Implications of Scottish Independence

[Rolfe]

Scotland would have to convince the market (actual and potential creditors) of that. I don't think it is very likely. Actually massively unlikely, which is probably why it won't be used as a serious negotiating stance.

I think you are viewing this from a very parochial perspective. A country which has no debt liabilities because another country accepted 100% responsibility for the debt of the dissolving union isn't exactly a bad risk. It's certainly a country with an attractive balance of payments position.

Non-sequitur--that's about oil tax revenues. The currency and an FX union is not part of those assets. The blog I linked to (so did you) regards repudiating debt as a useful bargaining chip for Scotland to get its wish about currency union. Nothing to do with territorial assets.

No, it's not about that at all.

In addition a one off removal of 10% (isn't it more like 8?) of economic output does not create a permanent "10% recession", but a one-off contraction in a single period (actually overnight) that is matched by a contraction in population, costs, liabilities. In the next period the effect is gone.

Of course Scotland will need to borrow. It's not going to be the only OECD nation that doesn't, ever.

I said "little need of borrowing" and you actually quoted my post. How did that suddenly become "no need to borrow"? The point is that iScotland without any debt will have little need to borrow, and so will be able to pay a somewhat higher interest rate on what borrowing it does require, without breaking sweat. If it came to that, that is.

Rolfe.

 

[Francesca R]

However, it if chooses to retain all the sovereign debt, that is recurring. It isn't absorbed in the first year. That's kind of the point of the article.

No the article refers to "the apocalyptic effect of a permanent 10% [recession]." It does not refer to permanent debt service. And it is incorrect on the point it makes.

I wouldn't bother trying to airbrush their error if I were you

Thanks for correction on the share of GDP.

 

[Rolfe]

.... a useful bargaining chip for Scotland to get its wish ....

Here you go again. We're not talking about bargaining chips. We're talking about cause and effect. If Scotland is thrown out of the EU, then EU fishing boats will no longer have access to Scottish fishing grounds. (And almost certainly not Norway's either.) That is a simple statement of fact, not a bargaining chip.

If Scotland is denied continuing use of its currency after independence, it will not be responsible for any debt held in the currency it is being denied the use of. That's also a simple statement of cause and effect.

You have to get out of this mindset of England as all-powerful, dictating to powerless and helpless Scotland what will and won't happen. The mindset where England owns everything, even the parts that are Scotland's. That's not how negotiation happens.

Rolfe.

 

[Rolfe]

No the article refers to "the apocalyptic effect of a permanent 10% [recession]." It does not refer to permanent debt service. And it is incorrect on the point it makes.

I wouldn't bother trying to airbrush their error if I were you

Thanks for correction on the share of GDP.

I'm not going to argue the head of that pin. The permanent debt service point remains. As does the point about the GDP.

There will be a mutually agreeable solution to this. Scotland has no desire to see England+'s economy tank after independence. However the rhetoric coming from Westminster that iScotland will have its face stamped into the dirt in any way England+ can possibly accomplish isn't doing much for future international relations I have to say.

And would you care to comment on this?

http://wingsoverscotland.com/wp-content/uploads/2014/05/timescu.jpg

Rolfe.

 

[Francesca R]

If Scotland is denied continuing use of its currency after independence, it will not be responsible for any debt held in the currency it is being denied the use of. That's also a simple statement of cause and effect.

And that's a standard bargaining method as well, used to bolster the apparent credibility of threat strategies. "It's not a threat, it's absolute fact. My hands are tied!" etc . . . . You should read Thomas Schelling's "The Strategy of Conflict", or Von Neumann & Morgenstern

You have to get out of this mindset of England as all-powerful, dictating to powerless and helpless Scotland what will and won't happen. The mindset where England owns everything, even the parts that are Scotland's. That's not how negotiation happens.

I think you are projecting a mindset onto me there.

 

[Francesca R]

I'm not going to argue the head of that pin.

I'll assume your excusing of their error to be withdrawn then.

I thought it was kinda relevant--a piece purporting to have wisdom on the FX issue then making an amusing fluff on levels and rates of change of economic activity. It doesn't mean that everything it writes is similarly rubbish of course. But I also think it is wrong on the repudiation-threat idea for the reasons I have already given

 

[Francesca R]

There will be a mutually agreeable solution to this.

