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The Independence of Scotland through investors’ eyes: Will Great Britain repeat the destiny of the USSR?

GBPUSD

 

 

In early May numerous analysts, economists, political scientists and investors became increasingly concerned about the situation in the UK: on May 5th the Scottish National Party (SNP) won the local elections. The problem is not that it got the majority of seats in the Scottish Parliament (65 out of 129), even though the fact itself is a sensation. It is about the fact that for the first time in the history of Scotland the nationalists got an opportunity to form a one-party (purely nationalistic) government. The SNP’s main goal is to make Scotland separate from Great Britain and become an independent state. Many experts anticipate the decline of the UK, its economy and national currency (the “downtrend” of GB began after the end of WWII, when the USSR and the USA became the world superpowers). So, let’s try to separate the wheat from the chaff.
 
The SNP’s long-term goals
 
According to the British Association of traders and Investors under Masterforex-V Academy, it took the SNP long 10 years to win the elections. However, another thing is much more important: previously the leader of the party Alex Salmond promised to hold a referendum concering Scotland’s independence from the UK. Now, when the SNP has the majority of seats, the referendum seems to be at hand – a matter of 2-3 years. That is why numerous experts say that the UK is going to repeat the destiny of the USSR within the next 20 years. They mention the half-disintegration of GB, the “Disunited Kingdom” etc.
The present-day Great Britain is a unitary state consisting of 4 states: England, Scotland, Wales and Northern Ireland.  Now the unity of GB seems to be under threat. What are the reasons?
 
The relationship of Scotland and England
 
The historical background of the confrontation between Scotland and England. Let’s start with an interesting legend that tells us about the divine creation of Scotland: After God created Scotland he called the archangel Gabriel to witness and told him: “This is the best thing I have ever created! Beautiful nature, music that pleases, courageous men and beautiful women, and a special beverage called whisky”. Gabriel said: “Wonderful! But don’t you think that you have shown a bit of generosity? Aren’t you afraid to spoil them? May be you should add a fly in the ointment?” God replied: “Do you know what neighbors I have blessed them with?”… So, these 2 nations – the Scots and the English – have been confronting each other for ages. The Scottish-English border on a tourist map of Scotland is nearly streaked with special signs (2 crossed swords) denoting the places of ancient battles between the 2 nations. Throughout Scotland there are many monuments to the heroes who fought against the English.
The continuous chain of wars ended when the Stuart Dynasty came to power. In 1603 King James VI of Scotland became King James I of England. In 1707 despite the Scottish people’s protests  the Act of Union was signed this making Scotland a part of the UK.
So, to make the long story short, since then the proud Scots have been feeling offended as Scotland has been pressed by the “younger brother” complex.
 
What benefits will Scotland lose if it leaves the UK?
 
It should be mentioned that Scotland benefited a lot from this “marriage of convenience” with England:
·         Scotland found itself under the protection of one of the world’s most powerful states. The elimination of the mutual borders gave the Scottish merchants an opportunity to gain entry to numerous markets around the world.
·         Since then the Scottish elite has been taking an active part in governing the UK. It is sufficient to say that the latest 3 Prime Ministers of GB (Tony Blair, Gordon Brown and David Cameron) come from Scotland.  A couple of years ago there was a situation when the 3 most influential British parties were headed by Scots. Yet there are usually many of them in the British Government.
·         There are many Scottish representatives in the British Parliament.
·         The budget spending per capita in Scotland is 15% higher than the average value for the entire UK.
·         Numerous famous and outstanding people in arts, education, mass media, science, radio and TV are of Scottish origin
·         The British Army includes special Scottish and Welsh forces.
In other worlds, Scotland cannot be called the poor relation of England and the UK while its role in the development of Great Britain cannot be overestimated. Moreover Scotland enjoys the broadest autonomy among all the UK members:
·         Scotland has its own legislative and judicial system, as well as its own system of social benefits and pensions.
·         They have a right to issue their own money – the Scottish Pound, which is in parity with the British Pound but is not always accepted in England (it is optional and is decided by every single merchant).
·         Scotland may vary the income tax within the scope of 3%
·         Scotland enjoys free healthcare system (though it is not as good as the English one)
·         In Scotland people can get a free higher education as opposed to England, where the fees are constantly growing. Even some Englishmen admit that the Scottish higher education is better.
·         The Celtic language received the status of an official language in 1992. That is why only 1,5% of the country’s population speaks the Scottish Gaelic language.
·         Since the end of the 19th century it has had its own national football, volleyball and rugby teams.
·         And finally, hunting is strictly forbidden in Scotland.
Don’t ever call a Scot an Englishman. This would probably be the biggest insult for him.
So, what is the reason for the endless confrontation?
According to the West-European Association of Traders and Investors, it’s all about   the Scottish partocratia, which looks forward to having its own state apparatus. They say that is why some Scottish politicians want Scotland to be independent. Is it really true? What is the real basis of the Scottish separatism?
 
