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             Re: Campaign for a Clean Currency (CCC).


So let us address the real issues: We are saying that Scotland must return to a sound and ‘clean’ currency which meets the real requirements of the Scottish economy, and is under the control of the elected Government of Scotland and in line with Scotland’s new written constitution.


We do not need a new theory on currency to challenge fractional-reserve banking. Indeed what is the theory behind fractional-reserve banking? There is no such theory.


Nobody sat down and designed the fractional-reserve banking system, and nobody ever would. This system arose historically out of fraudulent behaviour by bankers, it adds nothing positive to the economy, while it creates significant problems in the economy. This is the ‘dirty’ currency which we advocate escaping from.


I will go through our thinking on this very slowly and directly so that people can see exactly the problem we are addressing.


Adam Smith claimed that money (currency) had no intrinsic value. Every economist since then, as far as we know, agrees with Smith on this, as we do.


Money’s real economic role is as a medium of exchange in the market. That is the role of money or currency, it is not a commodity in the market, it is a medium of exchange, and like everything else in the economy, money is most efficient when it sticks to what it does best.


If all economists recognise that money has no intrinsic value, then where does money get its exchange value from?

Money’s exchange value comes from the goods and services it represents in the market. In other words the total amount of money in circulation is equal to the total amount of goods and services in the market. Because money is just a reflection of the goods and services, it is the goods and services which have the value, money merely reflects that value.


This can be seen in terms of ‘inflation’: Inflation has been described as “too much money chasing too few goods” This definition shows a clear relationship between money and goods.


Now we know that if the amount of money in circulation in increased by 10% overnight while everything else remains equal, then we will have inflation, and prices will rise by 10% in order to bring money and goods back into equilibrium. This demonstrates this relationship.


Similarly if the amount of goods and services (G&S) increases by 10% overnight while the amount of money in circulation, and everything else, remains equal. Then prices will fall by 10%.


This close relationship between the supply of money and of(G&S) in the economy is important. It is also a vital reason why money supply had traditionally been in the hands of the Government or the Crown.


Now what happens to economic policy if the Government has no control over the total money supply? 

This is exactly the position now in the UK, and is at the very centre of our current economic problems. Now when I say that the economy is in trouble, that does not mean that we are all affected in the same way. Indeed for the small wealthy elite in the UK they are doing very well out of the present economic situation and are keen to keep it this way for as long as possible, but for most of us the economy is not performing effectively and needs to be corrected.


The UK now has great difficulty with investment, social equality and with national debts. This is what we want the new Scotland to escape from. So what is causing the problems?


Let us look carefully at full-reserve banking, Full-reserve banking is not new or complicated, indeed it was how banking was initially conceived and how it operated (officially) for very many years. The basic idea is simple. I have plenty of goods and services at present for my needs and I want to save some of it for the future.

I convert it into money and I put it in the bank. The bank wants to use my deposit to lend to someone else who needs capital to develop his/her business, so it makes an agreement with me to lend some of my savings out and to pay me interest for it. The bank then gives out a loan and gets interest on the loan which it shares with me. So far so straightforward.


Now what effect does that have on the economy in general. If I stop spending some of my money, because I put it into savings, this will reduce the total amount of money in circulation and could tend towards pushing prices down; but if the bank lends my money to someone else who spends it on his/her business the circulation is restored. So the relationship between money supply and G&S is maintained.


So putting money into a full-reserve banking system, which lends out that money for interest does not, everything else being equal, change the relationship between money supply and G&S.

Now years ago bankers discovered that people who deposit money in the bank tend to leave it there for a long time and don’t tend to keep withdrawing it. They used this knowledge to work out a wee scam. If people don’t usually draw out all their savings and on average only draw out a ‘fraction’ of their savings, then the banker can lend out more than the amount agreed between him and the depositor, provided he leaves this ‘fraction’ in reserve to cover withdrawals, then the bank can make interest on this ‘new’ money without sharing it.


So fractional-reserve banking is not based on an economic theory it is based on an historical scam (which at the time would have been illegal). This scam was very lucrative for those involved and over the years it became established practice to the extent that people think it is the natural way to run a bank.


However there are problems. If banks can create money and give out new loans retaining only a fraction of their deposits the first obvious difficulty which arises is that when something big and unexpected happens people go to the bank and draw out more than the ‘fraction’ expected. If that happens on a wide scale the banks, and their back-up support systems fail to deliver. This run on the bank creates greater concern and expands the demand on the other banks. That is easily started but extremely difficult to stop.


However another and perhaps ever a bigger problem is that by creating ‘new’ money which is not a reflection of the G&S in the economy the banks are devaluing the real currency and creating long term inflationary pressures such as land and house price rises.


If the Government has no control over the money supply, then it has no control over this undermining of the currency.


Now we all know that if you set up a printing press in your garden shed and can produce very good copies of £5 notes which you then use for your weekly shopping you will be arrested. You will be committing a serious crime and will end up in jail.


Our big international banks are doing this every week, on a massive scale and are perfectly free to do so. It makes the powerful elite wealthier by the hour, but causes great damage to our economy and pushes up the national debt which we all have to pay interest on.


That is the cost of maintaining the fractional reserve banking system. If anybody tells you that this system is of value to the economy ask them to explain just how that is so in ‘real’ terms, not in money terms since we know that money has no intrinsic value. I think you’ll find they can’t.


Now the full-reserve system was used in the UK for over half a century in the Mutual Building Societies which were compelled to operate on a full-reserve basis and some small banks in Scotland such as the Airdrie Saving Bank were full-reserve banks.

These building Societies provided the capital for most of the housing stock in the UK. The Airdrie Savings bank, unlike all the big banks did not need one penny of tax-payers money after the banking crisis while the UK subsidised the major banks with £500 billion of Quantitative Easing, and other subsidies. 


If, as now seems widely accepted, Scotland is going to set up its own currency with its own central bank and legislative framework then it seem wise that we should look at the problems others are experiencing and draw lessons from that.


The only purpose of establishing a new fractional-reserve banking system in Scotland would be to ensure that the small wealthy elite maintain and develop their position of power at the expense of all the rest of us, there are no economic reasons for it that we can see.


If anyone thinks there are good economic ground for retaining this type of banking in the new Scotland let them put that case forward, we would all be interested to hear it.



Andy Anderson

Campaign for a Clean Currency

Clean Currency





Malcolm Parkin

 It is not just the ordinary citizen who borrows money from the banks at interest. The government itself does the same in order to finance the shortfall between tax revenue raised and their expenditure in any year. That borrowing is called the annual deficit. When politicians say they are reducing the deficit, what they mean is that they are reducing the rate at which the deficit is increasing. In fiscal 2017 the British government borrowed £42 billion, down from a previous £50 billion.


And that borrowing has been cumulatively piled up over the years, and is generally known as the National Debt. Interest on this debt, payable to the banks and other financiers, is presently (2018) about £52 billion every year, and this has to be paid to the banks before anything at all can be spent on things that we actually need, such as new roads, or the NHS.


The size of the National Debt is about £2 trillion. (That is to say £2,000 billion, expressed as Two thousand thousand million, and written as £2,000,000,000,000 a sum so large as to be beyond repayment, as it steadily accrues compound interest for the benefit of the banks. Not that they require it to be repaid anyway, because - as we shall see – most of the money never actually existed in the first place.


For the sake of comparison, in the year 2000, the National Debt was just £316 billion, and in 2012 it had risen to £1 trillion. How we have moved on at the practice of living beyond our means!


In the case of consumer borrowing, now also approaching £2 trillion – this has been lent by the banks to private individuals, at interest of course, for things as diverse as new cars, holidays, and mortgages. A good proportion of this is arguably unable to be repaid by the borrowers.


But where has this money actually come from? The banks have not lent all of this money from the deposits of private savers, or from business deposits, or from widows and orphans, or even from share-holders funds, as is commonly believed.


The banks have simply created most of this money from thin air by means of digital computer entries, coupled with the process of fractional reserve lending, which allows the banks to lend the same money over and over again, to different people, with only a small reserve made each time that money is lent, as it passes from borrower to borrower.