I think so too. If there is independence, Scotland will get 90% of the oil/gas, a proportionate share of debt (which will be formally an obligation of the Scottish state), and probably get the pound too. I am least sure on the last of the three but I think so.

(if the referendum goes yes of course)

 

[LondonJohn]

I think you are viewing this from a very parochial perspective. A country which has no debt liabilities because another country accepted 100% responsibility for the debt of the dissolving union isn't exactly a bad risk. It's certainly a country with an attractive balance of payments position.




No, it's not about that at all.




I said "little need of borrowing" and you actually quoted my post. How did that suddenly become "no need to borrow"? The point is that iScotland without any debt will have little need to borrow, and so will be able to pay a somewhat higher interest rate on what borrowing it does require, without breaking sweat. If it came to that, that is.

Rolfe.

Sheesh. This is horribly economically illiterate. And, coming from someone who's a political activist, it's frankly worrying.

Once again I will repeat the following, and I will bold it for the avoidance of ambiguity or doubt:

iScotland will not come into being with a zero bank balance and zero liabilities.

Rolfe quite obviously (and embarrassingly) doesn't understand the situation here. She believes that since the UK has guaranteed that it will continue to be the issuer, servicer and repayer of all national debt even if Scotland secedes, this somehow implies that iScotland will be debt-free. THIS IS INCORRECT AND FATUOUS.

Again, the following needs to be pointed out: if Scotland becomes independent, there will have to be a complex and detailed assessment made by an independent third party (I have suggested previously that this might be the IMF), in order to separate assets, income streams, tax takes, duties and debts. This third party will arrive at a (hopefully fair) set of undertakings in all of these areas.

In terms of debt therefore, the third-party arbiter will determine what proportion of UK national debt should fairly be attributed to (and de facto assumed by) iScotland. This proportion (together with the schedule of the debt) will have to be assumed by iScotland via the mechanism of a separate debt agreement with rUK.

I've worked through a simplified example before, but I'll quickly do it again for illustrative purposes. Suppose that current-UK's debt consisted solely of a £200bn loan from Deutsche Bank, repayable on 1st July 2015, with annual coupon (interest) payments of £10bn. Suppose that the independent arbiter judged that iScotland's fair proportion of this debt was 10%.

What would happen then would be that iScotland would take out a separate debt agreement with rUK, representing a notional £20bn of debt. Pursuant to this agreement, iScotland would agree to pay rUK interest payments of £1bn per year, and to pay rUK the £20bn principal on 1st July 2015. In this way, the interest and principal payments would mirror 10% of rUK's obligations to the source creditor - Deutsche Bank. rUK would continue to hold the entire original £200bn Deutsche Bank debt and be wholly responsible for it, but iScotland would in turn assume responsibility for paying rUK payments which represented (and mirrored) 10% of that debt.

 

[MikeG]

.........However the rhetoric coming from Westminster that iScotland will have its face stamped into the dirt in any way England+ can possibly accomplish .........

Could someone ask Rolfe to back up this assertion with a reference, please.

If I said that in reverse (which I wouldn't), I would be accused by Rolfe of racism.

 

[Francesca R]

And would you care to comment on this?

http://wingsoverscotland.com/wp-content/uploads/2014/05/timescu.jpg

I don't particularly think net borrowing rules (a la "Growth and Stability Pact") are needed either. And such rules aren't all that much use if they get torn up as soon as they are flouted (PS it was France and Germany that first broke the excessive deficit rule in the EMU-zone).

Except it is rather hard to predict the future. Comparisons with the federal and state governments of the US are probably not as appropriate as with member states of the EMU-zone. But in both cases there is / was a "no bailout" clause which has been overwritten in the Eurozone case (and not--I think--in the US case: municipalities have defaulted)

For sure there are incentives to borrow and tax prudently, but if those were the only incentives in play, nobody would ever get into a debt crisis. Bottom line I don't know. Of course Scottish and RUK bond yields would probably not be the same even if both are denominated in GBP. Scotland could even trade below the RUK in some circumstances.

