In a brief summary in his book Why It’s Kicking Off Everywhere, the journalist Paul Mason describes the self-defeating actions of the Obama administration when trying to kick-start the US economy during the 2008-11 Great Recession. The House of Representatives had given the nod to nearly a $1 trillion of funding under TARP 2 (Troubled Assets Relief Programme). This was the second injection of massive cash – TARP 1 was spent under George W. Bush in 2008. Obama had wanted to spend the money on infrastructure. However, Ben Bernanke, head of the Federal Reserve at the time, persuaded the economically inexperienced president that if he gave the money to the banks, they would lend it and the economic multiplier effect – money lent circulates several times around the economy – would mean that eight times as many dollars would flow into Americans’ hands.
Obama was persuaded and gave the money to the banks. They greedily took the no-strings attached monies, repaired their own balance sheets and turned $700 billion not into $5.6 trillion to course through and revitalise the US economic arteries and vessels, but into an anaemic $100 billion of loans. Obama would have hardly got back what his government had borrowed. And there was a price to pay: Congress and the Senate demanded large cuts in the federal budget for such borrowing, and they got it too, nearly a trillion in cuts. Instead of booming, the US economy limped along with entrenched unemployment and under-employment for the next eight years. It didn’t collapse but it barely rescued those in need.
If only Obama had watched the film Prince’s of the Yen, a documentary by the economist Richard Werner. It gives an insight into how having your own currency and a central bank can prevent collapse and keep employment high. When Japan had its economic crisis of the late eighties and early nineties caused by a housing bubble, similar to that which threatened to derail western economies twenty years later, the central bank of Japan directed government spending into infrastructure. Japan constructed roads, bridges, upgraded train lines and created airports. Having their own currency allowed them to borrow on their assets from their own government pensions funds and other government ‘investors’, on top of the taxation they already accrued. Japan is still following this policy.
People might point out that Japan has been stagnant with huge debts for nearly thirty years. However, this should be treated with some scepticism. Japan, many commentators argue, is keeping a low profile on its success. It is the world’s largest car manufacturer; it has the largest proportion of employment of all developed companies; it is the biggest direct investor in the world, and it is at the cutting edge of electronics and AI. A lot of Japanese activity is hidden through its off-shoring of production to China and other Asian countries. Nevertheless, even based only on what we can see, not only is Japan an economic giant, it has world-class trains, planes…and automobiles (and the smooth roads to drive them on.)
Spending money on infrastructure is such a good and obvious idea. It puts money into the pockets of working people who then spend it in their local communities, which puts money into the pocket of local business, who then employ more people and so it goes on. By financing the grassroots, that wealth, like the tide, raises all ships – and provides the deep ports, the transport links, the manufacturing base combined with a skilled, well-paid workforce to attend to them! Banks benefit too. Debts are repaid, balance sheets are balanced, and loans are given to create further jobs and skills. Having your own currency and a central bank with a remit to protect the ‘real’ economy empowers government to conjure not just cash in hand, but to satisfy the needs of a society: hospitals, schools, roads and so forth.
Alternatively, there is a form of corruption about borrowing money and giving it to the elite by way of the top tiers of the banking system, hoping that it will trickle down to the base like the proverbial crumbs from the Rich Man’s table; while at the same time hanging the debt around the necks of ordinary people who pay for it by tax rises, loss of employment and a crumbling built environment.
The price of the latter is too high. Scotland is a country that is passionate about inequality. Any attempts to remedy it will never succeed if we fail to have our own currency and a central bank along with it. On top of this, we require policies that will use these phenomenal powers for the good of everyone.
Why would an independent Scotland choose the worst of all worlds (represented by the Growth Commission) – someone else’s currency, forced limits on spending and borrowing, and the selling of what we have to make payments for debts we neither contracted or benefited from? Without our own currency and monetary institution, the worst prophecies of the doomsayer Unionists will come true. Scotland might not fail yet we will be on life-support for the foreseeable future, except a small elite of course, doubtless confidently telling us ‘this is the only way’. Is that the Scotland we’re fighting for? I do not think it is. Rather, an independent currency will be the keystone of all infrastructure development, social inclusion and re-industrialisation of an independent Scotland.