed for a fiscally autonomous Scotland, is well worth exploring but, as a non-economist, I think it vital we, in the independence movement, get a lot more economists on board. The Scottish Government’s Fiscal Commission report did mention a dual currency as an option (para 72) but very briefly. I think we need to hear more for them because I am worried that a lot of conceptual confusions about the nature of money are floating around in the current debate, including here on Bella.

    For example:

    1) only 3% of money is cash, that is notes and coin. There is nothing problematic about this and it is nothing in principle to do with digital money. Before computers money existed as ink marks on ledgers just as today it exists as voltage highs and lows. No doubt the amount of non-cash money has increased but as far as I am aware it is not a result of digital money.

    2) Superstition about gold; that gold is ‘real’ money and paper money, not to mention digital money is not. E.g. the author writes

    ‘ It doesn’t really have an intrinsic value anymore after most major currencies stopped basing their economic unit of account on the gold standard.’

    Well gold has some use other than as a medium of exchange, but in its use of money it is entirely a social product just like paper or electronic money: it has value because people believe it has value. The last thing we want is for people on the left to want a return to the gold standard. (It is bad enough that Paul Mason, in his well-intentioned but in my view massively confused book on post-capitalism has tried to revive the labour theory of value, though it does bring a nostalgic glow to old lefties like myself!)

    3) Fractional banking. Some in this debate want to abolish fractional banking, the long-standing practice of banks to ‘borrow short’ and ‘lend long’, to take deposits which can be demanded back immediately or in very short time spans but to lend out e.g. 25 year mortgages. This exposes them to the risk of bank runs and collapse. But the answer is deposit protection schemes (which are primarily funded by bank customers themselves, though with state back up but no reason why a fiscally autonomous Scotland couldn’t do that for the genuinely Scottish banks: Airdrie Saving and Adams, and Scottish customers of the Anglo-American globals such as RBS. Baron Darling of Debt’s scare story on that was a typical BritNat piece of disinformation). To abolish fractional banking would surely greatly hamper economic growth (if, contra the Greens, you want that.)

    4) Bit Coin etc: digital currencies are not necessarily private and I am worried the public might confuse the two. As point 1 notes, all major state currencies are primarily digital. Moreover the Euro (ill-fated example though it is) was solely digital for its first three years and thus there were dual currencies operating throughout the Euro Zone. As far as I can see, if they had wanted to, they could have continued that indefinitely, with national cash currencies on the street and a digital online currency which could be used for the bulk of transactions, for direct debits and so on.

    So are the authors right that should we consider that for Scotland, both if, as I hope, the SNP manages to extract FFA out of the Tories after next year’s election and after independence? What would the benefit be? Well, it might answer the asymmetric shock argument: that Scotland can’t survive on sterling because our reliance on volatile oil means we are subject to different stresses than England with its reliance on volatile financial products. But this problem is perhaps not so pressing if oil will remain at a low price for some time. It might help with the credibility problem on currency, if people aren’t scared by the thought of a digital currency. And if it takes a lot of sterling out the money supply- e.g. if the Scottish government starts requiring taxes to be paid online in a digital Merk (or ScotsPound), pays benefits in it (to be converted instantly into sterling- this would impose a transaction cost of course) would that not enable us to build up sterling reserves? Not sure about that- answers, on a digital postcard needed from economists sympathetic to our cause please!

    1. Broadbield says:

      Some excellent points in this post. I agree we need more information form a “think tank”-type of group, but not from any of the current crop of neoclassical economists. Some input from the likes of Steve Keen, Ann Pettifor would be useful, not only on the currency but on economics in general and a strategy for reducing inequality.

      As has been discussed elsewhere, politicians are generally the problem, wedded as they are to political dogma and short-termism, so we need to introduce other voices to the making of policy.

  13. Nick Kempe says:

    Alan,

    I think there is a common misunderstanding about fractional reserve banking. Banks create money out of nothing. They have no need for deposits to lend money. Why they need deposits is to enable money to circulate and to retain the trust of other banks. So, I borrow £50k to buy a house, its created out of nothing and if the person I buy the house from is with the same bank, the bank needs no deposit at all – its simply an internal electronic transaction. If the person I pay though banks with another bank, my bank needs to pay them. Now most of the time they don’t as my payment will be cancelled by someone else’s in the reverse direction but the outstanding overall balance needs to get paid off, either from money the bank has (deposits etc) or through the bank borrowing the money temporarily from other banks – this was why the fixing of LIBOR, the inter-bank lending rate, was so serious and the financial authorities took it so seriously – it could have destroyed the whole sytem. The reason Brown bailed out the banks was not because of the withdrawal of deposits (in theory the banks could just borrow the money to pay depositors) but because the other banks became fearful and would not lend the money. So the fundamental issue about money circulation is about trust between banks. You could avoid all of this by have one national state bank.