 

[Rolfe]

I think so too. If there is independence, Scotland will get 90% of the oil/gas, a proportionate share of debt (which will be formally an obligation of the Scottish state), and probably get the pound too. I am least sure on the last of the three but I think so.

(if the referendum goes yes of course)

You know, I think we're more or less in entire agreement. Isn't that nice!

iScotland will probably agree to a formal obligation to service a proportionate share of the debt, but only if there is a currency union. The two are absolutely linked. If I'm less than 100% sure of the last of the three it's because I'm less than 100% sure that Cameron and Osborne aren't self-destructive egomanical idiots.

In fact Scotland will get a lot less than 90% of the gas, because most of the gas is in English waters. Mineral resources which are still in the ground will be divided geographically. There is no possible other way to do it. iScotland doesn't want to have to come and extract 8.4% of the shale gas in Leicestershire or whatever.

The only reason a Yes vote isn't a dead certainty by now is that almost 100% of the media in Scotland are campaigning hard for a No vote. The amount of lying and misrepresentation that's going on would shame soviet Russia quite honestly.

We now have a single quality Sunday on the Yes side, as of four days ago. This may go some way to "normalising" the concept of independence, I don't know. If the Sun comes out for Yes the effect could be more marked. However with the BBC spinning like a top for No, it's very much in the balance.

It's really all to play for this summer. Did you watch the video of the consultant talking about the NHS? This is one of the things the media and in particular the BBC are fighting tooth and nail to hide from the electorate. Eleanor Bradford in particular seems to have made it her life's work to smear NHS Scotland at every possible opportunity.

I wonder if the consultant would come and speak in our village? She lives over Architect's way though.

Rolfe.

 

[Francesca R]

The only reason a Yes vote isn't a dead certainty by now is that almost 100% of the media in Scotland are campaigning hard for a No vote.

Oh right, I thought it was because it's not clear that a majority want Scotland to be independent.

 

[Rolfe]

I'm sure you can work out the cause and effect implied in that statement.

Rolfe.

 

[Francesca R]

Well yeah but that doesn't mean I accept it.

Did you watch the video of the consultant talking about the NHS? This is one of the things the media and in particular the BBC are fighting tooth and nail to hide from the electorate. Eleanor Bradford in particular seems to have made it her life's work to smear NHS Scotland at every possible opportunity.

No and I don't know what it's about.

 

[Damien Evans]

You have your mind solidly made up on the intent behind my use of the phrase one-eyed. I am fairly sure there is little I can say to change your mind, as everything I say antagonises you. My assurances only bring more and more accusations.

For others in the thread, though, let me add this to what I have said previously: firstly, this expression was in common use in my up-bringing in Australia, and I have used it all my life, for decades before I had ever heard of Gordon Brown. I can't recall anyone ever not understanding it immediately, (even if they have never heard it before, presumably). Secondly, my own father only had one eye. He was blinded by a cricket ball in his 20's. I don't poke fun at any disabled people, let alone those with the same disability as my father.

I can confirm this, it is indeed a common term over here.

An example:
http://www.theaustralian.com.au/spo...gwood-supporters/story-e6frg7mf-1225929136969
(Collingwood supporters are viewed similarly to Millwall supporters, but there's a lot more of them)

 

[Rolfe]

Well yeah but that doesn't mean I accept it.
No and I don't know what it's about.

You seem to imagine that someone has presented a vision of an independent Scotland as a land flowing with milk and honey, which it's easy to mock. However nobody is claiming any such thing. An independent Scotland is in the category of "some assembly required". It will need work, and steady hands on the tiller.

The point is that we will be working for ourselves, having control of all our own assets and making our own decisions on what to do with these assets. Scotland is in a very strong position in comparison to most of the other independent states in Europe of a comparable size, and these are doing just fine. None of them would voluntarily enter into an incorporating union with England+ on a bet. We would have to elect an extraordinarily incompetent administration to do badly out of this.

In contrast we have done badly out of the union, particularly in the past 50 years. Deprivation in parts of Glasgow is utterly shocking in a country as resource-rich as Scotland. The case for independence asserts that we can do better than this.

It's not about bean-counting, and in particular it's not about contrived economic assessments that declare Scotland would be such-and-such in debt if after independence she went on making exactly the same spending decisions as Westminster makes now. It's about the power to change those decisions.

