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Scottish Referendum in 100 Days and Counting
The Scottish referendum will be held in 100 days, on September 18. The referendum is fundamentally as different from the referendum in Crimea, or the one proposed by Spain's Catalonia as a prize fight is different from a bar room brawl. The former is conducted within established guidelines that govern such activity. The latter is not.
The question before Scotland is an exercise in clarity and simplicity. " Should Scotland be an independent country?" There is little scope for confusion. There is not threshold in terms of turnout that is required. The one innovation was to lower the minimum voting age for the referendum to 16 from 18.
If lowering the minimum voting age was meant to bolster the "yes" vote, it does not appear to be working. Polls have fairly consistently shown the "no" camp ahead. However, the debate is likely to become more passionate as the date draws near.
A "yes" vote would obviously have more impact than a "no" vote. If Scotland did vote in favor of independence, there would be about an 18-month period of preparation and serious negotiations with the UK. On key macroeconomic measures, like population and GDP, Scotland is 8-9% of the UK. The critical negotiations will be over how much of the UK's debt should Scotland finance as the UK will remain responsible for it all. Related to this, but separate is the currency that Scotland would use.
If Scotland commits to financing the share of debt in line with its relative GDP or population, a new independent Scotland may find itself with a debt burden of close to 100% of GDP. Moreover, its deficit may be on the magnitude of 10% of GDP. If Scotland refuses to compensate the UK, its own creditworthiness will likely be questioned. If may also weigh on the UK's rating.
The UK government has tried to play hardball, arguing that an independent Scotland could not use the pound as its currency. Scotland can still do so, via a currency board or a new Scottish currency that could be pegged to the pound. Such a currency regime, which is the least disruptive, also curtails the very independence Scotland ostensibly seeks.
Arguably Scotland's independent drive is a function of at least a couple of forces. First, Scotland has been pushing for greater local rule since 1997. Since 1999, some central government activities, such as education, transportation and health, have been transferred to Scotland in what has been called devolution. Second, the rise of the Scottish National Party, which won a parliamentary majority in 2011, should be also understood within the context of the political push back against austerity, seen recently in some of the EU parliamentary races. The SNP had campaigned for greater home-rule, in areas such as pensions and passports.
There may be some knock-on implications for the UK general election next May, eight months after the Scottish referendum. A victory of the "yes" camp in Scotland and the "loss" of Scotland would likely become key campaign issue. Even if an independent Scotland can be laid at the feet of the Conservatives, the loss of Scottish MPs would be a blow for Labour. It seems ironic, with the apparent increasing support for the UKIP and a faction of the Conservatives that want to ally with Germany's AfD (anti-EU party), it is rejected the kind of federalism on the European level that it claims to want Scotland to accept on the national level.
In a larger sense, the Scottish referendum is only one several considerations that we expect will boost sterling volatility in the coming months. The three-month implied volatility is just above 5.0%. It is at the lower end of where it had traded since at least mid-1996, when Bloomberg began collected the data. The 10-year average is closer to 9.5%, to put it in perspective.
In addition to the Scottish referendum, there are significant personnel changes at the Bank of England's Monetary Policy Committee, which in the past has been associated with an increase in volatility. Meanwhile, another part of the BOE may seek to impose new macro prudential measures to check the price of houses in the UK, that are rising particularly quickly in the south, including London. On top of this, a hawkish faction at the MPC appears to be coalescing, which may lead to increased speculation of a rate hike in Q1 15, ahead of the May national election.
The correlation between sterling and implied volatility (3-month implied) has turned positive (at the level of percent changes) on a 60-day rolling basis since late April for the first time since 2007. However, we suspect that the risk of higher volatility will coincide with sterling declining. For medium term investors who want to hedge their sterling exposure with options, may consider buying puts as opposed to the cheaper and more conservative strategy of covered rights.
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With my ancestors coming from the British Isles it gives mixed emotions. As a Scotch-Irishman this gives me pride to finally be free of British oppression. As an Englishman, this make me think "What the hell is wrong with you people!".