    What is really interesting is that the Scotpound proposal links everyone’s Scotpounds to one bank, in effect a national bank, and does away with the problem of money circulation. I have been thinking if banks create money out of nothing why we could not simply set up state and local authority and community banks in Scotland that created their own money to spend on socially useful investments (that would be repaid as per private banks). The challenge with doing this I would suggest – if we could get through the regulatory barriers – would be whether such banks would be able to borrow from other banks to enable money to circulate (and have sufficient capital backing so they were trusted by other banks). The Scotpound proposal could allow us to test out some community money creation for community investments on a small scale.

    1. Broadbield says:

      Banks creating money “out of nothing” has led to soaring debt, one of the factors behind the great crash of 2008, and the financialization of the economy so that money (debt) was used to make more money through financial instruments rather than investing in the productive economy. It also means that there is no democratic control of the supply of money.

    2. Alan Weir says:

      Dear Nick: Thanks. Yes the textbook accounts of money creation I read many moons ago, Samuelson etc., in which commercial banks were restricted in the money they could create by the need to keep ratios of ‘high-powered’ central bank reserves- they seem to be totally divorced from present reality, the Bank of England admitted as much (‘Money in the Modern Economy’). That just makes it all the more obvious, it seems to me, that trying to tie lending to something like gold reserves, international currency reserves, or customer deposits, would be a large highly restrictive move away from current practice. My main point was that all money is essentially ‘fiat’ money, its value depends totally on everyone believing that everyone else will believe in it too, even when technically it is not ‘fiat’ because convertible to something else like gold; for the value of the gold itself was essentially the same socially created and maintained value. (Of course a state without its own currency is in a very different situation from one which has its own.)

      And surely there has to be some control over money creation (as indeed there is, though it is much more complicated than the old textbook story). When the economy is operating way below its productive capacity, as it has been after the 2008 crash occasioned by Bush, Brown and Darling’s neo-liberal deregulation and Osborne’s further austerity lunacy of 2010 then we want money creation, although perhaps not of the quantitative easing type, to boost demand. But if and when it returns to near full capacity, hyperinflation will be the result of over expansion of the money supply, I don’t think any serious economist doubts that, it’s not just a monetarist article of faith.

      If there was a single monopoly state bank then of course the problem of balancing up the books between banks at the end of each day, the problem which the liquidity crisis aspect of the 2008 crash exemplified, would not, could not, arise within that state. But there would of course be inter-state problems, for example for Scotland and Scots trading with England and the rest of the world and having to get hold of English pounds, Euros, dollars. The same sort of problems would arise there, and if everyone else lost faith in the Scottish pound, that would be financial disaster.

      1. Nick Kempe says:

        Dear Alan, I agree with you on fiat money and that we need some control over money creation. The biggest issue at present about this is a) this right lies with private banks rather than the people 2) that at present the main money created by the banks is to purchase existing assets (eg to buy houses) which often leads to asset price inflation which benefits the better off. There is no reason at all why the state, national or local, or local communities could not run proper banks (not the Scottish Investment Bank or Green Investment Bank which basically seek funds from other financiers rather than creating money) and create money as debt a lot more cheaply than the banks (eg why should say housing associations have to borrow money at “market” rates for social housing when a National Scottish Bank, without bankers on bonuses, could lend them the money more cheaply. Its hard to see how such money creation, if issued as debt – and repaid through rent over time – would be any more inflationary than the money created by the private banks. Indeed in terms of housing, increasing the supply, is likely to reduce demand and house price inflation. There are many capital investment projects that generate income which could repay the debt over time
        The state though could also print money, as Osborne did. Whether this would lead to hyperinflation depends on what the money is printed for and how much. The proponents of Green Quantative Easing and People’s Quantative easing are basically suggesting it is spent on capital type projects which leave the country with assets and the assessment is in current climate with almost no inflation this is unlikely to increase inflation (and a small amount of inflation anyway is not a bad thing, the countries whose economies have grown fastest tend to experience inflation). The potential problem with the Green QE proposals much of which was about installing solar panels is that since most of these are manufactured abroad most of the benefit of this goes abroad and indeed could impact on currency exchange rates. If you are going to print money much better to spend it on things that do not require imports (building houses a good example).
        Printing money to pay for the current account deficit on a recurrent basis is a different matter with much higher risk of inflation (although in theory if tax levels are high enough a government could if they inject too much money into the economy take it out again through tax).
        To me the interest of the Scotpound is that instead of waiting or trying to push for the UK Govt to reform the financial system, we could start trying out different things on a very small scale. Its hard to see how NEF Scotpound proposals would be inflationary in present climate – the proposals are for a very small amount of initial money creation – and if its fiat won common acceptance it would become possible to start trying out new models for money creation, eg to allow community banks to create money to invest in deprived communities and put money into places it rarely gets to at present.

