Mitch Feierstein: An independent Scotland may find it hard to enter the European Union and the pound but wouldn't it be better off without them?

Midweek View: A truly modern currency would be linked to the value of a basket of commodities such as iron, platinum, oil and coal

So, the European Commission's President Manuel Barroso says that it would be "difficult, if not impossible" for an independent Scotland to become an automatic member of the European Union. George Osborne and (worse) his senior Treasury adviser Sir Nicholas Macpherson have ruled out any likelihood of currency union.

These things were predictable, perhaps, though Alex Salmond must have been taken aback by the bluntness of the language. Mr Barroso was simply stating what has long been known. Spain is jumpy about any idea that its restive regions might leave for the comforting embrace of the EU. So it's pretty much nixed the idea that Scotland would get a free pass, simply because of the precedent it would set.

And currency union is also a daffy idea. Scotland is a tiny country with a huge financial system – vastly more unbalanced than Britain's already lopsided one. The idea that England and Wales could take on the risks of that financial system without having Scottish government and financial policy under lock and key was simply never credible. Add to that, the fact that Mr Salmond has muttered about setting up his own currency if he wasn't happy with the pound sterling, and he has pretty much nailed an exit sign over the door in advance. Currency speculation has wrecked stronger countries and stronger unions than the one being proposed: it's crazy for Mr Salmond himself to provide the excuse.

When Mr Salmond threatened not to pay Scotland's share of the national debt if currency union was prohibited, he might as well have announced to the world financial markets: "Do not trust this nation's creditworthiness." It was an act of petulance, not rational politics.

But before we join the bash-Salmond bandwagon, shouldn't we stop to ask two questions. One, should Scotland actually want to retain the pound? And two, should it really want to be inside the European Union?

Take the first of those questions. The pound has recently seen a near-total failure of its financial system. Some of the currency's biggest banks – hello, RBS – are still limping so badly that they are probably better understood as actually insolvent. The central bank has inflated its balance sheet to grotesque levels, despite no commensurate increase in economic production. That same central bank has no clear exit strategy – that is, it has no idea how it will mop up the vast excess of liquidity that has been created. This experimental monetary expansion has caused an asset boom in bond prices. The rise in the bond market has percolated through to the equities market (and again, this is despite the fact that economic production in the UK is still way below its pre-crash trend). Oh, and we now also have a rapidly mounting bubble in the real-estate market, which has been fanned by implausibly low interest rates and the insanity of a government-backed help to buy scheme. (Or should that be help-inflate-the-bubble taxpayer's risk scheme?)

None of this sounds like the kind of currency that a sensible nation should be seeking. When you add on the inevitable restrictions and humiliations that would come from being a very junior partner in a shared currency, the Scots should proudly disdain the English pound. Why not have a Scottish pound, with the queen's head on it, instead?

Ah, but critics would say, these smaller nations are at permanent risk of currency instability as their wee central banks would lack the reserves to neutralise flows of capital. A fair point, but one that's based on a post-Bretton Woods groupthink. Our current (and fairly recent) monetary system is based on the notion of a pure fiat currency. One that has value, just because the central bank says it does and because everyone agrees to share the assumption. But it is that system which delivered the dotcom bubble, the various currency crises of the emerging markets, the housing bubble and the 2008 financial crash.

Much better would be for Scotland to revert to a modernised version of the old gold standard. Although I'm a gold nut myself – I hold plenty and expect value to continue its long-term secular increase – it's too narrow a commodity to sustain a modern financial system. And in any case, other commodities matter too. Iron, platinum, oil, coal.

A truly modern currency would be linked – and inextricably linked – to the value of a basket of such commodities. Scotland is strong in oil, so that its currency would have a loose but natural linkage with its own economic strength. Speculators wouldn't be able to ravage the currency, because the currency's value would simply be determined by global markets too big for any speculator to corner or manipulate.

And best of all, the currency would be protected from the unwelcome "protections" of the central bank. You couldn't get asset bubbles being fanned by generous regulators. If the economy was running too hard, the government would have to take the necessary tough political action to damp activity in exactly the way governments ought to: raising taxes, paying down debt, saving up for a rainy day. If the economy had too much slack, government, not the central bank, would be responsible for taking the steps needed to regenerate growth. Action would happen where it ought to happen and would lie in the hands of elected politicians who would need to explain and justify their actions to the electorate.

As for the EU, who needs it? The union was born in an era of high tariff barriers and was an effective solution to the needs of the day. We live now in an age of vastly reduced tariffs and other barriers to trade. The World Trade Organisation enforces rules that embrace not simply every member of the EU, but crucial trading partners such as the US and China. Scotland could set its own immigration rules, its own labour laws, its own regulatory system. For sure, it would often want to copy the European model – for legislative simplicity, if nothing else – but it would have a choice that would be made and defended by its elected politicians.

One last thing. The Scottish people are, wisely, wondering what their economic future would be like once the oil has run out. What industry would replace it? I'd suggest that the rise of the Bitcoin has taught us an interesting lesson. For sure, the currency is weird, it has been heavily involved in drug sales and the like. It's hardly the kind of thing a new nation should want to emulate. But the rise of the Bitcoin proves how desperate investors are for real money. A currency that stands beyond the reach of a central bank, beyond the clutches of our increasingly Ponzified financial system. A well-designed, commodity-backed currency would be beloved of investors and Edinburgh and Glasgow would be the natural home of those institutions who want to deal in it.

Oil? Phooey. Oil is for a generation. Commodities are for life.

Mitch Feierstein is the chief executive of the Glacier Environmental Fund and author of 'Planet Ponzi'

Arts and Entertainment
Game Of Thrones
Uh-oh, winter is coming. Ouch, my eyes! Ygritte’s a goner. Lysa’s a goner. Tywin’s a goner. Look, a dragon
tvSpoiler warning: The British actor says viewers have 'not seen the last' of his character
Arts and Entertainment
'New Tricks' star Dennis Waterman is departing from the show after he completes filming on two more episodes
tvOnly remaining original cast-member to leave long-running series
The Etihad Stadium, home of Manchester City
premier league

The Independent's live blog of today's Premier League action

Polly Borgen at the Tribeca Film Festival in 2012
peopleThe Emmy award-winner starred in Cape Fear, the Sopranos and Desperate House Wives
FootballGerman sparks three goals in four minutes at favourite No 10 role
Rumer was diagnosed with bipolarity, attention deficit hyperactivity disorder and post-traumatic stress disorder: 'I was convinced it was a misdiagnosis'
peopleHer debut album caused her post-traumatic stress - how will she cope as she releases her third record?
Life and Style
Couples have been having sex less in 2014, according to a new survey
Arts and Entertainment
tvReview: 'Time Heist' sees a darker side to Peter Capaldi's Doctor
Holly's review of Peterborough's Pizza Express quickly went viral on social media
ebooksAn unforgettable anthology of contemporary reportage
Dennis Rodman has confirmed he is not going to the Middle East to 'talk to with the leaders of Isis' as claimed in a recent satirical report
people'Bring It On' actress says her legal team will combat the 'vultures'
Radamel Falcao was forced to withdraw from the World Cup after undergoing surgery
premier leagueExclusive: Reds have agreement with Monaco
Arts and Entertainment
musicBiographer Hunter Davies has collected nearly a hundred original manuscripts
A long jumper competes in the 80-to-84-year-old age division at the 2007 World Masters Championships
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Day In a Page

Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam