Scotcoin – an answer to Osborne?
Can Scotland keep the pound and leave the UK? The message from No 11 is that no it can’t. That position was presented by Chancellor George Osborne as technical, not political, and reported as such by UK mainstream media. For instance the BBC reported today: “There is no rule or principle in international law requiring the continuing UK to formally share its currency with an independent Scotland.”
That is a meaningless statement. Neither is there a rule or principle that stops a country adopting another country’s currency as its own legal tender. Ecuador uses the US dollar for its currency and has done for over a decade.
An independent Scotland could easily adopt the British pound as its legal tender if it wanted to, without being part of a banking union. However, its banks could not issue such currency as bank deposits via loans (the current origin of 97% of British pounds), unless it registered those banks HQs and assets within Britain. That’s not that difficult – just over the border, Carlisle might even develop as a financial centre!
Although we might want to keep the UK together, we shouldn’t be misled by politicians, civil servants or reporters who aren’t willing to have a quick google to see what happens around the world.
For Scotland to keep the pound, it would not profit from the issuance and sale of notes and coins. The issuance of physical currency is a tiny issue compared to the economic and social implications of issuance of the majority of money by banks, as debt. If it kept the pound but became independent, Scotland would have no control over monetary policy. If the UK wanted a strict monetary policy but Scotland needed a less strict one to enable more credit to boost economic activity, then Scotland’s economy would suffer an absence of a means to transact. That’s exactly the situation of Greece right now in the Eurozone. It means prolonged recession, austerity and a firesale of state assets. Hmm, but wait. That’s the current situation in Scotland… because the Scotish and British public have very little control over monetary affairs right now, as it is the private banks that decide how much credit is created, at what price and for whom.
So if concerned about monetary policy, as it should be, Scotland could keep the British pound but create a complementary currency to enable internal transactions. After all, why allow the volume of local trade to be determined by monetary policies decided elsewhere? That doesn’t sound like independence to me.
Such complementary currencies are widespread, many thousands of them worldwide, and much more stable than the recent cryptographic currencies like Bitcoin that have become famous in the past year. Some are very local, some are global and involve governments bartering products and even satellite time, some are backed by commodities, like Ven. We learned about dozens of them at a UN conference we helped organise last year, and we teach about them at our Institute: www.iflas.info
Since Bitcoin shot to fame, it is becoming more widely understood that a currency can be founded on an unhackable public database of transactions that is maintained by a network of any computers that download the relevant software. Therefore there are now hundreds of adaptations of the bitcoin code, which create other currencies. It is not surprising then that an entrepreneur announced yesterday that they are creating Scotcoin.
Could Scotcoin be the answer that Scottish independence advocates are seeking? Almost. One of the problems of these cryptographic currencies is that the way they are issued. Early adopters get a huge reward, as do those with the most powerful computers. Therefore, the proposal by Derek from Scotcoin is that an agency will distribute these coins to whoever is registered as resident in Scotland.
Scotcoin, or something similar could work, if a number of things happen:
- The code is changed to adopt Freicoin’s demurrage system so that a small fraction of your coins is paid into a common pot, which can then fund an ongoing basic income payment to every registered user. This avoids hoarding and encourages circulation of the currency
- The code is changed to remove some of the less useful aspects of bitcoin, for instance, requiring a larger amount of mining power to be decisive in changing the protocol (more than 51%), and to speed up the transaction times
- The agency issuing the currency becomes democratically accountable to the people of Scotland, so that people can decide how much the computing processors should receive for maintaining the network, what the demurrage fee should be, what the minimum income should be, and what guidance should be given on new developments in the code
- If issued and governed democratically accountable, then the Scottish government adapts legal tender laws to recognise Scotcoin, so that it would have the same legal standing as Pound Sterling when debts are disputed in court. In addition, the Government would accept tax payments in Scotcoin, or even demand some tax payments in Scotcoin, from companies operating in Scotland. In addition, the Scottish government could begin to pay some portion of state employees with Scotcoin. This would provide some basis for stabilising the demand for Scotcoin, and therefore its market price against other currencies.
Such issues are too important to be left to individual brilliance. If the initiators of Scotcoin don’t like this, no problem, the Scottish government can create their own domain extension, register Scotcoin to it, create their own cryptographic currency with a public mandate in mind, and regulate so that anything called Scotcoin that is not the government-backed system, would simply be counterfeit, and its commercial users prosecuted as such.
I dont think that will be necessary but, yes, in saying this I’ll come clean I’m not an anarchist libertarian who thinks that somehow private enterprise will fix all our problems. Instead, a blend of libertarian sentiment, entrepreneurial drive, and a strong social democratic spirit, could create a more useful monetary system in the long term. Activist entrepreneurs can lead the way, but they need to team up with others who know more about community governance, for instance.
This future governance wouldn’t mean that other private currencies couldn’t emerge.. indeed we are already seeing the emergence of a multi-currency economy around the world. Its just that if one such currency is to play a role as a national currency and be backed by the government, it will need certain characteristics and forms of governance.
If Scots want to go independent and keep the pound, that’s up to them, and they shouldn’t be misled by treasury officials.
The fact this has been opened up is good news, as it reveals how little our politicians and mainstream media seem to understand about monetary issues, so wedded are they to mainstream delusion about the nature of money.
As I heard the Chancellor I was reminded of a quote I included in my new book “Healing Capitalism”:
“To desire freedom is an instinct. To secure it requires intelligence. It must be comprehended and self-asserted. To petition for it is to stultify oneself, for a petitioner is a confessed subject and lacks the spirit of a freeman. To rail and rant against tyranny is to manifest inferiority, for there is no tyranny but ignorance; to be conscious of one’s powers is to lose consciousness of tyranny. Self-government is not a remote aim. It is an intimate and inescapable fact. To govern oneself is a natural imperative, and all tyranny is the miscarriage of self-government. The first requisite of freedom is to accept responsibility for the lack of it.”
That was E.C. Riegel, quite a long time ago, in a book arguing for us to create our own currency systems. As Felix Martin says, Bitcoin ain’t all that new, as the field of currency innovation has been around as long as we have. What is new is the ability for us to create and scale new systems quickly. In bringing attention to monetary issues in the context of the debate about Scottish independence, George Osborne may have inadvertently started a conversation that will bring more people to an awareness that money systems should be what we chose them to be, not means of control and exploitation.
So while I’m at it… Psst, all you austerised local authorities… listen up! You could create your own currencies too, and back them up by your payroll, by local taxes and charges for things like your super expensive car parks. Sound odd? Well these aren’t new ideas, they have been used by around the world already, from Brazil to Kenya. It’s about time we got our DFID civil servants studying what we can learn from the rest of the world, as our Treasury officials sound far too little-Englander to me! Now the Scottish independence debate has taken a monetary turn, and we wake up to our current monetary delusion, perhaps we all might be free.
Thanks, Jem Bendell
Professor of Sustainability Leadership (www.iflas.info)
If you want to discuss this, see you over on the Lifeworth-IFLAS Linked In Group: http://www.linkedin.com/groups/Sustainable-Leaders-IFLAS-4778761
The BBC article: http://www.bbc.co.uk/news/uk-scotland-scotland-politics-26166794
See Scotcoin project: www.scotcoin.org
My book where I discuss all these things: http://jembendell.wordpress.com/2014/01/31/healing-capitalism/
If you dont know about Bitcoin: http://jembendell.wordpress.com/2014/01/29/davos-conversations-on-bitcoin/
For my views on the limitations of Bitcoin: http://jembendell.wordpress.com/2014/01/06/crypto-at-the-ok-coral/