Bad Arguments for the Permanence of Bitcoin

I will rebut various elements of a rather poor article arguing that Bitcoin will be around forever.  It might well be — I don’t know — but I do know that this article does not add any light to the topic.  It appeared here:

The random banker bashing in the headline might give you an initial suspicion about who is likely to be right here.

The first rhetorical question the article asks is “Would Jamie Dimon really sack traders who netted a 1,000% return in less than two years? The bank’s shareholders wouldn’t approve”

The answer to this is definitely yes.  Return alone is an inadequate assessment of trader performance.  We must look at risk-adjusted return. A guaranteed 10% return is better than anything lower than a 50% chance of 20%.  If the trader made his 1000% by betting on a single horse, he took an enormous risk to make his 1000%. The shareholders would certainly approve of Dimon sacking such a trader and in fact would demand it.

We then move on to a ‘fake news’ type criticism in which the author attempts to show that Dimon is biased.  He writes “Although JP Morgan was by no means the most leveraged of the banks, it still took bailout money, and, as its CEO, Dimon and bitcoin will inevitably be philosophically opposed.”  So this is a set of claims which don’t stack up.  Firstly, JP was bailed out post-crisis (fine).  Secondly, Bitcoin was invented in response to this crisis (I don’t know, but let’s accept this).  Thirdly, JP must be opposed to everything that happened as a response to the crisis.  Conclusion: JP is opposed to Bitcoin forever.  Premise Three is obviously false.  What can be said to even make it plausible?

The next section of the article accuses Dimon of not understanding Bitcoin because he says it is a fraud.  The author then admits that Bitcoin is in fact extensively used for fraudulent and criminal purposes but it is not itself a fraud.  This is parallel to those arguments against gun control which say that guns don’t kill people, people do.  I will leave that there.

I will close by criticising a remarkable paragraph which packs in a lot of errors and bad arguments.  The author writes: “Dimon declares that we will use the technology – blockchain technology – but that bitcoin will be shut down. That’s like saying we will use football pitches, but football players will be banned. One comes with the other. In any case, you can’t just shut bitcoin down. It’s a decentralised, distributed network. That’s the whole point of its design. There is no central point of failure.”

This is very strange.  Take the football analogy first.  There are two major problems with it.  As a parallel, it may or may not work.  Assume it works.  Let’s be generous.  There are alternative uses for football pitches.  They have been used as prisons and they were used as holding centres post-Katrina.  Other uses could be imagined.  We could land helicopters on them.  So even if Bitcoin ls like playing football and the blockchain is like a football pitch, we can do other things with football pitches and we could do other things with the blockchain.  Strikingly in fact, this is where much of the excitement exists.  There are many potential extremely useful applications of a distributed ledger technology such as property registers and shareholder transaction records.  These would be interesting because they would be highly transparent and resistant to corruption and bureaucratic sloth.

The second argument in here is equally poor.  The claim is that you can’t shut Bitcoin down because it is decentralised.  What this may actually bring out is that you cannot shut down the servers behind Bitcoin because they are decentralised.  But that isn’t what Dimon says.  He says that “There will be no currency that gets around government controls.” What if governments made Bitcoin possession and use illegal and banned its use in any transactions?  They could do that and then what Dimon has pointed out is true but no-one has to go around shutting down distributed servers.

I conclude that the author has done nothing to show that Dimon is wrong or that Bitcoin is not a bubble and will persist.  If you would like to read a higher standard of discussion on financial markets which includes more rigorous argument and some familiarity with the facts, you will want to buy my new book:



The Importance Of Hindsight Bias In Financial Markets

Recently, Lloyd Blankfein of Goldman highlighted an important feature of psychology that has impacts on financial markets: Hindsight Bias. 

He is discussing whether we are in a bubble comparable to Tulip Mania.  The key point he makes for our purposes today is:

“But, of course, you never really know until you know, he said. “When something happens, 80 percent of the world will remember knowing it … in hindsight.” ”

In psychology, this feature is known as Hindsight Bias.  It means that people falsely believe that they predicted events that have now occurred.  I suspect that this is due to another sort of idea much discussed in philosophy.  The common idea of time seems to be modeled on a ‘moving block’ theory.  This says that while the future is still open and fluid, the past is now fixed.  The fixed block moves forward as time does.  So, since the past is now fixed, it begins to look like everything that happened had to happen.  And since it was inevitable, we must have predicted it, right?

