16 September 2014 ~ Freedom for Scotland?

At 1pm today (GMT), Betfair reported they had paid out “six figures” on a number of “No to scottish independence” bets.
Furthermore they pointed out that betting patterns are suggesting a 79pc chance that Scotland will remain in the Union.
While I do believe this is the more likely outcome on September 18, I also believe the betting market has under-estimated the likelihood of a Union breakup.

According to this article, 97% of eligible adults in Scotland have registered to vote in the referendum – a level so high it is without precedent for Scotland.
My guess is that the many hundreds of thousands of “new” voters will tend to be less wealthy and less educated than the typical voting cohort.
Does it make sense for them to maintain the Status Quo – or is it more likely they will take a punt on an Independent Scotland and see how that plays out instead?
I think there’s a reasonable chance of the latter.

Foreign exchange markets have already made it clear that if the Union does break apart, the pound will head lower towards 1.55…

6B
A devaluation of the pound will make imports more expensive, creating new inflationary pressures. Could a “Yes” vote therefore inadvertently boost the English inflation rate, thereby cornering BoE Governor Carney in to raising interest rates earlier and more sharply than otherwise intended? London house prices are high enough, it’s about time they came crashing down in my book!

In case you haven’t guessed, I’m praying for a breakup. This is a once-in-a-lifetime opportunity to witness the end of the United Kingdom as we know it, and will make for some surreal newspaper headlines. In fact, if this does come to pass I might just stash a few copies away for future generations to enjoy.

Another interesting and important question is what the UK Office for National Statistics is going to make of all this. Civil servants have been instructed to make no provisions for independence. I guess the politicians feel it would send the wrong signals – or perhaps it is a calculated decision to avoid wasting time and effort on an “unlikely” contingency. I recently heard, in fact, that HM Treasury has made no preparations whatsoever and would be forced to “hire 100 people overnight” if the “Yes” vote won the day.

Anyway, the point I was getting at is this; the ONS produces many important economic data points, such as GDP, employment rates and CPI, all of which help the market second guess what the BoE is going to do next.

scots

* GDP is going to have to drop from $2.5 trillion to $2.25 trillion.
* It’s difficult to judge what will happen to CPI; as far as I am aware ONS don’t release on regional basis. However, if house prices are any indicator at all, it seems prices may be rising faster in Scotland than in England & Wales.
* Employment, similarly, is surprisingly (to me) low in Scotland.

So if anything perhaps the removal of Scotland could generate an impression of lower rates of inflation in England – perhaps giving BoE’s Carney plenty of room to maintain rock-bottom interest rates?

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