...Scotch-Irishman...
There is no such thing .
There is a Scots-Irish "ethnicity" (I'd define it as a culture) though. It's predominantly the Lowland/Border Scots that were removed to the Northern Ireland Plantation to do a war of attrition with the native Irish. Over time, this population became something different than Scottish, something different than the Irish they were sent there to fight. They had to be self-sufficient. They had to be independent and they most certainly held personal ownership of firearms (that allowed them to live another day) in high regard. As soon as they had the choice to get out from the English yoke by transplanting to the American frontier, they did so. This was the beginning of what the effete Northeasterners (of English descent)refer to as "hillbillies". Hadrian built a wall to keep them away, and we have an extremely long history of fighting for self rule. It'll happen once again, probably not in Scotland though, but almost assuredly in the southern states again at some point.
Fucking Scottish squatters.
I don't think either Irish or Scottish would care for the term, though.
Might as well say Israeli-Palestinian or oil and fuckin water
Cont.
Think of a culture as somewhat similar to how a language travels. The Scots-Irish culture is a snap-shot in time. Similar to how regional dialects often reflect the original settler's dialect for an area. The Scottish and Irish that migrated to the US later did not have the same values or cultural norms.
yes, wanting to break away from Britain but still be in europe with "ever closer union" does not make much sense.
Also Scotalnd receives more per head from general taxes than the rest of Britain.
Of course it makes sense. Being in "Great" Britain has nothing to do with being in Europe. In fact soon it may be the thing that actually excludes them from being in Europe if you've been keeping up.
And Scotland contributes more in taxes than it receives proportionally in government spending.
In any case they WILL break away and re-gain their independence. Today, or tomorrow, but they will break away. It will be yet another and perhaps the most significant loss in that execrable Empire. And it not a moment too soon.
AS a policy, one should look at what were--- and what now are--- the benefits of being independent, or amalgamating, consolidating, merging, and otherwise becoming part of a larger entity.
Over the last 100 years the upper 10% have benefitted mightily from the movement towards 'one world'. The human beans? Not so much.
The most obvious example is the Corporate one. The tens (hundreds?)of millions of jobs lost to unnecessary consolidations---thru merger or acquisition----over the last 35 yrs is an unconscionable destruction of career opportunites, jobs, and its ripple effects on businesses surrounding the absorbed entitities, a tragic commentary on capitalism. Competition elimination is anathema to Capitalist economies.
The same can be said about marriages. So many more couples opting for divorces (dissolving that 'merger') have been a net benefit to all parties involved provided they recognize the benefits of living apart amicably rather living together acrimoniously. Better for them, far better for the chillren.
The horrific cost that Lincoln and Davis heaped on to the american people in 1861 in millions of deaths and injiuries, money and debt, suspension of habeus corpus, the blood and bile strewn all over the south and north, just to stop South Carolina from exercising the same prerogative that the Revolutionaries exercised against England, is another.
There are so few consolidations that have worked for the masses, that it's almost a knee jerk to reject them summarily, and opt for a competitive independence where it is a viable alternative. Not necessarily an easy one, but in the long run, a boon to the people.
Yes, if one does not wish to work, is lazy beyond all common sense, desiring to relinquish freedom and be taken care of from cradle to grave by the state or country then it makes sense to stay glommed on to the tits of bigger entities that can extract------ under penalty of imprisonment -----the taxes (and printed new money) from the people who do work. But that also relinquishes ALL your power to the corrupt politicians pimping for communism, socialism and Fascism, while they live large like the richest capitalists.
I hope Texas and Scotland, Californica and Catalonia one day do manage a self-determinative destiny.
The benefits to the people who have some semblance of ambition, a willingness to do more than exchange oxygen into CO2, and a warm place to poop, will be a reversal of the good things back to the people and away from the 10%.
For that, I won't hold my breath. As the first world nations continue to age, the dependence by the elderly will become greater and greater, and they could care less and less about the freedoms that in their youth they would enjoy.