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A libertarian returns to Scotland "Freedom and Whisky gang thegither" - Robert Burns My other blog: Scottish Clouds
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Sunday, March 15, 2009
The Royal BankSpeaking at the Lib Dem conference, Vince Cable spoke about the Royal Bank crisis:
The collapse of the Royal Bank of Scotland would have wiped out the budget of an independent Scotland, the deputy Liberal Democrat leader said.Well, let's see. I recommend looking at Calum Cashley's response: Vince Cable, old buffer of the Liberal Democrats and former Glasgow Labour councillor, has claimed that the RBS balance sheet was 15 times the size of Scotland's Gross National Product, implying that this makes Scotland too wee or too poor to be independent.I hope that Calum doesn't mind my copying so much of his post, but I'm rather fed up with the unthinking claim that an independent Scotland would necessarily be unable to support itself. Now, I enjoy counterfactual history as much as anyone. Allow me to indulge. Scenario A: An RBS in an independent Scotland isn't allowed by the English authorities to take over NatWest. The Royal continues being a smallish conservative Scottish Bank and Fred the Shred leaves the Clydesdale and moves to London to perform his miracles down there. Scenario B: Somehow the Royal does buy NatWest and finds itself in a battle with Barclays to purchase ABN Amro. The English authorities are annoyed enough at the Royal being so big and put pressure on the Dutch to go with Barclays. A short while later it's Barclays that's going down the plughole - perhaps even under Sir Fred's leadership! Scenario C: The Scottish Government has appointed yours truly as Governor of the (Central) Bank of Scotland. I persuade Prime Minister Cashley that Scotland shouldn't have a Central Bank! A libertarian monetary policy is introduced. It is made quite clear in advance that the Scottish Government will not bail out any company, including banks. Depositors wisely spread their money around. Local savings banks are restarted and prosper. "Know Your Customer" means playing golf with them, not creating a database. More and more banks offer gold-backed notes. In such a climate it's unlikely that a Scottish-based bank would get bogged down in the bizarre world of derivatives and credit default swaps. But let's suppose that somehow the Royal has done just that and goes pear-shaped. What then? What happens then is that Prime Minister Cashley says: "Nothing to do with us, Gov" and "Not a penny from the Scottish taxpayer. You ken noo..." The world's financial community is shocked and Scotland is traduced in the international press. But two years down the track things are different. England and the USA have poured trillions into bailing out their fractional reserve banks and all to no effect. Their public finances are in ruins. And Scotland? Well we're sitting pretty. Everyone now sees that it was the others who were out of step, not us. The Scottish financial regime is seen as the soundest in the world and we all live happily ever after. |
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