  14. George Mckenzie says:

    As an 83 year old i have never made a comment on this site.
    I am fully aware of the disadvntages some of our senior citizens have as regards the digital agebut we are not all behind the times.
    Perhaps a scottish currency would help to diminish the fears of senior citizens and I think it may be the best way to go with the currant type of scottish currency running alongside sterling.
    I am no ecconomist so who am i to comment

  15. K Alexander says:

    Is there a risk that ScotGov may have difficulty spending the S£ it collects in taxes? What incentives are there for public sector workers to be paid in S£ (which may not be accepted as widely as Sterling)? Would they need to be offered more S£ than the equivalent £ to compensate, or are there other major incentives?

    1. Nick Kempe says:

      I don’t think there would be a risk IF the UK Government allowed scotpound to be accepted by the Scottish Government as tax – this is an argument/battle that would need to be won.
      My first point is that the Scottish Government spending any Scotpound paid as taxes does not depend on its staff accepting a small proportion of their wages in Scotpounds, as although staff wages are a high proportion of Government expenditure they are not the only one. For example, the Government spends money through procurement and allocates funds to other public and private bodies. Somewhere in the expenditure chain though scotpound would need to form a portion of workers wages. So, the issue that needs to be thought about is how scotpound might form a proportion of wages in general and not just for public sector staff. HOWEVER, Scotpounds could just circulate within the public sector without ever being received by workers. So, the Scottish Government pays lots of other public bodies grants, who then almost immediately a significant proportion of these funds to HMRC in the form of income tax deducted under Pay as You Earn. Anyone receiving such Govt grants could (if collection of income tax is devolved as planned) pay some of this in Scotpounds. We need to remember a significant proportion of public sector expenditure currently consists of electronic money circulating within the state. Now, such an outcome would not be desirable in terms of establishing scotpound (as if it ends up circulating only as tax tokens within the public sector it would not become established across the economy) but I think demonstrates that there is almost no risk of Scotpound being unuseable by Govt (so long as the UK govt agrees it could be used to pay tax).

  16. Scotcoin says:

    Scotcoin™, which was launched in 2014 offers all the pros of being a fully digital currency, which has been rolled out to thousands of people in Scotland already, with the added bonus of being completely independent and decentralized & with a total economy size of 1 BN Scotcoin ever! Which creates scarcity and true value – Interesting to see this mainstream proposal develop…

    1. Nick Kempe says:

      Scotcoin is an offshoot of Bitcoin, which seems to be as much used for financial speculation – its value fluctuates far more than any other currency – as real financial transactions. This is partly explained by the fixing of the total amount of Bitcoin in circulation – unlike other currencies this means that if it gets used by more people, demand for it will increase and its value will appreciate significantly – in other words the inflation is in the currency and has made it subject to speculation.
      There appears very little on the Scotcoin website on how Scotcoin is doing in Scotland apart from news about IT developments – incidentally according to Wikepedia the vast amount of computer power needed to process Bitcoin consumes considerable amounts of electricity and is a far from “green” solution. It would be interesting if could publish information about how many businesses in Scotland accept Scotcoin – the current interactive does not appear to show this information.
      Therre are fundamental differences between Scot/Bitcoin and the Scotpound proposal, not least of which is that the Scotpound proposal would put some money into hands of people who most need it.

  17. Jams O'Donnell says:

    Instead of using the current UK pound, as was tried to loud declamation last year, what about initially adopting the currency of a country with a similar economy to that of Scotland. Just off the top of my head and without any analysis of their economies, perhaps New Zealand or Norway or Sweden. That would allow a period of stability before choosing a more permanent option.

    1. Jams O'Donnell says:

      On further consideration, of course Sweden uses the euro. So possibly the NZ or Canadian dollar, or Norwegian Crown. Even Icelandic, though that seems a bit problematic. In any case I don’t know enough about the subject. Perhaps someone better qualified can comment.

  18. Mike Fenwick says:

    On the thread “Reaching for No”, I have raised these issues with the Scottish Government and asked that they be taken seriously enough to have the Council of Economic Advisers consider and comment on them.

    The reply I received was non-commital (see the thread listed above) – however I have now repeated my request, based on the comments below – which come from the Bank of England in a speech last week.