Scotland: all is not gold that glitters

 



Шотландия: не всё то золото, что блестит

It must be admitted that the Scots has enough grounds to speak about their independence. Here are some of them:
·         National and cultural originality. Despite 300 years of being a part of the UK, the Scots didn’t lost their national identity and cultural originality.  80% of the Scottish citizens say they are Scots while only 20% say they are Britons. The thing is that before uniting with England, for a long time Scotland was an independent kingdom with its own Parliament.
The Scottish Parliament was revived in 1999 (292 years later). However, it has little power as all the questions of national importance are solved in the British Parliament. Obviously the Scots don’t like it. Scotland is also famous for its strong social traditions. Most Scottish politicians oppose the British government’s policies including the reduction of social spending. Scotland’s politicians want to control the country’s finances and collect taxes on their own own.  The Scottish authorities often oppose the UK’s external policies. By the way, if Scotland gains independence the SNP promises to make it leave NATO, to eliminate the Clyde submarine base with nuclear arms and to make Scotland a neutral state.
 
·         Territorial/demographic factor. In terms of territory Scotland slightly yields to England and is 4 times as big as Wales. Scotland’s population is 5 million people (8.5%) of the entire British population.
 
·         Religious factor. Scotland has its own religion (Presbyterian Church), a branch of Protestantism. 16% of the Scots are Catholics.
 
·         Ethnic elite. While the biggest part of the Welsh elite is of English origin, Scotland has its own elite. Scotland gave to the world such outstanding people as Robert Burns, Walter Scott, Robert Louis Stevenson, Adam Smith, James Watt and many others.  By the way Shawn Connery (James Bond – Agent 007) is one of the ideologists and active members of the SNP.
 
·         Remoteness from the country’s center. Scotland is relatively far away from the UK’s political and cultural centers.
 
·         Economic factor. It is common knowledge that Scotland is one of the richest parts of Great Britain.
Here are the main cornerstones of the contemporary Scottish economy:
-          Financial sector.  Edinburg is considered the 2nd largest financial center of Great Britain as well as the 5th largest one in the EU.
-          Fishing. Scotland makes 1/3rd of the EU’s fish supplies.
-          Whisky. Nobody can come near Scotland in terms of whisky production – over 2000 kinds of whisky are produced in the country. Scotland makes over 1 billion pounds a year on whisky.
-          Electronic industry. The pace at which the IT industry is developed in Scotland is the fastest in the UK.  There is the local “silicon” valley located between Glasgow and Edinburg. The world’s most famous IT companies  - Hewlett Packard, Philips, Motorola etc. – have their labs and facilities located here, producing 1/3rd of the brand computers in Europe and 7% of their global amount. The Scottish electronic industry makes about 50% of the country’s net export.
-          Fixed property. More and more investors become increasingly interested in the Scottish housing market as the relation between the price and the quality is more beneficial as compared with England.
-          Powerful heavy industry. The UK’s 2 largest shipbuilding yards are located in Scotland.
-          Well-developed agriculture. All the foodstuffs produced in the country are of premium quality.
-          Tourism. Scotland keeps attracting lots of tourists from around the world first of all with its beautiful landscapes and places of historic interest.  Tourism makes 5% of the country’s GDP.
-          Natural gas and crude oil production in the North Sea. 90% of the net volume of crude oil produced in the UK is extracted from the Scottish offshore area of the North Sea. Scotland’s oil deposits are the 2nd largest in Europe (after Norway) – they make up over 50% of the EU’s net oil deposits. If one day Scotland leaves the UK, it will become possible mostly due to its rich oilfields. No wonder that for 30 years the British government concealed from the public the real volume of oil stored in the country’s oilfields in the North Sea as they were afraid of the rise of Scottish separatism. According to some unofficial data, over the last 30 years Great Britain has earned over 200B pounds on crude oil production. The income from crude oil export makes up 13% of Scotland’s GDP and 4% of the UK’s GDP. That is why the Scottish nationalists have been fighting for the right to produce Scotland’s oil deposits independently.  However, numerous skeptics assume that by 2020 the oilfields will have been almost exhausted, so the hope for crude oil as the basis of Scotland’s independence may turn out to be just a myth.
Thereby, the Scottish separatists have a couple of weighty arguments these days. With such industries they hope to survive without London, especially as Scotland was less affected by the global crisis than England. Taking into account the UK’s serious economic problems (the budget deficit is 10,4% of the GDP, the sovereign debt is 80% of the GDP) the separation from Great Britain may become more tempting.
 