Think about this carefully, and it is clear that these huge sums (£4 trillion) lent by the banks to the government in the first case, and to private individuals in the second case, could not possibly have come from deposits made with them. There is simply not that amount of money on deposit. So the money must have come from somewhere else, and that somewhere else is just thin air. The banks have simply created the money they have lent, and have acted as though that money was real.



This money did not belong to others, to whom the banks would have had to pay interest, and who would have been deprived of the use of that money. This money has been created from nothing. The banks are charging interest on money that they have created in cyber space, at no cost to themselves. This point does need labouring, so forgive me.


Less than 3% of money in circulation is cash, printed by the Bank of England as banknotes, or stamped by the Royal Mint as coin. The rest has been created by the private banking system as computer entries, and for as long as the total amount of this electronic money never has to be shown as cash, the process of creating more of it can continue forever, and it can circulate forever, in whatever amount the banks may decide, within the clearing system (BACS) that the banks themselves own and operate, so that they can balance their own books from their own self-created ocean of this digital money. Money is now simply digital numbers in computers. It is also almost entirely debt, because it was created as debt. It can on only be created by the process of borrowing.


So we are no longer managing money. We are managing debt.


And the ability of the banks to keep that magic digital debt in constant circulation, within their own BACS clearing system, is how they get away with what is really the ultimate gigantic fiscal fraud.


So it clearly follows that if nobody borrows from the banks, or debt is repaid, then our money supply reduces. This is why things get worse in a recession, because people stop borrowing, or repay their borrowing, so the money supply gets smaller. Remember again. The banks create the money supply as debt. If nobody borrows money, there is no money supply.


Bank of England money, introduced as Quantitative Easing, was an attempt to get more money into circulation to improve the economy. But the banks were already finding it difficult to lend because of the recession, so how could another £425 billion have possibly found its way into the economy by means of loans. The answer was that it could not.


But the banks themselves could use that QE money for their own casino style operations, and they did; driving up the stock market in a recession. And they also lent to their rich friends, who invested and speculated in the art and collectibles markets. The price of classic cars for example has more than doubled since QE. Hardly what was intended! As a mathematical fact, QE of £425 billion represented some £6,500 per man woman and child in the UK. Just imagine - £26,000 for a family of four!


To have actually got that money into the economy, it would have been more effective to have printed it as actual money, and thrown it from aircraft over our cities and towns. It could even have been directly injected into private bank accounts to relieve debt and encourage spending.


But of course QE was also not real money, in the sense that it was borrowed and someone was deprived of its use. It was – as always – created by computer entry from thin air.






In 1934, during the Great Depression in the USA, the staggering truth of the way the banks create money was recognised by Robert Hemphill, Credit Manager of the Federal Reserve Bank, when he said;


“We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon.


As Hemphill said, a more ridiculous situation would be hard to imagine, but that is the truth of it.


So what is the alternative to this state of affairs?


The alternative is that the State should be the issuer of real money, spending it into the economy debt free, but only in an amount that relates to the economic prosperity and assets of the country. Money should not be able to be created without limit, as it is at present by the banks, to create inflation and artificially distort such basics as house prices, and it should be created for purposes that add to the assets of the nation instead of being created to lend to those of the bank’s own choosing, and for those borrowers to then spend it on what they want.


So how would government creation and issue of our money supply work in practice?


Suppose a bridge builder wins the contract to build a new bridge at a cost of £1.5 billion. He needs extra cash-flow to perform the contract, and of course he goes to his bank to borrow this money.


His bank is delighted to lend at an interest rate of say 5% or more per annum. So the cost of the new bridge has to incorporate enough profit to repay that 5% annual interest to the builder’s bank. Put it another way..........the cost of the bridge is now at least 5% more than it needs to be. And if the loan stretches over years, so does the interest, so the bridge would now cost an extra 25% over a five year period of the contract.


But if the government itself created and spent that money into the economy, the builder would simply receive payment directly from the government, interest and debt free, as the work progressed, and he would in turn disburse this money to his sub-contractors and suppliers.