Wrong.  The canonical experiment on this asks people to assess the probability of events from a story of a war between two countries.  The build up is described and people are asked to assess the probability of war breaking out.  It is revealed that the story is in fact an actual description of the period leading up to a conflict between two Asian powers.  Some months later, people decide that since it did in fact happen, they must have predicted it.  They claim now that they gave a much higher estimate of probability than they actually did.

What does this mean in financial markets?  A great deal.  Think about what you are likely to do now if you suffer from this bias, as everyone does.  You will overestimate the probability that you gave to past events. Then, you will over-estimate the probability of your future forecasts being right.  This will make you over-confident at the wrong times and will kill your market performance.

I cover the importance of understanding the biases inherent in psychology in my new book The Psychology of Successful Trading

Hindsight Bias is just one of the many I discuss there.  There are two ways to benefit here in terms of improving your investment returns.  Firstly, you can look out for the biases in your own thinking and correct for them if need be. Secondly though, you can expect these biases to severely effect other market participants and that means opportunity for you.
You can take it from me since I have two relevant PhDs and spent nearly a decade on the trading floor of various investment banks.  Buy the book here:

The Psychology Of Successful Trading



Standard: The best regional Chinese restaurants in London

BEN NORUM | Thursday 4 February 2016 10:03 BST
1).  Sichuan


Aside from the Cantonese style of Chinese food which has long been dominant in the UK, Sichuan has become by far the most popular region for London restaurants. The cuisine’s hallmark flavour is the combination of hot chilli and numbing Sichuan peppercorns, along with a liberal use of garlic. Spicy dan dan noodles and kung pao chicken are among other well-known Sichuan dishes, though the latter will often be made particularly inauthentically.

Sichuan Folk in Spitalfields

and Barshu in Soho

are two of London’s best and best known Sichuan restaurants. The slightly grittier

Chilli Cool near Euston is also popular with expats.

2).  Hunan Province

The food of Hunan has similarities to that of Sichuan, but does not tend use Sichuan peppercorns, instead opting for larger amounts of chilli to create spicier dishes. Stews, dry-wok dishes and a pork belly known as ‘Chairman Mao’s Red-Braised Pork’ are popular menu items.

The best example of Hunan cuisine in London is at

Local Friends in Golders Green (a Bethnal Green sister site has now closed). It is also served at

Yip in in Islington and at

BaShan in Soho, though if you want the authentic spicing you’ll need to specifically ask for it when you order.

3).  Fujian Province

Fujian food is generally lighter and more subtly flavoured than other Chinese cuisines, with a stronger emphasis on letting produce speak for itself. Due to the region being both coastal and mountainous, many less common ingredients from sea and mountains are used — including wild herbs, mushrooms, oysters and crab. Popular dishes include oyster and seafood omelettes and a lot of soups, such as a variation of shark-fin soup known as ‘Buddha Jumps Over The Wall’ made with over 30 ingredients including abalone, dried scallops and pig’s trotters (and not necessarily the offensive fin itself ).

The cuisine is hard to find in London bar a few dishes here and there, but

NewAroma in Chinatown specialises in it.

4).  Shanghainese

In Shanghai city and its surrounding area, cooking involves larger amounts of wine, vinegar, soy and sugar than elsewhere — sweet and sour is a typical example of its flavours. Other characteristics include a lot of seafood, a predominance of rice over noodles and lots of salted meat and preserved vegetables.

Shanghainese food is served at

RedSun in Marylebone.

Ask the staff and they will direct you towards the most traditional dishes.

5).  Shaanxi Province

Dishes in Shaanxi tend to be both spicy and sour, similar to that of Hunan, but seasoning tends to be heavier on salt, garlic and onion. Pork and mutton are the most widely used meats, while steaming is a popular cooking method.

Xi’an Impression in Holloway

serves this cuisine, and takes its name from the province’s capital city of Xi’an. Also look out for streetfood stall

Mama Wang’s Kitchen.

6).  Guizhou Province

Like Shaanxi cuisine, the typical food of the Guizhou Province is reminiscent of that of Hunan, but with more sourness. As a point of difference, Guizhou food is less salty than Shaanxi while many dishes are often cooked to match the flavour of locally-made baijiu liquor, such as Maotai.

London’s best bet for Guizhou cooking is

Maotai Kitchen in Chinatown,

which is named after the popular drink.

7).  Liaoning Province

The food of Liaoning is highly regarded across China and very different to other regional cuisines thanks to a strong influence from cuisines — in particular Japanese, Korean and Russian. It can be characterised by strong flavours, saltiness and oiliness. Popular

TopTaste near Bethnal Green

serves Liaoning dishes as part of its menu.

