One of the most ridiculous claims is that Scotland, should it declare independence, must take its share of the national debt under the Vienna conventions.
What they (conveniently) forget is that HM Treasury also owns the shares in the Bank of England, and that is an asset which is, therefore, currently part-owned by Scotland. So if it is to get its 'fair share' of the debt, then it should also get its 'fair share' of the assets - including the Bank of England. The Vienna Convention isn't limited to the right hand side of the balance sheet!
Of course Osborne has (rightly) ruled out an Independent Scotland's participation in the Bank of England, and he has also committed the UK to guaranteeing the Scottish share of the national debt in GBP.
But that still means that Scotland should be compensated for the loss of an extremely valuable asset.
Of course once you understand Modern Money, you can solve both these problems with the same process - via a simple set of accounting journals.
Here's the (simplified) structure:
|Before Scottish Independence|
The Assets of HM Treasury are called "Taxpayers' Equity". It's unusual to see equity on the left hand side of the balance sheet, so first some explanation. The term comes from the Consolidated Statement of Financial Position in the 'Whole of Government Accounts' (I'd recommend the 2011 accounts which properly consolidates the Bank of England - see paragraph 3.80 on pp28 and 3.85 on pp29 for an interesting side note of the accounting effects of consolidation, and paragraph 7.50 on pp62 for a killer comment, and then paragraph 7.53 et seq. on pp65 for how QE actually works).
Taxpayers' Equity is described there as 'Liabilities to be funded by future revenues', which sounds ominous. However it would just as correct to describe them as 'Liabilities represented by Taxpayer cumulative net savings', because the alternative to net saving is spending, spending passes taxation points and thereby become 'future revenues'.
So Taxpayers' Equity is just those 'net savings of the non-government sector' you see mentioned in pretty much every MMT description. All there in the official, audited, consolidated government accounts.
On a population proportion of 8.38%, Scotland owns/owes £186bn of HM Treasury's balance sheet, and so the question is how best to deal with that.
The TL;DR version is that £186bn of the shortest dated Gilts from the Asset Purchase Facility are uplifted to HM Treasury and written out there - reducing both the Gilts outstanding and the Taxpayer Equity figure by £186bn and creating an asset adjustment at the Bank of England.
That then settles the Scottish share of the UK National Debt, and the Scottish claim over the Bank of England in one neat accounting journal. Scotland's government owes nothing in GBP, and the UK has no outside entity with any claim over its central bank.
However for those who think that isn't fair/right/possible, the Gory Details are as follows:
First expand the Balance Sheet of the Bank of England by pushing down the Taxpayer Equity:
HM Treasury: DR Bank of England Investment Value: £2216bn; CR Taxpayers Equity £2216bnPay off £186bn of the loan in the APF with £186bn of Gilts:
Bank of England: DR Other Assets £2216bn; CR Shareholders Funds £2216bn
Bank of England: DR Gilts held £186bn; CR Loan £186bnPay the Gilts to HM Treasury as a Bank dividend:
Asset Purchase Facility: DR Loan £186bn; CR Gilts £186bn
HM Treasury: DR Gilts issued £186bn; CR Bank of England Investment Value: £186bnAnd finally uplift the remaining Taxpayers Equity to HM Treasury:
Bank of England: DR Shareholders Funds £186bn; CR Gilts Held £186bn
HM Treasury: DR Taxpayers Equity £2030bn; CR Bank of England Investment Value: £2030bnThe end result of the short or long form is the same:
Bank of England: DR Shareholders Funds £2030bn, CR Other Assets £2030bn
|After Scottish Independence|
Once you understand Modern Money, you can see the myth for what it is.