Then, when the bridge was complete, the government would gauge the economic benefit arising from the presence of the bridge, and money to reflect that benefit would also be spent into the economy. So the new debt free government money has only been created to reflect the value of the bridge to the economy, plus the actual cost of building the bridge.


It is this restraint, and reflection of economic reality, that prevents inflation, and also other economic aberrations, such as huge house price rises which were caused by the banks creating their digital money from nowhere, to lend only for the particular purpose of house purchase. Had it not been for that huge house purchase lending binge, the price of an average house today would be an affordable £88,000 and a reasonable mortgage earnings multiple would be about three times the average wage, instead of the present ten times.


Only by this real system of money supply creation can we be rid of the burden of interest that maims the economy, and also be free from anomalies such as the fuelling of house prices that has driven home ownership beyond the reach of many, which then further damages the economy by preventing people from moving to where the work is.


Reform of the means of creating money is therefore essential if another collapse of the banking system is to be avoided, and if the country and the individual are not to remain forever enslaved to the banks, and their self-created magic debt money.


Politicians and private individuals may think they are managing money, but the reality is that they are managing debt, and for any government to think they are able to manage the economy of their country when the banks control the money supply is sheer fantasy. The money men are the real masters, and always will be until the banking system is brought under control.


© Malcolm Parkin 2011 - 2018

Currency Choice

Informing your choice

These are some of the thoughts & background which inform the choice of a National Currency for Scotland. 


No country is an island in terms of international trade and finance and any government which ignores the basic need to balance its exports and imports is guilty of criminal incompetence. The realpolitik of a nation in debt to others is little different from personal debt and the fact that a nation cannot go bankrupt in terms of its own currency does not mean  they do not  remain physically in debt to foreigners -  and that does have moral, political and economic consequences.

Quite apart from the familiar crises we experience every few years,  financial sanctions are increasingly being used to influence domestic political decisions. Most recently this has impacted Turkey but the list is substantial including Russia, Iran and Greece. More generally, the neo-liberal formula for financial stability consistently exercises financial dogma as the basis for privatisation, austerity and reduced public investment. Again any government unaware of these influences or unable to counter them will fail the people it represents.

The clear exception to this rule is the United States dollar which is the de facto world reserve currency - not because of the strength of its international balance sheet or unquestioned moral authority, but because of its economic and military power. That is realpolitik and nothing to do with the logic of a balance of payments.

The question is can this reality be challenged by some more natural and rational reserve currency? Gold was the basis of a reserve currency up until 1971 when the US dollar moved off the gold standard but the hard fact is that the dollars reserve status dates back to the end of WW2.

At  the Bretton Woods conference of 1944 the British economist J.M. Keynes proposed Bancor as a new world reserve currency – in effect an accounting system which recorded international trade balances and imposed  interest penalties to Nations which were either in surplus or deficit – i.e. a sanction which would oblige them to readjust their currencies to values which would encourage a balance of trade.

That did not appeal to the US negotiators as the dollar was in a large trade surplus with the rest of the world and was also linked to the price of gold. Back then realpolitik again won the day.

It’s interesting however that the Governor of the Central Bank of China, which is currently in a huge balance of payments surplus and has a large stock of gold, takes a different view. He has proposed that the  IMF should adopt a similar system and both the IMF and the United Nations believe these principles should again be examined in greater detail.

There is of course no indication that the United States would willingly give up the immeasurable advantages of being a reserve currency. However there are suggestions that the new technology of bit coin and the block chain ledger accounting system could present a new way of doing the same job with the US liked it or not. The system appears to be invulnerable to attack or interference.

At present international trade is controlled by the transferring of funds through private banking agencies like SWIFT (and others) which is a messaging network that financial institutions use to securely transmit information and instructions through a standardized system of codes. The US government has intervened in it to enforce sanctions against Russia & Iran.

It is with these and similar considerations in mind that the proposal is  to launch the Scots pound is a purely domestic currency not available to international money markets and using dollars and euros and sterling etc. to conduct our  imports and export business. This, together with using full reserve banking regulation and Central Bank supervision of accounts and foreign exchange resolves the initial vulnerabilities of the new currency.


