Elegantly succinct. I think I understand things better than before and find myself in agreement with your forecast. My inner evil twin is appreciative to Scotland for the drama they're providing us, no cable fees necessary, to view for another several weeks at least, and possibly well into the future.

'tis strange I should be old and neither wise nor valiant. From "The Maid's Tragedy" by Beaumont & Fletcher

Uh, Iceland's problem was that it was running its banking system on GB£ rather than local currency.

How did that become a point in favor of surrendering sovereignty over your currency?

- Jake

Friends come and go. Enemies accumulate.

I don't really see why it's such a drama. Because it's an English-speaking nation, I suspect. There is no philosophical, diplomatic, economic or monetary show-stopper. Scotland will join the group of relatively rich, independent, innovative and dynamic nordic nations.

Norway and Denmark speak closely-related languages and used to be united under one crown. They are still friends, trading partners etc. And with respect to the EU, I imagine that Norway's status would be the closest analogue to what Scotland will negotiate with the EU in the short term.

I'm not convinced that Belgium will be an irreductible opponent of Scotland's maintained EU membership, because

1. as far as I know, they still don't have a government
   
2. the Flemish parties would certainly be in favour, leaving any government divided, at best, on the issue.

I think Spain's supposed opposition will turn out to be a non-issue faced with a fait accompli of Scottish independence. There is no constitutional controversy, unlike the Catalan case; a split will be (at least technically) amicable.

As for the currency question :

Moreover, Scotland would expose itself to retaliative actions from the UK, with ill intended policy makers in London punishing Scotland for its dare.

I disagree. The Westminster government tried to blackmail the Scottish electorate by threatening to withhold "their" pound (which has suddenly become English, and not British!), but this has backfired spectacularly. There will be tough negotiations, but Salmond's tabling the nuclear option of repudiating Scotland's share of British debt was, in my view, a masterful way of pointing out that this sort of brinksmanship is absurd. Scotland will keep the pound sterling until such time as it joins the Euro (or a nordic currency coalition?)

_{It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II}

to re-enact the battle of Bannockburn?

Guardian

The emergency move for all three of the main Westminster party leaders to go to Scotland tomorrow - throwing aside all previous plans - was agreed on Monday afternoon at a meeting between Ed Miliband and David Cameron.

The Guardian's political editor, Patrick Wintour, reports:

    For Cameron it is a dramatic change of plan because he has been insisting he will not go to Scotland until next week.

    The agreement not to attend PMQs was taken at a meeting between Cameron and Miliband. It follows intense criticism of Cameron for not planning to go to Scotland until next week. He had been advised that his presence would be a negative influence, but a mixture of his own desperation at the prospect of losing the union and the belief that something desperate was needed to revitalise the no campaign changed his thinking.

    The two men made the decision in the knowledge that one poll had suddenly put the yes campaign ahead, and another was about to be published confirming the trend showing the two campaigns were neck and neck.

_{It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II}

To me it seems that many countries smaller than Scotland have had success with their own currency. They can use a peg or a floating peg to a currency that belongs to a major trading partner. An important thing is whether or not they tend towards a primary surplus in their trade balance. Another critical factor is the effectiveness with which they regulate the underwriting for credit creation. If that is strong they should have few fundamental problems if they manage their peg properly.

"It is not necessary to have hope in order to persevere."

What I think has shifted the debate in Scotland is the realization that institutions and assets which they had always been told were British, were in fact English.

Thus the Pound Sterling belongs to England (the name: Bank of England should have been a giveaway).  The military bases and manufacturing facilities in Scotland will be moved south - proving that the Army and associated industries belong to England.  And the general sense that the Scots will have to develop all institutions and skills of Governance from scratch - as if Scots have had no hand act or part of the Departments of State in Whitehall.

In other words the implied blackmail of taking all these things away has only confirmed that Scotland was being ruled not just from, but by England in the first place.  

Suddenly an establishment panic has set in - as this approach has been rumbled and has backfired. All the (archetypical English) party leaders are suddenly rushing up north with offers of enhanced devolution which Salmond had requested be on the ballot as a third option in the first place.  They therefore lack all credibility: just as all the promises made before the 1979 devolution referendum were promptly shelved afterwards.

If the much maligned (particularly by the English) Gordon Brown were still the PM, none of this might have been such a big deal today.  But the fact is the Scots now feel as if they have been taken for fools, and don't like the way the English have been putting them down -  more or less implying they are incapable of running a government or a monetary system.

