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sais is the term (also called sterlingisation) sometimes given to describe the use of a currency without a formal currency union.


The National Institute of Economic and Social Research considers that using the pound without a formal currency union would force an independent Scotland into an unstable currency regime resembling the dollarisation seen in countries such as Panama. A formal currency union would be neither practical nor desirable because the two countries are so different in size. It would leave Scotland with no banking union and with no public spending constraints – limits on fiscal deficits and debt levels – between the two countries. Angus Armstrong of NIESR said that with no control over monetary policy, an indebted country would be left few options to respond to a future financial shock because it would have little flexibility on spending and tax measures[1]. Panama, which has used the dollar since the early 20th century, required 17 bailouts from the International Monetary Fund between 1973 and 2000, second only to Pakistan over that period.


  1. [1]. Angela Monaghan The Guardian, Thursday 8 May 2014


Professor John Kay, a former economic adviser to the Scottish government, a former director of the Institute for Fiscal Studies amd now a visiting Professor of Economics at the London School of Economics suggested to MSPs in May that an independent Scotland continuing to use the pound without a formal agreement could be one solution if a currency union did not happen[1]. "The unilateral option may have more to commend it than it seems at first sight, that Scotland would simply go on using the pound anyway in these circumstances," he said. The economist said this would bring "stability" and would mean there would be no transaction costs between north and south of the border. He said the disadvantage of this arrangement would be that an independent Scotland would "effectively not have any freedom in monetary policy". But he went on to state: "I think the practical reality is that an independent Scotland would not really have any freedom in monetary policy anyway."
The Adam Smith Institute’s Research Director Sam Bowman said on 12 February 2014[2]:

“The Bank of England would not act as a guarantor for Scottish banks or the Scottish government. Lucky Scotland: the implied promise of a bailout from the European Central Bank is exactly what allowed Eurozone banks and governments to borrow cheaply and get themselves into a debt crisis. Scotland’s position would be closer to that of countries like Panama, Ecuador and El Salvador, which use the US Dollar without American “permission”, and ... consequentially have far more prudent and stable financial systems than if they were part of a formal currency union. An independent Scotland that used the pound as its base currency without the English government’s permission, with banks continuing to issue notes privately and private citizens free to choose any currency they wanted, would probably have a more stable financial system and economy than England itself".


  1. BBC News, 7 May 2014
  2. Adam Smith Institute: An independent Scotland would be better off using the pound without permission