8).  Xinjiang Province

The Xinjiang province borders Mongolia, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, Afghanistan, Pakistan and India, and is home to many ethnic groups including ethnic groups including the Uyghur, Han, Kazakhs, Tajiks, Hui, Kyrgyz, and Mongols. As such the cusine includes many different influences.

Typical dishes include kebabs, roasted fish, lengmen noodles topped with stir-fried meat and vegetables and polu, a form of pilaf rice. Mutton is the most-used meat, and because much of the population is Muslim much of the food is halal.


SilkRoad in Camberwell

for a taste of Xinjiang cooking in London.

9).  Guangzhou

The food from Guangzhou is easiest to find in London as this is from where Cantonese cooking hails. If a restaurant fails to specify what region the food it serves comes from, it’s probably from here. This will also be what is being referred to if something is described as Hong Kong style.

Some of the region’s most common dishes include sweet and sour pork, wonton noodles, chow mein, congee, char siu and roast duck as well as dim sum.

Good places to eat traditional Cantonese food include

Royal China Club on Baker Street,

Phoenix Palace in Marylebone and

DragonCastle in ElephantandCastle.

For roast duck,

GoldMine in Bayswater and

Four Seasons restaurants in Chinatown and Bayswater are especially good.

Of higher-end venues,

Hakkasan serves a modern take on Cantonese, while

Yauatcha specializes in dim sum and tea.

10).  Beijing

Better known as Peking cuisine, the food of Beijing and its surrounding area takes influences from the whole country. By far its most famous dish is peking duck. For the best peking duck in London visit sky-high

MinJiang in Kensington,

or try less pricey RoyalDragon in Chinatown

—where you can also partake in karaoke.

11).  Xizang Province (Tibet)

The Chinese ‘autonomous region’ of Tibet has a cuisine far removed from most of China, though Sichuan food is increasingly popular there. Flatbreads, dumplings, steamed buns and stir-fried meat (usually yak, goat or mutton) are among the staples, with steamed buns called momos among the most famous.

There is only one fully Tibetan restaurant in London —

Kailash Momo in Woolwich.

12).  Taiwan

It might not be part of the People’s Republic of China, but the food of Taiwan — officially titled The Republic of China — is extremely closely linked to that of its neighbour

Steamed buns known as bao are the most popular and best known Taiwanese dish, while noodle soups and pancakes are also prevalent. Another famous export is the drink yung marc, better known as bubble tea.

Leong’s Legends in Chinatown

serves a mix of Taiwanese and Cantonese dishes, while

Bao in Soho

is leading the way in the bun department.


Hunan in Pimlico

also serves mainly Taiwanese food.


The RMT Is Right, Just This Once

I used to be an investment banker.  This apparently makes me a class enemy to some in the Labour movement.  Although I voted Labour throughout the Blair years, I have been told that my vote is not welcome.  This is the kind of debate, I suppose, that will inform the leadership competition.  Electability or purity?  My point here in bringing this up as a preliminary is so that you do not think I am an automatic union partisan.  I think on this occasion — for the first time — the RMT is right, and if I as a generally unsympathetic person think so, perhaps they are.

It is a principle of employment  law that you cannot  arbitrarily make adverse changes to people’s contracts.  In fact, you can’t ever change a contract without the agreement of the other side.  Public sector management seems to act as if in ignorance of this surprisingly often.  When I was in private equity, we would never have done that.  Sure, we would have fired people who were incompetent and made people performing activities that were no longed needed redundant, but no-one gains from having a disgruntled workforce — and what is more likely to make them disgruntled than trying to change their contracts against their will?

Here’s how you handle this TfL situation if you are a competent private sector manager.  You say to the workforce, “guys, we need to run an all-night service.  We need volunteers to work ten weeks of nights a year.  We are offering an uplift of five grand.  Who’s up for it?”.  You then find out if you get enough people who want to do it.  We can assume that the current uplift of two grand is inadequate, both for the reasons that it looks inadequate — an extra 100 quid a month in your pocket after the government has taken its cut does not look like a good deal — and because the RMT have chosen to strike rather than accept it.

One of two things now ensues.  With luck, you get enough volunteers to run your service.  Maybe the younger drivers think they can go to Ibiza a couple of times a year and its worth it to them.  Maybe the older ones value spending time with their families more.  This is fine.  If you don’t get enough volunteers, you either up the offer or recruit.  Maybe you recruit specialist night drivers — there is some evidence that the adverse health effects of shift work are more to do with the disruption of shift changes than the nocturnal activity.  You might have to pay more for these specialist night drivers.  The union should not want to stop you doing this.

