{"items": [{"author": "Peter", "source_link": "https://www.facebook.com/jefftk/posts/871641057212?comment_id=871656900462", "anchor": "fb-871656900462", "service": "fb", "text": "These answers are interrelated. First, re: Gresham's law, there is an obvious cost (in annoyance, lost business etc..) of refusing to accept these other version of GBP so as long as the risk is lower than the cost people will accept them. The reason the risk is low enough is the same reason they can't break the currency union in the manner you suggest.
Your suggestion that these crown dependencies could break the currency union seems to assume they are genuinely independent states. They are not. They are essentially quasi-independent territories but from wiki \"Westminster retains the right to legislate for the Islands against their will as a last resort\" So the UK government could just claw back any money they made in this way. Even if this wasn't the case parliament could simply seize accounts in UK banks (or the government could sue in court and get a judgement). All of which are things countries that respect the rule of law regularly do.
As for Scotland printing currency it seems to largely be a matter of Scottish pride. I wasn't able to tell but it wouldn't surprise me if these notes were subsidized by the Scottish government but even if not printing your own money is a powerful tool to ensure customer loyalty and communicate stability.", "timestamp": "1494657108"}, {"author": "Keller", "source_link": "https://www.facebook.com/jefftk/posts/871641057212?comment_id=871656900462&reply_comment_id=871750482922", "anchor": "fb-871656900462_871750482922", "service": "fb", "text": "→ To add to this, in America, you have rights against the government arbitrarily seizing your money because \"you took advantage of a good system unfairly.\" In England, no such rights exist. Parliament is a unitary sovereign, and if it wants to seize your money it can.", "timestamp": "1494710138"}, {"author": "Martin", "source_link": "https://www.facebook.com/jefftk/posts/871641057212?comment_id=871656900462&reply_comment_id=880860536302", "anchor": "fb-871656900462_880860536302", "service": "fb", "text": "→ The UK govt also can't arbitrarily seize money - only by \"by lawful judgment of his Peers, or by the Law of the land\" (Magna Carta) where \"in the public interest and subject to the conditions provided for by law and by the general principles of international law\" (EU Convention on Human Rights).
UK Parliament could in theory pass an Act abolishing Magna Carta and withdrawing from the Convention, but that brings us into \"constitutional crisis\" territory.", "timestamp": "1497968458"}, {"author": "Daniel", "source_link": "https://plus.google.com/113952791760990667476", "anchor": "gp-1494708649455", "service": "gp", "text": "I imagine it comes from customer demand, as the notes have the same legal effect as regular pound notes. There is no real danger of banks \"going rogue\" and printing too much, the govt would shut that down fast.", "timestamp": 1494708649}, {"author": "Bruno", "source_link": "https://www.facebook.com/jefftk/posts/871641057212?comment_id=871760717412", "anchor": "fb-871760717412", "service": "fb", "text": "My impression is that people in day-to-day transactions totally do avoid non-BoE bills. In practice if not legally, they are not legal tender like Federal Reserve notes are.", "timestamp": "1494713219"}, {"author": "Jeff Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/871641057212?comment_id=871760717412&reply_comment_id=871769938932", "anchor": "fb-871760717412_871769938932", "service": "fb", "text": "→ In day to day transactions in Northern Ireland, Scotland, Jersey, Guernsey, etc?", "timestamp": "1494718833"}, {"author": "opted out", "source_link": "#", "anchor": "unknown", "service": "unknown", "text": "→ this user has requested that their comments not be shown here", "timestamp": "1494719693"}, {"author": "Bruno", "source_link": "https://www.facebook.com/jefftk/posts/871641057212?comment_id=871760717412&reply_comment_id=871774594602", "anchor": "fb-871760717412_871774594602", "service": "fb", "text": "→ Jeff, I was thinking mostly in England. I'd expect English notes to coexist with local ones elsewhere.", "timestamp": "1494721000"}, {"author": "Jeff Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/871641057212?comment_id=871760717412&reply_comment_id=871777224332", "anchor": "fb-871760717412_871777224332", "service": "fb", "text": "→ Wang: also from wikipedia, there isn't any legal tender in Scotland at all (neither Scottish notes nor English ones)", "timestamp": "1494722991"}, {"author": "Nicholas", "source_link": "https://www.facebook.com/jefftk/posts/871641057212?comment_id=871774574642", "anchor": "fb-871774574642", "service": "fb", "text": "It makes the transition to an independent state easier because you have things already set-up. Quebec has many duplicative departments and programs that the federal government provides in all other provinces but reimburses to Quebec. Pension plan, income taxes, etc are all done provincially, which is wildly inefficient, but if they were to separate they'd be all set to go. I wouldn't be surprised if this is part of their thinking, and it'd be \"anti-Scottish\" to propose scrapping it. (Of course, if they became independent they'd join the EU and then get rid of the Scottish pound. But they'd have a transition currency, something that's a problem for Montenegro, for example.)", "timestamp": "1494720972"}, {"author": "Jeff Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/871641057212?comment_id=871777748282", "anchor": "fb-871777748282", "service": "fb", "text": "Could you break the Guernsey (or whatever) Pound peg by borrowing huge amounts of Guernsey Pounds and then asking for conversion to BoE notes? The idea being that Guernsey runs out of BoE notes, their currency devalues, and your debt is denominated in Guernsey Pounds. Would no one lend enough money?", "timestamp": "1494723250"}, {"author": "Peter", "source_link": "https://www.facebook.com/jefftk/posts/871641057212?comment_id=871777748282&reply_comment_id=871778102572", "anchor": "fb-871777748282_871778102572", "service": "fb", "text": "→ Do you mean borrow physical Guernsey pounds? Presumably your ability to do this is limited by the difficulty of actually acquiring a large percentage of the fixed supply. And obviously the government isn\u2019t going to help you do this. Also the moment someone realizes what you are doing the value of Guernsey pounds starts to increase (they can sell to you for more than face value) so you likely end up losing money and failing to bankrupt the system.
