News & Analysis

Will Scottish nationalism empower or destabilize the GBP?

Andrew Saks, Monday, 19 April 2021

Socialism and strong, liberal currencies do not make good bedfellows.

Rather in the same vein that nationalized domestic market consumer goods manufacturers are notable by their appallingness, political involvement in markets, and in particular interference with freedom of enterprise, has created some monstrosities and led to national disempowerment in several eras since the second world war.

During the 1970s and early 1980s, when the Cold War dominated the mainstream news, and those who had been sold the socialist dream had only to look at their everyday existence of picket lines, inaccessibility to quality food and consumer goods, and the channel-crossing greens and Stalingrad gray color of every item available to rent from the state which can now be privately purchased in any shape, form or shade.

Oh how the Western world laughed at the Volgas, Autovaz, Ladas and Trabants on the other side of the Iron Curtain. Quite what was so amusing to the British senses was hard to fathom, however. Austin Allegro anyone?

Indeed, the vast majority of automotive abominations of the period between 1970 and the end of the Cold War in the late 1980s did not roll off the line of Lada's Tolyatti production line in what was then the Soviet Union, but off the political hotbeds controlled by British communist Derek Robinson - known as Red Robbo - in Birmingham.

That is, if the workers stopped striking long enough to actually finish a complete car.

What the entire world of commercial enterprise learned from that cold, bleak period is that private enterprise, efficiency, uninhibited access to global markets and healthy competition are all factors which contribute toward striving for excellence.

That plus an empowered workforce and a content population who do not feel as though their hard-earned capital is being pillaged by an overbearing state.

Hence, today's Britain is a leader in modernity, produces its own high technology and imports equal amounts from across the world.

Outside of technology, residents of the United Kingdom can buy non-seasonal produce at any time of year, at any supermarket at reasonable prices. Basically life has never been more comfortable or luxurious and that is owing to a fully competitive, free market economy. Britain has, until the lockdown-obsessed current government took hold and began to emulate some of the 1970s ideology, been the world's fifth largest economy and is one of the best and most sensible places to do business globally.

So what's this about the British Pound and its potential relationship with a return to 1970s comradeship?

Well, all was well until Alex Salmond, a staunch socialist and who served as the First Minister of Scotland from 2007 to 2014 before being replaced by equally left-leaning Nicola Sturgeon decided this week that he would make his opinion public that ditching the British Pound would be one of the proposed policies should Scotland devolve from the United Kingdom and become an independent country.

Mr Salmond today told supporters of his Alba party that Scotland 'must have its own currency' so it is able to cope with a post-coronavirus world.

Is this a means of installing capital controls should Scotland go independent, and impoverishing the nation whilst removing the burden of debt Scotland owes to Westminster and then creating a situation in which the Pound surges whilst the Scottish citizens of a newly independent nation struggle?

Or, is it a way of disconnecting British oil revenues from the British pound - Oil delivery from the North Sea is settled in British Pounds and the vast majority of British oil comes from Scotland. This would render the oil transactions to be handled in a new, potentially very unstable Scottish currency, whilst removing oil from the Pound's settlements.

Is this a good or bad thing? Currently it would be a bad thing, but as oil becomes less relevant to Western economies and renewable energy and electric cars become more common, would Scotland then be relegated to a raw materials economy with no diversity of commerce like many other socialist countries such as Venezuela and Russia.

Perish the thought. Most of Scotland's people want to keep the Pound and do not want to be cast away from the United Kingdom. Scotland is indeed a proud nation with an rich history, however it is also a very dignified one which prides itself in Scottishness and Britishness.

Mr Salmond's rather risky ideology could take its economy two ways - either toward being an oligarchy with a few socialist leaders raking in the oil money whilst its population suffer, or it could take it toward being its own raw materials power, supplying other parts of the world which would make a Scottish currency volatile and an interesting instrument to trade.

South of the border, the same conundrum applies. Would an independent Scotland with its own currency save money in the remaining Pound-denominated nations of the United Kingdom and strengthen the pound due to no need to pay for a dependent Scotland, or would it weaken it due to the natural resource - which is a commodity whichever way you look at its obsolescence or relevance today - becoming Scotland's property only?

Either way, one thing we do know is that damage caused by radical left wing policy always causes volatility and volatility is what gives Forex traders their independence and opportunity.

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