International Forecaster Weekly

The Scottish Independence Conundrum

...these are not trivial questions to be asking. In fact, they go to the very heart of what is meant by 'sovereignty' and 'independence'.

James Corbett | September 13, 2014

Next Thursday the Scots will go to the polls to answer a deceptively simple question: “Should Scotland be an independent country?”

            The question's simplicity belies the enormity of what is being asked. In centuries past, such a sovereignty proclamation would only have been delivered at the end of a sword after the spilling of much blood. Today the fates of nations are decided by referendum...sort of.

            You see, the question is extremely simple, and, in the words of at least one Canadian commentator who finds its precision refreshing after the convoluted tangle of Quebec's sovereignty referendum questions, “crystal clear.” But is it really? After all, what does it mean to be an “independent country?” Does that mean passport sharing with the UK? Military association? An independent currency? EU membership? NATO membership? Will Scotland keep an allegiance to the crown? Will it become a commonwealth nation? There are no answers to these questions because none of those details have been worked out yet. For now, nationalist politicians are content to leave voters to fill in the blanks.

            But these are not trivial questions to be asking. In fact, they go to the very heart of what is meant by “sovereignty” and “independence.” What's more, Scotland, insofar as it is fast becoming the envy (and the role model) for independence movements around the globe, could potentially be setting precedents for future events in Catalonia or Venetia or elsewhere. In effect, they are setting down the definition of freedom for others to strive toward, so their answer to this string of questions might make the difference between true independence and what could very easily be just another form of dependence.

            To see how this is the case, let's examine some of these questions.

Military Matters

            The question of what would happen to Scotland's military facilities in the event of independence is not an idle one. HMNB Clyde is the Royal Navy service basein Scotland and is home to Britain's nuclear weapon capability. This capability comes in the form of Trident missiles on the base's nuclear armed submarines. Currently, Scottish First Minister and leader of the “Yes” campaign, Alex Salmond, plans to remove all of the nuclear submarines from the base in the event of a “Yes” victory. This does not sit well with the usual chickenhawks in the corridors of power, who are hyperventilating over what such a “destabilizing” event would mean for the UK's nuclear deterrant capabilities. Evidently we are meant to believe that if the submarines had to be moved to another base Putin and his band of marauding Russians would use the opportunity to launch a nuclear strike on England.

            That specific concern plays into a larger question: would an independent Scotland be part of NATO? David Cameron used the opportunity of the recent NATO summit in Wales to announce that “a number of people” at the summit “raised their concerns about the referendum.” But could it maintain a spot at the NATO table? Salmond and the “Yes” campaign have made it clear they are interested in applying to NATO as a non-nuclear member. A spanner was recently thrown into the works, however, when NATO announced last week that the Scottish government would have to increase military spending by 500 milllion pounds (up from its proposed 2.5 billion pound budget) in order to be admitted into the alliance. Unnamed NATO officials have also been quoted in the media as noting that “you need every single NATO member to say Yes for you to join and even if one doesn’t, you’re stuck,” implying that a scorned UK could actually block an independent Scotland's attempts to join the alliance.

            Regardless of the back-and-forth wrangling over these details, though, the real underlying question is: should a free and independent Scotland seek to join NATO at all? Given its record in recent years in Serbia, in Afghanistan, in Libya and in its continual push toward encirclement of Russia and China, it can no longer be doubted that NATO is one of the greatest threats to peace and stability on the planet at this point. Its mutual self-defence clause obligates member nations to become involved in the affairs of other nations. As we saw with last year, high-ranking Turkish officials have discussed staging a false flag event to blame on the Syrian government in order to go to war with the Assad government. In such an event, Turkey would almost certainly invoke the NATO mutual self-defence clause forcing Scotland to commit resources to a strike on Syria. A similar situation could take place if NATO-member Poland similarly feels itself “threatened” by Russia.

            Why would a free and independent nation, finally un-yoking itself from centuries of subjugation to a foreign crown, immediately take on the yoke of a military alliance which would put its military at the beck-and-call of a proven pack of murderers and war criminals? It wouldn't, of course, and the Scottish people should be worried that Salmond and the SNP have expressed their eagerness to join NATO as soon as they achieve “independence.”

            The European Union

            "An independent Scotland will be an enthusiastic member of the EU,” says Scottish First Minister Alex Salmond. You might want to read that sentence again to make sure you understood it correctly. To repeat: the leader of the Scottish independence battle wishes to maintain membership in the European Union, one of the most draconian and tyrannical governmental institutions in the world today.

