Scotland is set to vote next week on independence from the United Kingdom and a new poll gives the pro-independence supporters a small edge for the first time. What’s interesting, and perhaps tragic, about the growing preference for breaking free of Britain is the apparent dismissal of the economic consequences that may arise from independence. The macro risks are quite stark. In fact, we’ve had a real-world test that’s ongoing of just how bad things can get when a small economy is on its own with fiscal matters but remains tethered to a currency that’s controlled by another government. This could work out, but just ask officials in Spain or Greece–or the (unemployed) man on the street, for that matter–about the downside to a shared currency while shouldering any fiscal fallout and you’ll get an earful.
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