Alex Salmond gets my groat

A sign this morning that the more we stop talking about the process of the Scottish independence referendum and the more we start talking about the substance, the harder it will get for the Nationalists to make their case. The unionist side, on which I broadly find myself, has some reasonably heavy hitters in Alastair Darling and Malcolm Rifkind, and now the Torygraph reports them saying something I've been thinking for a while now.

Alex Salmond used to say the Scots would join the Euro. For a time this was a sellable proposition, but as recent events have made this less and less credible, Salmond has reverted to saying a newly independent Scotland would keep the pound.

Fine. Let's assume Westminster agrees (although it might not). Now, who will be your central bank, Alex? Would it be the Bank of England, by any chance? And when that Bank sets interest rates, will it set them according to economic data from the UK as presently constituted, or will it just take data from England, Wales and Northern Ireland?

That's a no brainer: there is no way that a post-independence Bank of England will be taking account of what's happening in Scotland. For one thing, it would be politically unacceptable in England. No, after independence, if Scotland keeps the pound, it will have interest rates determined by the Bank of England, ignoring conditions in Scotland. That means that even if Scotland doesn't have the wrong base rate from day one, it'll have the wrong rate pretty soon after. Given that England tends to have stronger growth, in practical terms it means Scotland is likely to have base rates that are too high, strangling its economy.

And if Scotland were to join the Euro, what then? For the forseeable future it's a fair bet that national budgets of Eurozone countries will have to be vetted by Brussels. What kind of independence is it which exchanges the pooling of economic sovereignty with the rest of the UK for pooled sovereignty with twenty-odd other countries across a cold stretch of sea? Countries moreover with whom one has none of the ties of geography, language, culture, history and personal affection that bind, however loosely, the UK?

No, for the Jocks it'll be the Groat, or nothing.

Diane Abbott makes the news

At the gym today, pounding away in preparation for another mountaineering trip that will probably be lost to the weather, I learned that Diane Abbott has tweeted that "white people love playing divide and rule". It was the lead item on Sky News, although over on the BBC it didn't figure until later on. Make of that what you will.

Although I don't like much being lumped in with a group of people who, apparently, love playing divide and rule (I'm racking my brains for evidence of that kind of behaviour) I guess that's small beer in comparison with the sort of stereotyping black people have to put up with, and on the whole I rather like Diane Abbott. I agree with virtually none of her views, as far as those are available to the public, but I like people who say what they think, even if it sometimes means they say stupid things like this, and I don't share the widespread perception that she is a hypocrite for sending her son to an expensive public school. If I had a black or mixed race son I'd want to keep him well away from the kind of culture which affects an awful lot of young black men in Britain.

Please excuse the stereotyping there, Diane.

When the BBC did get round to reporting the story about ten minutes in to its lunchtime bulletin, its reporter rather let the side down, I felt, by describing Abbott's explanation for her tweet - that she was referring to 19th century colonialism - as "bizarre". I am quite capable of making up my mind whether Abbott's explanation is rational or barking mad without any help from you, madam.

There may be no such thing as objective reporting, but need it be quite so obvious?

stephen lawrence - institutionally rubbish #3

This blog has long argued that the most significant inference to draw from the Stephen Lawrence murder is that the police are quite often incompetent. The Macpherson inquiry found differently - it said that the police were institutionally racist.

Following the conviction of Messrs Dobson and Norris yesterday for Lawrence's murder, Dr Richard Stone, one of the inquiry's members, is quoted as follows in the Guardian this morning: "We couldn't believe the police investigated murders in general as they had done with the Stephen Lawrence case .... insufficient evidence was presented to us to draw the conclusion that it might have been corruption so we were left with one other possibility, that it had to be racism".

It's the first sentence which stands out for me. I saw first hand how the police did their investigations when I was a lawyer, and I find it only too easy to believe that they messed up not just the Lawrence case but many others as well. I've previously cited the Michael Barrymore swimming pool death. So when Dr Stone says "we were left with one other possibility", he's wrong. There were two others - racism, yes, but incompetence too. So far as I can gather, the Macpherson inquiry did not look at any other murder investigations, with or without a racial element, to see how well they were conducted. Maybe Macpherson wasn't that competent either.

Doreen Lawrence said yesterday "Had the police done their job properly, I would have spent the last 18 years grieving for my son rather than fighting to get his killers to court". That hits the nail on the head. I thought Mrs Lawrence behaved with a dignity, poise and restraint that were very characteristically British. Go on, laugh if you like. But black people being British is rather the point, isn't it?

