Sterling stuff

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By RF Morrison

The pound Sterling derives from its medieval origin of a pound weight of silver divided into 240 silver pennies.  Only after the establishment of the Bank of England in 1695 did bank credit start to replace silver and gold as money. 

Ever since then governments have fought a losing battle against inflation as bankers created credit as a profitable business.  Up until deregulation of the banks in 1986 the law restrained credit creation by imposition of minimum lending rates – virtually rationing the money supply by price.  It was also unlawful for banks to create credit  to finance their own proprietary trading.

By RF Morrison

The pound Sterling derives from its medieval origin of a pound weight of silver divided into 240 silver pennies.  Only after the establishment of the Bank of England in 1695 did bank credit start to replace silver and gold as money. 

Ever since then governments have fought a losing battle against inflation as bankers created credit as a profitable business.  Up until deregulation of the banks in 1986 the law restrained credit creation by imposition of minimum lending rates – virtually rationing the money supply by price.  It was also unlawful for banks to create credit  to finance their own proprietary trading.

Since then the banking ‘industry’ has created layer upon layer of complexity in the form of rigged financial markets which trade in their own abstruse credit products.  They are devices to defraud the public treasury and exist for no useful purpose other than to enrich their creators.

Our attitude to money is conditioned by many hundreds of years of custom, and when we seek to address  our present financial problems we tend to tinker with the symptoms rather than seek the underlying causes – which is why they keep coming back to haunt us.  

Today the Scots have a unique opportunity to look afresh at how they wish their banking system to work;  there is an opportunity to decide whether we wish to continue with Sterling or consider an independent Scottish currency designed for the twenty first century.  It is a unique moment because the banking business is now so entrenched in London, Washington and Brussels that collapse threatens to precede any meaningful reform.   If Scotland has the nerve to become independent again then it also has the opportunity to disengage from the City of London.

Last month saw the publication of “Currency Choices for an Independent Scotland:  A Report by the “Fiscal Commission Working Group” described as ‘ four eminent economists, Professor Andrew Hughes-Hallett, Professor Sir Jim Mirrlees, Professor Frances Ruane and Professor Joseph Stiglitz’. These are the four wise men appointed by Alex Salmond to advise the Scottish Government on the economics of independence.

These gentlemen may well be academic luminaries, but they pale in the shadow of Adam Smith, David Hume and the Scottish Enlightenment.  There is no fresh thinking here, no philosophy, no innovation, just the intellectual prison of the status quo.  This report has nothing to do with choices – its conclusion is clear from the outset  “the preferred model would be for Scotland to enter a formal monetary union with the rest of the UK with the Bank of England operating as central bank for the common monetary area…. This is a sensible framework and would allow the day-to-day operation of monetary policy and the banking system to operate as is currently the case”.  This is of course typical of how elites and lobbyists manage the political dimension and suppress open dialogue.

Is that what the Scots really want? There is of course no independence without financial independence.

The banks and financiers who control the National Currency also control the government and never before has this been so glaringly obvious to every taxpayer. 

What is less apparent is what can be done about it.  Politicians seem to have forgotten that banks are chartered by the state to distribute national currency to the citizens as a means of exchanging their goods and services among one another.  That is the only way that genuine wealth is created. 

The citizens guarantee the value of this currency and the function of the bank is to distribute it within well established parameters of responsibility and moral hazard.   Regrettably that is a very low priority with banks today.

The SNP is painting itself  into the Sterling corner, but it could still cultivate  an open debate which considers adopting the Scots pound at par with the British pound and pegging its value to Sterling – for as long as that serves Scotland’s interests. 

Suddenly  our role as supplicants to the Bank of England becomes reversed and we can negotiate with confidence in the knowledge that the Sterling balance of payments needs Scotland if it is to survive the next wave of speculation.

But far more important would be the new-found financial freedom to apply  our natural and human resources to create real wealth in a truly independent  Scotland.