The Adam Smith Institute’s report “Quids In: How sterlingization and free banking could help Scotland flourish” is quoted in The Guardian:
With bank runs and bailouts still fresh in people’s memories, Scotland’s sizable financial sector and many other businesses are unlikely to accept such a position.
But the Adam Smith Institute argues that an independent Scotland could flourish by using the pound without permission from the rest of the UK.
The free-market thinktank cites the example of Panama and other Latin American countries that use the dollar as proof that the informal use of another country’s currency “can foster a healthy financial system and economy”.
“Under sterlingisation, Scotland would lack the ability to print money and establish a central bank to act as a lender of last resort. Evidence from dollarised Latin American countries suggests that far from being problematic, this constraint reduces moral hazard within the financial system and forces banks to be prudent, significantly improving the overall quality of the country’s financial institutions. Panama, for example, has the seventh soundest banks in the world,” the institute said in a report last month.
Read the full article here.