The Adam Smith Institute’s Research Director, Sam Bowman, was quoted on The Guardian live blog, arguing that an independent Scotland should unilaterally adopt the pound, with or without the permission of the rest of the UK.
During the debate Salmond refused to name a ‘Plan B’ currency for Scotland if the chancellor continues to oppose a currency union. Sam Bowman, research director of the Adam Smith Institute, has a couple of ideas.
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).
(1) 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.
(2) 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.
Read The Guardian’s live blog here.