            This is the same European Union that made Ireland vote on the Lisbon Treaty a second time because it didn't like the results of the first vote. The same EU that has spearheaded the disastrous Eurozone and the subsequent meltdown of the Eurozone economy. The same EU that is run by bureaucrats through an unelected an unaccountable European Commission. The same EU that ruled through its “Court of Justice” [sic] in 1999 that it is illegal to criticize the EU, a ruling that they actually used to formally reprimand UKIP MEP Nigel Farage in 2009 for calling the EU an unaccountable tyranny.

            Why anyone claiming to be in favor of Scottish independence would be interested in immediately signing away their sovereignty is beyond my comprehension. But even for those “independence” advocates who are so inclined, it is doubtful they will find a cheerful ally in the European Union. The members of many of the EU nations will be concerned about the potential genie that Scotland is letting out of the bottle with this referendum. Spain will worry about Catlonia, Italy about Venetia, Belgium about Flanders.

            Ironically, though, as long as these “independence” movements all follow the Scotland “Yes” campaign in clamoring for EU membership, it is the EU that will be the big winner of this trend. Brussels will have even more power over Europe when small, isolated local governments are gathering at the table. It is only by rejecting Brussels altogether that Scotland can have any hope of maintaining its sovereignty or achieving true independence.

Free Scotland and the Monarchy

            Would a free and independent Scotland still recognize the Queen as its monarch? According to “Yes” campaign leader and SNP First Minister Alex Salmond, yes it would. In fact, he even went so far as to say that the Queen “will be proud” to be the monarch of an “independent” Scotland, and Scotland “would be proud to have her as monarch of this land.” The Queen, for her part, “is firmly of the view that this is a matter for the people of Scotland,” according to a royal spokesman.

            The idea, presumably, is that Scotland would take its place in the Commonwealth alongside Canada, Australia and other former British colonies that have achieved independence from England but still recognize the Queen as head of state. In the case of Scotland, the bond between the crown and the country is more substantial; the 1603 “Union of the Crowns” united Scotland, England and Ireland under a single monarch (Queen Elizabeth I of the Tudor dynasty). The Crown of Scotland remains distinct and separate, meaning that Queen Elizabeth is also formally “Queen of Scots,” a role that Salmond sees no problem with her maintaining after independence.

            This is not such a popular position, however. Polls show that 46% of independence supporters also support the idea of Scotland breaking its ties to the crown. Yes Scotland campaign chair Dennis Canavan is on record saying that he is in favor of a referendum on the subject if the country wins its independence. An independent country would also have the ability to write the monarchy out of the picture politically by removing the Queen as “head of state” even if they did decide to keep some formal tie to the crown.

            The anti-royalists face an uphill battle, however. The Queen spends a week each year at her official residence in Scotland, Holyrood Palace, and even more time at Balmoral Castle in Aberdeen; Prince Charles is the Duke of Rothesay; the Duke and Duchess of Cambridge are also the Earl and Countess of Strathearn. The royal roots in Scotland are deep, and a majority of the country is in favor of keeping the ties.

            But why is this? What is “independence” if not the notion that a nation is sovereign; that is, not subject to any outside authority? Why would a free and independent Scotland want to bow down to any crown, rather than take their place amongst the nations of the world that recognize no special line of rulers who are granted their title, crown and ornate riches for no other reason than they were born into the right family?

            If the independence movement wants to live up to their name, they will take Canavan's suggestion, hold a referendum on the royal issue, and roundly reject the notion that any family has the right to rule over Scotland by virtue of their “blue blood.”

Scotland's Own Currency?

            By far the most important question facing an independent Scotland would be how to handle its monetary policy.

            It may be surprising to anyone who has never shopped in Scotland, but the country already has its own currency, issued as banknotes by three of the country's biggest banks: the Bank of Scotland, the Royal Bank of Scotland, and Clydesdale Bank. According to The Association of Commercial Banknote Issuers, these Scottish banknotes are “fully backed at all times by ring-fenced backing assets partly held in Bank of England notes and UK coin and partly as balances on accounts maintained by the issuing banks at the Bank of England.” Interestingly, some of this issuance is backed somewhere in the bowels of the Bank of England's vaults by special 1 million pound notes called “Giants” and 100 million pound notes known as “Titans.”

            But as viewers of “Century of Enslavement: The History of the Federal Reserve” will know, the paper money in circulation in the US only makes up a tiny sliver of the total money supply, and similarly in Scotland these Scottish banknotes only make up a fraction of the money supply there. Most of the money in Scotland (like almost every other country) is credit created by the private banks as accounting entries in their ledgers when customers took out loans.