I don't see Scotland being allowed to remain within the EU as being much of an issue - as a successor state - just as East Germany joining the the EU as part of Germany never became much of an issue.  With England possibly leaving, the EU will be more than anxious to ensure Scotland stays - and thus make it much more difficult for England to leave as leaving would then have much greater effects on the v. substantial cross-border trade than Scottish independence ever did. The Scots would be much less disrupted of EU business than the UK ever was, and will, I think be welcomed with open arms - Spanish and Belgian qualms notwithstanding

Of course publicly, at least, the EU has to be supportive of the UK as a member state right up to and including the referendum, but suddenly, if the referendum is passed, all that will change dramatically and previously mooted legal difficulties will become mere technicalities to be resolved sooner rather than later, with the declaration that Scotland is a unique and once off situation, and not a precedent for any other situation...

The price may be, at some point in the future, that Scotland has to join the Euro.  The EU would certainly not be happy to see another new currency joining the Union.  That would be very unpopular if mooted now, but might become the next best option if England were tempted to play silly buggers with the Pound, just as they have played silly buggers with the concept of "Britishness" and all the institutions of state that were supposed to belong to Scotland as well, but which have now been claimed by England.

As for N. Ireland, the Unionists are all in a dither with Orangement marching against independence in the Streets of Scotland: Just what the YES campaign needed to prove that "the Union" is a partisan and sectarian arrangement - Anglicanism being the State religion of England whereas the Church of Scotland is not established and mainly Presbyterian. Many N. Ireland Unionists would, ideally, like their own independent state, but know that just about no one else will agree to that. Geographically, Emotionally and historically they are much closer to Scotland than to England, and yet following Scottish independence, it us to England that they will continue to be tied.

The worry that England will have a permanent Conservative majority is overdone.  Scotland, with 10% of the total population was always little more than a makeweight in Westminster politics. Besides, UKIP may well split the Conservative vote which s fatal in a primitive first past the post system. The Conservatives, having "lost" Scotland, may well become unelectable for many years to come, especially as they are split on the perennial EU question.

UKIP is the classic little Englander, petit bourgeois, Thatcherite English Nationalist party and could displace the Tories as the lead right wing party as it has a clear (and  relatively popular) position in opposition to the EU. Labour also are clearly pro- EU policy and could benefit from the split on the right, if they had the courage to actually offer a left alternative. My view is that Scottish independence would actually lead to a Labour led Government (possibly in coalition with the Lib Dems) keeping the rump UK in the EU more likely, not less.

Index of Frank's Diaries

As Scotland deliberates, a reminder: 'Scotland must be braver!' http://t.co/jdY7DHkkWV & 'If Scotland Why Not Greece? http://t.co/ybNVjioMLf

— Yanis Varoufakis (@yanisvaroufakis) septiembre 9, 2014

The question is not whether the Scottish government will be able to twist England's arm (perhaps by threatening to walk away from the UK's public debt) so as to be allowed to stay in the Sterling zone. This is the wrong debate to have. The real question, that is already surfacing, is whether Scotland should want to share the Bank of England, as the recent White Paper sets out to do. The question for the people of Scotland is: If political union must precede a successful monetary union, as the Eurozone crisis has demonstrated so vividly, does it make sense to want to preserve a monetary union prior to dismantling a political union? The answer is unequivocally negative, turning the White Paper into unionism's unwitting ally.

Suppose for a moment that London bows to Scottish demands that the two countries share the Bank of England, appointing a governing body of Scottish and English central bankers in proportion either to population sizes or to national income shares; and even renaming it the Bank of England and Scotland (BoE&S). Presently, following the Credit Crunch, the Bank of England pursues energetically a policy of quantitative easing, supporting Westminster with copious purchases of Treasury-issued gilts. Once Scotland begins to issue its own bonds, as an independent country must do, the question is: How will the BoE&S decide on the mix of gilts and Scottish government bonds that it will purchase? Is this matter to be left to the discretion of the English-majority governing board, thus rendering Scotland's independent fiscal policy a sham? Or will some fixed ratio be devised, again limiting Edinburgh's fiscal leeway?

Moreover, when the current `unconventional' monetary policy comes to an end, with interest rates rising to `normal' levels, how will this `tapering' decision be reached? The English governors will always vote in favour of higher interest rates in tune with the London-based economy and its tendency to create real estate and financial bubbles. Unlike in the European Central Bank's governing board, where no country can ever have an absolute majority, in the BoE&S Scottish governors will be consistently out-voted, the result being Scottish interest rates that are permanently too high for Scotland. With Scottish growth thus artificially restrained, Edinburgh's fiscal policy will have to remain contractionary so as to meet the European Union's deficit and debt limits, if the White Paper's commitment to remain part of Europe is to be fulfilled. Without its own central bank to back its bonds, the Scottish government will be constantly threatened with rising bond yields; a scenario that bodes ill for a nation thirsty for national sovereignty.

