Which economics is this then?

And I agree: that might be necessary if Scotland did, as the archly neoliberal thinks appropriate, fix its currency against sterling. Of course in that case Scotland would have no choice but spend all its earnings trying to maintain parity with the pound, crushing economic growth in the process.

But if Scotland had its own currency and let it float, as it would have to, Scotland could concentrate on delivering full employment instead.

Entirely true, an independent Scotland with its own currency could print as much as it likes in order to stimulate the economy. There might be the odd side effect or two of course:

Jimmy says:
June 7 2018 at 11:45 am
Correct me if I’m wrong Richard, but if Scotland had a free floating currency, but a huge budget deficit, would that currency likely lose value quickly?

And if the currency starts losing it’s value quickly that will make us Scots poorer, as inflation goes up and our imports cost more.

Reply
Richard Murphy says:
June 7 2018 at 12:32 pm
Do you know it will have a huge budget deficit?

Why?

A trade deficit is a threat: but is a budget deficit really a cause when the reality is that these need never be funded with foreign currency borrowing?

In other words I do not agree with your hypothesises

A currency in greater supply does not fall in value. That’s just so neoliberal to insist that it does.

Hmm.

9 comments on “Which economics is this then?

  1. I like the idea of someone being archly neoliberal more than their being saucily collectivist but I can’t think of an actual person in the former category, alas.

  2. The Scots will just crank up their tax rates to cover the deficit (or to soak up the money-printing, as Spud would say). Since nobody ever changes their behaviour in response to changes in tax rates, everything will be rosy. I look forward to Scotland’s 80% tax rate.

  3. @ Jim
    It’s not just the absolute level of the tax rate – it’s also whether it’s on gross or net income after other taxes. 30% on what’s left still leaves you with 14% of pre-tax but some years ago when no 1 son was at uni and no 2 son at school I was working part-time ro share caring responsibilities and I calculated that my marginal tax/withdrawal of tax credit/uni grant rates was noticeable over 90% and if I’d had two kids at uni and one at school it would have been over 100%.
    There must have been some contracts where the non-tax-deductible expenses wiped out the tiny amount of taxable profit left after deduction of taxes.

  4. Richard Murphy, June 7 2018 at 12:32 pm says:

    Do you know it will have a huge budget deficit?

    Why?

    A trade deficit is a threat: but is a budget deficit really a cause when the reality is that these need never be funded with foreign currency borrowing?

    Hmm, is he thinking only those living in Scotland will be allowed to buy/own the SNP Bonds? That would possibly wipe-out any trade deficit as Scots would be living on gruel.

  5. Do you know it will have a huge budget deficit?

    If it doesn’t have a budget deficit, how will this new currency get into the economy?

    Can’t have it both ways, Spud. Though you try desperately hard to do so.

  6. An independent Scotland would, presumably, want to remain in the EU.

    It would therefore need to adopt the Euro, licketty-spit. So, it would not be independent for long, and what it does with any currency in the meantime is largely irrelevant.

  7. Unless Brexit is massively delayed (sadly, looking increasingly possible), there’s no possibility that Jockxit could take place until after we’d left. So they’d have to reapply if they wanted EU membership. They’d struggle to pass the economic tests, and why would the eurozone want another basket case? Further, Spain would be at the front of the queue of EU countries with fissiparous tendencies of their own, who would veto a Scots re-entry in order not to create a precedent.

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