This may of course result in your service becoming more expensive.  This has to be paid for.  The obvious thing to do is increase prices to users of the night time service.  Most of us have had one drink too many in Soho and ended up taking a cab which might cost £30.  If the alternative is a tube which is twice the normal tube price, say £8, that’s a good deal, right?

Although I still think that £49,673 is quite a high non-graduate starting salary, I do think it is fair enough for the RMT to say that it is not on to impose night working on their members.  It is a major adverse contractual change and drivers can reasonably insist on the right not to do it; the response is to pay them more until enough of them agree.

“Rape” At The Royal Opera House

There has been a lot of controversy in old and new media over a scene in a new production of Guillaume Tell at the ROH; cf.

Two preliminaries:.  One: I was there at the first night, in seat W14 at the back of the Orchestra Stalls.  If you weren’t, then you will have to take my word for it in terms of what actually happened.  Two: I am a philosophical psychologist (cf. so if you would like to respond, do so to exactly what I write below and not to something in the vicinity of what I say which annoys you.  If you want to be formal about it, I suppose the proposition for which I am arguing is “the scene was appropriate.”

I will start by outlining the events I saw and then show that all of the objections aiming to show that the scene was inappropriate fail.

A foreign army is occupying Switzerland.  At the point in the libretto of interest, we are told that some soldiers force the local women to dance with them.  One woman is offered champagne, somewhat against her will.  She acquiesces nervously.  She is then doused in champagne.  The leader of the occupying forces, Gesler, molests her by placing a pistol between her legs at around mid-thigh level.  She moves on to the dining table, upon which is placed a large table-cloth.  She disappears behind a group of perhaps 10-15 soldiers.  Shortly afterwards, she reappears naked.  The duration of the nudity was something like half a second.  She partly wraps the table-cloth around her and moves away from the table.  The hero, Tell, appears and ensures that she is fully covered.

That’s it for the stage action. There ensued enormous amounts of booing which interrupted the action.  One man shouted out “one step too fucking far mate” and another shouted “Holten out”.  (Kaspar Holten is Director of Opera at the ROH.)  There were a number of noisy walkouts.

The objections I have seen are as below.

The scene was too long

I don’t really see how this objection works.  People have spoken of a ” five-minute gang rape”.  I do not think you can get to five minutes even if you include all of the events I outline above in your duration.  I would put it at two minutes; perhaps three at the outside.  In any case, the nudity was momentary.  This means at the outset we have to decide what constitutes a depiction of rape.  That is a difficult question.  Naturally, there was no sex or simulated sex on stage by anyone, so a fortiori there was no sex or simulated sex involving multiple men and the woman. However, it was clearly the intention of the director to depict rape in some sense and that intention we may assume was realized, because of the intense audience reaction.  I think that this intense negative reaction meant that the “rape” that was perceived by the audience was too long simply because any duration was too long to be comfortable.  But if we are purely talking about seconds on the clock, then it could not have been shorter and remained what it was.  (You may wish to challenge me here by noting that the scene has now been cut and shortened.  Is it still what it was?)  You will also need to deal with the question as to how fictional objects get their properties; see my Sherlock piece:

The scene was gratuitous

This objection cannot succeed; it gains its initial plausibility by appearing to be the nearby objection “the scene had a negative effect”.  To make out the claim that the scene was gratuitous, you have to show that the scene had no effect.  In other words, the aesthetic impact of the piece would have been identical if the scene had been eliminated.  This is transparently false since the audience reaction to the scene and the reaction of others who were not there was immense.  You may well feel that the aesthetic effect of the scene was undesirable, but that is not consistent with saying that its inclusion was gratuitous.

The scene was unnecessary

I can again respond similarly to what I said to counter the previous objection.  In addition, I can observe that nothing is necessary.  Even claims like “everything is identical to itself” are questionable under certain circumstances.

I do not expect to see that at the opera

Why not?  I will defer to others, notably the Director of Opera, to make a number of valid points in response to this.  The scene is fully justified by the libretto (cf.; perhaps also the purpose of art is to shock, sometimes.  Bear in mind that this is about war, not the marriage of Figaro.  Also, why are we holding opera to a much different standard to those we permit on the theatrical stage, or film (cf., let alone what one can see on the internet.

We need to protect victims of rape from depictions of rape

Was this a depiction of rape?  Do we also need to protect people who have had a family member murdered from depictions of murder?  There were several of those in this piece; they aroused no comment.