What is going on at the moment is an overwhelming tide of too-wee-too-poor-too-stupid scare stories that present Scotland's disadvantaged position within the union as a reason why Scotland can't do well out of the union. Added to that there is a nasty undercurrent of "don't dare vote Yes because if you do, your so-called friends and neighbours in England will do their damndest to crush the life out of you."

Nowhere in the mainstream media (apart from a single issue of one newspaper so far) is there the slightest positive vision. Where there is no vision, the people perish. This summer will be about who captures the vision.

Rolfe.

 

[Francesca R]

You seem to imagine that someone has presented a vision of an independent Scotland as a land flowing with milk and honey, which it's easy to mock. [ . . . ]

What, because I don't agree that "The only reason a Yes vote isn't a dead certainty by now is that almost 100% of the media in Scotland are campaigning hard for a No vote."? I'm not following the media in Scotland much except what you bring to this table, and that's hardly "100% campaigning hard for a No vote".

Perhaps back off from what you imagine I imagine?

It's not about bean-counting, and in particular it's not about contrived economic assessments that declare Scotland would be such-and-such in debt if after independence she went on making exactly the same spending decisions as Westminster makes now. It's about the power to change those decisions.

Nonetheless, forward-looking projections of the fiscal dynamics of Scotland will and should be made, and it is folly to suggest that these are all bunk because, what, well we have no clue what Scotland will choose to tax and spend money on so nobody knows.

What is going on at the moment is an overwhelming tide of too-wee-too-poor-too-stupid scare stories that present Scotland's disadvantaged position within the union as a reason why Scotland can't do well out of the union. Added to that there is a nasty undercurrent of "don't dare vote Yes because if you do, your so-called friends and neighbours in England will do their damndest to crush the life out of you."

I wouldn't know. Like I said once before, I am not convinced that increased vitriol in the debate injected by political leaders particularly helps the No side. I thought that was a blunder, and that you agreed. Looks like you no longer think that purveyors of nasty "No" arguments are shooting themselves in the foot.

 

[MikeG]

I can confirm this, it is indeed a common term over here.........

Thanks Damien.

 

[Rolfe]

What, because I don't agree that "The only reason a Yes vote isn't a dead certainty by now is that almost 100% of the media in Scotland are campaigning hard for a No vote."? I'm not following the media in Scotland much except what you bring to this table, and that's hardly "100% campaigning hard for a No vote".

Perhaps back off from what you imagine I imagine?

I'm not even sure I understand that. The media are a virtually unrelenting deluge of "vote no" spin.

Nonetheless, forward-looking projections of the fiscal dynamics of Scotland will and should be made, and it is folly to suggest that these are all bunk because, what, well we have no clue what Scotland will choose to tax and spend money on so nobody knows.

And so we do well to look at comparable counties to appreciate the likely position. If we do that we see a bunch of places at or near the top of most of the global indices of prosperity, happiness and so on. And that is countries blessed with fewer natural resources than Scotland.

Assuming that Scotland will elect a bunch of incompetent self-destructive numpties into government if given half a chance isn't much of an argument against independence. We gave that up after 2003.

I wouldn't know. Like I said once before, I am not convinced that increased vitriol in the debate injected by political leaders particularly helps the No side. I thought that was a blunder, and that you agreed. Looks like you no longer think that purveyors of nasty "No" arguments are shooting themselves in the foot.

I genuinely don't know. It's clear some people are indeed responding in the desired way. The high incidence of door-to-door canvass returns indicating a voter who would like to see Scotland independent but is intending to vote no because "we couldn't go it alone" is alarming.

Some voters see the blunders for what they are. People who only watch the BBC/STV and read the Daily Record often fall for it. And that's a lot of people.

Rolfe.

 

[anglolawyer]

Hello everyone. I am in the don't care camp, not having a vote nor minding which entity my entity is part of nor whether my entity should be an entity at all. But … why shouldn't the highlands be independent of the lowlands? Or the islands. At what level does nationhood begin and end? Personally, I think folks should not get in a lather about nations. We'd all get along better without them and all this stupid 'we' and 'they' crap.

Are you kicking out Her Maj Rolfe? I would vote for independence if that was on offer.