Thistle… or the peculiarities of the Scottish mentality



Чертополох… или особенности ментальности шотландцев

 

 
Thistle is the unofficial symbol of Scotland. The legend says that it was this thorny weed that saved Scots from the unexpected night assault of Vikings in the 13th century. The Vikings stepped barefooted into the tangles of thistle and cried with pain, giving themselves away. This simple and unpretentious but unruly plant mostly corresponds to the Scots’ national character.
In general, the Scots are hard working while their persistence neighbors on stubbornness. It is next to impossible to make them change their mind. The Scots have their own opinion about everything.  Sometimes they are called stingy. Others (who a better familiar with Scotland and its people) say that they are thrifty. They just don’t waste what Mother Nature gave them. Some people call the Scots some of the kindest and most compassionate people in the world.  They are strong and enduring. Other nations often call the Scots reserved, suspicious, incommunicative and unemotional. In Scotland “Not bad!” is a strong compliment. Nevertheless, the Scots are fairly hospitable. They like celebrating festive occasions. They are proud, self-confident and self-reliant. And finally, the Scots are famous for their strong national spirit.
 
To be, or not to be: that is the question
 
In other words, what will be the future of Scotland and the entire United Kingdom?  There are several possible scenarios:
The Iceland scenario: After WWII Iceland became completely independent from Denmark. In 2007 (before the crisis) the UN recognized Iceland the world’s best country to live in.  The idea of a small and comfortable country encourages many Scots. Indeed, Scotland doesn’t yield to other relatively small flourishing European countries like Finland, Norway and Denmark in terms of territory, population and economic potential, especially as the Scottish politicians promise to preserve the dual citizenship (Scottish and British), close ties with the UK, to join the EU and to preserve the British Pound for some time.
The supporters of this scenario assume that the Scottish sovereignty has a bright future. If it happens, the wave of separatism may spread over Wales and Northern Ireland, thus making the UK disintegrate.
 
The Quebec scenario. In 1995 in Quebec the supporters of the unity with Canada won the elections, which seriously affected the local separatism. As for the Scots, according to numerous surveys, only 25% to 40% of them support the separation and complete independence from Great Britain.  Most Scottish businessmen are afraid that their businesses may become nonviable if Scotland becomes independent. Moreover, London proves that the tax expenditures of the Scottish businesses will double in this case because the new state apparatus will need a lot of extra money to exist (bureaucratic apparatus, embassies, safeguarding of the state's borders etc.). London also reminds the Scottish separatists that after Ireland gained independence its economy recovered and started growing only after 30 years of deep recession.
In order to prevent Scotland from separating, London is ready to expand its autonomy.  Under such conditions most Scots can vote against the separation from the UK. Some experts say that the most the Scottish separatists can achieve is to get the right to send its own national Olympic team to in the London 2012 Olympic Games.
In 1979 only 33% of the Scots participated in the referendum. 52% voted for Scotland’s autonomy. 20 years later 71% of the voters supported the country’s independence. To be or not to be? We will see it in the near future…
 
GBPUSD perspectives.
According to the professional traders from the Department of Masterforex-V trading system ,  GBPUSD is hampered by the lower border of the upward MF sloping channel    - formed by the uptrend of wave C of Weekly.
1.       If the price comes out of the sloping channel and breaks below the MF pivot 1.6165 (as shown in the picture below), the mentioned wave C of Weekly will be completed while the price will form the 1st wave against the existing mid/long-term uptrend. A retracement (and the “moment of truth”) will be needed to clarify the situation.
2.       If the price rebounds from the lower border of the sloping channel, GBPUSD will keep rallying through the” Hound of the Baskervilles” pattern by Elder/MF.

 



график

 

 

 

Market Leader and Masterforex-V Academy would appreciateiIf you could share with others your opinion on the matter. Just visit the Academy’s forum for traders and investors and answer the following question:
 
If Scotland gains independence what consequences investors may face?
 
·         The collapse of the country’s financial system and complete loss of investments.
·         In this case Scotland will become more attractive for investors
 

 


 

 

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