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the Scottish independence issue

the Scottish independence issue

Old Sep 29th 2014, 7:04 pm
  #2266  
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Default Re: the Scottish independence issue

Originally Posted by RoadWarriorFromLP View Post
There are functioning, successful governments that disprove that thesis, year after year after year.

A country that controls its own currency can operate with deficit spending if it has sufficient GDP to support the debt. That leaves more money in the hands of the public, which can then spend and invest it to create more GDP that supports future deficits. ....
Sorry, I over simplified what I wrote. But there is some practical limit on how much a country can borrow to fund spending.
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Old Sep 29th 2014, 7:09 pm
  #2267  
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Default Re: the Scottish independence issue

Originally Posted by RoadWarriorFromLP View Post
For a country to control its monetary policy, it has to control its money.

In other words, a country has to have its own currency for this work. Not all of them do, with Euroland being the world's largest example of this. (The Greeks suffer because the Germans control the euro that the Greeks have to use, for example.)

Scotland would need to have its own currency in order for this to work. Joining the euro or keeping the sterling would limit its ability to operate with deficits, since it would not have much or any control over its ability to print money; the central bank has to be able to respond to local conditions.
OK, so the fact that iScotland would likely have either had to join the Euro or tie their currency to sterling would have worked against this?

Re: your previous post, were you essentially saying if a country is earning enough (GDP), it can run a deficit because it can service its debt ...? (still not sure how controlling your currency comes in - via being able to devalue/promote inflation, thereby reducing the relative size of the debt?)

Economics is like Latin to me.
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Old Sep 29th 2014, 7:23 pm
  #2268  
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Default Re: the Scottish independence issue

Join the Euro and unless you are France you have limits to how much you can over spend.

Theoretically.

Own Currency and you can print what you want, see US for example, until people lose confidence, see Germany after WW1, or UK after WW2, Export or Die etc.
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Old Sep 29th 2014, 8:36 pm
  #2269  
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Default Re: the Scottish independence issue

Originally Posted by neilcumming View Post
Im just making a point ,in my opinion that Britain isnt that great and hasnt been for a long time.I know you will disagree with me but I believe Scotland needed to break from this failing union to be able to prosper.
In the news today at the tory conference Osbourne announced the budget cuts of 25 billion,4 billion of that to hit Scotland,to cheers from the tory delegates.
I wonder if they have food banks in Germany!
Cuts to the UK's bloated welfare bill are long overdue. I'm no big fan if this Conservative government, but I certainly give them credit for attempting to tackle this issue.

And, yes they do have food banks in Germany:

http://www.spiegel.de/international/...-a-941661.html

Last edited by Giantaxe; Sep 29th 2014 at 8:38 pm.
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Old Sep 29th 2014, 9:31 pm
  #2270  
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Default Re: the Scottish independence issue

Originally Posted by dunroving View Post
OK, so the fact that iScotland would likely have either had to join the Euro or tie their currency to sterling would have worked against this?

Re: your previous post, were you essentially saying if a country is earning enough (GDP), it can run a deficit because it can service its debt ...? (still not sure how controlling your currency comes in - via being able to devalue/promote inflation, thereby reducing the relative size of the debt?)

Economics is like Latin to me.
The economy basically consists of a bunch of people who pass money around to each other. When we pass it around at a decent clip (but not to excess), then times are good and we keep each other afloat.

But when the economy goes into recession or depression, people start hoarding, which hurts everyone who depends upon that money being passed around (which is to say, most of us.)

There are two basic areas in which the government can help to influence the degree to which we pass this money to each other: fiscal policy and monetary policy.

Fiscal policy consists of spending and taxation, which comes from the legislature. In a recession, governments typically cut taxes so that consumers and businesses have more money, which we would hope that they use to spend and invest our way out of it. Government can also give people money and benefits (such as unemployment benefits) which add to spending power, or create stimulus (i.e. infrastructure spending.)

But that will probably require deficit spending. The inability to run deficits interferes with the pace of recovery.

Monetary policy comes from controlling ones money. This is managed by a central bank, not by the legislature. The central bank can use the money supply to lower interest rates, which should also help to stimulate the economy by making borrowing cheaper. Or if there is too much debt, the money supply can be increased in order to create inflation, which effectively lowers the price of paying down/off the debts.

This power is needed if one is to run deficits. As noted, this is an important tool for fixing most recessions.

Without control over the central bank, the whole thing becomes a lot more difficult. Not only is there no way to control monetary policy, but the fiscal component gets harder, too.

