An Independent Scotland could use the power of its sovereign currency to improve people's lives

And is an excellent reason to leave the failing UK

The letter below was published in the December 30th edition of The Scotsman. In it, I respond to Jill Stephenson, a member of the Scotland in Union group of letter writers. She appears regularly in the unionist papers letters pages. A retired professor of modern German history, she should stick to history and steer clear of economics, a subject about which she knows very little.

Jill Stephenson (Scotsman letters page, December 29th, 2023) again displays her economic ignorance. 

First, why shouldn’t Scotland benefit from pandemic financial support as it’s still part of the UK, financial largesse being the chief advantage according to Ms Stephenson? 

Second, Scotland doesn’t have a central bank. It relies on the Bank of England, owned by the UK government. Its job is to create money to enhance the nation’s wellbeing, which it has generally failed to do. In 2020, the Treasury instructed it to create £400 billion to support people through the pandemic which it did by tapping a computer keyboard. None of this new money added to the UK’s debt, because a central bank can’t owe money to itself.  

Third, Ms Stephenson doesn’t understand what the national debt is. It’s comprised of government bonds and national savings held by citizens, pension funds, life assurance companies and foreign governments, who save with the government because it’s the safest place to put their money. They know the government, as a sovereign currency issuer, can always create the money to repay. It will never go broke.

These savings increase our wealth and ensure the smooth operation of the banking system, pensions, and foreign exchange markets. If all government bonds/debt were repaid, banks would fail because they wouldn’t have the money to function. 

The only constraints on government spending are inflation, resulting from too much money chasing too few goods, and bumping up against the productive limits of the economy. We are nowhere near either at the moment. 

Because the UK government has managed its budget like a household’s when there’s no need to do so, it has chosen not to use the power of its sovereign currency to improve people’s lives, but to pander to the parasitic City of London. 

Scotland’s future prosperity depends on creating the institutions and policies to harness our resource wealth and develop the human potential of all Scots, an excellent reason to leave the failing UK.