Dear Mr Salmond and Mr Miles,
I react to the idea, mentioned in The Economist, that an independent Scotland might wish a currency union with the remaining UK.
If you indeed would want to investigate this option, I advise you my paper
Money as gold versus money as water
That paper discusses the eurozone, but the mechanism would apply to any currency area. I am proposing a new theory – though untested yet – that countries with an Economic Supreme Court could have a currency union without greater political union. Perhaps you would not want to wait till the eurozone gives the working example. A definition of an Economic Supreme Court is in an appendix in my book DRGTPE, see the paper references.
It is useful to also refer to the paper by David Miles cs. on Optimal Bank Capital, now published in the Economic Journal but also available at the BOE:
The link is that optimal bank capital can be easily attained, if money / capital is created by the Central Bank and directly neutralised by capital requirements. Again, this would help the eurozone, but perhaps the UK can set the example.
I happened to see Mr Salmond’s cv and that he was born in 1954. It happens that I was too, like Angela Merkel and Francois Hollande as well. I suggest to take advantage of the common experience of history. It is important to refer to the censorship of science since 1990 in Holland and my advice to boycott Holland till that censorship is lifted. Perhaps your best point to start reading is this weblog entry where I observe that Spain might block EU membership of Scotland for fear of a precedence on Catalunya. But Spain might be grateful if you help solve the EU crisis by boycotting Holland till the censorship of economic science is lifted.
Thomas Cool / Thomas Colignatus
Econometrician and teacher of mathematics
PM. Link in The Economist