            But what would happen in the event of a “Yes” vote? Would the Scottish pound continue to be backed by Bank of England notes? Would it continue to trade at par with the English pound? Would the Bank of England continue to act as a lender of last resort and set monetary policy for Scotland? It is by no means clear, and depends on whether “independence” involves: Scotland entering into a formal currency union with the UK; Scotland continuing to use the sterling as its unit of account; Scotland creating its own, completely separate currency; or Scotland adopting the Euro.

            In order to enter into a currency union with the UK, Scotland would have to negotiate an agreement with the Bank of England to set the terms of that relationship. Perhaps the Bank of England would remain Scotland's central bank, or set monetary policy, or act as the lender of last resort. If so, there would be very little change to the status quo, although it would likely mean that the cost of borrowing for the newly-independent Scottish government would go up, depending on the terms it could reach with the BoE.

            If Scotland adopted the Euro, it would need to set up its own central bank. As Ollie Rehn, the former EU commissioner for monetary union, noted earlier this month, any attempt to join the Eurozone would require “a monetary authority of its own” which he referred to as one of the “necessary instruments of the Economic and Monetary Union.” This central bank would presumably work something like the Bank of England does today; as a nominally “nationalized” bank that sets interest rates and purchases treasuries.

            If an independent Scotland went the route of using the sterling without a formal agreement with the Bank of England, it could get by without a central bank. As many observers have noted, Hong Kong similarly relies on three private banks for the issuance of its banknotes and it does not have a central bank. Instead the Hong Kong Monetary Authority maintains the Hong Kong Dollar's peg to the US Dollar by selling or buying US dollars as needed to balance supply and demand of the local currency. Similarly, a Scottish Monetary Authority could maintain a peg to the pound sterling by maintaining buying and selling Bank of England notes, all without the need for a central bank.

            Perhaps the most exciting prospect of all, however, is for Scotland to become an example of some of the truly revolutionary (but historically proven) methods of securing national credit. The Scottish treasury could issue credit instruments directly. The inflationary pressures of this issuance could be controlled by offering a discount for use of these instruments in the payment of taxes. When the issuance is returned to the Exchequer the debt is cancelled out and extinguished or recirculated as required. As Marco Nappolini lays in a convincing article for Pieria, “Credit Scotland,” such a system could completely eliminate the need for banks to act as the middlemen of credit in the economy. As Nappolini argues, this would not only be possible, but has already been attempted in the past; in Alberta in the 1930s, for example.

            Clearly, the “problem” of how an independent Scotland would secure its national credit presents a very serious challenge to the potential independence of the nation itself. A free Scotland could opt to immediately put itself back in the debt chains of the bankers—either by negotiating a deal with the Bank of England or the European Central Bank or creating its own system of central bank while keeping the currency-as-debt model—or it can truly strive to achieve “independence” in the deeper sense of the word, by throwing off the bankers' debt chains and finding an alternative system.


            Of course now that the polls are showing that the momentum is on the “Yes” side of the ledger, the powers that shouldn't be are pushing every panic button they can find on their bought-and-paid for media wurlitzer. According to the propaganda pushers, a “Yes” vote for independence would mean: a possible Russian invasion (Business Insider), the abandonment of the country by the nation's biggest banks (NY Times), higher prices for consumer goods (Herald Scotland), higher roaming charges for cell phone use in the rest of the UK (Sky News), soaring mortgage costs (Financial Times), a deep recession (The Daily Mail) and a litany of other doom-and-gloom scenarios. If the “Yes” momentum continues watch for these same media mouthpieces to bring out even more bombastic claims: the cancellation of Christmas! A rise in dental cavities! The opening of an interdimensional portal and releasing of the kraken!

            No, the hyperventilation of the mockingbird media can be safely dismissed for what it is: transparent fearmongering. But there are serious pitfalls that the independence movement might sleepwalk into if they do not think through their actions carefully. After all, “independence” and “freedom” are not just words on paper; they are lived experiences of free and independent people. If that freedom and independence is not expressed – by the rejection of royal families and regional governments and banking oligarchies and military alliances – then they do not really exist. In a very real sense, even if Scotland does vote “Yes” this coming week, that will be only the first step in their journey toward independence.

            And there is an added burden on the Scottish people. They are not just acting for themselves, but setting an example that will doubtless be aped by independence movements around the world.

            Choose your actions carefully, Scotland. The world is watching.

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