The inclusion of the scene condones rape

I don’t understand this objection, so if you share it, you will have to explain it to me.  One question is whether or not it matters that the perpretators of the “rape” were the villains of the piece.  If this is an alleviating factor, then it would have been an aggravating one to have had the hero Tell perpetrate it.  Perhaps that would have been the provocative directorial choice.

The scene was “the last straw”

This is one of the more common objections.  It seems to run approximately as follows: `this was a terrible production full of infantile symbolism, each scene was more offensive and unimaginative than the last, the “rape” scene was one step too far’.  I happened to think that the production was brave and innovative, but that is not actually relevant to the argument.  The problem with this objection is that it seems to entail the following: `this rape scene would have been appropriate in a more traditional production, or a production I liked more.’  That seems unmotivated and hard to argue for.  It seems to be caused by the phenomenon of “moral licensing,” which is not a way to stand up an objection.


I conclude that all of the objections fail and the scene was appropriate.  It is therefore unfortunate that the scene has now been modified by weakening it and shortening it.  We may at least note that the Director of Opera did not insist on this; in fact he apologized for the offense that seemed to have been caused and explicitly did not apologize for the production.  This is right and proper; I do not want what I can see at the Royal Opera House controlled by reactionary prudes who can only stomach totally traditional productions.  The changes were made by the Director; so our regret should be that a courageous and ground-breaking production team have been forced to weaken the impact of their vision.

For me, the most dismaying part of the experience was seeing the change in the countenance of Malin Bystrom, who was superb.  She was quite clearly delighted by the richly deserved approbation she received in her curtain call, but was still there for the booing of the production crew.  This is what I call gratuitous.  In fact, I can’t see any occasion on which booing is appropriate.  Walk out silently if you must, but otherwise why not just stay at home.  The ROH is generally sold out; we can do without your ticket money if you think you are going to decide what is appropriate in a production.

UK Deficit No Longer A Problem

There has been controversy recently over the Conservative claim that the UK deficit has `halved’, based on the observation that £91bn is not half of £153bn:

As the Conservatives correctly argue, the most natural way of considering the deficit is a proportion of the size of the economy.  On this measure, they say it has indeed halved.  I will offer a couple of brief arguments as to why the Conservatives are right to say this.  Then I will suggest they could have gone further and argued that the problem is basically solved.  (They may have chosen not to do this because they consider it will be valuable in the election as a way of harming other more spendthrift parties.)

1).  The deficit as a proportion of GDP is the way the bond markets look at deficits.  This is the correct perspective to take, because it is the bond markets who are funding the deficit.  They look at debt to GDP (%) and the deficit is the rate of change of debt to GDP (also %).  He who pays the piper calls the tune.

2).  Relatedly, looking at the absolute number makes no sense.  If I ask you whether a £5,000 overdraft is a problem, you will ask me what the person who has the overdraft makes in a year.  If they have no income, it’s a big problem.  If they make £80,000 a year, it is no problem at all.

Now I will look at what they could have said.

The UK budget balance as a % of GDP is currently estimated at -4.5% of GDP.  (All of my numbers are going to come from the table on p. 96 of the 13 December 2014 issue of The Economist.  They caveat their number as being either from `The Economist poll or an Economist Intelligence Unit estimate/forecast’.  We do not need to worry about this as the number is about right; they are just allowing for the fact that they are making an estimate for the whole of 2014 slightly before it ends.)

We now need to know where we have come from in order to know how far we have come.  The first benchmark is the Maastricht criterion.  Although the UK is not looking to join the Euro, that is a relevant benchmark of UK peers.  It requires the deficit to be 3% or less of GDP.  (Again, note that the criterion is expressed as a % of GDP because that is the only sensible way of looking at it.)

I saw estimates before the last election that the previous administration was looking to borrow 15% of GDP p.a.  That was terrifying, not least because 1.15^5 = 2.01 i.e. 15% a year doubles debt to GDP in a single parliament.  That is a doubling of the national debt before you get another chance to intervene.

Now, perhaps that 15% was a politically influenced estimate.  More neutrally, all sides agree that the deficit has reduced from around 10%.  Let us take that number.  Now consider this: you can run a deficit at the same level as your nominal GDP growth without changing your debt to GDP number.  Since that is what bond markets care about, it should be what you care about as well.  GDP growth for 2014 is 3.0%.  So imagine we want to get from 10% to 3%, then the distance we want to travel is 7.0%.  We have actually moved from 10% to 4.5% i.e. a distance of 5.5%.  5.5% divided by 7.0% = 79% i.e. we really only have another 20% of the distance to go.

