Independent Scotland Should Definitely Have its Own Currency - Professor

Sputnik has asked Prof Steve Keen, Head of the School of Economics, History and Politics at Kingston University in London whether there could be disadvantages to Scotland distancing itself from the pound.

Sputnik: Do you think it is a sensible move for the SNP to suggest Scotland should have its own currency; is it more beneficial for Scotland's future in the long-run to distance itself from the pound?

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Steve Keen: Absolutely, the whole idea of having a nation which doesn't have its own currency is virtually an oxymoron. And you can see the impact of that on countries like particularly Spain and Greece in the European Union. When the downturn occurred they were in no position to run budget deficits because they were not allowed to by the central bank that was not part of their own economy. So you simply have to have your own central bank and your own currency if you are going to have a viable national state.

Sputnik: Would there be any disadvantages of Scotland distancing itself from the pound?

Steve Keen: Well it will make commerce for Scotland and the rest of the United Kingdom slightly more complicated of course. I think the best solution would be for the central bank to offer a free service to convert whatever you call the Scottish currency into pounds at no cost because that's the main reason people don't like having separate currencies and actually like the euro for the convenience. But the convenience to individual consumers ends up being an absolute curse for national governors whenever a recession strikes so that might be the way round the problem.

Sputnik: What kind of teething issues could there be initially?

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Steve Keen: The biggest problem I can recall is that the author of the [Growth Commission] report Andrew Wilson said they wanted to have the budget deficit reduced from 6% of GDP to 3% of GDP, and fundamentally that's imposing the same straightjacket as the euro is imposing on public finances in the countries of the Eurozone and that's been a disaster.

There's no reason why the government deficit should be limited to 3% GDP; the main deficit you need to worry about is your trade deficit — that's the one I'd be keeping an eye on and I'd be trying to keep the private sector from getting into too much debt because that's been the major issue in the UK.

Completely ignored by conventional economics, but between the beginning of Thatcher and the end of Blair, private debt in the UK rose from between 55% of GDP to 195% of GDP — far beyond the level of government debt and that's what caused the recession in 2008 and all the other volatility. So you do have to have an integrated idea of how to control a national currency, but I think some of the tests that were set forward are the wrong tests.

The views and opinions expressed by the speaker do not necessarily reflect those of Sputnik.