Julian Barnes and the Diminishing of the English Novel

Engaged in a session of Dad's-taxiing the other night, I nearly heard Julian Barnes in the radio talking about the Booker prize. Actually I did hear a little of it; Barnes spoke of his anticipation with a childishness eagerness at odds with his reputation as a serious writer. I couldn't help but think that he'd have sounded rather different if he'd lost. Perhaps that's a given. Then my journey came to an end and I missed whatever momentous stuff followed.

In keeping with my new found status as person up-to-speed with modern literature (see posts passim) I have read The Sense of an Ending, Barnes' winning novel. Tony, a man of middle years, divorced, seeing old age approaching, recounts his friendship as a young adult with Adrian, and with Veronica, his first serious girlfriend (NB Spoilers coming). He and Veronica split, and Adrian writes to ask Tony if he'd mind if the two of them got together. Tony remembers replying facetiously; but it then turns out, many years later, that Tony wrote a rather different letter, and we are invited to believe that this led to a series of awful consequences for which the elderly Veronica cannot forgive him.

I found myself uttering a series of increasingly exasperated Paxman-like "Oh for God's sakes!" as the faintly melodramatic denouement of Barnes' book unfolded. For it to be effective - and for the novel to work - we have to accept that Tony's letter led to those awful consequences, whereas in fact a moment's reflection would convince us that they would probably have happened anyway; we would have to accept that Veronica, a clever woman, was incapable of perceiving this; and we would have to accept that Tony, himself a clever person, rather than meekly accepting his guilt, would not have the wit to utter a rather tart "Get over yourself" to Veronica and get on with his retirement. Moreover since what Hitchcock used to call the McGuffin of the story is that we all create our own histories, blurring the past, it seems strange that this should happen to everyone in the story apart from Veronica, for whom the reverses of the 1970s appear to be as painful as when they were fresh. If we as readers find any one of these things implausible (and I found all three so) the novel collapses.

Once more I found myself saying exasperatedly to my friends in the Males from Hale, a book group, "But people just don't behave like that!" I find myself increasingly hamstrung by the divergence of some art from observed behaviour. We watched Atonement the other day at home, and I was reminded anew of my exasperation with Ian McEwan's novel. You have to believe that the Keira Knightley character, caught in flagranto with the gardener's son by her sister, would have said nothing when the sister denounces him to the police, another guest having been sexually assaulted in the grounds. Yes, McEwan really thinks we will meekly accept that the Knightley character would rather have watched her lover go to prison than stand up for him. Oh, and that the victim of the assault in the grounds will one day marry her attacker. Folks is strange, but not that strange. "It's only a film", says my wife. "It's just not a very good film", I reply. Or novel, for that matter. Both Barnes and McEwan write beautifully; but no amount of beautiful writing can camouflage an unbelievable plot.

One advantage of magical realism is that it matters slightly less whether authors get this kind of thing right. When normal rules of physics and taxonomy cease to apply, one is inclined to be a bit more forgiving of aberrations of human psychology. I have also been reading Ali Smith's The Accidental, in which Amber, a woman, unbelievable in naturalistic terms, intervenes in the lives of a seriously dysfunctional family, with dramatic effect. We accept that it's not naturalistic and accept what Smith tells us. Smith makes Barnes' book feel plodding, and McEwan look like a navel gazing coin polisher. She has more talent in her little finger than either of them.

Of course the disadvantage of magical realism is that it makes us all the more aware that we are being manipulated by the author, and that it's the author's decision to make the characters move in a particular way. Good novels make it seem inevitable that, say, Sidney Carton should give up his life for his double, and it's only if we stand back and think about it that we realise Dickens could have done it differently. When Alan Breck gambles away his money in Kidnapped we are blissfully unaware that it is Stevenson who is making it happen. It seems to happen because that's what Alan Breck is like. It's the fact that we don't think about the alternatives when we're reading that gives a good naturalistic novel its peculiar force. It seems to me as a non-novelist that that's too important a quality to throw away.

Although Smith's book was wonderful, I found myself thinking afterwards about its ethos. Thanks to the wonderful Amber's intervention in The Accidental, the four members of the family are liberated from their various unhappinesses; or rather all are bar the truly unpleasant father, Michael. In particular the mother, Eve, embarks on a liberating journey in America while the others remain at home.