    If the BofE can see the need to consider the position – should we not expect the Scottish Governemnt to do likewise????

    Extracts from that speech:

    A more radical proposal still would be to remove the ZLB constraint entirely by abolishing paper currency.  This, too, has recently had its supporters (for example, Rogoff (2014)).  As well as solving the ZLB problem, it has the added advantage of taxing illicit activities undertaken using paper currency, such as drug-dealing, at source.

    A third option is to set an explicit exchange rate between paper currency and electronic (or bank) money.  Having paper currency steadily depreciate relative to digital money effectively generates a negative interest rate on currency, provided electronic money is accepted by the public as the unit of account rather than currency.  This again is an old idea (Eisler (1932)), recently revitalised and updated (for example, Kimball (2015)).

    All of these options could, in principle, solve the ZLB problem.  In practice, each of them faces a significant behavioural constraint.  Government-backed currency is a social convention, certainly as the unit of account and to lesser extent as a medium of exchange.  These social conventions are not easily shifted, whether by taxing, switching or abolishing them.  That is why, despite its seeming unattractiveness, currency demand has continued to rise faster than money GDP in a number of countries (Fish and Whymark (2015)).

    One interesting solution, then, would be to maintain the principle of a government-backed currency, but have it issued in an electronic rather than paper form.  This would preserve the social convention of a state-issued unit of account and medium of exchange, albeit with currency now held in digital rather than physical wallets.  But it would allow negative interest rates to be levied on currency easily and speedily, so relaxing the ZLB constraint.  

    Would such a monetary technology be feasible?  In one sense, there is nothing new about digital, state-issued money.  Bank deposits at the central bank are precisely that.  The technology underpinning digital or crypto-currencies has, however, changed rapidly over the past few years.  And it has done so for one very simple reason:  Bitcoin.

    In its short life, Bitcoin has emerged as a monetary enigma.  It divides opinion like nothing else (for example, Yermack (2013), Shin (2015)).  Some countries have banned its use.  Others have encouraged it.  Some economists have denounced it as monetary snake oil.  Others have proclaimed it a monetary cure-all for the sins of the state.

    What I think is now reasonably clear is that the distributed payment technology embodied in Bitcoin has real potential.  On the face of it, it solves a deep problem in monetary economics:  how to establish trust – the essence of money – in a distributed network.  Bitcoin’s “blockchain” technology appears to offer an imaginative solution to that distributed trust problem (Ali, Barrdear, Clews and Southgate (2014)).

    Whether a variant of this technology could support central bank-issued digital currency is very much an open question.  So too is whether the public would accept it as a substitute for paper currency. Central bank-issued digital currency raises big logistical and behavioural questions too.  How practically would it work?  What security and privacy risks would it raise?  And how would public and privately-issued monies interact?

    These questions do not have easy answers.  That is why work on central bank–issued digital currencies forms a core part of the Bank’s current research agenda (Bank of England (2015)).  Although the hurdles to implementation are high, so too is the potential prize if the ZLB constraint could be slackened.  Perhaps central bank money is ripe for its own great technological leap forward, prompted by the pressing demands of the ZLB.

    Extract ends:

    Link to the full content of the speech here:

    http://www.bankofengland.co.uk/publications/Pages/speeches/2015/840.aspx

  19. Jamie morris says:

    Don’t know if anyone’s interested but I came across this several months ago. It’s an experimental virtual currency with an “allowance” given periodically. I guess the main idea is to get people used to the idea. They can play with the system without any personal cost.

    http://www.zippcoin.com/

  20. Andrew says:

    There is sense but lots of naivety here. Yes we need our own currency and it has to be a hard currency we can grab and take out of a bank. People need to take power away from the banks. We need a central state controlled bank in Scotland ASAP. Without that austerity is the kicking we get daily for the robbery done by financiers in 2008/9. It was a heist!!!! And they will, like all thieves, come back for more and it will be a digital theft next time on a massive off the chart scale probably just after most people get paid…..and will be cloaked as a cyber theft from the big bad evil Russians under our beds since all right wing nutters these days need a Reds-under-the-beds story to scare the hell out of the dumb and impressionable masses who spoon the daily tabloids. And btw a stimulus of 250 new Scots pounds is a joke! Proper QE for the people and infrastructure is the way. Rather than new digital currency, back to the real economy of a wage packet and cash in yer hand for real work is the way forward to lessen the theft of the biggest crooks in history, before their next big heist, the financiers! In this class war, let’s not take our eye off the venture capitalists looking down the barrels of calculating greed at us as they plan their next smash and grab!

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