This is an excerpt from James Robertson’s newsletter. James Robertson is the co-author of the book Creating New Money: A Monetary Reform for the Information Age (2000). Positive Money proposals are heavily based on this work which in turn builds on the original proposal for „Full Reserve Banking“ by Irving Fisher.
Scotland will hold a referendum on 18 September. It will decide whether the outcome will be “Yes, Scotland will be independent” or “No, Better Together“.
If the result is independence for Scotland, one particular question will be especially interesting: Money. It hasn’t been decided what currency an independent Scotland should use.
It already seems to people in Scotland that David Cameron and George Osborne (the UK Prime Minister and the UK Chancellor of the Exchequer – financial minister) are behaving negatively and arrogantly towards the question of a future currency for an independent Scotland in the event of a Yes verdict. An expression of that will be found here.
At present there is a comparatively high level of support in Scotland for a Yes referendum vote. But the prospective danger of expulsion from the UK sterling currency might start a shift of opinion towards a cautious No. If that happens, what rabbit could the Scottish National Party leader, Alex Salmond, and his colleagues pull out of their hat to counteract the shift?
It could be monetary reform. Alex Salmond could announce that the present Scottish Government is preparing a feasibility study in the light of the developments at Item 2 above. The study would report on whether, after winning a Yes referendum, an independent Scotland should adopt a democratic currency with a money supply created as a debt-free public service to society as a whole, instead of the present money supply created as debt by commercial banks at great profit to themselves and great cost to society at large.
That announcement would be widely publicised; knowledge in the UK as a whole, and in other countries too, that monetary reform was being considered as a serious political possibility would become very widely discussed; and that discussion could provide the tipping point for international monetary reform; and the newly independent Scotland would start its life as a proud world leader.
It turns out that preparatory work for the study has already been done:
An outstanding example is the book Moving On by Andy Anderson and Ronnie Morrison on the Campaign for a Scottish Currency.
Click here to read an excerpt from the book. There is a button at the bottom of that page to buy the book.
Mike Edwards has written an important paper on Why Our Monetary System Is Broken and How The Scottish Independence Referendum Creates An Opportunity To Fix It For Scotland which can be found here.
“The Scottish Independence referendum is bringing change to Scotland regardless of the outcome. Even in the event that Independence is voted against it is highly unlikely that maintaining the status quo will be an acceptable outcome. In reality, whether Independence is won or lost, change will follow.
Therefore the question we must ask ourselves is will we the people of Scotland drive the change or will we be driven by it?
The answer to this question lies in how we choose to the answer the following two questions:
1) will the people of Scotland develop a cohesive vision for the future? and
2) have we got the conviction to implement such a vision?
One key to a new vision for Scotland is implementing a reformed monetary system that works for the benefit of all. In order to ensure the implementation of this new vision, a strong coalition of people and institutions must be built to push through this reform when the opportunity arises.
If we do not develop a vision or have not got the conviction to implement it, then history informs us that established interests will work hard to high-jack this historical opportunity for their own benefit. The opportunity that Scotland has is only valuable if it is not used to further entrench benefits to the few.
Independence for Scotland (rather than more devolved powers) is the most pragmatic route available for people in Scotland to implement monetary reform – a key reform necessary to create a fairer, more stable, more democratic, and a more environmentally responsible society.
As this paper has demonstrated, money reform is the underlying structural issue that constrains change on all other issues. How we respond to this issue will shape our daily lives for years to come. Therefore, the opportunity to implement a reformed money system in Scotland is one of the primary reasons that Scottish people should consider voting for an Independent Scotland.
In a stronger economic position Scotland would be better placed to provide economic leadership and help to others. Thus Scottish Independence could be better for the people of Scotland, as well as, the people of England, Wales, Northern Ireland and other countries around the world.”
Positive Money has published A Scottish Currency? 5 Lessons from the Design Flaws of Pound Sterling.
Positive Money accepts that an independent Scotland may have to abandon the pound and establish its own currency, to regain control over its own monetary policy and economic affairs; and it points out some of the pitfalls that it should avoid if it does so.
It should limit the creation of a Scottish currency to a Scottish Central Bank, which would be concerned with the long-term health of the Scottish economy rather than the short-term need to chase profits and market share.
This would give Scotland an economy where:
• The amount of money in the economy would be stable regardless of the actions of banks.
• Households could reduce their debts without inadvertently triggering a recession.
• The economy could be stimulated without relying on rising household debt.
• The proceeds from creating money would go to the state rather than banks, resulting in a significant saving for taxpayers.
• Badly-run banks could be allowed to fail without threatening the payments system or the wider economy.
These changes would give Scotland a safer banking system and an economy that is more stable and far less dependent on debt.
Although the well-known economist John Kay may not have discussed the possibility of monetary reform for an independent Scotland, his recent Financial Times article on English Law Cannot Stop Scots Being Sterling Squatters suggests that, one way or another, an independent Scotland with its own currency need not worry too much about making use of sterling as well.
Personally, being of mixed Scottish and English blood and having spent much of my young life in Scotland and much of the rest of it in England, I would regret the two countries becoming independent from one another. But if Scotland becomes the first nation in the world with a money system that serves its people fairly, I would feel very proud of it.
Actually, once the present Scottish leaders let it be widely known that they are seriously considering monetary reform as a feature of their possible independence, that by itself could become a tipping point on a wider scale. Public pressure on the UK government and others around the world could then compel them to consider it seriously too. Monetary reform could then spread like wildfire.
You can sign up for James Robertson’s newsletter at www.jamesrobertson.com.