Further to the political argument for a new Scottish currency, there are formidable economic arguments in its favour; arguments that do not obtain in Greece's case.

First and foremost, Scotland, unlike Greece, has its own banknotes. This may well be an historical curiosity but, nonetheless, it could prove hugely beneficial for an independent Scotland. Presently, three Scottish banks issue Scottish pounds under an agreement with the Bank of England which limits the quantity of printed money.[2] Upon independence, the Scottish government can commit to maintaining (say, for two years) the same rules except that the control of the three banks' note issues is transferred to a Scottish Central Bank which commits to maintaining a currency board that allows for a seamless transition to a free-floating Scottish pound (within two years). Unlike in the case of a Greek abandonment of the euro, in Scotland there need be no bank closures (as the Scottish notes are already in circulation), no ATM disruption, no re-writing of short and medium term contracts and no fear of bank runs. Indeed, the currency in people's wallets will be exactly the same as now.

Turning to the issue of public debt, another difference with Greece (which will default de facto the moment it leaves the Eurozone) is that Scotland does not have a public debt. Or, to be precise, it will have whatever debt it inherits from the United Kingdom as a result of a post-referendum negotiated settlement between London and Edinburgh. The SNP's misguided commitment to staying within the sterling union is forcing Mr Alex Salmond to sacrifice the debt issue, using it as a bargaining chip for securing the continuation of a lopsided currency union (rather than issuing a new currency in order to minimise the amount of UK debt shouldered by an independent Scotland).

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

Interestingly argued article, Luis. I think you are correct in your assumptions, but there are so many variables that it is difficult to be precise. One factor which you are a little light on is the emotional factor. A recent study showed that voters are more likely to be swayed by their emotions than the hard practical facts. As a Scot, I have heard a lot of debates on the 'I' subject and supporters of both sides have occasionally shown themselves to be somewhat emotionally unhinged in their condemnation of the other side or personality.
Nevertheless, the one overarching fact is that the only people not disenchanted in the UK with the current political status quo are the politicians themselves and I believe that whatever the result, Britain has reached a watershed and we will see a completely new political landscape in the next five years or so.
Perhaps this is a peculiarly British condition, but it is an early warning that the politicians of the EU in particular and the other member states should ignore at their peril.

The US has just realised that it might be a good idea to pay some attention to Scotland. Here is the NY Times' attempt.

Even by NYT standards, it's pretty amazing. They manage to spend a paragraph on Hobbes, give the response to Katrina (!!) as an example of the advantages of being part of a large country, while never mentioning Thatcher, the Tories, or Salmond. They suggest that the main issue is that Scots want to be ruled by people who look like themselves (why are most minorities so strongly for independence? Never mind. They didn't mention them). As for problems, they think that they will have less power to negotiate with the EU for passport-free travel to Italy (as opposed to being part of a country that doesn't want to negotiate this. No, they didn't mention that either).

Tomorrow's FT front page shows the risks of separation are real and would put jobs and our economy at risk #indyref pic.twitter.com/T174wFdVTa

— David Ross (@David_Ross86) septiembre 9, 2014

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman

Blood & Treasure

If Novoscotiya is really going to secede from Ukania what the better together campaign needs to be doing right now is organising the post referendum resistance, the 'reunify' movement. Whoever wins, the vote is going to be close, there are millions of people in Scotland who don't subscribe to the McKipperist hallucinations, and voting, by its nature, is provisional, this being an especial feature of referenda. An independence vote decides many things. It settles nothing so long as people may be willing to change their minds.

 This might seem a tall order for demoralised Unionists (and the much larger community of not-separatists) and the way in which London has collapsed souffle-like from smugness into a kind of hysterical despair doesn't bode well. But the separation process will be long and difficult and will end in a state of affairs that messes up both countries, so there are plenty of both practical and moral reasons to try and rectify the situation: and, surely, it will be impossible not to say 'I told you so'. So it follows that this should be said in an organised way and be shaped to point towards a particular outcome.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

The Independent

Their concern was underlined by a lengthy statement from Deutsche Bank, signed by Deutsche Bank board director David Folkerts-Landau, which said: "A Yes vote would go down in history as a political and economic mistake as large as Winston Churchill's decision in 1925 to return the pound to the Gold Standard or the failure of the Federal Reserve to provide sufficient liquidity to the US banking system, which we now know brought on the Great Depression in the US.

Germany, of course, has never done anything comparable.