Good morning! It's very quiet for results today, so I'll have a ramble about something else - the Scottish Independence vote. Putting aside the politics of it, which would not be appropriate for me to comment on here, it's the potential impact on the markets which worries me. With the latest poll at 47% Yes, and 53% No, it's now looking very close, and the Yes campaigners seem to have momentum, and to be successfully convincing many voters through a mixture of emotion and highly questionable economics, that a Yes vote will be economically beneficial for Scotland. Whereas it seems to me the consequences would be potentially catastrophic. Sadly the main flaw with democracy is that you are asking people to make a decision on things that very few properly understand.

In all likelihood an independent Scottish Govt would massively over-spend, and would eventually default on its debt. So existing holders of UK Gilts are now facing the possibility that their Gilts might perhaps be split into an English part (which should remain pretty solid), and a Scottish part which would inevitably be regarded as far more risky, and could eventually default - bearing in mind that the oil tax revenues are not reliable, and are declining. Why would anyone who bought UK Gilts want to hold Scottish debt? So a run on UK Gilts could easily happen. A run on sterling might also happen - what if UK base rates have to be hiked up to (say) 5% (or more) in order to stem the capital outflows? It would plunge us into a horrendous Recession.

There would be years of uncertainty, which markets hate, as hundreds of years of laws & commercial relationships are unpicked & replaced. It seems to me complete madness to be doing this at a time when the UK is still running a gigantic annual budget deficit, and is dependent on ultra-low interest rates for a recovery. Why put that at risk? Whoever had the idea to do this Referendum now needs to be pensioned off before they can do any more damage!

Even if there is a No vote, if it's close (as seems likely) then the Union will be holed beneath the waterline, and without a convincing vote of popular support, markets will surely realise that it's only a matter of time before the Union eventually breaks up.

Trouble is, I don't want to adjust my shares…

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