No to BRITISH Pound Sterling for a non-British Scotland

Setting out their proposals, the Scottish National Party (aka the Scottish Government) says it wants an independent Scotland to keep the British pound and have the Bank of England administer the currency.

"A sterling area for scottish people would be most reasonable for both sides," suggests Salmond. Indeed, Salmond says it would be "common sense" to not opt-in for the Euro.

Salmond has gone so far as suggesting the Bank of England is an asset for the Scottish people; an acknowledgment to the respect the Bank generates throughout the UK.

So the British pound is good for Scotland, but is it good for the remainder of the rejected UK?

The immediate response to this amongst those south of the border would be a realisation that these chaps want to have their cake and absolutely devour it. And this realisation is absolutely right.

"I would be horrified, as would millions, if a Conservative/Coalition Government allowed you to keep Sterling or be regulated in London, let alone use the facilities of the gilt-edged market, to fund your requirements at preferential rates – “On yer bike!”" David Buik at Panmure Gordon writes in a response to Salmond's vision.

This sentiment is hinted at in a question from the Economist put to Salmond - "could the UK reject Scotland keeping the Pound?"

Buick further suggests, "the resentment in the UK would be humungous!"

We at Pound Sterling Live agree.

Surely a key concept of independence involves being independent in a monetary sense; why would an independent country wish to be tied to an institution that falls outside of its jurisdiction such as the Bank of England? They may argue for Scottish representation in the Bank - but why would the UK agree to such a demand to allow outsiders to form policy at their most important financial institution?

So while being monetary independence 'lite' appears something the SNP wish for we note that an independent Scotland would certainly not want to be dictated to in terms of fiscal policy - their debt raising, taxes and spending will fall squarely under their remit.

But, what the Eurozone crisis has showed us is that monetary policy has to be tied to monetary policy for a the union to succeed economically.  

Our feeling is that Scotland aims cover any fiscal shortfalls brought about by going independent through debt issuance at the low interest rates possible; rates that come courtesy of the economic conditions in the larger UK economy.

Ironically, these low rates are attributable to a Tory Chancellor and the London government that the SNP so despise. Any fiscal irresponsibility north of the border would compromise these low rates and strong sterling valuations.

Our initial take is that the SNP is pushing for a win-win situation. The problem for the rest of the UK is this is a lose-lose.