Now I am the first to think we should continue to bear down on the deficit, and in particular it is a really bad idea to fund OpEx with debt rather that Capex — meaning you can borrow to fund actual investments in actual pieces of infrastructure which pay you actual GDP benefits but you cannot sensibly borrow to keep the lights on or to pay benefits — but it still the case that a lot of the work has been done.  I would at this stage like to see the deficit number reduce only slightly but shift spending into sectors which will produce a GDP return.

Two ideas: the Germans lend EUR16bn a year to their famed SME sector.  The Israelis generated a globally successful tech start-up  industry by `pouring money into elite universities and creating a clever system to attract venture capital’ (The Economist again, p. 76).

Peston suggests that it is fashionable in the City to ignore the deficit:

I do not doubt it.  The truth is always in fashion.

Scotland Has no Feasible Currency Options on Independence

Originally written in response to an article by Monbiot here:

One immediate problem is that Monbiot begs the question, in that he assumes the conclusion he is trying to prove as a premise in his argument. This can be seen throughout the first four paragraphs. He aims to conclude that Scotland should be an independent country starting from a set of rhetorical questions premised on Scotland being a country. True but irrelevant, since the question at issue is exactly whether Scotland should be an independent country. To see this more clearly, note that his argument, if valid, goes through for anything you call a country: Wales, London, Pimlico, the local pub. Should Pimlico accept the hegemony of Westminster…?

A more serious problem is that whether or not Monbiot is right that there is a much better possibility in the offing depends on whether there is a feasible path to get there. Otherwise he is arguing that we would all be better off living on the moon in gold houses. True, but irrelevant, because we can’t do it. Here the currency problem comes to the fore. Monbiot concedes that Scotland might have no control over its currency post-independence, and seeks to minimise that difficulty by arguing that this represents no change against the status quo. Maybe, but the problem is much worse than that. Scotland in fact has no viable currency options post-independence.

The possibilities are a) keep the pound or b) join the Euro.

a). in fact splits into two possibilities. a1). is to obtain agreement from Westminster to retain the use of the pound on the same basis as the remaining-UK (RUK). a2), also known as Sterlingisation or the Panama option, is to use the pound without agreement from Westminster.

It is possibility a1). that all Westminster parties have ruled out. The pro-independence camp here argues that the Westminster parties are bluffing here. They are not. RUK cannot afford to bluff here. The pro-independence camp says they will not take on their share of UK debt (£100bn) if Westminster does not let them use the pound. Westminster is in fact going to bite that bullet if need be. RUK is already on the hook for the entire current amount of UK debt. This is because RUK has already been required by international bond markets to state that it will be standing behind all current UK debt because the international bond markets were not prepared to accept the risk that they might end up holding Scottish debt. (There is an interest rate at which they would be prepared to do so, but it is much higher than either the UK or RUK rates, because an independent Scotland would not have a Aaa rating.) So this option will not be available.

Possibility a2) is where the pound is just used to make retail purchases in Scotland. It is true that Westminster cannot stop this and nor need it. It is simply not a problem for RUK, just as it is not a problem for the US that Panama uses the dollar. However, Westminster can and must prevent Scotland from issuing pound-denominated debt. It cannot be allowed since Scotland would be issuing debt for which RUK would be responsible. (This is fact is the other way around. No authority could be given to Scotland to issue debt.) Similarly, the Bank of England will not guarantee Scottish banks because it would not be in a position to regulate them. Since Scotland will continue to be in a financial deficit position after independence, like the UK and RUK, it will need to issue debt. So this option will not be available.

Possibility b). is the Euro. This again splits into two possibilities like the above, but no one has proposed b2) (`Euroisation’) which has the same fatal problems as a2). So b) means EU membership.

The first problem here is that Spain would have to veto membership or risk fission, starting with Catalonia.

The second problem here is that you don’t join on UK conditions. You join on currently available conditions. That means no opt outs and no rebate. The latter in particular is going to be particularly expensive.

Thirdly, today’s letter from the former European Commissioner for Economic and Monetary Affairs:

is germane here. Key points:

– you can’t join the Euro if you just reneged on your debt as postulated above;

– you can’t join the Euro without a stable central bank (I imagine that means at least three to four years)

– you can’t join the Euro if you have been `sterlingised’ for the candidacy period.

So this option is also impossible.

There are no more options.