I would say that 1 isn't very likely to cause a crisis because that's what you'd get with the adaptation of a new floating currency coupled with government support for contracts getting renegotiated. That insulates you against credit risk due to currency changes but it has the drawback of being the most difficult and expensive course of action. Since the Scotland crowd hasn't been emphasizing the hard work component so far I would be surprised to see them take the harsh medicine. And given that the european economy is very weak right now it's not an ideal time to be taking harsh medicine. Scotland has more room to fall then say, Greece, so thats a serious concern.
2 is what I consider the really big concern. While it's true that the failures are very irrational, as you note, the problem is that the markets can remain irrational for a long time. The 2nd half of the 20th century was notable for seeing crisis after crisis in foreign denominated assets and there was no reason for say, the US to want to see the economy of Singapore or Mexico to collapse. Post '97 nations have learned to avoid too much exposure to exchange rates. Not breaking ties with the pound would actually be worse then that because the pound is a much smaller currency then the dollar is. It's very possible that a boom and bust in North Sea exploration for instance could cause the Scottish and British economies to move in opposite directions with devestating consequences. I'd go so far as to say I'd expect something like that to occur.
The Euro scenario isn't quite as !FUN! as the pound scenario but the Eurozone still carries a lot of unresolved baggage. I just dont see the Euro achieving balance without a European government being given very broad taxing and spending power that would need to include a substantial fraction of automatic stabilizer non-discretionary funding such as retirement and unemployment moneys. And I find it farfetched to believe that the Scottish voters are going to revolt in demand of more fiscal autonomy only to turn around and hand that over to a pan-national entity.
It's possible for a newly independent nation to start off on a good monetary foot. I just don't have high hopes that Scotland will do that.
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Topic: Sheb's European Megathread: Remove Feta! (Read 1746448 times)