There will be no significant legacy of a share of UK National Debt which of course is largely incurred as a result of the fractional reserve system and any new borrowings required to finance imports will be modest. These will be the only “external” borrowings to be secured on government bonds.


This strategy for a Scots currency renders it secure yet flexible to accommodate whatever the future may hold in terms of international trade and financial arrangements.


It is for the reader to decide if this is a radical or a rational monetary policy but this is not a decision purely for expert economic advisor's and bankers (remember sharing the pound in 2014).  it is a matter for popular sovereignty and literally every citizen of voting age in Scotland will have their say on this and every other matter concerning the Constitution of Scotland. If we are to protect our democracy then each one of us must participate.

By Ronnie Morrison

Further information can also be found at the Scottish Monetary Reform Group.

Currency and CW

Currency and Common Weal

Dear Friend,             Re: Campaign for a Clean Scottish Currency (CCSC).


I have recently been sent a lot of material which has been prepared by Common Weal on the currency and related matters. Common Weal have done a considerable amount of work on this and have agreed to meet us to discuss the currency issue.


We are keen to try and ensure that all of us in the independence campaign work together and do not allow our Unionist opponents to try to encourage divisions among us so that they can claim that we are ‘fighting with each other’ over our plans for a New Scotland.


I start therefore on the positive and say that unlike the run up to the referendum in 2014, we who supported an independent ‘Scottish Currency’ are no longer an isolated minority.


In the Growth Commission Report, there is a recognition that a Scottish Central Bank will be required and provisions made, at least in theory, for a separate Scottish currency. While Common Weal, like us, support the establishment of a Central Bank and a separate Scottish currency. This means, that on the main principles which need to be agreed before the referendum, there is broad agreement between all three of us. That is; (1) Scotland should be independent. (2) It should have its own Central bank. (3) Provision should be made for Scotland to have its own separate currency.


Since we are all agreed on these principles, and since we can’t make any further progress on these issues until after we have a positive vote on political independence. Our first objective must be to work together to achieve a victory in the independence referendum.


After the Scottish people have decided to have an independent state we can develop the debate amongst ourselves exactly what type of currency we want, and what legislation is required to set up the institutions which will support the currency and the banking system. We will need to do that, in any event, because Scotland currently does not have any such legal framework.


Now, we have a different view on what actual currency we require from Common Weal’s view, and CW has a different view on this from the Growth Commission, but that is not a problem, indeed it is what the First Minister is calling for, a debate on this issue.


This debate can take place in a rational and sensible manner, we have the time, we have the knowledge, we have respect for each other, so we have the ability to examine and carefully consider the views being put forward by each of our supporters, so that by the time we have successfully won our political independence we will be in a strong position to begin to implement our own currency and banking system.


The new Independent Scottish Parliament will certainly be far better prepared to handle this complex issue, than the Westminster parliament has been able to address Brexit.


In setting out our position on this issue in contrast with the views expressed by the GC and CW prior to our meeting with CW, I will use the CW leaflet headed “Key things you need to know about the Growth Commission” I will use their questions and responses and say what our response could be to the same questions.


Q1 What is the Growth Commission proposing on Currency?


CW response: The Growth Commission proposes “Sterlingisation”, which is the process by which an independent Scotland would not have a currency of its own but would buy or borrow UK pounds and circulate them in the economy.


Our response is that we agree with CW’s comment, but acknowledge that the GC are also suggesting an option of a Scottish currency, which would be some way off, and subject to strange tests. Like CW we are not impressed by that aspect of the GC report.


Q2 Why do we need the protection of a Central Bank?


CW response: A nation which does not have the formal protection of a central bank is in a very vulnerable position. There are two ways to gain the protection of a central bank- to have your own currency, or to have a formal currency union. The only two currency unions which Scotland could consider joining would be the EURO or agreeing a Sterling union. For various reasons these are both off the table. The remaining option for Scotland is therefore to start its own currency.


Our response: We agree that both these options are unavailable. We believe that it is essential in Scotland’s best interests to have its own central bank and its own currency.


