Wednesday, 10 September 2014
Scotland: If yes wins, then yes for own currency too
If Scotland were to leave the UK, then it should have its own currency too.
Scotland should not join the EMU while the latter does not function with a federal central bank. If Scotland were to join the EMU it would simply be another German monetary colony like all the others in the EMU.
If Scotland were to leave the UK and keep the Pound with the Bank of England as bank of last resort, it would be a UK monetary colony.
So too if Scotland were to leave and keep the Pound without the BOE as bank of last resort. It would be an even weaker UK monetary colony.
If Scotland votes to leave the UK , then
1. it should immediately have its own currency.
2. Next Scotland should abandon Historical Cost Accounting and change over to Capital Maintenance in Units of Constant Purchasing Power in terms of the Daily CPI. That would stabilize the constant real value non-monetary item economy (including salaries, wages, rents, taxes, capital, all profit and loss account items, trade debtors, trade creditors, provisions, etc.). It would keep the real value of all constant real value non-monetary items perfectly stable in all entities that at least break even in real value - ceteris paribus - at all levels of inflation or deflation for an indefinite period of time.
3. Lastly it should inflation-index its entire money supply on a daily basis in terms of the Daily CPI. That would only remove the effect of inflation or deflation from the monetary economy. It would do nothing to actual inflation or deflation. That depends on the central bank. However, the economy would function as if there were no inflation or deflation.
Nicolaas Smith Copyright (c) 2005-2014 Nicolaas J Smith. All rights reserved. No reproduction without permission.
Posted by Nicolaas Smith at 00:14