Thursday, 16 January 2014

Scotland's potential to strike it rich - devolution

Very rarely do the politics of devolution offer the chance for a nation to become incredibly rich - but when the move is combined with a policy to engage in sound monetary policy, the nation could become a new Switzerland.

It's politicians however are dooming it to failure from the beginning. But that's what politicians generally are good at doing.


Because a new Scotland will be founded on dependency and cheap money whereas if it stood up for sound money and banking, it would flourish properly and with genuine reasons to be proud too.

In September 2014, Scotland will be voting in a referendum to become independent of the United Kingdom (to some extent or less that the politicians have not yet clearly worked out). A yes vote would end 300 years of political union (or rule from London, depending on your view point).

The nation was brought into the Union following a horrendous monetary debacle in which a quarter of the nation's money was invested in the Darien Scheme; at the time Scotland was relatively poor and the idea of setting up a trading colony to enrich the Kingdom appealed enormously to the landowners. It failed and Scotland was propelled into political Union with England. (The Crowns had already been united with the accession of James VI of Scotland to the English thrown as James I).

The Darien scheme precipitated the Union: what could the Scots lose from an economic and political union with the wealthier England? Well, as Robert Burns penned (and it is well worth reading aloud to feel the great poet's ire! Or hear it here by the bbc)

Fareweel to a' our Scottish fame,
Fareweel our ancient glory,
Fareweel ev'n to the Scottish name,
Sae fam'd in martial story.
Now Sark rins o'er the Solway sands,
And Tweed rins to the ocean,
To mark where England's province stands -
Such a parcel of rogues in a nation.

What force or guile could not subdue,
Thro' many warlike ages,
Is wrought now by a coward few
For hireling traitor's wages.
The English steel we could disdain;
Secure in valour's station;
But English gold has been our bane -
Such a parcel of rogues in a nation.

O would, or I had seen the day
That treason thus could sell us,
My auld gray head had lien in clay,
Wi' Bruce and loyal Wallace!
But pith and power, till my last hour,
I'll mak' this declaration;
We're bought and sold for English gold -
Such a parcel of rogues in a nation.

Stirs the heart of any person keen on securing their independence of greater political unions and powers that interfere: the rogues will sell their flag, their people, their ideals and traditions to secure personal gain and glory.

And so we turn to the current momentum building towards the referendum. Here's the great chance for Scotland to raise the Saltire with pride ...

here's the great chance for a highly developed, highly educated and stalwart people to generate wealth and freedom and help reduce its poverty.



What got Scotland into its mess with England, what prompted its loss of freedom and what gained the  sarcasm of one of the world's greatest poets, was monetary failure: sure, there was misplaced optimism and a risk adventure - but the whole scheme was drummed up by William Paterson, who following the great misadventure went on to found the Bank of England - another great misadventure, which, unknown to most people swiftly went bankrupt and only maintained its existence through government decree and the promise that the government would bail it out (or it would be allowed to bail itself out...). The Bank of England - and indeed all central banking - is based on the premise that the central bank can never go bankrupt because ... it can print money. Naturally, printing money creates economic disasters and it still amazes me how naive researchers, think tanks, politicians (well perhaps they don't amaze me for their 'naivety'), and most economists think that printing money (or 'quantitative easing') can be economically neutral or is indeed somehow beneficial - one has to ask: to whom?

Sound money on the other hand is based on a hard currency - something that cannot be created out of thin air (e-currencies) or from printing more of it. Hard currency is typically based on gold and silver. For centuries before governments got wind of the power of central banking (or perhaps before the money changers got wind of how they could harness government to maintain their monopolies and privileges of defrauding the rest of the community), gold and silver were currency. And when countries' wealth increased, the prices of most commodities fell - the poor earning low salaries became wealthier as standards of living improved. And economic growth was easy to ascertain - your penny or shilling or pound (all derivatives of weights of the hard metals) would be worth more at the end of your lifetime than at the beginning.

Sound money also presupposes that banks do not lend out more money than the deposits they take in. For centuries, the money changers and the governments that work closely with them in a mutually enriching partnership, banks have manipulated deposit schemes so they lend out a greater proportion of funds than that taken in.

This is known as fractional reserve banking and is the greatest scam perpetuated on humanity. It is an ancient scam going back to the Egyptians and Greeks. Whenever banking in any form has developed, there has been the temptation of defrauding the people by lending out more than what is taken in. For a wonderfully detailed survey of this, read De Soto's erudite work and Rothbard's easy to follow overview of banking:

Fractional reserve banking has been the bane of all economies where ever it has been introduced. It requires a central bank and government promises to maintain the fraud - and Scotland's move towards voting on independence provides a useful time to raise the issue and to present to its people the chance of revoking its three hundred year political and economic dependency on more powerful countries.

Should the Scottish gain a grasp of what opportunity could be exploited, Edinburgh could become a major financial centre attracting capital and monetary flows. It could become the northern Switzerland and Luxembourg. The move would be simple and highly attractive to millions of concerned investors and savers around the world: bring back sound money and banking.

Take the Scottish pound and declare it's value against gold as a weight (not as some nominal fluctuating value - the pound was a pound of silver, period - what it bought was dependent on what people produced, so its value was determined by the productive economy rather than by money printers printing more or less of it).

Say £1 = one thousand of an ounce of gold, or one gramme equals £35 of gold. Fix the rate in stone (preferably in Scone - joke, but culturally important place for the Scots). Simple - just as the rate of centimetres is fixed against inches, so too should a currency be fixed against other currencies in the same manner. It begins though by fixing the currency against gold ... and sticking to it. No fraudulent devaluations allowed.

With a hard money currency and a 100% reserve banking system, true wealth would flow in. Scotland has good traditions of banking, finance, and insurance to exploit the potential from sound money. As wealth flowed in, the economy would gradually find itself becoming wealthier as the Scottish banks acted as gold depositors and traders. All sound money systems have enjoyed flourishing economies, because their wealth creation is based on hard principles of earning your daily bread, saving it, and investing it, rather than pumping the economy with steroids, which is what the inflationism of printing money and quantitative easing produces: short term gains for the few not the many.

Would William Wallace have accepted defrauding the people with counterfeit money and quantitative easing? I doubt it. Would those who signed the declaration of Arbroath accepted it? I doubt it.

Scottish independence based on sound money would be a beacon to the rest of the world sick of inflation and declining currencies. Politicians would  have to change their tune and become honest in monetary policy.

It's a grand opportunity!

But what do the politicians want from independence...more EU welfare. Independence, Deputy First Minister Nicola Sturgeon proclaims, would increase the welfare payments to Scottish farmers by £850 million.

Such a parcel of rogues in a nation
Would sell their people for EU paper.

Shame on them. It's rather sickening to hear an intelligent woman call out that her people should vote for independence to become welfare dependents. Pathological in many respects.

I just hope the Scots have enough pride in themselves and their nation to vote for independence for true independence (sound money and banking) not for vile dependence on welfare.

Dr Alex Moseley
(Connections: I've always had a soft spot for Scotland following their 1970s World Cup endeavours, when my own country, England, failed to get in! I enjoyed the privilege of three years' sojourn in Edinburgh and fell in love with the city and the mountains to the north. It's a grand place to live!)

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