Q3  What would Central Banks do?


CW Response: Central Banks have a range of policy levers they can use. They can increase or decrease interest rates to stimulate or dampen down the economy. They regulate the financial system to ensure that banks do not repeat the activities that caused the 2008 financial crisis. They manage the money supply, and are able to create more money in emergencies (as the Bank of England did via ‘Quantitative Easing’ during the last crisis) They provide services such as clearing systems (how banks transfer money to each other) and payment systems (like the UK BACS system.) They also manage foreign currency reserves to protect the value of the currency internationally and to protect against so called ‘speculative attacks’. These are only some of the ‘monetary policies’ that central banks are able to use to protect the economy.


Our response to this question would be quite different. We agree that the central bank would regulate the banking and financial system. We agree that they should manage the money supply in accordance with strict rules (the BoE does not at present manage money supply) They should operate the bank clearing systems and have responsibility for Balance of Payments. We do not agree with the central bank trying to manage the economy with interest rate control (which is ineffective and can be done effectively in other ways) We totally disagree with the QE system which cost UK taxpayers £425 Billion or £6,500 per head for every man woman and child in the UK and utterly failed. The Central Banks can’t prevent another crisis, indeed all the causes of the last one are still operating so we are certain to have another, it is just a matter of time. Central banks could not stop it last time, and will not be able to stop it next time. We agree with CW however that the Scottish Central bank will have a vital role to play in controlling the financial system.


Q4 Why can’t we just use sterling?


CW response: We can, but it is very dangerous. Without the support of central bank with proper powers none of the above policies can be used. For example, if Scotland needed to stimulate its economy it would need to lower interest rates, but if the economy of London was overheating the bank might raise interest rates. This would actively harm the Scottish economy; or if the UK went into a major financial crisis (like 2008), private money markets,(where Scotland would have to buy its sterling) might stop lending altogether. This could have a devastating impact on the Scottish economy. Basically any major economic or financial crisis requires monetary policies responses and if they are not available, there is little alternative option other than crossing our fingers.


Our response: We can, and we should use sterling, along with other currencies for international trading. We should not use sterling for the domestic economy in Scotland. We consider it vital that the financial and economic policies needed for a successfully managed mixed economy requires the central bank to be in control of money supply while linking this to GDP growth. This can’t be done unless the bank has its own currency.


Q5 But we’d still have all the other Government policy levers we could use?


CW response:  The other kind of policy that is used in a period of crisis or when the economy needs to develop and grow are ‘Fiscal’ policies (basically taxing and spending). But if Scotland used Sterling without permission it would be very reliant on private money markets and the need to keep them happy would be very strong. Those money markets would almost certainly demand strict deficit and debt rules. And Scotland would have to stay vary closely aligned with the UK economy, mimicking UK tax, banking and macroeconomic policies. Effectively, a Scottish Government in a Sterlingised independent Scotland would have few more economic powers than under devolution, and in some regards might have even fewer powers.


Our response: To be honest I do not understand this question, nor the CW answer to it. I do not know what policy levers are being considered, I’m not sure where fiscal policy (taxation policy) comes into this, but I will address the question of what economic management tools a Scottish Government might have if it controlled the currency.

A Scottish Government which controlled the money supply through the central bank would be able to control macroeconomic policy entirely. It would be able to control employment levels by the Keynesian method used by the Attlee Government and thereby first build, and then retain full-employment levels in the Scottish economy (which would vastly increase Scotland’s wealth from its current level). It could, by selective investment, cooperation between universities and industry, and effective use of the National Investment Bank greatly improve Scotland’s productivity which is currently very low.

I agree with Common Weal unless we have our own currency none of this economic management would be possible. I will address fiscal policy later.


Q6  But starting a new currency is really difficult, right?


CW response: Nope, it has been done many times and the steps needed to create a new currency are well tested. Common Weal has produced a detailed explanation of how it is done and it has estimated that three years would be a generous time-scale. There is absolutely no reason why Scotland can’t start a currency or make a good job of managing it.


Our Response: we agree with CW


Q 7.  Why can’t we wait and make a decision at a later date?


