There has been some ill-informed discussion in the media on how a possibly independent Scotland should take responsibility for its share of the UK National debt. Speculation, too, that an independent Scotland will be either bankrupt before it starts or leave the rest of UK ‘carrying the can’. Much of this has been driven by a misunderstanding of what National debts actually are. I’m not sure that Alex Salmond has understood the situation properly either. He’s saying Scotland can’t afford to assume its ‘fair share’ of the debt. There been much less mention of assets. It should not be forgotten there are assets too.
This is really a non-issue when the wider macro-economic implications are understood.
In exactly the same way as the total of all the world’s national debts, approximately $57 trillion, represents the stored financial assets of all of us globally, so too does the UK’s ND of $2 trillion represent the same amount of stored assets. They won’t all be held by Scots but some of them will. The assets and liabilities will balance out. There’s really no problem.
All countries have some form of National debt. Norway, which has more oil money that it seemingly knows what to do with, still has a National debt, by choice, of 938 billion kr ($158 billion) . Its where Norwegians, and other holders of Krone, store their financial assets expressed in Krone.
Scotland, as a similar sized country, will end up, by mutual and amicable agreement, with a similar sized National Debt after independence, if that is the path the Scots choose. It is not a question of whether they “can afford” the debt. They’ll need it just like the Norwegians need theirs. If Alex Salmond doesn’t understand how it all works, which is quite possible, he’ll need to sit down with someone from the Treasury who’ll explain it to him.
I’m not sure the word “debt” is a feasible reason to strike fear into the public, the idea that the worlds population is accountable for 57 trillion is bonkers, if money wasn’t around then some other form of barter would be.If Scotland becomes liable for 10% of the 2 trillion British debt, then that seem on face value to be an IOU of some sort, which in turn creates all the here and now economic practices of a nation, some may say the asset base worth of Scotland far exceeds the paper write of an IOU and if the people of Scotland become the sovereign owners of a new constitution then maybe the over due way of doing proper economics will come Scotland’s way.