Commenting on Alex Salmond’s refusal to name a ‘Plan B’ currency for Scotland if the Chancellor were to continue to oppose a currency union, Research Director of the Adam Smith Institute, Sam Bowman, said:
“An independent Scotland could flourish either by using the pound sterling without the permission of the rUK (or by setting up a “ScotPound” pegged to sterling through a currency board, which would achieve a similar end). This ‘sterlingization’ would emulate a number of Latin American countries that use the US Dollar without an official agreement with the US government. Because Scottish banks would not have access to a currency-printing lender of last resort, they would have to make their own provisions for illiquidity, and would necessarily act more prudently.
“Scotland actually had this system of ‘free banking’ during the 18th and 19th centuries, during which time its economy boomed relative to England’s and its banks were remarkably secure. And Panama, which uses the US Dollar in this way, has the seventh most stable financial system in the world.
“Everyone says Mr Salmond needs a Plan B if the rUK does not agree to a currency union with Scotland. But unilateral adoption should be Plan A, making Scotland’s economy more stable and secure. The UK’s obstinacy would be Scotland’s opportunity.”
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The Adam Smith Institute is an independent libertarian think tank based in London. It advocates classically liberal public policies to create a richer, freer world.