For example, it would have helped Greece if the ECB had started using quantitative easing to push more money into the economy. But because the Germans get to call the shots, they used a policy that they preferred for themselves. Hence, the Greeks suffer at the pleasure of the Germans, yet there isn't much that the Greeks can do about it. If they had still had the drachma, they could have gone into inflation mode, tamed their debt by inflating it away, and probably been better off than they were with austerity.

If Scotland kept the pound, then it would be hard to call that "independence" in the strictest sense of the word. All of the shots would be called from London, unless they made some agreement governing how the Bank of England would operate. Ditto for joining the euro, and it should be clear to everyone by now that it isn't a great idea to let the Germans run the central bank for anyone who isn't German.

If that still sounds like gobbledygook, let me know.
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Old Sep 30th 2014, 8:06 am
  #2271  
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Default Re: the Scottish independence issue

Originally Posted by RoadWarriorFromLP View Post
The economy basically consists of a bunch of people who pass money around to each other. When we pass it around at a decent clip (but not to excess), then times are good and we keep each other afloat.
....
Why does the 'rate' of money movement matter? Obviously it generates more fees for transactions, but I can't imagine that is a big factor.
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Old Sep 30th 2014, 12:24 pm
  #2272  
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Default Re: the Scottish independence issue

Originally Posted by Steerpike View Post
Why does the 'rate' of money movement matter? Obviously it generates more fees for transactions, but I can't imagine that is a big factor.
I wasn't being literal, but GDP can be expressed as money supply X money velocity.

I wasn't referring to a price, but to the amount of economic activity. Too little activity is deflationary; too much is inflationary.
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Old Sep 30th 2014, 4:08 pm
  #2273  
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Default Re: the Scottish independence issue

Originally Posted by Giantaxe View Post
Cuts to the UK's bloated welfare bill are long overdue. I'm no big fan if this Conservative government, but I certainly give them credit for attempting to tackle this issue.

And, yes they do have food banks in Germany:

German Food Banks and Soup Kitchens Struggle with Demand - SPIEGEL ONLINE
Its ironic that the tories created the problem and they are some kind of white knights coming to the rescue,its pathetic.
I will have to check with my german friend here if he can give any info on the food banks.
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Old Sep 30th 2014, 4:27 pm
  #2274  
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Default Re: the Scottish independence issue

Originally Posted by neilcumming View Post
Its ironic that the Tories created the problem and they are some kind of white knights coming to the rescue,its pathetic. .....
The Tories created the bloated welfare system? A large amount of the bloat was created directly by Gordon Brown, who just happens to be Scottish. ..... Oh, and not a Tory, at least not the last time I checked.
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Old Sep 30th 2014, 4:37 pm
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Default Re: the Scottish independence issue

Originally Posted by Pulaski View Post
The Tories created the bloated welfare system? A large amount of the bloat was created directly by Gordon Brown, who just happens to be Scottish. ..... Oh, and not a Tory, at least not the last time I checked.
Maggie did put a lot on disability, to bring down the number of unemployed.
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Old Sep 30th 2014, 5:17 pm
  #2276  
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Default Re: the Scottish independence issue

Originally Posted by Sally Redux View Post
Maggie did put a lot on disability, to bring down the number of unemployed.
One could suggest, that in Scotland and Northern England, she put a lot of people on unemployment benefit.
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Old Sep 30th 2014, 5:19 pm
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Default Re: the Scottish independence issue

Originally Posted by Hotscot View Post
One could suggest, that in Scotland and Northern England, she put a lot of people on unemployment benefit.
Yep, bloated times.
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Old Sep 30th 2014, 5:22 pm
  #2278  
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Default Re: the Scottish independence issue

Originally Posted by Sally Redux View Post
Maggie did put a lot on disability, to bring down the number of unemployed.
That was always the claim. It seems the story was more nuanced:- disability benefits were higher than unemployment benefits, so there was an economic incentive to claim one was disabled.
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Old Sep 30th 2014, 5:36 pm
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Default Re: the Scottish independence issue

Originally Posted by Giantaxe View Post
That was always the claim. It seems the story was more nuanced:- disability benefits were higher than unemployment benefits, so there was an economic incentive to claim one was disabled.
The story was that people were strongly encouraged to claim the disability benefits, to the point where there were/are towns with a very high proportion of such claimants. I think there was some truth in it.
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Old Sep 30th 2014, 5:41 pm
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Default Re: the Scottish independence issue

Originally Posted by Sally Redux View Post
The story was that people were strongly encouraged to claim the disability benefits, to the point where there were/are towns with a very high proportion of such claimants. I think there was some truth in it.
So there was an incentive on both sides:- on the government to "massage" unemployment figures lower; on the recipient side, to get more money by being "disabled".
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