The Fall in the Value of the Pound – Scotland’s Fault?

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Many people are not sure why their pound can, overnight, buy them fewer euros or dollars. Sometimes, this happens the other way round. The papers and the tv news report that the value of the pound has risen/fallen, that confidence in the pound is high/low, that trade figures are up/down, etc.

The fact is that currencies buy more or less of other currencies (the rate of exchange) depending upon simple demand and supply. If those who hold currencies like central banks, commercial banks and speculators decide to put a currency on the market, ie up for sale, supply increases and so price – the rate of exchange – falls. If they want to buy then the price of the currency rises.

There are many reasons for holders of currency wanting to buy/sell. However, the bottom line is that if they expect the value of a currency to fall they will sell – get out now whilst the price is relatively high. If they expect the value to rise then they will buy in expectation of selling at a higher price.

One of the main reasons for buying/selling currency is confidence in how well a country is doing – how buoyant is its trade? Are its future prospects good .. or bad? Is its level of debt increasing? Is there uncertainty as to how well it will do in the next few weeks .. months?

At the moment the pound’s value is showing an inexorable downward trend. In 2014 the value of the pound fell – we were told that this was due to uncertainty as to the result of the Scottish independence referendum. In 2016 it fell as a result of the EU Leave/Remain referendum. Now in 2017 as we see it falling we are being told that it is due to the likelihood of a second Scottish independence referendum.

It is not difficult to understand a fall in the value of the pound due to the madness that has caused a majority of the electorate in England and Wales to vote “Leave”. Walking away from the largest and most successful trading partnership in the world cannot fail to make the UK worse off, hence the rest of the world dumping its pounds and causing the exchange rate to drop. However, the situation with a Scottish independence “Yes” vote needs just a bit more thought.

Unionists in both mainstream and social media loudly tell us that all this independence uncertainty is the cause of the fall in the value of the pound. It’s Scotland’s fault that they can buy fewer euros for their holidays and that the prices of bananas and coffee and tea and everything else that comes into the UK are rising.

Now, at the same time we are also told that we are subsidy-junkies, a drain on the resources of the UK, scroungers, grant-takers and downright parasites. So .. here’s the question – “If Scotland is a drain on the UK and is expected to vote to leave and regain its independence, then surely this is a good thing for the UK economy?” In that case, with the UK’s prospects improving through no longer having to subside we Scots, surely the rest of the world, also seeing this, will want to buy pounds as quickly as they can, causing the exchange rate to rise? But wait .. the exchange rate is falling. Mmmm. Could it possibly be that the currency markets see the UK losing Scotland as being detrimental to the UK, ie Scotland isn’t really subsidised, but, in fact gives more than it receives?

As always, unionists want to have their cake and eat it.

 

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6 thoughts on “The Fall in the Value of the Pound – Scotland’s Fault?”

  1. It is indisputable that Scotland has been subsidising England for at least the last 40 years. Indeed even with that subsidy the UK economy has been in severe decline. In 1970 a pound bought 4.5 US Dollars. An independent Scotland could look forward to a rising Scottish pound value as we built up reserves,over time, from the next 40 years of oil and gas revenues when the western sea board reserves are exploited.

  2. Totally agree with you, Ian. It could even be argued that Scotland has more than paid its way for longer than 40 years. The U.K. government deliberately obscures Scotland’s position with smoke and mirrors, with “unidentifiable public expenditure” and with subjective allocations of national debt interest.

    It’s a long time ago now, but up until 1922, with separate figures available, Scotland was shown to subsidise the UK Exchequer every single year. So, what did Westminster do? It stopped publishing the figures!

  3. Another interesting and pertinent point to be aware of, when listening to the BBC propaganda – when they state that 4 times more exports go to England than the rest of Europe it’s not true. Almost all Scottish exports to Europe go through ports in England and are “hidden” from our true export to Europe figures. Whisky, seafood, beef, lamb etc. Of course our most significant export to England is our people!

  4. Wee Ginger Dug put it quite succinctly today when he pointed out that according to GERS, 25% of expenditure attributed to Scotland is not spent here. He goes on to say that no other country in the world has so much expenditure outside its own borders.

    1. Should also have mentioned WGDs key point that, after Independence, the 25% expenditure currently spent outside Scotland would be repatriated to Scotland, thus potentially transforming our economy.

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