I would be willing to bet that Smith, Scottish and a lesbian, is of the bien-pensant Left. In case we had failed to work out how horrid Michael is, we are told quite early on that he supported the Iraq war. How ghastly! And yet the tone of the book is one in which the pursuit of personal freedom leads to fulfilment. I find this a surprisingly right-wing, even libertarian, outlook. One of the reasons so many of us lead lives which, from the outside, appear no doubt stultifying and conventional is that association with others (spouses and children in particular, but other people too) brings with it responsibilities which require that one's own personal freedom is constrained. In The Accidental Eve's Thelma and Louise-like Odyssey is described in some detail; the effect on her children, abandoned in London with their asshole father, is glossed over. Everything we know about these dysfunctional kids tells us that they will be lost without their mother. But Smith more or less ignores that. After all, gritting your teeth and getting on with family life doesn't make much of a story, does it?

It turns out that I'm not the only one who didn't think the Booker winning novel was up to much. Geoff Dyer has written a withering review of it in the New York Times (www.nytimes.com/2011/12/18/books/review/julian-barnes-and-the-diminishing-of-the-english-novel.html). Dyer's objection was that it was kind of OK, but no more. I think that the English novel is big enough to withstand being diminished by Barnes, and by McEwan and Smith. But I do wish they'd write with a bit less polish and a bit more plausibility.

"Pourquoi nous?", demandent les Francaises.

Apologies for prolixity this morning, and for the clumsy French, but Euro news is coming thick and fast.

Here's the head of the Bank of France and European Central Bank policymaker Christian Noyer, bleating about the rumoured imminent ratings downgrade for France: "The downgrade does not appear to me to be justified when considering economic fundamentals. Otherwise, they should start by downgrading Britain which has more deficits, as much debt, more inflation, less growth than us and where credit is slumping."

These people just don't get it. M. Noyer, even a layman like me can see that you have ignored the most fundamental of economic fundamentals.

Britain's economy may have the defects you describe; but its government has shown a willingness to get its spending under control. Has France? No. It has merely put up a couple of taxes.

Britain has its own central bank, its own currency, and can set its own interest rate. Rates here have been at 0.5% for years. ECB rates are way above this, and the Bank (for which you work M Noyer) actually put rates up after the crisis broke.

Because Britain has its own central bank, it can print money when it likes. Can France? No. France is stuffed because it signed up to monetary union.

France would love to have Britain's control over its own currency and start the printing presses rolling; in fact its President has been trying unsuccessfully to bring that about for months. It can't because its larger, more powerful and harder working neighbour, Germany, won't allow it to.

Now do you understand why Britain is borrowing at just over 2% and France is threatened with losing its AAA rating?

Someone once complained that this blog seemed quite angry quite a lot of the time. If that's so, it's a deplorable fault. But no apologies for the above.

Borg triumphs for Sweden again

Apologies to tennis fans, but Sweden's Anders Borg has been named EU Finance Minister of the year. I learned this piece of earth shattering news last night on the way home from an orchestral meeting. Mr Borg was interviewed on The World Tonight on the day Britain's unemployment figures reached their worst level for Lord knows how many years.

What, Robin Lustig, asked him, was Sweden's secret? How come Sweden's unemployment levels were so benign in comparison with Britain's? Ah, said Mr Borg, that's because we were more careful with our spending. We ran a surplus in 2006 and 2007, so that when the crisis came we could put that money into our economy.

Somewhere, I fancy, the corpse of JM Keynes gave a twitch, and in his long sleep the great man dreamed that someone in the world of the living had finally listened to him.

Lustig persisted. Did Mr Borg think that Britain was right to be cutting its deficit? Yes, said Borg. When the deficit is so bad you have no alternative. But what, Lustig went on, his desperation now becoming palpable, was Sweden's experience when it tackled its spending? Was Britain right to be cutting so fast? Yes, said Borg. We found in Sweden that it was helpful to front-load the spending cuts.

So there you have it. Someone who thinks George Osborne has got it about right.

Oh, and it turns out that Sweden isn't going to sign last weekend's Euro treaty either. Not without some changes. We are not alone!

Alex Salmond, Euroland and the Groat.

I watched Newsnight last night, mindful of wails from the Torygraph about the BBC's pro-EU bias. From the point of view of someone essentially well disposed to the EU but sceptical about the single currency, I found it pretty disappointing.