Especially since in such a situation the UK would almost certainly extend credit to it\u2019s dependency making it impossible.
---
If you mean borrow in the normal sense (get bank accounts balances so denominated) then it depends a great deal on whether banks actually denominate in Guernsey pounds or if everyone denominates in British pounds. But again the UK would extend credit so you would fail.", "timestamp": "1494723742"}, {"author": "Alice", "source_link": "https://www.facebook.com/jefftk/posts/871641057212?comment_id=871777748282&reply_comment_id=871778162452", "anchor": "fb-871777748282_871778162452", "service": "fb", "text": "→ Jeff Kaufman Several countries have at times had dollar pegs (Argentina, Venezuela, maybe others) and UK tried to use a fixed exchange rate in the European Market and was swiftly driven out by Soros.", "timestamp": "1494723792"}, {"author": "Nicholas", "source_link": "https://www.facebook.com/jefftk/posts/871641057212?comment_id=871777748282&reply_comment_id=871778312152", "anchor": "fb-871777748282_871778312152", "service": "fb", "text": "→ I feel as if the community is small enough in Guernsey (or Isle of Man, etc.) that they'd notice something was up. It's not like Soros can just hit a few buttons and make a huge bet on a currency that's not widely available on the international market. There's too much human interaction, and like in small towns, people would talk. I think Scotland is big enough (in people, area and GDP) that you could pull this off quietly, but you'd need way too big a bankroll, so all but the richest would fail.
This kind of of currency union thing reminds me of when German bonds went below 0. The ECB was propping up Spanish and Greek (etc.) Euro-denominated bonds, and since German Euro-denominated bonds were clearly safer, those had to carry a lower rate, so we hit the zero bound. With large institutional investors that bid a certain level of safety automatically you get this. Not gonna happen in Guernsey.", "timestamp": "1494723951"}, {"author": "Peter", "source_link": "https://www.facebook.com/jefftk/posts/871641057212?comment_id=871777748282&reply_comment_id=871778391992", "anchor": "fb-871777748282_871778391992", "service": "fb", "text": "→ Alice I believe currency controls usually go along with those pegs, e.g., Venezuela (when it had a peg and I believe now) prevents you from selling/buying too much of their currency. Though that wasn\u2019t true when the UK tried it I believe.
This is a bit different because the country to which the currency is pegged is implicitly backing the peg as well (at least to some degree).", "timestamp": "1494724017"}, {"author": "Jeff Kaufman", "source_link": "https://www.facebook.com/jefftk/posts/871641057212?comment_id=871777748282&reply_comment_id=871778821132", "anchor": "fb-871777748282_871778821132", "service": "fb", "text": "→ Nicholas: this wouldn't work with Scotland because their notes are all backed by BoE notes. (Unless they're illegally over-issuing, in which case you could maybe do something.)", "timestamp": "1494724314"}, {"author": "Nicholas", "source_link": "https://www.facebook.com/jefftk/posts/871641057212?comment_id=871777748282&reply_comment_id=871785223302", "anchor": "fb-871777748282_871785223302", "service": "fb", "text": "→ Lots of currencies are pegged to the Euro, and though the (mostly) African ones mostly have currency controls, many are EU/EFTA countries getting ready to adopt the Euro (in Eastern Europe) or not (Denmark, Sweden, Norway). Their central banks signal to the market that they will aggressively keep their currency within 1% or less of the band (called the ERM II), and so the market doesn't try to push it unless there's severe economic pressure. Currency controls aren't necessary for a peg, but you usually need an economy and government that's somewhat developed, stable and clear. EU countries, relatively at least, usually fit the bill.", "timestamp": "1494728118"}]}