CW response: The longer we wait, the longer we are vulnerable. The worst case scenario is that we try Sterlingisation (which is an entirely untried system for an economy of our size) and then there is a financial crisis in the UK, forcing us to scramble to create a new currency in emergency circumstances. But the best case is that we start the conversation after independence – and that would take us not much more than three years. An independent Scotland would by then have a Constitution and it is likely that a lengthy parliamentary process (and public referendum) would be necessary to change that constitution to introduce a currency. It is virtually impossible that such a process could be completed in the first term of an independent Scottish Parliament unless the commitment to do so was made in advance. It is much more likely that Scotland would be trapped in a vulnerable and risky Sterlingisation experiment for at least seven or eight years.


Our response: We agree with CW


Q 8 But would a Scottish currency not be vulnerable itself?


CW response: All currencies are vulnerable to international money markets. Sterling is one of the biggest currencies in the world and was successfully ‘shorted’ (attacked by money markets) after ‘Black Wednesday’. Sterling has lost its value against almost all currencies in recent years. The key is to have a strong central bank with a large currency reserve. Effectively, the bank has to deter financial attacks by being able to ‘back’ the currency to a level higher than the profit that could be made attacking it, if speculators know that it will cost them more to attack the currency than they can make out of the attack, they won’t bother. So long as Scotland managed the currency and its economy in a sensible way, it would be no more vulnerable than any other currency. And in the early days of independence foreign money markets won’t hold very much of Scottish currency to begin with, so they couldn’t ‘dump’ it to influence the value (which is how financiers make money in currency speculation). Later, Scotland can employ the normal tools used by sovereign countries to defend their currencies. Attacking currencies is risky for the speculators and history has shown that a majority of attacks on a currency are successfully defended against.


Our response: Yes, a Scottish currency which was part of the fractional-reserve system would be vulnerable to such attacks. £40 billion reserves would certainly not prevent this, in a world flooded with ‘phantom’ money. The only sure way to prevent it is not to allow your currency to be used as a commodity and sold on the market.

If your currency is legal tender in Scotland alone, and is not used for international exchange or sold to money markets then speculators can’t attack your currency. This gives 100% safety from that problem.


Q 9  But how could we afford to set up a foreign currency reserve and would it not be very expensive?


CW response: We need reserves of £40 billion. Common Weal has explained how this can be done at less cost than we are currently paying for the Bank of England.


Our response: In our full-reserve banking system no reserve fund is required. A reserve fund is only required under a fractional-reserve system because banks consistently lend out more money that they take in. That is why their reserves are always ‘fractional’. A full-reserve system does not have that problem it always operates on full-reserve. We agree with CW this can be done much cheaper than it is currently costing us to use the pound.


Q 10 OK but sterling is popular in opinion polls, so will the public support a new currency?


There are very strong arguments for a currency and we can’t expect the public to form a view until they have heard these arguments. If people don’t know the alternative to keeping sterling; they can’t be expected to support it. We must make a case for currency like we must make a case for independence. Last time round almost everyone agrees that the Sterling position was a weakness. This time round it is likely to be even more of a weakness as we will be asked to defend an untried and experimental financial system. It is likely that, after a period of sustained attack from our opponents, there will be very substantial public concern about those proposals. Scotland simply cannot afford to make crucial decisions about its entire money and banking system based on half-baked PR. If we want people to vote for independence, we need to promise them a proper financial system, not a untried fudge.


Our response: Well we certainly agree that the currency issue must be properly examined and discussed and we have been trying to get an open discussion on this issue for some time on a wider basis in the Yes movement. The debate is now opening up and we are very pleased with that. I don’t think for one minute that people in Scotland find the pound sterling popular, on the contrary many are well aware that the banking system is corrupt, but they are not quite sure how it is being manipulated by the elite. Our task is to expose this and help people to make an honest choice.


Q11 Is there anything else we need to think about?


CW response: Yes – Scotland can’t join either the EU or the EEA without an independent central bank. If we Sterlingise, Scotland will be excluded from Europe and will be wholly tied to a post-Brexit UK economy. 


