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I see some are seeing posts like this and deploying the straw man "too wee, too poor" argument & saying Scotland would just be borrowing and furloughing workers like any other country right now if we had gone indy. Let me explain why that doesn't stand to reason. Thread 1/
First, no one is saying a country of 5 million people with an advanced economy can't issue debt, have a central bank controlling its money supply etc. The argument is one of transition - going from being an integrated part of a single monetary & fiscal entity, the UK, and 2/
then unilaterally removing your economy from those functions & trying to transition to operating on a stand-alone basis with a new currency regime & credible fiscal systems in place. Let's be clear how momentous & challenging that would be. 3/
It's never been attempted in the modern era & in the context of open, free market economies, with all the interconnectedness & complexity that entails - from mass consumer debt markets, to insurance & pensions markets, to state-established welfare etc. The closest examples 4/
we have are the break up of communist states with underdeveloped economies & practically no private sector, or colonies becoming independent in the post-War years, prior to modern financial complexity & where the economies were already mostly segregated anyway from the 5/
colonial power. So Scotland removing itself from the UK, which would entail full monetary & fiscal autonomy kicking in overnight upon secession/independence day, would be an exceptional economic experiment. What would the likely result of that experiment have been? 6/
We have a good idea of what would have happened after March 2016's indy day. We know for a fact that the new state would have started with a budget deficit of at least £13.3 billion, or 8.3% of GDP for 2016/17, as per government figures. We also know that a monetary regime 7/
called 'sterlingisation' - unofficially using the pound with the Bank of England no longer controlling the money supply or ensuring liquidity within the Scottish economy - would have kicked in upon secession day. Take this one aspect alone. One of Scotland's 8/
leading macroeonomists, Prof McDonald at Glasgow Uni, looked at this after it became official SNP policy & concluded that, given Scotland's balance of payments deficit (different to the budget deficit & to do with net cross border transactions), an indy Scotland 9/
would quickly be subject to a "classic currency crisis" with cash in the economy drying up, & the new state most likely being forced to launch a new currency under emergency conditions. A crisis like this would be unprecedented in a modern economy. 10/
It's the sort of crisis we might have seen in South American or Asian emerging markets in the past but not in an advanced economy, and its implications for wealth in the country, for people's savings and livelihoods, would have been immense. On the build up to the crisis 11/
well off people & businesses would have acted rationally to protect their interests by moving capital, companies, & perhaps themselves & their families, outside the country (further eroding the tax base). The combination of the cash crisis & large budget deficit position 12/
means it would almost certainly not have been possible for the new Scottish government to issue sovereign debt at an affordable price. March 24, 2016 fiscal & monetary autonomy therefore would have led to both an emerging market-style currency crisis 13/
and a public sector payments crisis as the new state would have found it impossible, at this critical stage, to meet its liabilities either through taxation or borrowing (on the ground that could have meant public sector workers not getting paid for some period, 14/
bills delivered to the NHS & other public sector bodies going unpaid, resulting in services being withdrawn etc). Now, imagine a country having to go through an exceptional crisis like that in 2016/17 & then being hit by coronavirus in 2020. 15/
It doesn't bare thinking about. And that's why an indy Scotland would not have been in a position to bail out its economy in the way the UK has this year. We'd still be reeling from the 2016/17 self-inflicted economic crisis brought on by indy. 16/
Stable states with established government debt markets can pay for things like a furlough scheme, but the evidence is compelling that Scotland would still have been some years away from completing its transition to becoming a stable stand-alone state. 17/17
Postscript: please stop voting for nationalists who almost ruined our country once & are pushing to do so again. The loss of your livelihood & security will be taken as an acceptable price for achieving their outdated dream of purified sovereignty around a single nation.
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