As usual with these matters, it's very hard to put your finger on bias, because the presenters never come out and say, "Well I think . . . .". Bias is something you have to infer from the questions that are asked, from those that aren't asked, from the tone of the interviewer (in this case Emily Maitlis), and from the attitudes and assumptions that underly the programme. It was this last which I found striking. Maitlis's questions, presumably scripted by her and her producer, seemed to assume that David Cameron had lost something fundamental by not signing up to a really important treaty which has a good chance of saving the Euro.

But a 6th Form economics student could tell you that the Treaty has no chance whatever of doing that. It contains fiscal rules which will not be obeyed, attempts to impose austerity measures which will make even less likely that countries will be able to grow their way out of trouble (and which there are now some signs that electorates of individual countries won't accept), makes no provision for transfers between rich and poor regions of the EU and does nothing to make the ECB a lender of last resort.

The failure to grasp this context coloured Maitlis's questions, both to the solitary Tory MP and the European politicians on the programme. She didn't ask the Eurocrats any questions about utility of the treaty, and when they accused Britain of acting selfishly she didn't point out that Britain is not in the Euro, or that in any event the Germans are effectively holding the whole continent to ransom by refusing to allow the ECB to print money. Now there's self-interest for you. Where was the question to the Dutch MEP about the transfer of Holland's surpluses to the struggling south? The EU apparently always makes good, gradualist decisions, whereas Maitlis's questions to the hapless Tory were tinged with what sounded like real anger at Cameron's impulsive mistake.

As a BBC lover I found it made uncomfortable viewing. You don't need to be a genius to see that, whatever Cameron may have got wrong, the Eurozone leaders are in a different class of incompetence altogether.

In the Autumn the EU tried to impose a haircut on Greek bond investors. "No", cried economics geeks (including me): "If you do that to Greece, that'll just push bond yields up for bigger countries like Italy". And thus it came to pass. So what does the Group of 26 promise now? That in future there will be no more haircuts for bond investors. The words "stable door" and "horse" spring to mind. But the idea that the gilt markets will believe a promise, enshrined in an EU treaty or not, that there is no chance of them losing any of their money in a future default, is laughable.

We are dealing with a group of people, mostly unelected, incapable of understanding that if you impose losses on the bond markets it might make them wary of investing in other insolvent countries, but, that having come comprehensively to pass, capable of believing that a promise that it'll never happen again will make bond investors come running back waving their hands in the air like guests at a Happy Clappy wedding.

What does any of this have to do with Alex Salmond? Well, for a long time the SNP's policy was to join the Eurozone. That's a policy which has looked more and more difficult to justify as the imbalances thrown up by the one-size fits all interest policy have brought first Ireland, then Greece and now Italy and Spain into the maelstrom. And so it comes as no surprise to find Salmond saying, on the Today programme this morning, that post-independence the SNP will "keep the pound" until conditions are right for Euro membership. "Keep the pound"? That's big of him.

I have always thought the currency issue might be the Nats' achilles heel, and strains in the Eurozone have now brought the problem to the surface. If the Scots become independent, that means independence from the Bank of England. No doubt some accommodation could be reached about ownership of the actual notes and coins in circulation. But the Bank of England sets interest rates for all the UK. Post independence it will not be setting rates for Scotland. Or rather, it will not be taking into account the Scots economy when it sets rates. I'd be willing to bet that won't happen because some English Tory MPs will make sure it doesn't. If Scotland uses the pound for any length of time (and there will be a strong feeling in England that it shouldn't), it will be on England's terms. And that will mean interest rates suitable for England and the rest of the UK, not Scotland. In practical terms that probably means a rate that is too high for Scotland, and which will quickly strangle the Scottish economy.

Salmond had better hope that the Euro is still surviving in workable form when independence day dawns. Because Scotland could fairly quickly be setting up its own currency. How about the Groat?

PS - A couple of headlines, one on Radio 5 and one on Radio 4, two days apart, both pretty much identical - "David Cameron has vetoed a treaty to stabilise the Euro" was the gist - and both thoroughly misleading. Cameron has not prevented a treaty taking place. He has used his veto to prevent Britain having to sign it. The treaty is set to be signed next March by 26 other countries. Secondly the treaty has as much chance of stabilising the Euro as I have of conducting the Berlin Phil. Hours before the time of the second headline - last night - Italian 10 year bonds had reached record levels. Some stabilisation.