SWINNEY ISSUES STERLING THREAT.

John Swinney, the man who sees himself as Scotland's 'Chancellor of the Exchequer' is in a real panic, so much so that he's now issuing threats against the UK government.

All 3 main UK political parties have made clear that, should the Scots vote for independence in September, they will not enter into a currency union with the newly independent nation. While they acknowledge that Scotland could continue to make use of sterling as its currency, there would be no formal agreement and the pound would continue to be managed from London as now. Swinney and his pals in the SNP don't like this and so are now threatening that no currency union would mean Scotland refusing to accept its share of the UK's national debt, currently estimated to be about £100bn.

Exactly what planet Swinney is living on is a bit of a mystery though it clearly isn't the same one inhabited by the rest of us. Why does he think that Scotland, having rejected its place in the United Kingdom, should be entitled to continue to enjoy the benefits of its old currency in a formal currency union ? Why does he think there is a link between using the currency and national debt ? Why does he think that the government of the rest of the UK doesn't have plenty of routes by which it could take back the £100bn if it chooses to ?

The SNP wants Scotland to be independent and yet is madly trying to reassure its troubled population that nothing will change if it achieves its goal EXCEPT that everything will be much better than now. Poppycock.

If an independent country does not control its own currency it has no financial freedom whatsoever. As a minor partner in a currency union it would have little power and would almost certainly have to submit its budget to the UK Treasury; in an informal arrangement it would have no control whatsoever over the value of the currency and exchange rates as well as interest rates, little control over tax rates and would be entirely at the mercy of the economy of the remaining, and much larger, part of the UK. It would not have its own 'central bank' and would not be able to borrow independently; it would be no more than a vassal state.

With all of these restrictions, why on earth does Swinney want to keep the pound ? The simple answer is that he has no choice as the only alternative for Scotland if it wants to be a member of the EU is the Euro. An independent Scotland would almost certainly have to apply to become a member of the EU and the rules of that egregious organisation require new members to adopt their benighted currency and all the restrictions that go with it. Swinney and his mates in the SNP see sterling as their way out, giving them a degree of bargaining power when it comes to EU membership.

For Scottish voters it's a case of 'the devil you know or the devil you don't'. Swinney, Salmond and the rest know that their people would shy away in their millions if the Euro was the currency of choice, so they've gone for the pound. Sadly for them, the people who represent the nations they want to reject don't like the idea one jot and have issued a resounding 'NO WAY !'. Whether any of this matters will become clear with September's vote, though any Scot with financial sense will surely say 'No' also.

EUROZONE STUMBLES ON AS GREEKS DROP THE BALL.

Less than a week ago I wrote that the solution to the latest Eurozone crisis might well last no more than 2 or 3 weeks, but I didn't reckon on the Greek Prime Minister throwing all the balls into the air with his announcement that the deal reached last week would be put to a referendum of the Greek people.

The Greek people are not a happy bunch, despite the fact that they've been enjoying a lifestyle in recent years that's way beyond their ability to pay for it and that a substantial part of the cost of putting things right was now going to be picked up by other European Union member countries. For some reason, the Greeks think that it's all very unfair for them to have to be 'put upon' in this way and the initial reaction to Mr Papandreou's statement is to expect them to vote the Greek equivalent of 'Up Yours', when it comes to the referendum in December or January.

Why Mr Papandreou has, effectively, reneged on the agreement reached last week is anyone's guess. His announcement certainly seems to have come as a complete surprise to all and sundry and stock markets have nose-dived as a result. Is he playing a game designed to screw a few extra drachmas out of Brussels ? Is he simply trying to save his own political skin ahead of a confidence vote due on Friday ? Whatever the reasoning, the view of most pundits seems to be that he may well lose Friday's vote, thus precipitating a general election. The announcement of a referendum on the proposed solution to the Greek debt crisis, while unsettling to say the least, is probably no more so than would be the collapse of the Greek government and so Papandreou really had very little to lose, but quite a lot to gain, at least in the short term.

What will happen next is in the lap of the Gods, almost literally so in the case of Greece, the home of Mount Olympus. Will Papandreou survive ? If he does, which way will the Greek people vote in the referendum ? If he doesn't, will there be a referendum at all ? Should the people vote against the proposed deal, it seems quite likely that Greece will then have to leave the Eurozone, possibly to be followed by others such as Ireland, Portugal, Spain and Italy. If they vote for the deal, or don't get the chance to vote, the Eurozone will likely hold together for a few more months, until the next crisis, unless the fall-out from the current meleé proves too much for Italy to withstand, as already seems a possibility.

What fun times these are.

WHAT IS A TRILLION, ANYWAY ?

Eurozone leaders meet to discuss how to resolve their ongoing financial crisis and the commentators throw around numbers that are simply mind-boggling - not mere billions any more, but we are now into trillions of Euros, pounds, dollars, or anything else you care to mention. Does any of it make sense or even really matter ?

What we have is a crisis caused by governments and economists. Forget all the ire aimed at 'bankers', other than the entirely incompetent ones like Fred Goodwin and Eric Daniels, they've done no more than apply the rules that applied to their businesses, rules that were set by governments. Additionally, they responded to the pleas of their governments to lend, lend, lend, as much as possible so as to 'stimulate the economy', in pursuit of an economic theory that has now been shown to have been rather flawed, to ever greater growth. That they didn't really have the money to lend and that most of the loans were unsupported by sound business cases was of minor importance.

In the Eurozone, we have the scenario outlined above multipled by a factor of billions as a result of the utterly impossible Euro project. Anyone with a brain cell knew that trying to cram together many nations with disparate economies under a single currency was doomed to failure, and so it has proven. Perhaps those that chose this path actually did so knowing that it would fail and that they would then have an opportunity to propose even closer union as the only logical step - this has only just occurred to me as an option but it makes terrifying sense.

Thinking more about this, it's bloody obvious that the original perpetrators of the Euro knew full-well that 'stage 1' was doomed to failure; they also knew that the only realistic solution to that failure was a 'stage 2' that involved even greater union between the member nations. What they didn't, and couldn't include in their calculations, was the financial crisis that has occurred quite independently of the inevitable Euro mess. When both crises are put together, the result is a total melt-down of the Euro, which is exactly what has happened.

It is now being reported that the Eurozone leaders have been discussing a potential change to the European Treaty as part of the resolution to their problems, something that should automatically lead to a referendum in this country; being a cynic, I wonder if this is a manufactured move designed to 'head off' Monday's debate and vote in the house of Commons. Of course, DC has said that any change would be in our interest, no doubt another attempt at a Monday bypass; one also wonders whether his words may be a precursor to an attempt to say that a referendum is unnecessary as we won't be affected by any consequent change.

We all know what a bunch of prevaricating and disingenous crooks and liars our politicians are. We also know that whatever they come up with, it's us, the people, who will pay. Is it any coincidence that the country currently doing best in Europe is Belgium, and they've been without an effective government for months.

To answer my original question, "Yes, it does make sense, even if the numbers are beyond our comprehension and it matters far more than the vast majority realise or even care."