Our response: We agree with CW on this.


 In addition there are areas of macroeconomic policy not covered in these questions such as public investment and employment and land management which are central to economic policy and financial arrangements. Which we are determined to open up debate on. But finally in this letter I will touch briefly on fiscal policy.


Many people think that public investment can only be undertaken if the Government pays for such investment from taxes, and people have also been led to believe that income and consumer taxation have to be the main source of this Government taxation.


None of this is true. For centuries the main source of taxation in Scotland was land, which is now hardly taxed at all and which could be a huge source of income, taken mainly from rich foreigners who use our land to allow them to evade taxes in the UK and elsewhere.


Governments do not rely on taxation for their public investment policy, or should not. This policy should be directed to macroeconomic objectives such as employment productivity and public wealth creation. However without a clean currency we will not be able to pursue our desired economic objectives so we are anxious to debate this with people in the movement.


We also want to examine, and discuss with others a deeper examination of community and mutual not for profit banking which ties in with our view of full-reserve banking and we want to bring that discussion into the frame.


As usual I will answer question on anything in this letter, or anything about currency or the economy which you feel should have been in this letter.




Andy Anderson

Campaign for a Clean Scottish Currency


Annual Ground Rent

Text taken from The National.


A SCOTTISH independence-supporting lawyer has been touring the country promoting a public revenue system that would reduce personal and indirect taxation and substantially increase people’s disposable income.

Graeme McCormick, who owns Conveyancing Direct, developed the Annual Ground Rent (AGR) method after the independence referendum debate, when Unionists constantly undermined the economic case for Scotland going it alone.

He told The National: “I thought the economic argument for independence, although it was robust, obviously failed to persuade enough people. Regardless of Brexit or anything else like that, the arguments against independence will still be directed at us, no matter what the economic position is in Scotland.


I wanted to try to develop a system of public revenue which could answer these questions and successfully defend against these attacks – one not subject to the volatility of global markets, or the price of oil, or which would result in Scotland having to pay higher interest rates for the public purse to get money to invest.

“It’s a system that derives money from our land and the more I looked into it I found, astonishingly, that you could return a large amount of money to people by reducing taxation.

“Using it would encourage more of the ‘haves’ who didn’t vote the last time to say ‘there’s something significant in this for me’, apart from being of benefit to an independent Scotland as well.”

AGR is calculated by dividing Scotland’s land by the desired amount of public expenditure, and putting it into four categories – rough grazing, woodland, arable and urban. Home or land owners calculate their own AGR by multiplying the area of their space by the land type rate and would make their return online to Revenue Scotland, either yearly or by instalments.

McCormick pointed out that most people live and work in urban areas, where most public amenities are sited. Because of their intensive use they require more management, repair and replacement, but they also create greater wealth.

The urban rate would apply to houses and gardens in urban areas and buildings in rural settings, with liability for common property div-ided by the number of owners, while landowners would be able to recover the AGR from their tenants.

Revenue Scotland would carry out spot checks for inaccurate or dishonest filings, and transparency would be assured with everyone’s return on a public register.

McCormick gives the example of someone on average earnings of £26,500, who currently pays income tax and national insurance of £4,400; council tax on an average-priced property at £1,169; water rates of £417; road tax £200; and £4,943 in VAT, making a total of £11,129.

By comparison, (under AGR) someone living in an average urban house would pay £1,120 – a saving of £10,009.

McCormick says income tax could cease to exist, along with inheritance, business and council taxes and VAT.

There would be no adverse effect on the value of people’s homes or business premises and they would know how much they owed at the start of each year.

Big landowners would likely offload uneconomic land that did not provide sufficient income to pay the AGR, and it would be in their interests to develop, diversify and farm any that they retained.

McCormick believes AGR’s biggest selling point is its simplicity: “The bureaucracy attached to it is miniscule in comparison to HMRC. It’s such a simple way to gather public revenue – people would do it themselves and you wouldn’t need anyone official to estimate it.

“And if people are dishonest with their returns there would be spot checks with a significant penalty if they weren’t being honest about it.”

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